Finance dissertation introduction example

CHAPTER ONE

INTRODUCTION

1.1 Background

Ghana has an average per capita income of $397 (according to the Ghana Living Standards Survey (GLSS) 5, 2008), implying that the average Ghanaian lives on less than $1.10 (with a dollar to cedi ratio of 0.92) a day. The report also indicates that the per capita expenditure is also $592.48. About 40% of Ghanaians live below the official poverty line of $1 a day (ILO Report, 2004, TUC Report, 2004) although the incidence of poverty has been found to be about 80% in the northern part of the country (TUC Report, 2004). This statistics is interesting considering the fact that Ghanaians spend more than they actually earn; it is no surprise that Ghanaians are referred as ‘economic magicians’. However, the real interest lies in the fact that there is an economic opportunity among the 40% poor people who live on about $1 a day for companies willing to be innovative and adopt unconventional business practices. This market in Ghana seems to present about a three billion dollar opportunity annually.

The concept of bottom of the pyramid (BOP) markets considers how organizations particularly multinational corporations (MNCs) can serve poor markets like those in the lowest quintile in the Ghanaian economy. Prahalad (2005) proposes that MNCs should be innovative and co-create products and services for these markets with other stakeholders (these are development and aid organizations, BOP consumers and entrepreneurs, civil society organizations and local government). Although Prahalad (2005) suggests that the MNCs should be proactive in developing products for these markets, in Ghana the reverse may be seen to exist as micro-entrepreneurs in these markets have always led MNCs in delivering the products and services that consumers in this market want. Classical examples are in the telecommunications and Fast Moving Consumer Goods (FMCG) markets. In the mobile telecoms in the early 2000s mobile phone top-up was as high as $3 per recharge voucher; it was the micro-entrepreneurs in poor markets that started what became known as “space-to-space” (communication centre booths) helping the poor access mobile telephony services at a price they can afford. Later the mobile telecommunications companies saw the opportunity in serving this market and devised a strategy to serve the poor by introducing credit transfer of as low as $0.35 for the poor to be able to purchase. In the FMCG market, Key Soap, one of Unilever Ghana’s ‘cash cows’ used to be in long bars until micro-entrepreneurs started buying the large bars and ‘cutting’ them into smaller units to sell for the poor who could not invest his/her meager resources into the large bars; it was then only that Unilever Ghana start making smaller bars of their Key Soap brand that could cater for the poor.

This makes it significant to study this segment of the consumer market usually ignored by marketers and the activity of micro-entrepreneurs who currently serve this market. Knowledge of this market can be used by multinationals who want to enter the market. From the earlier examples above it is clear that micro-entrepreneurs in Ghana seem to lead the way in terms of market development and distribution and an understanding of their activities will help both practitioners and academics understand how micro-entrepreneurs operate in BOP markets. Significant challenges however arise from firms trying to serve the poor. These include distribution which results from the widespread span (geographically) within which poor people can be found. Significant challenges mainly conceptual also arise when conducting such a study as both BOP and entrepreneurship concepts seem to be in their early stages and there are no readily available models to fall on as well as a difficult in defining a poor person; with some authors considering the BOP concept as a mirage (Karnani, 2007a). Nonetheless the study will seek to add to the existing literature on both subject matters; particularly from a developing country context which provides different cultural dimensions.

1.2 Statement of Problem

Markets in the traditional “top of the economic pyramid” are saturating globally and Multinational Corporations (MNCs) are looking for new markets for their goods and services (Prahalad, 2005). Prahalad (2005) proposes that there is a market at the “bottom of the economic pyramid” where MNCs can move into. This market Prahalad argues has about four billion people who earn $1,500 and less annually presenting about a six trillion dollar market opportunity annually. However, for MNCs to succeed in this market they need to have an “ecosystem of entrepreneurs” also the “BOP innovators” to help them navigate the nuances of this market. These BOP innovators will help MNCs break down the challenges of geographical span, culture, needs assessment and of broader distribution that this market presents as this market cannot be considered a monolith (Prahalad, 2005). Hence an understanding of these BOP entrepreneurs is invaluable to the success of MNCs in this market. However, knowledge and literature on these BOP entrepreneurs or BOP innovators seems to scant or non-existent although elsewhere there have been several studies on BOP markets (Anderson and Billou, 2007; Fletcher, 2005; Guesalaga and Marshall, 2008; Kourula and Halme, 2008; Nielsen and Samia, 2008; Pitta et al, 2008; Sridharan and Viswanathan, 2008; Prahalad, 2005; and Wood et al, 2008) and on entrepreneurship (Babu and Pinstrip-Andersen, 2007; Brush et al, 2009; Keogh and Polonsky, 1999; Sathiabama, 2010; Morrison, 2000; Machan, 1999, and Zheng et al, 2009). Again, no study has combined both concepts (entrepreneurship and BOP) in one study especially focusing on the BOP entrepreneurs and what their triggers are, what relationships exist between various factors in the market. This study will seek to fill this gap by studying the “ecosystem” of entrepreneurs in the BOP market in Ghana.

1.3 Research Objectives

In order to address the problem statement discussed above; the objectives of the study are as follows:

1. To determine the relationship between antecedents of entrepreneurship in BOP markets and nature BOP market
2. To determine the relationship between nature of BOP market and entrepreneurial benefits
3. To relationship between entrepreneurial antecedents and entrepreneurial benefits

1.4 Research Questions

To achieve the set objectives of this research further questions are being asked to guide the literature review, information gathering and the rest of the research activities. The following questions are therefore being asked:

1. What is the relationship between antecedents of entrepreneurship in BOP markets and nature BOP market?
2. What is the relationship between nature of BOP market and entrepreneurial benefits?
3. What is the relationship between entrepreneurial antecedents and nature of BOP market?

1.5 Research Methodology

The research purpose is to establish the nature of entrepreneurship in bottom of the pyramid markets. The research paradigm that was adopted was that of critical realism which Saunders et al (2007) argues is the best for management research. The study adopted a quantitative approach which comes from the deductive school of thought. Survey was the research strategy that was employed in the study with questionnaire been the research method used to collect primary data. The research approach, method, and strategy were all underpinned by an objectivity criterion that seeks to achieve both internal and external validity. Data was collected from 287 BOP entrepreneurs. A combination of inferential and descriptive statistics was used in analyzing and interpreting the data collected.

1.6 Significance of Study

The study is significant for four broad groups; that is, managers of multinational corporations, governments, non-governmental organizations (NGOs) and academicians. Both BOP and entrepreneurship concepts have been touted by several authors (Buame, 2007 and Prahalad, 2005) as ways by which nations can eradicate poverty. Hence for governments in the developing world a study that seeks to combine both concepts should be invaluable. NGOs that engage in capacity training programmes for micro-enterprises in rural and poor areas of the country can fall on the study to identify what models of entrepreneurship works and what does not work in poor markets. The study is useful to multinational corporations as they seek to expand their markets. The top of the pyramid is saturating and most firms are looking for opportunities in developing markets in which most of the people are poor. The study provides an understanding of micro-entrepreneurs in this market who serve as an “ecosystem” (Prahalad, 2005) for distributing goods and services in these markets. For academics the study presents another valuable addition to both concepts of entrepreneurship and BOP especially BOP that still has a lot of critics and has yet to be accepted fully by academics (Prahalad, 2005). The study will present the African perspective especially to the concept of BOP and how an ecosystem of micro-entrepreneurs can help in market development.

1.7 Disposition of the Study

This thesis is organized into six (5) chapters, the details of which are outlined below.

Chapter One: Introduction

This chapter seeks to give a general description on the topic. This is the introduction to the entire thesis and presents the context of the research. It covers the general description of the area of concern, definition of important terms and concepts, the purpose of the proposed study, background to the study, the statement of the research problem and the significance the research.

Chapter Two: Literature Review, and Conceptual Framework

Chapter two is devoted to presenting existing related literature on conceptual issues addressed in this thesis. These include the concept of entrepreneurship and bottom of the pyramid; the objectives, principles and strategies of entrepreneurship and bottom of the pyramid markets. The literature review also discusses various existing models and arguments on both concepts.

Chapter Three: Research Methodology

Chapter three discusses the methodological approach to be employed and the methods to be used to collect data for the research. The chapter shall comprise of the presentation of techniques to be used for data collection and research methodology and scope and limitations of the study.

Chapter Four: Data Analysis

This chapter is an analysis of the data collected for the study. The data is tabulated and presented in forms that can be easily interpreted whilst discussing the relationship among variables and developing/designing an appropriate model for entrepreneurship in bottom of the pyramid markets.

Chapter Five: Conclusion

This final chapter of the thesis discusses the findings of the research in line with the aims and objectives that guided the entire study. The chapter also draws conclusions on the major findings of the study.