A recent article in Ethical Corporation titled Social innovation – Giving the majority a stake discusses how Latin American companies are getting to grips with doing business with the low-income segment, i.e., with what the Inter-American Development Bank (IDB) calls the “majority market” of 360 million Latin Americans earning $9/day ($3,260 a year). This population segment is both deprived of access to opportunities for wealth creation and underserved by the products and services that effective markets provide.
The article also refers to a study conducted by Innovest Strategic Value Advisors, which creates a so-called Opportunities for the Majority (OM) Index of publicly traded firms operating in the Latin American and Caribbean (LAC) region for investors. The new index rates and ranks LAC companies based on their performance and positioning on critical OM issues with regard to four criteria: strategic governance, human capital, stakeholder capital and the environment. The study involved the review of 75 publicly traded firms in Brazil, Argentina, Chile, Colombia, El Salvador, Nicaragua, Jamaica, Peru, Trinidad & Tobago, Mexico and Honduras. The companies selected operate within the following sectors: finance, telecommunications and IT, infrastructure, homebuilding and consumer goods/retail.
The top performing firms are:
1) Bradesco (Brazil, finance)
2) Grupo ACP (Peru, finance )
3) Paralife (Mexico, finance)
4) Unibanco (Brazil, finance)
5) Cemex (Mexico, homebuilding)
6) Cajasur (Peru, finance)
7) Desarrolladora Homex (Mexico, homebuilding)
8) Grupo Nueva (Chile, homebuilding)
9) Farmacias SIMI (Mexico, consumer goods/retail)
10) Unilever (Mexico, consumer goods/retail)
As Oliver Balch explains in the Ethical Corporation article, the findings of the index throw up interesting trends:
First is the importance companies in the region place on the issue of low-income consumers. In more than four out of five cases, senior managers at the national companies surveyed by Innovest responded in person.
Another facet of the research is the regional and sectoral differences in business take-up. Companies in Mexico, Brazil and Peru stand out as leaders, in large part because of the size of their low-income populations. At a sectoral level, the finance industry also stands out above the rest. Latin America's microcredit providers have shown extraordinary innovation in accessing low-income consumers. Now such institutions are using their existing distribution networks to diversify into new products, most notably micro-insurance.
A third noteworthy trend is the leadership of national companies over their international peers. Micro-insurance firm Paralife in Mexico, Peruvian financial intermediary Cajasur and many of the other high performers in the index are local firms. With the bulk of their local market being low-income consumers, such firms have learned to search out opportunities among the “majority” by default. Multinational companies, by contrast, often lack the experience, the local relationships, the market understanding and often the vision to trouble themselves with poor customers.
Additional readings:
Social business – The bigger, the better Ethical Corporation, 16 April 2008 – Responsible companies can learn a lot from social entrepreneurs about selling to the poor, but first they must understand how their core business contributes to social and economic development.
Social innovation: Good for you, good for me Ethical Corporation, 10 April 2008 – Big firms are joining the queue to follow in Muhammad Yunus' footsteps by developing businesses designed to fix social ills.
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http://picasaweb.google.com/ConcreteForming/HomexOfMexicoHousingConstruction#
Posted by: Formwork | February 19, 2009 at 09:09 PM