What does building mechanisms to drive BOP business success entail? The "Circular Model" that creates a virtuous cycle of growth is the key.

BOP business is gaining increasing attention as a method to simultaneously raise the living standards of low-income groups and generate corporate profits. It is considered highly significant within the context of the SDGs and is anticipated to be a rapidly growing market. Beyond social contribution, companies are showing growing interest in pursuing BOP business themselves, drawn by its potential to enhance corporate value and create new business opportunities.

On the other hand, it is also true that BOP business presents unique challenges distinct from business in developed countries, stemming from differences in culture, business practices, and economic structures. However, by examining successful BOP business models that have overcome these hurdles, we may gain insights applicable across various business scenarios. This time, we explore hints for future business success from the perspective: "Can BOP business models, which grow through collaboration with stakeholders using mechanisms like subscription services, provide insights for organizational and system development across various businesses?"

BOP Business: A Sustainable Business Model Driving Social Issue Resolution

BOP stands for "Base of the (Economic) Pyramid," referring to low-income consumers with annual incomes below $3,000. Currently, their number is estimated to be around 4 billion worldwide, primarily in developing countries, accounting for approximately 70% of the global population. Many live in rural areas far from urban centers, facing the "BOP penalty" where living costs are disproportionately high for low-income individuals. This includes walking hours to shop due to inadequate transportation, limited product choices, and high prices for food and daily necessities due to transportation costs.

BOP business, gaining attention as a sustainable business model that can promote developing countries' growth and significantly contribute to the global economy, is a business approach that provides products and services to solve various problems faced by the BOP segment, thereby contributing to improving local living standards. Its key characteristic is that it is not charitable work supporting developing countries, but rather an approach that tackles poverty issues with innovative and efficient business methods to develop markets, achieving both social contribution and corporate growth. It is also considered an effective means of achieving the SDGs, with expectations that it will improve not only poverty but also diverse issues concerning the health, welfare, and education of people in developing countries.

There are various benefits for companies engaging in BOP business. Being recognized as a company that creates social value through supporting developing countries can enhance brand image in the global market. Furthermore, expanding business in developing countries requires understanding religious precepts, ethnic customs, and values distinct from those in developed nations, and tailoring approaches accordingly. Simply selling existing products or services at lower prices does not necessarily work. Adapting to the unique circumstances of each country or region by devising new plans and innovations often fosters unprecedented, innovative ideas and business models.

The BOP segment, representing over half the world's population, is also referred to as the "Next Volume Zone"—a group poised to rise into the middle-income bracket due to rapid economic growth in developing nations. Building relationships and establishing trust with users in emerging and developing markets early through BOP business could yield significant future returns.

The key to BOP business success lies in creating sustainable systems tailored to the specific circumstances of each country or region.

With these characteristics in mind, let's examine key success factors for BOP business through representative case studies.

Case Study 1: Air Conditioner Subscription Service

A major air conditioner manufacturer launched a subscription service in Tanzania, East Africa, where many people cannot afford air conditioning due to economic reasons. This service allows users to access air conditioners without the initial cost burden. By implementing a system where users pay a fixed monthly fee via local mobile money and introducing highly energy-efficient air conditioners that keep electricity bills low, the company has increased its user base while also contributing to reduced environmental impact. Furthermore, by localizing services like installation and repairs through technical training, the company created jobs and improved service quality.

Case 2: Selling Low-Cost Single-Use Soap in Rural India

A UK-based consumer goods manufacturer sells single-use soap bars in rural India at prices affordable to low-income households. Concurrently, it promotes handwashing education in areas with poor sanitation to improve local health. The company created a system enabling rural women to sell the products as independent entrepreneurs, fostering female independence and social advancement.

Case 3: Contributing to Local Fisheries Development with Outboard Motors

A Japanese transportation equipment manufacturer was an early pioneer in BOP business, developing and selling outboard motors for fishing boats in emerging markets. They achieved success by designing outboard motors tailored to local needs and conditions, such as creating simple, robust structures that fishermen could repair themselves onboard during coastal fishing trips. Beyond mere sales, the company contributes to local fishery development by providing advice on fishing techniques, freshness preservation, processing methods, and sales strategies.

Let's summarize the key points from these three cases. To succeed in BOP business, it's crucial to lower the barrier to product use by setting prices affordable even for low-income groups. Subscription models, which reduce the initial cost burden, are also highly effective. Beyond cost benefits, for example, the air conditioner subscription service introduced in Case 1 ultimately returns the product to the company, reducing environmental pollution from disposal.

Furthermore, to make the business sustainable, it's vital to create economic and social mechanisms that encourage continued use, rather than ending with the sale. As seen in the examples, methods like enabling local people to sell and earn profits, or providing technical guidance for maintenance, are effective. Building such mechanisms leads to local job creation and income growth, forming the foundation for a better society.

Designing systems that enable BOP participation, improving not only income but also education levels, can help empower local people to become protagonists. This empowers them to cultivate the ability to envision their future—what they want to be and what kind of society they want to create. This capability could then connect to the development of products and services for a better society, led by local people themselves. These products and services could then benefit many more people... potentially creating a virtuous cycle. Couldn't this become a sustainable economic system, a "circular model for people and organizations"?

Of course, even in traditional business models where selling products and services to generate profit is the primary goal, companies often form partnerships with local people, resulting in positive impacts on society and the environment. What BOP business requires is a more proactive approach: building stronger relationships and jointly striving to realize a better society.

Applying BOP Business Mechanisms to Your Own Business

The key points for BOP business success can be applied more broadly to business as a whole.

As mentioned earlier, BOP businesses succeeding in developing countries have been crucial in creating mechanisms that foster local growth and enable profit through learning. This generates a virtuous cycle where not only does the business grow, but the entire region improves.

Such approaches can also yield positive effects in organizational management. Taken to an extreme, one approach might be to cut personnel or departments deemed "unprofitable" within an organization. However, instead of that, what if we considered that "the current organizational structure is not fully utilizing people's potential" and reviewed personnel placement and training systems? In fact, developing a "circular model" that prevents talent "loss" by equipping individuals with skills and knowledge that benefit both the company's growth and the person's interests may ultimately serve the company's long-term interests.

A key consideration here is how to maintain motivation. Technical training and awareness activities in BOP business can help people regain their motivation and ability to envision the future, which are often eroded by the harsh environment of poverty. Similarly, within organizations, providing opportunities for education and skill acquisition to effectively draw out an individual's drive and capabilities can strengthen the trust between the company and its people. This could create a virtuous cycle of growth where each person proactively considers and works to realize a better organization and a better way of doing business.

Furthermore, BOP businesses have demonstrated how tailoring services to the values and local circumstances of target demographics can generate innovative ideas and systems. Learning from these successes about the challenges and values held by people in different cultural and economic spheres—beyond those traditionally targeted by your company—can spark new business models. How to confront and resolve social issues and differences in values. Adopting this perspective should serve as a source of innovative thinking, not just for BOP business.

Even if your company isn't directly engaged in BOP business, learning about these cases and considering how to balance social contribution with profit generation is highly valuable. What kinds of products or experiences should be offered to solve social challenges? What mechanisms are necessary to sustain the business? The keys to success in BOP business are rich with insights for rethinking new business models and organizational structures.