Challenges and solutions for successful business linkages with the low-income segment

In the framework of their Business Linkages Series, in March 2009 the International Business Leaders Forum (IBLF), the International Finance Corporation (IFC) and Harvard's Kennedy School of Government organized a three-day roundtable dialogue in Jaipur, India, looking specifically at the challenges in forming business linkages with low-income communities as well as solutions for successful linkages. The seminar's report (pdf, 32 pages) explains how inclusive business models fall into 3 broad categories: buying from, distributing through, and selling to those at the so-called "base of the economic pyramid" (BOP). Furthermore, companies are working with low-income consumers, producers, and small and micro enterprises beyond their value chains, for ex. in broad-based education, health, and enterprise development efforts.

The report identifies 3 main categories of challenges in doing business with the low-income segment:

1. Operational challenges, which include securing internal commitment for linkage efforts within the firm, obtaining reliable, actionable information about BOP consumers, producers and other enterprises present in the market, and measuring the impact (especially the social impact), of any linkages that are formed.
2. Reputational and relationship management challenges, which include managing community expectations and reducing the economic dependence of local producers and small and micro enterprises on the business relationships they establish with the larger firm.
3. Systemic challenges, which include building the skills and capacity of small and micro enterprises at the BOP, improving their access to finance, and strengthening the regulatory or public policy environment.

The authors then go on to identify a comprehensive pattern of solutions to each of these challenges, including examples from business-led initiatives.

More information on the topic of business linkages:

In its issue brief on small and medium enterprises (SMEs), the WBCSD-SNV Alliance for Inclusive Business explains how governments can help alleviate poverty by focusing on SMEs and how larger corporations can help themselves by including SMEs in their value chains.

IBM / IFC Toolkit aimed at improving SME management - free business management information and training toolkit for small businesses and SMEs on accounting and finance, business planning, human resources, marketing and sales, operations, and information technology.

See also: Webcast: reaching the bottom billion through corporate supply and distribution chains and Harnessing the potential for development of multinationals’ supply and distribution chains  

Comments

[jonathan]

The low income segment will need more stimulus and added-value products. Focus more on that two. Thank you.