Socially Responsible Distribution Vachani&Smith

Social Innovation Centre

Faculty & Research Working Paper
Socially Responsible Distribution: Distribution Strategies for Reaching the Bottom of the Pyramid

_______________ Sushil VACHANI N. Craig SMITH 2008/21/ISIC

Electronic copy available at: http://ssrn.com/abstract=1116630

SOCIALLY RESPONSIBLE DISTRIBUTION: Distribution Strategies for Reaching the Bottom of the Pyramid

bySushil Vachani* and N. Craig Smith**

December 5, 2007

This paper can be downloaded without charge from the Social Science Research Network electronic library at: http://ssrn.com/abstract=1116630

* **

Professor of Strategy & Policy, School of Management at Boston University Chaired Professor of Ethics and Social Responsibility at INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex,France, Tel: 33 (0)1 60 72 41 45, Fax: 33 (0)1 60 74 55 00, e-mail: Craig.Smith@insead.edu

A working paper in the INSEAD Working Paper Series is intended as a means whereby a faculty researcher's thoughts and findings may be communicated to interested readers. The paper should be considered preliminary in nature and may require revision. Printed at INSEAD, Fontainebleau, France. Kindly do notreproduce or circulate without permission.

Electronic copy available at: http://ssrn.com/abstract=1116630

Summary While management scholars and development economists have provided a compelling case for greater attention to the bottom of the pyramid, few contributions have examined specific strategies for reaching the bottom of the pyramid. The majority comprising the bottom of the pyramidresides in hundreds of thousands of villages located beyond most multinationals’ distribution networks. Its access to essential goods is limited not just by high prices, but also by inadequate rural distribution, which also restricts the poor in distributing its produce. We use the term socially responsible distribution to describe initiatives that provide poor producers and consumers with marketaccess for goods and services that they can benefit from buying or selling, by helping neutralize the disadvantages they suffer from inadequate physical links to markets, information asymmetries, and weak bargaining power. This paper examines three socially responsible distribution case studies of multinational company, government and NGO initiatives. It identifies how socially

responsibledistribution can be achieved by strategies that take cost out, reinvent the distribution channel or take a long-term perspective that invests for the future. It summarizes procedures and precautions for setting up distribution into the rural bottom of the pyramid, and the payoffs from socially responsible distribution strategies.

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Electronic copy available at: http://ssrn.com/abstract=1116630SOCIALLY RESPONSIBLE DISTRIBUTION: Distribution Strategies for Reaching the Bottom of the Pyramid Les bons pauvres ne savent pas que leur office est d’exercer notre générosité. Jean-Paul Sartre, Les Mots (1964) Recent thinking and practice in management has challenged the widely-held view that the role of the poor, as Sartre put it, is to exercise our generosity. There are alternatives to charitywhere the poor help themselves and business plays a part by pursuing its economic interests and tapping the economic potential of the bottom of the pyramid (BOP)—the 2.7 billion people who live on less than $2 a day. Prahalad and Hammond (2002, p. 48), in their seminal article on “Serving the World’s Poor, Profitably,” highlighted the potential of market forces in large-scale poverty alleviation.This was a particularly welcome message in light of the challenges of meeting the Millennium Development Goals and concern about the role of poverty in fostering terrorism. A literature has begun developing that builds on the core argument of Prahalad and his colleagues (see: Prahalad 2005; Prahalad and Hammond 2002; and Prahalad and Hart 2002; for a critique, see Karnani 2007). Unfortunately,...