Poverty Alleviation through Sustainable Strategic Business Models

318 Pages·2008·4.74 MB·English

B&T28420-Erim-11jul08-Klein
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Essays on Poverty Alleviation as a Business Strategy
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Poverty Alleviation through Sustainable
Strategic Business Models
Essays on Poverty Alleviation as a Business Strategy

Armoedebestrijding via duurzame strategische bedrijfsmodellen:
Essays over armoedebestrijding als bedrijfsstrategie

Proefschrift

ter verkrijging van de graad van doctor
aan de Erasmus Universiteit Rotterdam
op gezag van de rector magnificus
Prof.dr. S.W.J. Lamberts
en volgens besluit van het College voor Promoties.

De openbare verdediging zal plaatsvinden op
vrijdag 3 oktober 2008 om 13.30 uur

door

Hermanus Klein

geboren te Ridderkerk

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Promotiecommissie

Promotor: Prof.dr. H.R. Commandeur

Overige leden: Prof.dr. P.J.F. Groenen
Prof.dr. A.R. Thurik
Prof.dr. D.M. Wright

Copromotor: Dr. E. Verwaal

Erasmus Research Institute of Management (ERIM)
RSM Erasmus University / Erasmus School of Economics
Erasmus University Rotterdam

Internet: http://www.erim.eur.nl

ERIM Electronic Series Portal: http://hdl.handle.net/1765/1

ERIM Ph.D. Series Research in Management 135

ISBN 978-90-5892-168-0

© 2008, Martin H. Klein

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by
any means electronic or mechanical, including photocopying, recording, or by any information
storage and retrieval system, without permission in writing from the author.

English editing: E.G. van Weezendonk
Cover design: H. Huinen
Fig. 1.1 and picture underneath “BoP context” in Fig. 5.1: Prahalad and Hammond (2002)
Picture underneath “Learning through native capability” in Fig. 5.4: Prahalad (2006b)

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I would like to express my sincerest gratitude for all the help and assistance I received
from the following committee members and promotores.

Committee members
Prof.dr. J.B. (Jay) Barney
Prof.dr. P.J.F. (Patrick) Groenen
Prof.dr. S.L. (Stuart) Hart
Prof.dr. A.R. (Roy) Thurik
Prof.dr. D.M. (Mike) Wright

Promotores
Prof.dr. H.R. (Harry) Commandeur
Dr. E. (Ernst) Verwaal

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Contents

1 Introduction and outline 1
1.1 Research context: Base-of-the-pyramid 2
1.2 Base-of-the-pyramid businesses: A strategy of “doing well by doing good” 8
1.3 The BoP approach as form of poverty alleviation 10
1.4 Business arguments to develop a business strategy around the BoP 12
1.5 Objectives and outline 15

2 Discerning the organizational problems and opportunities at the
base-of-the-pyramid: A classification and an investigation of
contextual relationships 21
2.1 Introduction 22
2.2 Theory and hypotheses 24
2.3 Methods 34
2.4 Analyses and results 38
2.5 Discussion 52
App 2.I Dimensions and formative items of investment climate 56

3 The business model concept: A strategic management approach 57
3.1 Introduction 58
3.2 Literature review 59
3.3 Defining the strategic business model 64
3.4 Multiscale analysis and components versus linkages 66
3.5 Conceptual framework 68
3.6 Propositions: Assessment of internal fitness 79
3.7 Discussion 88
App 3.I Literature review of the business model concept 94

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4 Can private businesses really build profitable and sustainable
business models at the base-of-the-pyramid? 103
4.1 Introduction 104
4.2 Theory and hypotheses development 106
4.3 Data and methods 116
4.4 Analyses and results 121
4.5 Discussion 124
App 4.I Measurement items and validity assessment 129
App 4.II Formative items for firm performance 131

5 A management support model for developing profitable
pro-poor business models at the base-of-the-pyramid:
On how to analyze base-of-the-pyramid case studies 133
5.1 Introduction 134
5.2 A management support model for developing profitable pro-poor business
models at the base-of-the-pyramid 135
5.3 BoP business model qualities 147
5.4 Analysis of validity: Case reviews 220
5.5 Discussion 232
App 5.I From business challenges to business questions 236
App 5.II Making an assessment of the business model qualities 239

6 Conclusion 242
6.1 Introduction 242
6.2 Conclusions and implications 243
6.3 Directions for future research 256

Nederlandse samenvatting (Dutch summary) 259
Acknowledgements 270
References 270
Curriculum vitae 295

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List of Figures
1.1 The base-of-the-pyramid: An estimation of its size 4
1.2 Strategies for social value management 8
1.3 Path of social value management 9
2.1 Multidimensional scaling plot of business challenges for firms at the BoP 41
3.1 Number of articles in which the term ‘business model’ is used 60
3.2 A conceptual framework of strategic business models 69
3.3 Demonstrating the conceptual framework (visualization of the propositions) 83
4.1 Hypothesized structural model 108
5.1 The rationale of the management support model for developing
profitable pro-poor business models at the BoP 136
5.2 The management support model for developing profitable
pro-poor business models at the BoP 137
5.3 Net of basic business questions 139
5.4 Framework of BoP business model qualities: Today, Together, Tomorrow 149
5.5 The BoP business model qualities 151
5.6 Estimated BoP market size by sector in billion of US$ 155
6.1 A multilevel approach: a necessity at the BoP 245
List of Tables
1.1 Illustrative examples of BoP firms 5
1.2 Levels at which the private sector can involve the poor 12
1.3 Outline of dissertation 20
2.1 Classification frameworks of organizational problems of non-BoP firms 25
2.2 Overview of hypotheses, methodology, and results 27
2.3 Sample description 39
2.4 Means, standard deviations, and correlations 39
2.5 Classification of business challenges for firms at the base-of-the-pyramid 41
2.6 Explaining importances of business challenges 46
2.7 Interpretation of business challenges 50
3.1 Literature review of the business model concept 61
4.1 Means, standard deviations, and correlations 122
4.2 Structural equation model results of the standardized structural paths 123
5.1 The basic business questions 140
5.2 BoP characteristics 142
5.3 Case studies included in the validity test 222

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