Cognitive mapping the topic of the bottom of the pyramid (BOP)

Cognitive mapping the topic of the bottom of the pyramid (BOP)

Joseph Kim-keung Ho

Independent Trainer

Hong Kong, China

Abstract: The topic of the bottom of the pyramid (BOP) in the subject of Business Management is complex. By making use of the cognitive mapping technique to conduct a brief literature review on the bottom of the pyramid topic, the writer renders a systemic image on the topic of the bottom of the pyramid. The result of the study, in the form of a cognitive map on the bottom of the pyramid, should be useful to those who are interested in the topics of cognitive mapping, literature review and the bottom of the pyramid.

Key words: The bottom of the pyramid (BOP), cognitive mapping, literature review

Introduction

As a topic in Business Management, the bottom of the pyramid (BOP) is complex. It is thus useful to employ some learning tool to conduct its study, notably for literature review purpose. For a teacher in research methods, systems thinking and management, the writer is specifically interested in finding out how the cognitive mapping technique can be employed to go through a literature review on  the bottom of the pyramid. This literature review exercise is taken up and reported in this article.

On the cognitive mapping exercise for literature review

Literature review is an important intellectual learning exercise, and not just for doing final year dissertation projects for tertiary education students. On these two topics of intellectual learning and literature review, the writer has compiled some e-learning resources. They are the Managerial intellectual learning Facebook page and the Literature on literature review Facebook page. Conducting literature review with the cognitive mapping technique is not novel in the cognitive mapping literature, see Eden and Simpson (1989), Eden, Jones and Sims (1983), Open University (n.d) and the Literature on cognitive mapping Facebook page. In this article, the specific steps involved in the cognitive mapping exercise are as follows:

Step 1: gather some main points from a number of academic journal articles on The bottom of the pyramid. This result in the production of a table (Table 1) with the main points and associated references.

Step 2: consolidate  the main points from Table 1 to come up with a table listing the cognitive map variables (re: Table 2).

Step 3: link up the cognitive  map variables in a plausible way to produce a cognitive map (re: Figure 1) on the topic under review.

The next section applies these three steps to produce a cognitive map on the bottom of the pyramid.

Descriptions of cognitive map variables on the bottom of the pyramid topic

From the reading of some academic articles on The bottom of the pyramid, a number of main points (e.g., viewpoints, concepts and empirical findings) were gathered by the  writer. They are shown in Table 1 with explicit referencing on the points.

Table 1: Main points from the bottom of the pyramid literature and referencing

Main points from the bottom of the pyramid literature	Referencing
Point 1: "Since the publication of CK Prahalad’s HBR article, and bestselling book (Prahalad, 2006; Prahalad and Hammond, 2002), an increasing number of scholars have turned their attention to understanding markets as a means to alleviate poverty and engaging the poor in economic life. The importance of markets and how they are performed is thought to be central to making better and more inclusive societies and to improving the lives of those at the bottom of pyramid (BoP)".	Mason, K. and R. Chakrabarti. 2017. "Markets and marketing at the bottom of the pyramid" Marketing Theory 1-10, Sage (DOI: 10.1177/1470593117702286).
Point 2: "The economic essentialist view of BoP markets defines them in terms of consumers living on less than US$2 a day. This definition of poverty becomes situated in low-wage, developing economies such as the BRICs: Brazil, Russia, India, China (Parvin, 2013; Prahalad, 2006). In contrast, adopting a market studies approach, the sociopolitical aspects of BoP markets are foregrounded and a new assemblage of ‘facts’ needs to be taken into account: the social relations of people at the BoP (Abdelnour and Branzei, 2010), the influences of politics and policy on BoP markets (Faria and Hemais, this issue) and the conceptualisation and problematisation of the economic in relation to others become key. This positions BoP markets as a relative and relational construct".	Mason, K. and R. Chakrabarti. 2017. "Markets and marketing at the bottom of the pyramid" Marketing Theory 1-10, Sage (DOI: 10.1177/1470593117702286).
Point 3: "Social enterprises serve distributed electricity to the bottom of the world’s economic pyramid (BoP), where 4 billion people live on less than US$2 per day and 1.6 billion lack access to electricity. Current mainstream theories of business models do not fully explain the logic by which these ventures create and capture value".	Ladd, T. 2017. "Business models at the bottom of the pyramid: Leveraging context in undeveloped markets" The International Journal of Entrepreneurship and Innovation 18(1), Sage: 57-64.
Point 4: "The World Resources Institute (2007) defines bottom of the pyramid (BOP) as those with under $3000 in annual local purchasing power, which comprises 4b people around the world. Others define BOP as those living on less than $2 a day, covering nearly half the world’s population (Martin and Hill, 2012). While these measures are useful for identifying the neediest across the world, such empirical measures exclude people living in developed nations where poverty exists on a large scale".	Piacentini, M. and K. Hamilton. 2013. "Consumption lives at the bottom of the pyramid" Marketing Theory 13(3), Sage: 397-400.
Point 5: "For poor people living in consumer culture, a real issue emerges in relation to coping with limited economic resources. Various studies of low-income consumers have found that social capital is an important resource to improve quality of life, a rich source of support, information and guidance (Hill and Stephens, 1997) and a way to help navigate the welfare system (Hill, 2001). In this sense, social capital is leveraged in ways that facilitate productive engagement with marketplace (commercial and non-commercial) institutions".	Piacentini, M. and K. Hamilton. 2013. "Consumption lives at the bottom of the pyramid" Marketing Theory 13(3), Sage: 397-400.
Point 6: "...while initiatives aimed at facilitating entrepreneurial activity benefited the relatively more privileged members of a farming community, as the state reducing its role (intervention), smaller scale farmers felt even more economic marginalisation. A major risk of the BOP perspective is therefore the way poverty is ‘reconceptualised as a problem that can be solved by market mechanism’ and consequently the underlying causes of poverty remain unaddressed".	Piacentini, M. and K. Hamilton. 2013. "Consumption lives at the bottom of the pyramid" Marketing Theory 13(3), Sage: 397-400.
Point 7: "On the one hand, as has been shown in the context of non-BOP markets (Hall et al., 2009), MNCs have the potential to act as market makers, maximising the potential of BOP markets. But on the other hand, too often, MNCs have also been shown to extract surplus value and inhibit upgrading in ways that are detrimental to development".	Faulconbridge, J.R. 2013. "Situated bottom of the pyramid markets and the multinational corporation" Marketing Theory 13(3), Sage: 393-396.
Point 8: "One of the fundamental questions facing those seeking to better understand BOP markets relates to the need, to use the language of Araujo (2007), to reconnect marketing to markets and to better understand what leads to the emergence of stabilised conditions of demand (Slater, 2002). When considering the role of MNCs in BOP markets, such questions are important as part of evaluation of the pros and cons of the MNC as market maker or market maximiser".	Faulconbridge, J.R. 2013. "Situated bottom of the pyramid markets and the multinational corporation" Marketing Theory 13(3), Sage: 393-396.
Point 9: "..... major economies such as Brazil, Russia, India, China, and South Africa have large numbers of people living in poverty. This consumer group, known as the Base of the Pyramid (Bottom of the Pyramid or BoP), is comprised of the people who occupy the lowest rungs of the global economic pyramid. Those in this context live in poverty; they lack access to affordable products and services and the income with which to purchase them. Ultimately, the result is that the world’s poor have little in the way of tangible possessions. BoP consumers also struggle with access to basic resources, such as clean drinking water, affordable energy, and reliable transportation systems, all of which affect their consumption and the marketing opportunities in this context".	Beninger, S. and K. Robson. 2015. "Marketing at the base of the pyramid: Perspectives for practitioners and academics" Business Horizons 58, Elsevier: 509-516.
Point 10: "...there is tremendous opportunity to serve BoP consumers–an opportunity companies are gradually realizing. Current research has yet to reflect this growing interest in marketing to the BoP. Although there is a vast body of literature from the perspective of marketing in the developed world, there is limited research focused on marketing aimed at the world’s poorer consumers".	Beninger, S. and K. Robson. 2015. "Marketing at the base of the pyramid: Perspectives for practitioners and academics" Business Horizons 58, Elsevier: 509-516.
Point 11: "BoP consumers not only spend money on expensive goods, but also often wind up paying higher prices for goods–—sometimes as much as 100 times more than consumers not in the BoP (Prahalad & Hammond, 2002). This can be due to factors like an inability to access retailers with lower prices, limited time to compare prices, or reduced or inefficient distribution to poorer neighborhoods. Especially in BoP contexts, where people often live in remote areas, higher prices are simply a reality".	Beninger, S. and K. Robson. 2015. "Marketing at the base of the pyramid: Perspectives for practitioners and academics" Business Horizons 58, Elsevier: 509-516.
Point 12: "The concept of ‘fortune at the bottom of the pyramid’ has been extensively discussed in academic theory and practice in the corporate world. According to this proposition, there is a potential market at the bottom of the pyramid that firms can serve profitably while simultaneously helping to eradicate poverty".	Agnihotri, A. 2013. "Doing good and doing business at the bottom of the pyramid" Business Horizon 56, Elsevier: 591-599.
Point 13: ".... a win-win situation can be created by treating poor people not only as customers but more importantly as suppliers, producers, and/or employees. The benefit for both firms and poor people is comparatively higher in this scenario than when firms treat such individuals only as consumers. However, the pyramid base is not an equally important market for all firm types. For example, companies that provide clean drinking water encounter a more lucrative market at the bottom than firms providing tourism or entertainment services".	Agnihotri, A. 2013. "Doing good and doing business at the bottom of the pyramid" Business Horizon 56, Elsevier: 591-599.
Point 14: "The ‘poverty premium’ refers to the higher prices poor families pay for basic necessities like gas, electricity, and banking compared to average customers. The poverty premium in the United Kingdom was estimated at £1,170 in 2011, an increase well above the rate of inflation. This premium exists because people who do not have bank accounts do not obtain the advantages of discounts that average consumers secure when they pay utility bills with debit or credit cards. Since there is no real exploitation but rather a lack of certain additional features average consumers have, poor people can end up paying 10%—15% more for the same services".	Agnihotri, A. 2013. "Doing good and doing business at the bottom of the pyramid" Business Horizon 56, Elsevier: 591-599.
Point 15: "Most of the BoP research concentrates on estimating the BoP market and on summarizing case studies and firms’ alliances with different stakeholders. However, less research has been focused on how BoP projects are identified, planned and implemented, and on how firms formulate their business models, with articulated value propositions [7], [8]. Another aspect is that, if the poor in developing economies simply copy the resource-intensive consumption patterns of developed countries, global sustainable development will be compromised, because of the limiting carrying capacity of our planet".	Antūnez-de-Mayolo, C. 2012. "The Role of Innovation at the Bottom of The Pyramid in Latin America: Eight Case Studies" Procedia - Social and Behavioral Sciences 40, Elsevier: 134-140.
Point 16: "Market creation is fundamentally different from market entry. According to Simanis[14], even considering the BoP’s ´basket´ of compelling needs, the BoP is not actually a market. In order to ´create´ a market, firms should focus on products or services that could be ´embedded´ into the BoP consumers´ lives".	Antūnez-de-Mayolo, C. 2012. "The Role of Innovation at the Bottom of The Pyramid in Latin America: Eight Case Studies" Procedia - Social and Behavioral Sciences 40, Elsevier: 134-140.
Point 17: "According to the BoP literature, a BoP venture is a revenue-generating enterprise that either sells goods to (BoP-as-consumer) or sources products from (BoP-as-producer) those at the base of the pyramid, in a way that helps to improve the standard of living of the poor [6], [16]. A specific BoP venture can adopt either or both approaches".	Antūnez-de-Mayolo, C. 2012. "The Role of Innovation at the Bottom of The Pyramid in Latin America: Eight Case Studies" Procedia - Social and Behavioral Sciences 40, Elsevier: 134-140.

With a set of main points collected, the writer produces a set of cognitive map variables. These variables are informed by the set of main points from Table 1. These variables are presented in Table 2.

Table 2: Cognitive map variables based on Table 1

Cognitive map variables	Literature review points
Variable 1: Drivers of interest in the bottom of the pyramid	Point 1: "Since the publication of CK Prahalad’s HBR article, and bestselling book (Prahalad, 2006; Prahalad and Hammond, 2002), an increasing number of scholars have turned their attention to understanding markets as a means to alleviate poverty and engaging the poor in economic life. The importance of markets and how they are performed is thought to be central to making better and more inclusive societies and to improving the lives of those at the bottom of pyramid (BoP)". Point 9: "..... major economies such as Brazil, Russia, India, China, and South Africa have large numbers of people living in poverty. This consumer group, known as the Base of the Pyramid (Bottom of the Pyramid or BoP), is comprised of the people who occupy the lowest rungs of the global economic pyramid. Those in this context live in poverty; they lack access to affordable products and services and the income with which to purchase them. Ultimately, the result is that the world’s poor have little in the way of tangible possessions. BoP consumers also struggle with access to basic resources, such as clean drinking water, affordable energy, and reliable transportation systems, all of which affect their consumption and the marketing opportunities in this context". Point 10: "...there is tremendous opportunity to serve BoP consumers–an opportunity companies are gradually realizing. Current research has yet to reflect this growing interest in marketing to the BoP. Although there is a vast body of literature from the perspective of marketing in the developed world, there is limited research focused on marketing aimed at the world’s poorer consumers".
Variable 2: Improve intellectual understanding of the bottom of the pyramid	Point 2: "The economic essentialist view of BoP markets defines them in terms of consumers living on less than US$2 a day. This definition of poverty becomes situated in low-wage, developing economies such as the BRICs: Brazil, Russia, India, China (Parvin, 2013; Prahalad, 2006). In contrast, adopting a market studies approach, the sociopolitical aspects of BoP markets are foregrounded and a new assemblage of ‘facts’ needs to be taken into account: the social relations of people at the BoP (Abdelnour and Branzei, 2010), the influences of politics and policy on BoP markets (Faria and Hemais, this issue) and the conceptualisation and problematisation of the economic in relation to others become key. This positions BoP markets as a relative and relational construct". Point 3: "Social enterprises serve distributed electricity to the bottom of the world’s economic pyramid (BoP), where 4 billion people live on less than US$2 per day and 1.6 billion lack access to electricity. Current mainstream theories of business models do not fully explain the logic by which these ventures create and capture value". Point 4: "The World Resources Institute (2007) defines bottom of the pyramid (BOP) as those with under $3000 in annual local purchasing power, which comprises 4b people around the world. Others define BOP as those living on less than $2 a day, covering nearly half the world’s population (Martin and Hill, 2012). While these measures are useful for identifying the neediest across the world, such empirical measures exclude people living in developed nations where poverty exists on a large scale". Point 11: "BoP consumers not only spend money on expensive goods, but also often wind up paying higher prices for goods–—sometimes as much as 100 times more than consumers not in the BoP (Prahalad & Hammond, 2002). This can be due to factors like an inability to access retailers with lower prices, limited time to compare prices, or reduced or inefficient distribution to poorer neighborhoods. Especially in BoP contexts, where people often live in remote areas, higher prices are simply a reality". Point 12: "The concept of ‘fortune at the bottom of the pyramid’ has been extensively discussed in academic theory and practice in the corporate world. According to this proposition, there is a potential market at the bottom of the pyramid that firms can serve profitably while simultaneously helping to eradicate poverty". Point 14: "The ‘poverty premium’ refers to the higher prices poor families pay for basic necessities like gas, electricity, and banking compared to average customers. The poverty premium in the United Kingdom was estimated at £1,170 in 2011, an increase well above the rate of inflation. This premium exists because people who do not have bank accounts do not obtain the advantages of discounts that average consumers secure when they pay utility bills with debit or credit cards. Since there is no real exploitation but rather a lack of certain additional features average consumers have, poor people can end up paying 10%—15% more for the same services". Point 15: "Most of the BoP research concentrates on estimating the BoP market and on summarizing case studies and firms’ alliances with different stakeholders. However, less research has been focused on how BoP projects are identified, planned and implemented, and on how firms formulate their business models, with articulated value propositions [7], [8]. Another aspect is that, if the poor in developing economies simply copy the resource-intensive consumption patterns of developed countries, global sustainable development will be compromised, because of the limiting carrying capacity of our planet". Point 16: "Market creation is fundamentally different from market entry. According to Simanis[14], even considering the BoP’s ´basket´ of compelling needs, the BoP is not actually a market. In order to ´create´ a market, firms should focus on products or services that could be ´embedded´ into the BoP consumers´ lives".
Variable 3: Effective the bottom of the pyramid practices	Point 5: "For poor people living in consumer culture, a real issue emerges in relation to coping with limited economic resources. Various studies of low-income consumers have found that social capital is an important resource to improve quality of life, a rich source of support, information and guidance (Hill and Stephens, 1997) and a way to help navigate the welfare system (Hill, 2001). In this sense, social capital is leveraged in ways that facilitate productive engagement with marketplace (commercial and non-commercial) institutions". Point 6: "...while initiatives aimed at facilitating entrepreneurial activity benefited the relatively more privileged members of a farming community, as the state reducing its role (intervention), smaller scale farmers felt even more economic marginalisation. A major risk of the BOP perspective is therefore the way poverty is ‘reconceptualised as a problem that can be solved by market mechanism’ and consequently the underlying causes of poverty remain unaddressed". Point 13: ".... a win-win situation can be created by treating poor people not only as customers but more importantly as suppliers, producers, and/or employees. The benefit for both firms and poor people is comparatively higher in this scenario than when firms treat such individuals only as consumers. However, the pyramid base is not an equally important market for all firm types. For example, companies that provide clean drinking water encounter a more lucrative market at the bottom than firms providing tourism or entertainment services". Point 17: "According to the BoP literature, a BoP venture is a revenue-generating enterprise that either sells goods to (BoP-as-consumer) or sources products from (BoP-as-producer) those at the base of the pyramid, in a way that helps to improve the standard of living of the poor [6], [16]. A specific BoP venture can adopt either or both approaches".
Variable 4: Learn from the bottom of the pyramid practices	Point 7: "On the one hand, as has been shown in the context of non-BOP markets (Hall et al., 2009), MNCs have the potential to act as market makers, maximising the potential of BOP markets. But on the other hand, too often, MNCs have also been shown to extract surplus value and inhibit upgrading in ways that are detrimental to development". Point 8: "One of the fundamental questions facing those seeking to better understand BOP markets relates to the need, to use the language of Araujo (2007), to reconnect marketing to markets and to better understand what leads to the emergence of stabilised conditions of demand (Slater, 2002). When considering the role of MNCs in BOP markets, such questions are important as part of evaluation of the pros and cons of the MNC as market maker or market maximiser".

The next step is to relate the cognitive map variables to make up a cognitive map on the bottom of the pyramid. The cognitive map and its explanation are presented in the next section.

A cognitive map on the bottom of the pyramid and its interpretation

By relating the four variables identified in Table 2, the writer comes up with a cognitive map on the bottom of the pyramid, as shown in Figure 1.

These cognitive  map variables, four of them altogether, are related to constitute a systemic image of the bottom of the pyramid. The links in the cognitive map (re: Figure 1) indicate direction of influences between variables. The + sign shows that an increase in one variable leads to an increase in another variable while a -ve sign tells us that in increase in one variable leads to a decrease in another variable.  If there no signs shown on the arrows, that means the influences can be positive or negative.  For further information on the bottom of the pyramid, readers are referred to the Literature on the bottom of the pyramid Facebook page.

Concluding remarks

The cognitive mapping exercise captures in one diagram some of the main variables involved in the bottom of the pyramid. The resultant cognitive map promotes an exploratory way to study the bottom of the pyramid in a holistic tone. The experience of the cognitive mapping exercise is that it can be a quick, efficient and entertaining way to explore a complex topic such as the bottom of the pyramid in Business Management. Finally, readers who are interested in cognitive mapping should also find the article informative on this mapping topic.

Bibliography

1.      Agnihotri, A. 2013. "Doing good and doing business at the bottom of the pyramid" Business Horizon 56, Elsevier: 591-599.

2.      Antūnez-de-Mayolo, C. 2012. "The Role of Innovation at the Bottom of The Pyramid in Latin America: Eight Case Studies" Procedia - Social and Behavioral Sciences 40, Elsevier: 134-140.

3.      Beninger, S. and K. Robson. 2015. "Marketing at the base of the pyramid: Perspectives for practitioners and academics" Business Horizons 58, Elsevier: 509-516.

4.      Eden, C. and P. Simpson. 1989. "SODA and cognitive mapping in practice", pp. 43-70, in Rosenhead, J. (editor) Rational Analysis for a Problematic World, Wiley, Chichester.

5.      Eden, C., C. Jones and D. Sims. 1983. Messing about in Problems: An informal structured approach to their identification and management, Pergamon Press, Oxford.

6.      Faulconbridge, J.R. 2013. "Situated bottom of the pyramid markets and the multinational corporation" Marketing Theory 13(3), Sage: 393-396.

7.      Ladd, T. 2017. "Business models at the bottom of the pyramid: Leveraging context in undeveloped markets" The International Journal of Entrepreneurship and Innovation 18(1), Sage: 57-64.

8.      Literature on cognitive mapping Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/Literature-on-cognitive-mapping-800894476751355/).

9.      Literature on literature review Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.literaturereview/).

10. Literature on the bottom of the pyramid Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/Literature-on-the-bottom-of-the-pyramid-1922908507931276/).

11. Managerial intellectual learning Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/managerial.intellectual.learning/).

12. Mason, K. and R. Chakrabarti. 2017. "Markets and marketing at the bottom of the pyramid" Marketing Theory 1-10, Sage (DOI: 10.1177/1470593117702286).

13. Open University. n.d. "Sign graph" Systems Thinking and Practice (T552): Diagramming, Open University, U.K. (url address: http://systems.open.ac.uk/materials/T552/) [visited at April 10, 2017].

14. Piacentini, M. and K. Hamilton. 2013. "Consumption lives at the bottom of the pyramid" Marketing Theory 13(3), Sage: 397-400.