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Last Updated: Friday, 28 January, 2005, 09:55 GMT
Are you ready for Globalisation 2.0?
By Tim Weber
Business Editor, BBC News website, in Davos

ApproTec's 'Money maker' pump
ApproTec's pump has proved to be a true money-maker
Would you run a business and ignore five billion potential customers? The fact is, many businesses do.

Janet was in her early forties when she lost her husband. Farming her little plot of land in Western Kenya, she earned about $25 a month.

Enough to feed her six children. Hardly enough to send them to school or pay for proper healthcare.

Eight years on she is making $8,000 a year, employs five workers, all her children will go to college and health

worries are a thing of the past.

It was not a big aid handout that helped Janet, but six months of hard scrabble until she could afford a $80 micro-irrigation pump, powered through a treadmill.

It increased her farming yield more than five-fold, and the money started coming in.

Return on investment = 20:1

"We call this pump 'the money-maker' and have sold thousands of it," says Nick Moon, co-founder of ApproTec, which designed it in Kenya and is licensing it locally for production.

ApproTec specialises in inventing or designing mass-market low-cost machines that are tailored for the region.

Admittedly, ApproTec is not profitable. But for every $1,000 donated to the company, local firms generate more than $20,000 in new profits and wages, claims Mr Moon.

Not a bad return on investment. Even in the short-term it easily beats spending aid money on food handouts.

Globalisation 2.0

Targeting the poor also works for companies that have to make a profit.

Until a few years ago, some 80% of the world's population - about 5 billion people - were well below the radar screen of big business, says CK Prahalad, professor for business administration at the University of Michigan.

Kenya has 30 million people and three million cell phone users - but only 200,000 households that have electricity
Rory Stear, Freeplay Energy
But nowadays "for a large company, this is not an opportunity they can walk away from," he says.

For consumers in developing regions it means both better access to quality products, and more opportunities to strike out on their own.

"Call it Globalisation 2.0, if you want," says Professor Prahalad, adding that "tailoring products for [poor] consumers will be a huge source of innovation".

Mobile power

It can be a win-win situation. Across the poorest regions of Africa and South Asia telecoms operators are rolling out mobile phone networks and making a tidy profit.

Their customers, meanwhile, reap their own benefits, by checking out commodity prices or connecting with business partners or family.

Woman using mobile phone in Senegal
Mobile companies can ring up profits in poorer countries
In Nigeria, the average mobile phone generates $55 (29.15) in revenue every month. In Rwanda and Mozambique, two of the world's poorest nations, it is $20 (10.60).

It's not that Africans are mobile phone crazy. Rather, many phone owners make money by reselling airtime to their local communities.

And here is the opening for the next profit niche with a social purpose, says Rory Stear of Freeplay Energy, the company that develops and sells 'wind-up' energy generators best known in the 'wind-up radio'.

"Kenya has 30 million people and three million cell phone users - but only 200,000 households that have electricity," he says.

"People mail their mobile phones to relatives with electricity at home just to recharge them... Now think of the possibilities of selling an energy solution together with a telecoms partner," says Mr Stear.

In this case there would be four winners - the mobile phone users, the telecoms firms, Freeplay, and indirectly the Freeplay Foundation, which distributes wind-up radios to refugees, for example, and to children that are heads of their household because both parents have died, most likely of Aids.

'At the bottom of the pyramid'

The key to the success of globalisation 2.0 is the underlying hard-nosed business case.

Mumbai slum
Slum-dwellers may be below the breadline, but they're still buyers
The people at the "bottom of the pyramid" - the poor - have just as much aspiration, brand and fashion consciousness as consumers in industrialised countries, says Professor Prahalad.

Don't be surprised if they make surprising choices.

In India, in Mumbai's largest slum, there is no clean water. But 90% of households have invested in a colour television or at least a radio.

And you have to understand that these 5 billion people do not have uniform demands. You have to tailor your product for each segment of the market, says Professor Prahalad.

Making the business case

Rajendra Pawar of India's NIIT Group proves the point. He has three different business models, rolled out in 37 countries.

His enterprise provides IT training - for $2 (1.06) an hour to young adults in urban areas; for 30 cents an hour when teaching computer skills in schools; and for 10 cents an hour when using "hole-in-the-wall" computers to provide elementary education for six to 14-year-olds that live in slums and have never seen the inside of a school.

Such projects, and any sales pitch aimed at the bottom of the pyramid are "not charity," says Professor Prahalad.

And anyway, he adds: "Don't call these people poor, call them consumers."


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