Situating one’s rant within business model typology for rural and low income markets

After yesterday’s post on stripping out social considerations to allow for a pragmatic economic assessment of viability prior to investing in infrastructure for service delivery to rural customers, I looked up literature on the general theme. Site selection as a keyword brought a slew of articles focusing on GIS technology, primarily from the lens of feasibility, while inclusive business brought up a lot of agribusiness related material as the drive to include smallholder farmers in global value chains and food systems has created a lot of interest.

Two papers, both from the perspective of renewable energy which is extremely popular right now, touched upon the broad theme of rural economic capacity – one, from Indonesia (Sitompul & Sinaga, 2020) brought up the concept of ‘willingness to pay’ but categorized this under community and social concerns rather than economic concerns where they instead only considered the top down costs and feasibility issues of infrastructure building.

The other (Hubble & Ustun, 2018) looked at a number of countries together but used a generic approach based on rural GDP – an amalgamation of a country’s GDP, their population, and the amount of wealth owned by the poorest 10% of the population using World Bank data – to draw conclusions on target customer ability to pay for electricity as a criterion for selection of energy source and grid size.

Neither paper went deeper into revenue stream assessment based on the population’s economic capacity, remaining within their engineering oriented comfort zone of feasibility assessments as opposed to viability assessments. And, seasonality, the cornerstone of rural life that matters for viability assessments, remains rather unpopular as a research topic (Devereux, Sabates-Wheeler, & Longhurst, 2013).

Turning to business models and rural markets, I finally found a paper that helps me contextualize my thinking within a theoretical framework – albeit a high level one – from which to start exploration, discussion, and debate.

Pels, J., & Sheth, J. N. (2017). Business models to serve low-income consumers in emerging markets. Marketing Theory, 17(3), 373-391.

Pels & Sheth (2017), working from literature, propose this matrix above as a typology for business models targeting low income consumers in emerging markets, and I found it directly relevant in contextualizing the issues I brought up in yesterday’s post.

First, from their paper’s methodology section:

Little attention has yet been given to the role and the process of theorizing in marketing (MacInnis, 2011; Weick, 1995). These efforts are fundamental to bring coherence and perspective to problem areas (Cooper, 1988) and to guide theory development (Meredith, 1993). ~ Pels & Sheth (2017)

and then, a brief description of the matrix:

We suggest a 2x2 matrix anchored to two dimensions: (1) Does the organization believe that the low-income market is full of opportunities or full of constraints? (2) Is the business model grassroot bottom-up or is it top-down mandate? The four resulting cells become the article’s suggested alternative business models: market adaptation, mission focus, radical innovation and inclusive ecosystems. For each cell we (a) summarize the extant literature, identifying the underlying discipline(s) and the theories upon which it draws, (b) identify opportunities for further research and(c) provide guidelines for practitioners. ~ Pels & Sheth (2017)

While they focus on double bottomline (business and society) business models, their theory building groundwork is far more powerful a foundation, as framed thus:

The literature review provides evidence that we are still in our infancy and that most studies are at the descriptive level and have not yet been associated with existing theories developed in other disciplines (e.g. the recommendation to innovate has not been linked to the vast literature on innovation nor the study of subsistence entrepreneurs to the conventional entrepreneurial literature). ~ Pels & Sheth (2017)

This provides the impetus for my own efforts to contextualize my research on the informal economy as a commercial operating environment in its own right within the broader literature of other disciplines and existing theories. As the work of Pels & Sheth (2017) implies, this allows one to break free of the bounds of default categorization based only on the relative wealth, location, or ethnicity of the research subjects, and instead to think of their practices in terms of the literature from management and business.

The conceptual framework helps academics as it allows them to position their research within a given stream and suggestions have been provided on how these could be further developed. Moreover, by looking at the matrix from the bottom left cell (market adaptation) to the upper right cell (inclusive ecosystems), a shift can be seen from mainstream marketing literature to a broader set of underlying disciplines and theories. This shift has important theoretical implications as it implies cross-fertilizing marketing knowledge with that of other fields (e.g. innovation, systems,social capital). Explicitly grounding the low-income consumers in emerging markets studies would allow following Gummesson’s (2005) call to move from descriptions to conceptualizations in the process of (eventually) generating theory.

And, what is missing, is theory development. Pels and Sheth’s approach (2017) also opens up a new way to look at double impact businesses, in that the operating conditions of the rural economy in developing countries are so deprived of the services and goods taken for granted even in the urban contexts of the same country that any business, even if they choose not think of their mission as social impact or themselves as an inclusive business, manages to sustain a customer-centric revenue model and maintain operations necessary for reliable service delivery, they would in fact end up arriving at the end goals of value creation (Schoneveld, 2020) for their target market segments. I will pick up this theme in the next post from the perspective of prepaid business models and mobile telephony.

References:

Devereux, S., Sabates-Wheeler, R., & Longhurst, R. (Eds.). (2013). Seasonality, rural livelihoods and development. Routledge.

Hubble, A. H., & Ustun, T. S. (2018). Composition, placement, and economics of rural microgrids for ensuring sustainable development. Sustainable Energy, Grids and Networks, 13, 1-18.

Pels, J., & Sheth, J. N. (2017). Business models to serve low-income consumers in emerging markets. Marketing Theory, 17(3), 373-391.

Schoneveld, G. C. (2020). Sustainable business models for inclusive growth: Towards a conceptual foundation of inclusive business. Journal of Cleaner Production, 124062.

Sitompul, R. F., & Sinaga, D. A. P. (2020) Sustainability Approach of Site Selection for Renewables Deployment in Indonesian Rural Electrical Grids. International Journal of Advanced Science Engineering Information Technology, vol. 10, no. 6

This entry was posted in Biashara Economics, Business Models, Consumer Behaviour, Frameworks, Indigenous & Traditional, Informal & Flexible, Innovation Planning, Literature review, Marketing, Perspective, Retail in Africa, Rural Economy, Strategy, Sub Saharan Africa, Work in Progress and tagged , , , , , , , , , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

Post a Comment

Your email is never published nor shared. Required fields are marked *

You may use these HTML tags and attributes <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*
*