The Untapped, $5 Trillion Market

C. K. Prahalad, the University of Michigan strategy guru and author of the best seller “The Fortune at the Bottom of the Pyramid,” has lately taken some flack for his have-it-both-ways proposition that multinational corporations could alleviate global poverty while boosting their bottom lines. Critics like Aneel Karnani, also of the University of Michigan, argue that the bottom of the pyramid is smaller than Prahalad has claimed and far less lucrative.

In an interview for Fast Company’s March “Fast 50” issue, Prahalad insisted he hadn’t overestimated the size of the BOP. Now he’s got some hard data to back up his claim.

According to a report released this morning by the IFC (the private sector arm of the World Bank Group) and the World Resources Institute, 4 billion people who live in “relative poverty” have purchasing power that amounts to a $5 trillion market. The report, The Next 4 Billion, uses income and expenditure data from household surveys to measure the size of the market at the very base of the economic pyramid. That’s a first.

The report defines those who live at the base of the pyramid as having incomes below $3,000 in “local purchasing power” ranging from less than $3.35 a day in Brazil to $1.56 in India. In a classic bit of understatement, the report politely characterizes the $5 trillion BOP market as “underserved.”

No doubt, some experts will continue to squabble over the numbers. But perhaps The Next 4 Billion, which is loaded with business case studies, will inspire at least a few big companies to at last understand that the BOP market could well be their next growth opportunity.