21 August 2013

Poverty Alleviation and Profitability : Can businesses alleviate poverty whilst making profits?

The very notion of alleviating poverty through profitable ventures seems a counterintuitive concept, because businesses are meant to be entities that make profits at all costs. However business is still run by human beings and most of us do care about the impact we can make on the world. Based on evidence there are 2 methods by which a business can achieve that positive impact in society and yet stay profitable.

The first and more conventional philosophy is Corporate Social Responsibility. The fundamental expectation here for a business is to create a more positive profile or perception amongst all stakeholders such as employees, suppliers, consumers and shareholders. This is achieved by investing resources in poverty alleviation or for that matter in any initiative that will impact positively on society. But this approach does not completely address the profitability angle. Profitability breeds sustainability and so CSR will only address part of the question.

The other approach is to build profitable markets amongst poor consumers. This is achieved by giving them not only what they need but also what they want. One commonly adopted model is by marketing goods that can make an improvement to living standards in an aspirational way to create the desire and action that can eventually deliver profits. One good example is Unilever’s water filtration product Pureit which has been distributed to millions of poor consumers across the world. This did not just give this consumer base access to a basic necessity but also is something that they inherently want to have.

There are numerous case studies but not much has been done to address the question of poverty alleviation in a robust manner. The Poverty Alleviation and Profitability research group will aim to answer 3 key questions –
  • How different is the poor consumer to a business in comparison to any other customer and how should these differences be interpreted? 
  • What are the challenges organisations face when engaging these poor segments and then sustaining their strategies profitably?
  • What is being done currently and how can businesses learn from this?
As a researcher, I feel there are more questions than answers at the moment but with more and more organisations seeing the benefit in emerging markets, it is critically important now than in any other point in time to identify frameworks that businesses can implement profitably and still address the big issue of poverty.

Author: Jarrod Vassallo
Founding member of the Poverty Alleviation and Profitability Research Group. He is also guest lecturer at the University of Sydney Business School and a PhD candidate at Cambridge Judge Business School.

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