Business Models at the Bottom of the Pyramid : Leveraging Context in Undeveloped Markets

Current mainstream theories of business models neither explain nor propel social enterprises serving 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. Through interviews with 30 practicing entrepreneurs selling distributed electricity directly to BoP consumers, we derive a new framework of business models for the BoP that emphasizes 1) a market linkage between the customer and the economic activity generated from use of the product; 2) embeddedness of the venture's offering into the consumer's social network, daily habits, mental models, and product constellations; 3) pricing based on affordability; 4) growth through replication, typically via franchise; 5) distribution with key partners, social networks, or venture-constructed dedicated avenues; 6) and integration of the influences of government regulation. This framework recognizes the venture's context to leverage existing systems into its business model, with implications for normative, activity system, and choice perspectives on business model theories. BoP markets are undeveloped, with little competition or infrastructure. With further research, several of the concepts proposed in this framework might also apply to business models in other BoP sectors and in developed, mature, competitive markets