Final answer:
The Bottom of the Pyramid strategy aims at offering affordable products to low-income consumers but risks cannibalizing a company's core product sales. Competition with firms offering cheaper products can diminish profits. Businesses must ensure their strategies do not exacerbate poverty and inequality in developing countries.
Step-by-step explanation:
The Bottom of the Pyramid strategy involves targeting low-income consumers by offering affordable products. It carries several risks, including the potential for these new low-cost products to cannibalize the sales of a company's core products.
This cannibalization can occur when customers opt for the cheaper offerings, thereby reducing the sales and profits gained from the company's more established, premium-priced products. Such a strategy demands a delicate balance to avoid undermining the company's existing market share.
Furthermore, firms must be wary of competition from other businesses that might offer better or cheaper products, which can lead to reduced profits or even cause a company to go out of business. For workers, this could mean loss of income or jobs.
However, on the other side, successful businesses with innovative and cost-effective products can increase their profitability, reward their employees, and provide consumers with better or less expensive products, thereby contributing to overall economic gains.
Companies like Apple and Nike have been criticized for pursuing profit at the expense of worker welfare, highlighting another danger of market-driven strategies in developing countries. The introduction of new technologies and innovations must be handled with care to ensure they do not exacerbate issues of inequality and poverty and that they contribute genuinely to the welfare of the target communities.