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ServingtheWorld’sPoor,ProfitablybyC.K.PrahaladandAllenHammondReprintr0209cHBRCaseStudyr0209aGrowingforBrokePaulHempHBRatLarger0209bCruciblesofLeadershipWarrenG.BennisandRobertJ.ThomasBigPicturer0209cServingtheWorld’sPoor,ProfitablyC.K.PrahaladandAllenHammondTheCurseoftheSuperstarCEOr0209dRakeshKhuranaTakingtheMysteryOutr0209eofInvestorBehaviorKevinP.CoyneandJonathanW.WitterThreeQuestionsYouNeedtoAskr0209fAboutYourBrandKevinLaneKeller,BrianSternthal,andAliceTyboutPricingandthePsychologyr0209gofConsumptionJohnGourvilleandDilipSomanBestPracticer0209hWhatMakesGreatBoardsGreatJeffreyA.SonnenfeldToolKitr0209jABetterWaytoDeliverBadNewsJean-FrançoisManzoniSeptember2002onsiderthisbleakvisionoftheworld15yearsfromnow:Theglobaleconomyrecoversfromitscurrentstagnationbutgrowthremainsanemic.Deflationcontinuestothreaten,thegapbetweenrichandpoorkeepswidening,andincidentsofeco-nomicchaos,governmentalcollapse,andcivilwarplaguedevelopingregions.Terrorismremainsaconstantthreat,divertingsignificantpublicandprivateresourcestosecurityconcerns.Opposi-tiontotheglobalmarketsysteminten-sifies.Multinationalcompaniesfinditdifficulttoexpand,andmanybecomeriskaverse,slowinginvestmentandpull-ingbackfromemergingmarkets.Nowconsiderthismuchbrightersce-nario:Drivenbyprivateinvestmentandwidespreadentrepreneurialactivity,theeconomiesofdevelopingregionsgrowvigorously,creatingjobsandwealthandbringinghundredsofmillionsofnewconsumersintotheglobalmarketplaceeveryyear.China,India,Brazil,and,gradually,SouthAfricabecomenewen-ginesofglobaleconomicgrowth,pro-motingprosperityaroundtheworld.Theresultingdecreaseinpovertypro-ducesarangeofsocialbenefits,helpingtostabilizemanydevelopingregionsandreducecivilandcross-bordercon-flicts.Thethreatofterrorismandwarre-cedes.Multinationalcompaniesexpandrapidlyinaneraofintenseinnovationandcompetition.Bothofthesescenariosarepossible.Whichonecomestopasswillbedeter-minedprimarilybyonefactor:thewill-ingnessofbig,multinationalcompaniestoenterandinvestintheworld’spoor-estmarkets.Bystimulatingcommerceanddevelopmentatthebottomoftheeconomicpyramid,MNCscouldradi-callyimprovethelivesofbillionsofpeo-pleandhelpbringintobeingamorestable,lessdangerousworld.Achievingthisgoaldoesnotrequiremultination-alstospearheadglobalsocialdevelop-mentinitiativesforcharitablepurposes.Theyneedonlyactintheirownself-interest,forthereareenormousbusi-nessbenefitstobegainedbyenteringdevelopingmarkets.Infact,manyin-novativecompanies–entrepreneurialoutfitsandlarge,establishedenterprisesalike–arealreadyservingtheworld’spoorinwaysthatgeneratestrongrev-enues,leadtogreateroperatingefficien-cies,anduncovernewsourcesofinno-vation.Forthesecompanies–andthosethatfollowtheirlead–buildingbusi-nessesaimedatthebottomofthepyr-4Copyright©2002byHarvardBusinessSchoolPublishingCorporation.Allrightsreserved.ServingtheWorld’sPoor,ProfitablyBigPictureCbyC.K.PrahaladandAllenHammondImprovingthelivesofthebillionsofpeopleatthebottomoftheeconomicpyramidisanobleendeavor.Itcanalsobealucrativeone.amidpromisestoprovideimportantcompetitiveadvantagesasthetwenty-firstcenturyunfolds.Bigcompaniesarenotgoingtosolvetheeconomicillsofdevelopingcoun-triesbythemselves,ofcourse.Itwillalsotaketargetedfinancialaidfromthede-velopedworldandimprovementsinthegovernanceofthedevelopingnationsthemselves.Butit’scleartousthatpros-peritycancometothepoorestregionsonlythroughthedirectandsustainedinvolvementofmultinationalcompa-nies.Andit’sequallyclearthatthemulti-nationalscanenhancetheirownpros-perityintheprocess.UntappedPotentialEveryoneknowsthattheworld’spooraredistressinglyplentiful.Fully65%oftheworld’spopulationearnslessthan$2,000eachperyear–that’s4billionpeople.Butdespitethevastnessofthismarket,itremainslargelyuntappedbymultinationalcompanies.Thereluc-tancetoinvestiseasytounderstand.Companiesassumethatpeoplewithsuchlowincomeshavelittletospendongoodsandservicesandthatwhattheydospendgoestobasicneedslikefoodandshelter.Theyalsoassumethatvari-ousbarrierstocommerce–corruption,illiteracy,inadequateinfrastructure,currencyfluctuations,bureaucraticredtape–makeitimpossibletodobusinessprofitablyintheseregions.Butsuchassumptionsreflectanar-rowandlargelyoutdatedviewofthedevelopingworld.Thefactis,manymultinationalsalreadysuccessfullydobusinessindevelopingcountries(al-thoughmostcurrentlyfocusonsell-ingtothesmallupper-middle-classseg-mentsofthesemarkets),andtheirexperienceshowsthatthebarrierstocommerce–althoughreal–aremuchlowerthanistypicallythought.More-over,severalpositivetrendsindevelop-ingcountries–frompoliticalreform,toagrowingopennesstoinvestment,tothedevelopmentoflow-costwirelesscommunicationnetworks–arereducingthebarriersfurtherwhilealsoprovidingbusinesseswithgreateraccesstoeventhepoorestcityslumsandruralareas.Indeed,oncethemisperceptionsarewipedaway,theenormouseconomicpotentialthatliesatthebottomofthepyramidbecomesclear.Taketheassumptionthatthepoorhavenomoney.Itsoundsobviousonthesurface,butit’swrong.Whileindi-vidualincomesmaybelow,theaggre-gatebuyingpowerofpoorcommuni-tiesisactuallyquitelarge.Theaveragepercapitaincomeofvillagersinrural