Last year (2002), Prahalad and Hammond offered a thought provoking Harvard Business Review article that, in effect, provided a new perspective of the role of MNCs in assisting poverty areas (where the traditional view often proffers charity). These authors suggested that if MNCs were willing to consider investing in the world's poorest markets, they potentially could increase their own revenue, while helping to reduce poverty. In essence, this should provide a win-win situation for both the MNC and those in the low-end of the economic scale. Prahalad and Hammond pointed out several ways that some of the risk for the MNC operating in such low income markets could be reduced. For example, the individual firms could enter these markets via partnerships or consortia. Such efforts potentially could create jobs and reduce poverty in a region while simultaneously providing an expanding market for MNCs.

On the surface, the argument may seem unrealistically simplistic and would likely require a number of firms to make similar investments. However, it does suggest an important rationale for more active private sector involvement in poorer markets. And, clearly, shareholders should be more supportive of such an approach (that offers a potential for profitability) as opposed to increased "charitable" donations.

While, as Prahalad and Hammond suggest, it is clearly possible for the MNC to develop markets, often there is an overwhelming backdrop of corruption and public "fears" that need to be considered. Unfortunately, Africa provides a recent example of both. In a recent issue of African Business, it was reported that fifty-five of the "...world's poorest countries" scored at the lower end of Transparency International's 2001 Corruption Perceptions Index (CPI) and that Nigeria and Uganda were at the bottom along with Bangladesh. It is small wonder that fears of corrupt governments have tended to reduce the investment potential in some markets.

At the same time, fears of new technology and scientific breakthroughs have likely produced some additional barriers to potential investment in some high poverty regions. Perhaps the best example was Zimbabwe, Mozambique and Zambia's refusal to accept food aid in 2002, if it came from the U.S. and contained genetically modified seeds. This was at a time when more than 15 million people in Southern Africa were "...facing starvation." Ultimately, all but Zambia finally accepted the grain. The Zambian president reportedly stated that "Simply because my people are hungry is not justification to give them poison."

These illustrate the sort of barriers that MNCs might experience in some of the poverty ridden markets. This must be taken into consideration when selecting locations for the type of entry that Prahalad and Hammond have suggested.

In fact, one could develop a very extensive list of "risks and concerns" about developing an entry strategy for the poorer markets of the world (and even for entering poorer markets in developed countries). However, with the promise of realistic levels of profits as an incentive, the growing competition and diminished growth opportunities in many "richer" markets, and the calls for MNCs to act more proactively in addressing social concerns, the challenge offered by Prahalad and Hammond should be strongly considered. 

Marketing product or services to the various high poverty markets, whether in Africa, Asia, Eastern Europe or more developed markets, such as the United States, requires some unique decision marking for MNCs. Typically, MNCs are accustomed to competing on innovation and performance rather than basic need fulfillment. Further, special considerations beyond the traditional market entry measures are required. One is reminded that in the article, "The End of Corporate Imperialism," Prahalad and Lieberthal caution MNCs not to view entry into the big emerging markets (China, India, Brazil, etc.) as a way to increase sales of existing products or to squeeze profits out of "sunset products." A different mindset is required; one that is clearly focused on meeting the unique demands of these new low-income consumers in cost-effective ways. However, is the need for a new mindset only a managerial issue, or is it also an academic one?

One could argue that this issue demands new theoretical approaches to market entry and  he enumeration of critical variables influencing market entry in this situation. However, can academics bring to the table that may not only assist in managerial action but may provide for theoretical extension and empirical verification (if the newly derived context provides for theoretically founded modifications to existing theoretical paradigms as opposed to only contextual adjustments). Simply stated, do our existing theories apply to the current context? Or, are theoretical extensions, modifications, or new theories warranted? How can academics approach this issue to provide relevant, theoretically sound, advice to practitioners? 

Central to the MSI/JMR Special Issue is the simple concept of making our research relevant to practitioners. As practitioners are faced with the issue of marketing to the poorest in the world, what insights, based upon strong theories, can we provide?
 

Nevin, Tom. 2002. Nigeria Most Corrupt in Africa - TI. African Business. January.

Prahalad, C.K. and Allen Hammond. 2002. Serving the World's Poor Profitably. Harvard Business Review. November-December. 48-57.

Prahalad, C.K. and Kenneth Lieberthal. 1998. The End of Corporate Imperialism. Harvard Business Review. July-August. 69-79.