Business models of non-MNC firms serving the BoP in South Africa

Abstract

As firms intend on entering low-income markets as a result of stagnation in developed economies, they face numerous organisational barriers within their firms and external that hinder entry and ensure continued success in these markets. In order to successfully serve these BoP consumers in emerging markets, new innovative business models are required; however there are entities that are currently serving the BoP successfully – these are Small and Medium Enterprises.The purpose of this study was to deepen our understanding of why small and medium sized businesses have been successful in low-income markets through an understanding of their business models and their competitive advantages over MNCs.The objective of this report, hence, was to explore the business models for firms that are currently serving the BoP successfully and what their competitive advantages are as compared to their MNC counterparts within the South African context. Using the grounded theory approach of building theory from data that offers a new perspective on the BoP for MNCs a framework resulted and was theorized from the data from interviews with owners of SMEs in the FMCG manufacturing domain. The BoP Blueprint is a framework that describes elements of business models of SMEs in the context of SME Fundamentals – basic business fundamentals and the Customer Core – focus on the customer. Eleven in-depth interviews were conducted with owners from 11 different companies to test the research questions that were derived from the literature.As a result of the grounded theory, no unique or innovative business models were discovered that made these SMEs successful contrary to the literature and the essence of the findings is that MNCs need to focus on fundamental business practises with the customer as the centre of their decisions when entering BoP markets.