Alternative execution strategies to overcoming institutional voids and institutional distance in BoP markets

Abstract

Emerging markets are a great point of interest to multinational companies seeking to exploit new opportunities as they realise that catering to the rich domestic markets limits their opportunities, their potential and competitive advantage. Serving the consumers that are at the bottom of the economic pyramid (BoP) presents enormous opportunity but it also comes with its unique set of challenges. These challenges require an alternative business strategy, as companies entering these markets must develop new offerings designed to meet the specific requirements of servicing the BoP consumer. This report seeks to explore why companies operating in South Africa are entering the lower income markets, and will describe the challenges encountered both internally and externally, when operating in these markets. Ten interviews at six multinational companies based in South Africa were conducted to test the research propositions derived from the literature. The results concluded that companies enter the BoP markets in pursuit of growth. A variety of secondary factors also emerged. The data revealed that these companies have created innovative alternative execution strategies to overcome the challenges encountered in this market. The report offered a descriptive model of why companies enter the BoP market, and highlights how the challenges presented by the institutional voids and institutional distance were overcome.