Business Case Studies, Executive Interviews, Ravi Ramamurti on Bottom of the Pyramid

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Executive Interviews: Interview with Ravi Ramamurti on Bottom of the Pyramid
November 2008 - By Dr. Nagendra V Chowdary


Dr. Ravi Ramamurti
CBA Distinguished Professor of International Business & Strategy,
and Director of the Center for Emerging Markets at Northeastern University.


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    That said, one should not discount the significance of important social or environmental trends. On the social front, consider, for instance, the implications of an aging demography in Europe, North America, Japan and even in China. India, on the other hand, is expected to have a growing population and an expanding labor force for several more decades. Thus, the effect of demographics will be quite different in different countries. The aging consumer in the West will present one set of opportunities and threats to firms, while the explosion of young, up-and-coming consumers in countries like India and Mexico will present another.

    Similarly, in terms of the natural environment, there is now a strong 'green' movement not only in Europe and Japan but also in the US. This is likely to produce a string of new technologies and products, and bring about a whole new industries designed to minimize the carbon footprint of production, distribution, consumption, and post-consumption disposal. Companies in India may feel less affected by this trend, because India's official stance has been that rich countries are responsible for spoiling the environment and should therefore lead in its clean up. However, enlightened Indian firms will recognize that the global 'green' trend could create opportunities for them as well, in India and around the world. Suzlon Energy is a good illustration: wind energy makes great sense in India, for well-known reasons, and through its imaginative strategy Suzlon has found a way to emerge as one of the world's top-5 wind energy companies.

    As for the mismatch observed in the McKinsey study between action to address observed trends and results, one possible explanation is that responding to long-term trends does not yield high returns in the short run. Thus, while 'green technologies' may be a sound investment in the future, firms may find that the payoff from such investments comes slowly, because the adoption of new technologies usually follows an S-shaped curve.

    On the whole, therefore, I don't find McKinsey's findings particularly surprising or alarming.

  • Do you foresee an increasingly decreasing role of multilateral international bodies like, WTO (with the rise of regional and bilateral trade agreements and perennial showdown at recent meetings, including impasse at Doha round of talks), UNO (with private sector assuming a great role at humanitarian activities for instance, Bill and Melinda Gates Foundation, Clinton Global Initiative, etc., and increasing role of Social Entrepreneurship Initiatives and Microfinance Initiatives), the IMF and the World Bank?
    Yes. Multilateral institutions like the WTO are on the wane, not because they have become less useful but because the US no longer stands behind them the way it did in earlier decades. On trade, for instance, many countries, including the US, have become enamoredwith bilateral deals and are soft-pedaling the Doha Round of multilateral talks. India, too, is beginning to push for bilateral deals, like the one just concluded with ASEAN. As I said earlier, there is a conflict between the desire of countries to trade with other countries and their willingness to cede some of the sovereignty necessary to manage the resulting interdependence. Countries feel that bilateral deals give them greater control of their own destiny. But, as Jagdish Bhagwati and others have argued, in the long run multilateralism is preferable, because it results in simpler rules and fewer distortions.

    The rise of NGOs, on the other hand, does not undermine multilateral institutions, because there is enough work for everyone. Development is such a big challenge and governments have proven to be so incompetent at doing their part that we should be delighted to have more hands on deck. This will result in healthy competition among NGOs for funds, clients, and public support in areas such as healthcare, micro-lending, and education. NGOs can also give government departments a bit of competition, thereby exposing governmental inefficiencies and poor standards of service and turning public monopolies into potentially competitive markets. This has to be good for the average citizen.

  • What according to you is the new economic consensus and the new business order? Do you see the rise of business diplomacy? Do you see a greater role for government in business, positively of course?
    This issue comes up for heated debate every few years. It comes to the fore whenever there is an economic crisis, such as the Enron scandal, the dotcom bubble, or the current subprime and credit crisis in the US. Where simple greed and corruption on the part of firms or senior managers are involved, all will agree that the guilty should be punished. But such crises often also lead to broader soulsearching about how capitalism works, about government's role in it, and the obligations of business to society. A common question is whether firms should be accountable only to their shareholders or they should be accountable to all stakeholders, including customers, employees, and the communities in which they operate? The answer to this question has spanned the full range from Milton Friedman's famous view that "the social responsibility of business is to make a profit," to the opposite view that companies exist no more for shareholders than for other stakeholders. In between are people who believe that managers should 'balance' the competing interests of stakeholders and do what is best for society as a whole, whatever that means.At the end of the day, I believe that firms should pursue their enlightened self interest. This means thinking long term rather than short term. It means taking account of the needs and obligations to all stakeholders, not just shareholders. It means doing what is right, rather what one can get away with, and so on. None of this is inconsistent with long run growth and profitability and therefore with earning returns for shareholders.

1. Bottom of the Pyramid Case Study
2. ICMR Case Collection
3. Case Study Volumes

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