Text: Fully 65% of the world’s population earn less than $2,000 each per year- t

Question

Text:

Fully 65% of the world’s population earn less than $2,000 each per year- that’s 4 billion people. But despite the vastness of this market, it remains largely untapped by multinational companies. The reluctance is easy to understand: companies assume that people with such low incomes have little to spend on goods and services and what they do have goes on basics like food and shelter. Prahalad and Hammond: it is wrong to assume that the poor are too concerned fulfilling their basic needs to “waste” money on non-essential goods: in fact the poor often do buy “luxury” items: one study of shanty towns in Mumbai (Bombay) found 85% of households own a television; 75% own a pressure cooker; 56% own a gas cooker. They found that the poorest people know they will never own a house or car but can palliate (give the sense of alleviating pain as a palliative drug does) the grinding misery of poverty by buying little luxuries as and when the opportunity arises. Unilever the $60 billion global leaders in consumer-packaged goods (soaps; detergents; packaged foods; beverages) has been in India since 1931: owning 51% of Hindustan Lever. India has a population of 1 billion. Until 2003 Hindustan Lever concentrated on the top of the population pyramid the 250 million middle-class mostly based in the cities. In 2003 Hindustan Lever realized there was both profit to be made from India’s poorest whilst at the same time doing good: it launched project “Shakti” targeting the base of the population pyramid: rural poor.

Questions (No plagiarism allowed):

Imagine you are the CEO of Hindustan Unilever: How can you make a healthy profit selling soaps/detergents/sweets to the very poor? In what ways could you improve the lives of the very poor (especially women) while at the same time making money?
*Address the above questions and provide realistic arguments that will also support sustainability overall.

Suggested reading:
“Serving the world’s poor, profitably” CK Prahalad and A Hammond. Harvard Business Review September 2002.
-Building Wealth by the Penny
https://www.hul.co.in/sustainable-living/

Explanation / Answer

It is rightly said that MNCs can earn tremendous profit by targeting the poorer section of the society too. HUL being the market leader of FMCG segment in India can chalk out a plan with dual focus that is to improve the life of the people by providing them qualitative product along with a standard profit margin. India has population of more than 1 billion so the size of market is quite large and it has to be keep in mind that around 50% population of India living near the poverty line. HUL should develop products in soap, detergent etc which are demanded more by the poorer segment of the people. Everyone knows that quality of a product drive the price and the rich people can afford both. The quality of the product can be slighly lowered so that production cost can be minimized. Advertising in the same way as being done for targeting rich people won't work in targeting poor people. The positive sign for HUL in this sphere is that it can endorsed product by the local celebrity or influencer who normally charged less. In this way HUL can cut the advertisment and publicity cost.Initially HUL will not make more profit because it cannot charge more to poor.When market will be enlarged it can avail the economy of scale and increase the revenue by decresing the price.

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