I remember back in the days, whilst an MBA student at the University of Botswana writing an essay based on the work of a reknown marketer, C.K.Prahalad. The essay was entitled: The Market/ Wealth at Bottom of the Pyramid. This is a very accurate observation, especially in the context of developing countries.
If you take a country like Botswana, it's only a few who can be characterised as rich. The fallacy for a long time has been that it's only the rich who can afford to buy significant amount of merchandise; hence companies, usually, in doing their market surveys tend to concentrate on potential disposable incomes. But, you see there are very few rich people in developing countries, as earlier pointed out. On aggregate, therefore, consumption by the rich is negligible. Besides, we also learn in economics that rich people have a low marginal propensity to consume.
In a nutshell, to succeed in a developing country like Botswana, location is very important. Specifically, you ought to locate your business nearer to the lower income groups. These are many, and their marginal propensity for consumption is higher. Look at companies like Choppies Stores. I remember in 2004 there were a small outlet situated next to the Botswana Meat Commission in Lobatse. And, they had been trading on that location for several years before then. In fact, I bet, most of their revenues might have been coming from selling basic food items mealie-meal, sugar and samp to the BMC kitchen. But, once they moved out and started operating from underpriviledged sections of the community, their growth became phenomenal.
We can learn a lot from Choppies. First, is that the poor can bring a lot of business, because of numbers. Reciprocally, and secondly, the poor do not need aid. Aid tends to create dependency and, in fact, does not lead to economic growth. What is needed are opportunities. And, still on the Choppies story, I am sure the store does employ a lot of people from the communities in which it is operating.
If you take a country like Botswana, it's only a few who can be characterised as rich. The fallacy for a long time has been that it's only the rich who can afford to buy significant amount of merchandise; hence companies, usually, in doing their market surveys tend to concentrate on potential disposable incomes. But, you see there are very few rich people in developing countries, as earlier pointed out. On aggregate, therefore, consumption by the rich is negligible. Besides, we also learn in economics that rich people have a low marginal propensity to consume.
In a nutshell, to succeed in a developing country like Botswana, location is very important. Specifically, you ought to locate your business nearer to the lower income groups. These are many, and their marginal propensity for consumption is higher. Look at companies like Choppies Stores. I remember in 2004 there were a small outlet situated next to the Botswana Meat Commission in Lobatse. And, they had been trading on that location for several years before then. In fact, I bet, most of their revenues might have been coming from selling basic food items mealie-meal, sugar and samp to the BMC kitchen. But, once they moved out and started operating from underpriviledged sections of the community, their growth became phenomenal.
We can learn a lot from Choppies. First, is that the poor can bring a lot of business, because of numbers. Reciprocally, and secondly, the poor do not need aid. Aid tends to create dependency and, in fact, does not lead to economic growth. What is needed are opportunities. And, still on the Choppies story, I am sure the store does employ a lot of people from the communities in which it is operating.
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