Dr Nick Mangos of the Flinders Business School is investigating the commitment of Australian companies to supporting the Millennium Development Goals, an initiative of the United Nations proposed in 2000 which aims to alleviate poverty by encouraging major companies to engage economically with the world’s lowest income earners.
While there is a fundamentally altruistic aspect to the policy, Dr Mangos said that the so-called Base of the Pyramid earners – people earning less than US$1500 a year – also represent a vast, untapped market, estimated to comprise four billion people with US$5 trillion in purchasing power.
“This new market is characterised by large volumes and low margins,” Dr Mangos said.
With Asia the home of more than half of these low income communities, Dr Mangos said a number of Australian companies have made a commitment to take up the dual strategy of wealth creation and poverty reduction.
“One way of doing this is to provide products that poverty-stricken people can actually afford,” Dr Mangos said.
“This can take the form of the restructuring of manufacture and provision of consumer products in small, affordable units, or the supply of microfinance by banks.
“There is a profitable way of operating that can also alleviate poverty.”
Dr Mangos is examining the extent to which Australian banks and companies operating in developing countries such as Cambodia, Vietnam, Malaysia, India and in the South Pacific region are servicing the Base of the Pyramid markets, and whether their involvement constitutes a strategic priority.
The “Business for Millennium Development Summit”, held in Sydney in October 2008, formulated the Australian response of Australian companies to the Millennium Development Goals, creating benchmarks for poverty alleviation that Dr Mangos will identify and measure.
“I’m going to be looking at what stage they are at, and where they could possibly improve to accelerate their pace to meet with the Millennium Development Goals,” he said.
Dr Mangos also wants to test the extent of the companies’ formal strategic commitment.
“There is a counter argument that low income earners end up buying things that are not useful to them, and simply make the companies fatter in terms of profit. One of the papers on which I’m working will assess if there is a formal strategic intent on the part of the companies to do good, or whether it is just a PR exercise,” he said.
“Some companies don’t do it for the right reasons and yet there are others, like the ANZ Bank, which has put a lot of work and effort into villages and communities in areas like Fiji and the Solomon Islands, with a strategic intent in assisting them towards economic self-sufficiency with low interest loans.”