Summary of the Article
The article gives information on how entrepreneurs can benefit immensely by investing in the informal sector, which normally is comprised of the poor people. Using case studies of companies that have set up operations in Brazil and Mexico……….
Prahalad details out the case of “Casas Bahia,” a family owned business started by Samuel Klein. Over the year and through investing into the poor people, the business was able to acquire and formal structure and developed to become the largest retail chain in Brazil, selling electronics, appliances and furniture……….
The author them proceeds to share the case of “Cemex,” a company operating in Mexico which has been able to tap into the power of microcredit to boost its cement sales. The company operates in similar ways as “Casas Bahia,” by giving poor people a chance to buy on credit while strictly monitoring them to……….
Identifying Social Problems
From the case study, various social problems stand out;
Lack of collateral: From the case study, it is evident that poor people lack collateral; hence they are barred from participating in the formal market, which demands that borrowers have collateral in order to get credit. B……….
Lack of Data: Another problem revealed by the case study is that there is simply not sufficient data about the savings, consumption and purchasing tendencies of poor people. As a matter of fact, governments and……….
The Business Model
Since the major problem facing low income households was low incomes such that their purchasing power was diminished, t…………
Access to credit
Measuring the Impact
As Prahalad points out, it is not difficult to measure the effects of investing in the poor so as to eradicate poverty while at the same time realizing profit. The investment initiatives and unique business models adopted by both Casas Bahia and Cemex yielded impacts that were visible for everyone to see……….