A business model development strategy to expand into the bottom of the pyramid population

Ver Loren van Themaat, Tanye (Stellenbosch : University of Stellenbosch, 2011-03)

Thesis (MScEng (Industrial Engineering))--University of Stellenbosch, 2011.

Thesis

ENGLISH ABSTRACT: The Bottom of the Pyramid (BoP) population are those individuals who live under the poverty line. They often do not have easy access to products and services, because the infrastructure to serve them is not in place and most organisations consider the challenges of the BoP overwhelming and unconquerable. The primary objective of this research is to develop a framework that guides an organisation through the design of a business model, which will allow them to expand into the BoP population Organisations face constant pressure to increase their market share and profits, and improve their performance in the current aggressive environment. To retain their competitiveness they have to look at unconventional and alternative markets. By recognising the BoP as a potential emerging market, organisations can increase their market share or enter new markets, thereby creating benefits for organisations and the BoP alike. The reasons why organisations fail when targeting the BoP market are also identified in this research. These reasons include aspects like organisations making assumptions about the BoP, not understanding the BoP, not knowing how to approach the BoP market and being ignorant in designing a business model tailored for the BoP market. This research addresses the difficulties organisations face when they want to target the BoP by developing a framework that allows an organisation to successfully target the BoP population. This framework also fulfils the secondary objective of this research, which is to adhere to the three goals of Sustainable Development: • Fair treatment of all people: Giving all people, regardless of their level in the economic pyramid, equal access to products and services. This is the foundation for social equity. Including the BoP in economic activity by overcoming the constraints the BoP face; • To not degrade the environment through sustainable design; • Economic growth and development to ensure the organisation makes a profit. Four primary research fields – Sustainable Development, Bottom of the Pyramid literature, Business Models and Blue Ocean Strategy – were investigated and then aspects of these fields were merged to form the Business Model Development Strategy. This framework offers a systematic approach for organisations to first analyse and understand all aspects of the BoP and their environment, and then develop a business model that fulfils the core requirements of the BoP. It was found that if organisations want to successfully target the BoP, they have to fulfil the 4 A’s – Acceptability, Awareness, Availability and Affordability – which are the core needs and requirements of the BoP. Using the Business Model Development Strategy as guideline, organisations can design a business model that minimises the risk of failure when they target the BoP, while maintaining the principles of Sustainable Development.

AFRIKAANSE OPSOMMING: Die term Bottom of the Pyramid (BoP) verwys na diegene in die bevolking wie ‘n bestaan voer onder die armoedelyn. Vanweë die feitdat die nodige infrastruktuur nie aan hul behoeftes voldoen nie, en ook dat meeste organisasies hul uitdagings as oorweldigend en selfs onoorkombaar beskou, het die BoP bevolkingdikwelsnietoegang tot sekeredienste en produktenie, Die primêre doel van hierdie navorsingstuk is om ‘n raamwerkte skep wat organisasies deur ‘n unieke ontwerp van ‘n besigheids model sal lei. Hierdie model sal organisasies in staat stel om hul dienste uit te brei en sodoende ook die BoP bevolking te bereik. Organisasies ervaar gedurig druk om hul markaan deel en wins tevergroot en omtefloreer in onstuimigeekonomieseklimaat. Om hul mededingendheid te verseker, moet organisasies hul blik werp na ongewone en alternatiewe markte. Deur die BoP as ‘n potensiële ontluikende mark teerken, kan organisasies hul markaandeel vergroot, of selfs nuwe market betree en in die proses voordele skep vir organisasies sowel as die BoP. Hierdie navorsingstuk sal ook die redes ondersoek waarom organisasieson suksesvol is wanneer hulle die BoP mark betree; hierdie redes sluit in, ondermeer, dat organisasies aannames maak oor die BoP, hierdie mark glad nie verstaan nie, onbekwaam is wanneer hulle die BoP mark betree en nie weet hoe om ‘n besigheidsmodel te ontwerp spesifiek vir die BoP mark nie. Die navorsing vervat in hierdie tesis oorbrug die struikel bloke wat organisasies in die gesig staar wanneer hulle die BoP mark wil betree, deur die ontwerp van ‘n raamwerk wat sulke organisasies in staat stel om die BoP bevolking suksesvol te betree. Hierdie raamwerk voldoen ook aan die sekondêre doel van hierdie navorsingstuk, om die drie uitgangs punte van Volhoubare Ontwikkeling te ondersteun: • Die regverdige behandeling van alle mense: om aan alle mense, ongeag hul posisie binne die ekonomiese piramide, gelyke toegang te gee tot produkte en dienste. Hierdie is die beginsel van sosiale billikheid. Om verder die BoP in te sluit in ekonomiese aktiwiteite deur aan hul behoeftes te voorsien; • Om, deurmiddel van volhoubare ontwerp, geen skade aan die natuurlike omgewing aan te bring nie; • Om ekonomiese groei en ontwikkeling aan te moedig om te verseker dat die organisasie telkens ‘n wins maak Vier primêre navorsings gebiede – Volhoubare Ontwikkeling, ‘Bottom of the Pyramid’ literatuur, Besigheids modelle en ‘Blue Ocean’ Strategie – was ondersoek en bymekaar gebring om die Business Model Development Strategie te ontwikkel. Hierdie raamwerk bied ‘n sistematiese benadering aan organisasies om, eerstens, alle aspekte van die BoP en hul omgewing te analiseer en te verstaan, en omvervolgens ‘n besigheidsmodel te ontwikkel wat aan die kern vereistes van die BoP sal voldoen. Daar is bevind dat, indien organisasies suksesvol die BoP wil betree, hulle aan vier kern vereistes moet voldoen – Aanvaarbaarheid, Bewustheid, Beskikbaarheid en Bekostigbaarheid. Hierdie aspekte vorm die kern benodigdhede en vereistes van die BoP. Deur die Business Model Development Strategie as riglyn te gebruik, kan organisasies ‘n besigheidsmodel ontwerp wat die risiko van mislukking sal minimaliseer wanneer hulle die BoP mark betree, terwyl dit die beginsels van Volhoubare Ontwikkeling ten volle ondersteun.

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