Competitive Dynamics between MNCs and Domestic Companies at the Base of the Pyramid: An...

Long Range Planning xxx (2013) 1–18

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Long Range Planning

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Competitive Dynamics between MNCs and Domestic Companies at theBase of the Pyramid: An Institutional Perspective

Federica Angeli, Anand Kumar Jaiswal

This article investigates the factors underpinning the competitive dynamics between multi-national corporations (MNCs) and domesticcompanies in base of the pyramid (BoP) markets. We analyze the case of a multi-domestic MNC, Hindustan Unilever Limited (HUL), facingthe competition from two small domestic companies, Nirma and CavinKare, in the low-end shampoo and detergent markets in Indiarespectively.Our findings highlight a fundamental rigidity of HUL. By using institutional theory as our interpretative lens, we ascribe this rigidity to theoverlap of institutional domains faced by the MNC’s subunit, at two levels: 1) the constant search for legitimacy in both the host countrydomain and within the MNC, which requires the concurrent adherence to local policies and to practices institutionalized within the MNC;and, 2) the simultaneous pursuit of legitimacy in both low- and high-income markets, which requires non-consistent actions to conform tocognitively distant social groups. Building on previous work, we interpret these phenomena as manifestations of “institutional dualism.”This work advances the current understanding of strategic behavior of firms in BoP markets. Furthermore, it contributes to internationalbusiness literature by providing new theoretical and empirical depth to the concept of institutional dualism, which emerges as a potentialliability for MNCs competing in highly idiosyncratic foreign markets.

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Introduction

Since the seminal work by Prahalad and Hart (2002), increasing scholarly efforts have been devoted to understand if andhow the private sector can purposefully contribute to alleviating poverty and to improving the living conditions of thedeprived population (Bruton, 2010). The societal relevance of the issue is self-evident; the base of the pyramid (BoP) pop-ulation that live with less than $1 a day at purchasing power parity – considered as extreme poverty –was 1.1 billion in 2001.People earning less than $2 per day –who are considered poor – involved half of the global population in 2001 (World Bank,2002), and nearly 70% of the world population according to more recent estimates (Webb et al., 2010). However, there is stillno convergence among scholars on the exact definition of BoP markets. As per the World Resources Institute BoP marketsencompass people with an average yearly income of $3,000, scaled to 2002 US dollars (Hammond et al., 2007; Webb et al.,2010). According to this estimate, India counts a BoP population of 925 million, out of which 78% is located in rural areas.Indian BoP population represents a $1.2 trillion market, which is 84.8% of the overall $1.42 trillion national household market,and also the largest constituent of the worldwide $5-trillion BoP market without China (Hammond et al., 2007). This workadopts Hammond’s and colleagues’ (2007) definition of BoP, which is widely accepted in the literature. The low-incomemarket (used here interchangeably with BoP market) is therefore potentially very large for those companies willing todevelop products and business models suitable to serve poor consumers.

At the same time, BoP markets present challenging conditions. BoP communities in the same national boundaries, fromisolated rural villages to urban slums, can present extreme cultural, geographical, religious, ethnic and linguistic heterogeneity(Hammond et al., 2007; London, 2009; Sachs, 2005;Webb et al., 2010). Literacy is often very poor, the penetration of the massmedia such as television and Internet is often very limited, due to severe infrastructural limitations such as lack of electricity orits poor and intermittent supply (Vachani and Smith, 2008). The situation is further made complex by the lack of specializedintermediaries to provide credit, the non-existence of an environment that supports business growth, by the absence ofregulations and systems to enforce the fulfillment of contracts, and by high informational asymmetries (Sanchez et al., 2007).

Prahalad and Hart (2002) argue that MNCs are better placed in facing these challenges. They possess the resources to buildthe complex commercial network, the distribution infrastructure, and the communication channels needed to target the BoP;they can leverage the knowledge developed at different sites, thus building up a unique global knowledge base; and, they canbridge and coordinate the different entities that need to act and interact in addressing the BoP, such as NGOs, communities,

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Please cite this article in press as: Angeli, F., Jaiswal, A.K., Competitive Dynamics between MNCs and Domestic Companies at theBase of the Pyramid: An Institutional Perspective, Long Range Planning (2013), http://dx.doi.org/10.1016/j.lrp.2013.08.010

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F. Angeli, A.K. Jaiswal / Long Range Planning xxx (2013) 1–182

local government, entrepreneurs and even multilateral development agencies. In a comparative perspective, the betterplacement of MNCs versus domestic companies in a developing economy competitive arena is not surprising (Bellak, 2004;Willmore,1986). Compared to their domestic counterparts, foreign firms display higher ratios of added-value to output value;higher advertising and royalty payments; higher returns from exports; higher workforce productivity; higher wages; and,higher capital intensity. Moreover, the ability to transfer knowledge across units and countries and exchange cutting-edgetechnology (Dunning, 1973), leverage economies of scope and scale (Markusen, 1995) and attract better human resourcesthrough higher wages (Martins, 2011) notably support MNCs’ competitive edge. However, an important question arises: canthese relative advantages be salient in the BoP market, given its peculiarities?

Despite Prahalad’s theoretical expectations, MNCs are in some instances strikingly lagging behind domestic companies inserving the low-income markets (Bhattacharya and Michael, 2008; Ganesh, 1997). One explanation discussed and supportedin international business literature about MNCs’ disadvantages in foreign countries is liability of foreignness. This conceptidentifies all costs that MNCs incur when entering a foreign market, such as costs associated with distant coordination andcontrol; with unfamiliarity and lack of roots in the local environment and economic nationalism; and, with regulatory re-strictions to technology sales (Zaheer, 1995). Liability of foreignness decreases over time, as subunits becomemore embeddedin the host country environment (Zaheer and Mosakowski, 1997). To enhance their competitiveness, some MNCs that aim totarget the BoP in emerging markets have put considerable efforts into conceiving ad hoc products and business models,committing to the local communities, and developing cultural and cognitive embeddedness through local partnerships andlocal management. This is the case of Hindustan Unilever Limited (HUL)1 in India. The subsidiary of Unilever, which has beenoperating in India since 1930, has undertaken a series of initiatives to penetrate the rural market in a cost-effective way. Onesuch initiative is Project Shakti, which enables rural women to earn their livelihood by selling HUL’s various products in ruralareas. The outsourcing of the last mile of the distribution process has contributed to HUL gaining the legitimacy needed tomore effectively participate in this market, cutting distribution costs, and also benefitting local economy by supportingpotential entrepreneurs. For a long-tenured company like HUL, the negative impact of liability of foreignness is likely to belong overcome (Zaheer and Mosakowski, 1997).

Yet, this work illustrates two cases, inwhich HUL systematically loses market share in the shampoo and detergent marketsin favor of two then newly-founded domestic companies which from inception focused on BoP market segments, Nirma andCavinKare. Available theories fall short in explaining the case of a well-established MNC losing the competitive race of BoPmarkets in favor of relatively new domestic companies: if liability of foreignness decreases over time (Zaheer andMosakowski, 1997), and the advantages of an MNC in terms of scale and superior knowledge transfer still hold (e.g.,Dunning, 1973), why does HUL underperform Nirma and CavinKare? A gap in the literature emerges, in terms of factorsexplaining the poor performance of MNCs over domestic rivals in the BoP markets over and above the explanation providedby liability of foreignness. Therefore, the question guiding this work is: Which factors underpin the competitive dynamicsbetween established MNCs and newly-founded domestic firms at the BoP?

This research explores how MNCs and domestic companies compete in low-income markets, with a particular emphasison the factors that might jeopardize MNCs’ success with respect to domestic players. To investigate underexploredcompetitive dynamics, our focus is on MNCs which already display high levels of local adaptation. HUL is one such MNC thatoperates worldwide by promoting high local responsiveness against low degree of global efficiency pressures, followingBartlett and Ghoshal’s (1986) multi-domestic strategy. Besides being active in multiple countries, HUL also serves multiplemarket segments, from high-end to BoP. The two domestic players under examination, instead, are relatively small and newcompanies that are exclusively focused on the domestic BoPmarket from the very beginning, a condition that we label here as“Born-BoP”. Our analysis therefore develops a comparison between a multi-country, multi-segment company versus twosingle-country, single-segment domestic companies, focusing on Indian BoP markets.

Following previous research, we use an institutional lens to compare MNCs and domestic companies (Kostova and Zaheer,1999). Institutional theory is best suited to study companies’ behavior in emerging economies, because of the imperfectnature of market transactions, the often sharply uneven distribution of power and wealth, and the scarcity of resources thatcharacterize these settings (Hoskisson et al., 2000). The institutional framework is also particularly relevant to understandBoP markets, where the influence of informal institutions prevails, and where social groups behave according to highlyidiosyncratic norms, values and beliefs (De Soto, 2000; Rivera-Santos and Rufín, 2010).

This work makes important contributions. To our knowledge, the issue of competitive dynamics between MNCs anddomestic firms in low-income markets has been largely neglected by prior studies. Literature has so far provided valuableinsights in relation to (social) entrepreneurial actions and new market creation at the BoP (Chelekis and Mudambi, 2010;Seelos and Mair, 2005; Thompson and MacMillan, 2010; Webb et al., 2010). With regards to existing markets, much ofBoP scholars’ investigation has addressed cooperative dynamics. Partnerships between MNCs and domestic players emergeas crucial for the former to penetrate BoP markets (Dahan et al., 2010; Rivera-Santos and Rufín, 2010; Rivera-Santos et al.,2012; Seelos and Mair, 2007). On the contrary, how firms compete at the BoP has received far less attention, despite therelevance that such knowledge could have in guiding new BoP ventures through the development of successful businessmodels. This in turn may have far-reaching implications not only for management practice but – most importantly – forsociety at large.

1 The company was formerly known as Hindustan Lever Limited (HLL). It changed its name to Hindustan Unilever Limited (HUL) in 2007


F. Angeli, A.K. Jaiswal / Long Range Planning xxx (2013) 1–18 3

With regard to the international business literature, evidence about MNC disadvantage against domestic companies is stillscant. Much has been done on the front of liability of foreignness (Zaheer, 1995; Zaheer and Mosakowski, 1997). However,despite interesting conceptualizations about other factors that may undermine MNCs operations in host countries, such asthe complexity of the institutional environment (e.g., Kostova and Zaheer, 1999), rich empirical evidences are still missing.Fresh insights about howMNCs compete not only in foreign countries but also at the BoP can shed new theoretical as well asempirical light on the debate.

The paper is structured as follows. We first introduce the theoretical framework of the work, highlighting the relevantstudies this paper builds upon and the theoretical concepts that will support our analysis. We outline our research methodsand then illustrate our empirical evidence in separate sections, which lead to the formulation of a set of propositions. Ourconclusive remarks underline the theoretical as well as managerial contribution of the work.

Literature review and theoretical framework

The competitive advantage of MNCs

The theory of MNCs focuses on the reasons why MNCs exist. Kogut and Zander (1993) argue an ownership advantage intransferring highly tacit and strategic knowledge across the countries, and thus legitimize the existence of MNCs as comparedto a set of outsourcing agreements among companies. The economic theory of the MNC emphasizes the specific-advantagehypothesis (Buckley and Casson, 1976; Caves, 1974; Dunning, 1973; Markusen, 1995), which argues that MNCs can transferacross countries firm-specific advantages, often organizational or managerial capabilities that are difficult to imitate by rivalsand are easily transferablewithin the firm. This perspective is consistent with the subsequent resource-based viewof the firm(Barney, 1991; Lippman and Rumelt, 1982; Nelson, 1991), which underlines the importance of firm-specific resources andorganizational capabilities in determining firm’s competitive advantage.

Acocella (1992) argues that not only firm-specific advantages contribute to superior performance of an MNC, but also themultinational nature of the firm itself. This element is empirically evident in the findings of Doms and Jensen (1998), whoreported just few performance differences between US domestic-ownedMNCs and foreign-owned MNCs in the US. But whatdoes multinationality entail? Being a subunit of a multinational corporation implies being part of a system of subunitsscattered worldwide. Bartlett and Ghoshal (1990) suggest that the MNC can be interpreted as an interorganizational network.Every subsidiary is locally embedded in a network of exchange relationships towards buyers, suppliers, and regulatory bodies,and it competes for resources against a well-identified set of competitors, forming altogether the organization set of a givensubsidiary. Different organization sets can partially overlap and be linked to each other through additional ties. Because ofsuch linkages, the sum of all organization sets of all subsidiaries of an MNC is addressed as the MNC’s external network.

The global network of an MNC can entail several advantages for the subunits (Bellak, 2004). Subsidiaries are betterpositioned to tap foreign markets by way of intra-organizational exchanges and network economies, which allow them to bemore profitable on a larger scale; foreign-owned affiliates can handle the complexity of larger scale by leveraging theirparents’ organizational and managerial capabilities; the industrial and geographical diversification of MNCs endows thesubunits with better ability to screen and evaluate different situations (Caves, 1996); and, MNCs’ instruments to lobby na-tional governments and regulatory bodies are more effective than those available to single-country firms. Discussion on firm-specific advantages has indicated that MNCs display an advantage in technology-intensive and knowledge-based industries.Availability of superior technology across borders engenders extra opportunities for organizational learning, originalknowledge recombination, and ultimately successful innovation (Bellak, 2004).

All these factors suggest that some MNCs may enjoy competitive advantage over domestic companies, due to theirmultinational nature. Buckley and Casson (1976) confirm this hypothesis and find that foreign firms generate greater returnsthan their domestic counterparts in the UK manufacturing industry and that, in almost all US industries, US-based MNCsspendmore on R&D against each unit of sales in comparison to local firms operating in the same industry. On the same line, Liand Guisinger (1991) give evidence that foreign-owned firms in the US failed less often than domestic-owned companies,over the period 1978-1988. Recent studies have examined the competitive dynamics from the domestic companies’perspective. The contribution by Jaffe et al. (2005), building on Lavie and Fiegenbaum (2000), distinguishes different strategicoptions before domestic companies when they compete with MNCs. The study by Wu and Pangarkar (2006) provides acontingency view in examining MNCs’ advantage, and considers the role of industry in determining the success of specificstrategies of domestic firms over MNCs.

An institutional perspective on the MNC

When considering that MNCs are different in nature because of their additional embeddedness in a global network ofsubsidiaries, the institution-based view of the firm (Peng et al., 2009), or institutional theory (DiMaggio and Powell, 1983;Meyer and Rowan, 1977; Scott, 1995) leads to entirely different perspectives about MNCs’ competitive advantage in hostcountries.

Institutional theory emphasizes the role that factors surrounding organizations have in shaping social and organizationalbehavior (Scott, 1995). These factors were initially identified as “institutional forces”, “rational myths” or “rule-like frame-works” (Meyer and Rowan, 1977). An important step in the systematization of the pillar concepts of institutional theory was



marked by the work of DiMaggio and Powell (1983), and Scott (1995). DiMaggio and Powell (1983) discussed coercive,normative and mimetic routes of social reproduction, or isomorphism. Scott (1995) built on this framework and suggestedthree categories of factors underpinning institutional order: regulative, normative and cognitive elements (also Scott, 2008).Regulative aspects include superimposed rules, monitoring and sanctioning; normative aspects stress the prescriptive,evaluative and obligatory dimension that is self-constructed by social groups and that orders their social life; and cognitivecomponents identify “shared conceptions that constitute the nature of social reality and the frames throughwhichmeaning isextracted” (Scott, 2008, p. 57). The distinction between the three dimensions forming the institutional framework parallelsthe distinction between formal and informal institutions advanced by North (1990). Formal institutions are laws, regulationsand rules that apply to all citizenship and are enforced through coercive power. They correspond to the regulative domain ofinstitutional order in Scott’s taxonomy. Informal institutions on the contrary are norms, cultures and ethics that rely onnormative and cognitive institutional factors (De Soto, 2000; Peng et al., 2009; Rivera-Santos et al., 2012).

An in-depth conceptualization of what institutions are and how they operate is crucial to understand social legitimacywhich is at the core of institutional theory. Following Suchman’s definition, legitimacy is conceived here as “a generalizedperception or assumption, that the actions of an entity are desirable, proper, or appropriate within some socially constructedsystem of norms, values, beliefs and definitions” (Suchman, 1995: 574). As described earlier, the conception, adoption andexecution of organizational ideas and processes occur in a “taken-for-granted (i.e., institutionalized) social and cultural”domain (Meyer and Rowan, 1977; Meyer and Scott, 1983; Powell, 1988; Scott, 1983; Zucker, 1987), which creates regulative,cognitive or normative reassures for conformity (Guler et al., 2002; Meyer and Rowan,1977). Each institutional order provides“a different rationale for claiming legitimacy, whether by virtue of being legally sanctioned, morally authorized or culturallysupported” (Scott, 2008: 51). To gain andmaintain legitimacy, organizations converge towards behavioral conformity throughprocesses of coercive, normative and mimetic isomorphism (DiMaggio and Powell, 1983).

For its appreciation of the contextual and historical factors that may contribute to determining competitive advantage,institutional theory or institution-based view is increasingly seen as a third prominent perspective to strategic management –industry-based and resource-based views being the other two (Peng et al., 2009). Strategic actions are embedded in complexinstitutional environments, which may play a dominant role in determining strategic outcomes (Greenwood et al., 2010).Further, firms may face multiple institutional domains, which may display conflicting demands and clashing pressures forconformity (Pache and Santos, 2010). This phenomenon is described as institutional pluralism (Kraatz and Block, 2008).

MNCs face a complex institutional context, characterized by multiple-country institutional environments, each withspecific regulatory, cognitive and normative requirements (Kostova and Zaheer, 1999; Westney, 1993). Institutions and theirlegitimacy demands vary across national environments, since within-country institutional homogeneity is typically higherthan across-country (Kogut, 1993; Kostova and Zaheer, 1999; Rosenzweig and Singh, 1991).

MNC subunits are exposed to counteractive institutional forces. They are confronted with pressure to conformity exertedby the local environment and with the need for embeddedness into the local context, in order to attain external legitimacy. Atthe same time, subunits need to prove consistency within the MNC, thus to achieve internal legitimacy in the network ofsubunits forming the MNC. Internal legitimacy results from a subsidiary’s compliance with the organization structures,policies and practices existing within the MNC, which have crystallized over time under the influence of the externalenvironmental forces in which the parent enterprise was established (Kostova and Zaheer, 1999). Therefore, MNC subunits inhost countries face an institutional dualism (Hillman and Wan, 2005), being pressured to isomorphically conform to the localenvironment and to preserve adherence to the MNC-imprinted practices.

MNCs, organizational legitimacy, and low-income markets

Institutional concepts are particularly suited to explain firms’ strategies in emerging countries, where the effects ofgovernment and societal forces are more salient than in developed economies (Hoskisson et al., 2000). As the market ma-tures, transaction-cost economics and subsequently the resource-based view of the firm gain more explanatory power.Indeed, emerging economies are characterized by a widespread lack of basic infrastructures, deep informational gaps andprofound market imperfections, which generate a sharply uneven distribution of power and resources (Khanna and Palepu,1999). Particularly at the BoP, formal institutional voids lead to socioeconomic activities being predominantly controlled byinformal institutions (De Soto, 2000; Rivera-Santos and Rufín, 2010). As a consequence, legitimacy is more likely to follownormative and cognitive forces instead of formal standards imposed by regulatory institutions. In addition to that, low-income consumers display substantial isolation, as their interests, behaviors, priorities, responsiveness towards advertisingmessages, and adoption of new technology are likely to differ substantially from high-income, top-of-the-pyramid (ToP)consumers (cf. Chelekis and Mudambi, 2010). The scarce impact of education and communication on BoP consumers'cognitive framework widens the gap between the institutional environment characterizing wealthy and BoP consumers(Khanna and Palepu,1997). The high institutional distance – or institutional divide, in the conceptualization offered by Rivera-Santos et al. (2012) – between BoP markets and the traditional markets targeted by MNCs (both home-country and wealthymarkets in developing economies) results in MNCs facing important knowledge gaps, as far as daily norms, values and beliefsthat characterize the BoP are concerned (London, 2009).

Furthermore, the institutional environment at the BoP is highly heterogeneous (Hammond et al., 2007; Sachs, 2005;Webbet al., 2010). The relevant stakeholders and social groups involved in the process of legitimacy formation are bound to thespecific rural village, or urban slum, or spatially-bounded region. For example, rural villages in India are typically ruled by the


Firm-specific advantage(Buckley & Casson, 1976; Caves, 1974,

1996; Dunning, 1973)

Multinationality(Acocella, 1992;

Doms and Jensen, 1998)

Institutional dualism(Hillman and Wan, 2005)

Liability of foreignness (Zaheer, 1995)

Competitive Advantage of MNCs in BoP markets

+

__

+

Figure 1. Theoretical Framework


panchayat, self-organized groups of five elderly villagers who benefit from the community’s trust. The panchayat can allow ordeny permission for any new commercial activity or sometimes even for product entering the village. For instance, in 2003the panchayat of Plachimada village in the Indian state of Kerala cancelled the operating license of Coca-Cola for extractingwater for its packagedwater plant, because of allegations that groundwater in local areas was significantly depleted as a resultof the plant’s operations (Bijoy, 2006). The source of legitimacy, as well as the process to establish and maintain legitimacy, isentirely controlled by institutional forces completely alien to other market segments within the same country. The notion ofinstitutional dualism (Hillman andWan, 2005) can even extend into institutional pluralism (Kraatz and Block, 2008) for MNCsoperating at the BoP, as they may face isomorphic pressure towards multiple heterogeneous BoP segments.

Figure 1 summarizes the theoretical framework of the article as emerging from existing literature, and highlights thestrengths and weaknesses of MNCs present in host countries.

Taking this as its conceptual starting point, this work aims at examining the factors underpinning competitive dynamics atthe BoP between domestic companies and well-established MNCs – namely MNCs that have overcome the initial liability offoreignness. Once liability of foreignness has been ruled out, institutional dualism emerges a key determinant for MNCs’disadvantage. Hence, this work aims to garner further insight into this concept.

The presence of multiple institutional frameworks faced by MNCs at the BoP can be understood through an in-depthanalysis of the customers’ requirements in low-income markets, in terms of innovative products and criticality of devel-oping unique business models. Guiding this analysis is the 4A framework proposed by Anderson and Markides (2007) andBalakrishna and Sidhart (2004), which highlights the dimensions of product affordability, acceptability, awareness andavailability. Acceptability is related to product innovation, more specifically to the extent to which the product is sociallyacceptable to the poor. Awareness considers how BoP consumers can learn about the new product, and about how to use itthrough dedicated promotion channels. Affordability encompasses the pricing of the products, which is in turn related to thecosts of product manufacturing, procurement of rawmaterials and logistics. Finally, availability deals with how the product ismade available to consumers through ad hoc distribution channels.

This 4As perspective recognizes that low-income consumers located in both rural and urban areas are lacking essentialgoods not because of affordability issues only. New products need to be widely distributed and made available, especially tothe poor communities scattered across remote rural areas. Further, innovation needs to be socially acceptable to the poor, whomay hold strong psychological barriers towards technology and newness, due to the complex social, linguistic, and ethnicbackground. Before seeking a product to solve a need, low-income consumers have to develop awareness towards that need,which relies on their very heterogeneous levels of literacy and living conditions. The 4As framework provides a multifacetedlens which allows appreciating how social norms, cognitive schemes, values, cultures and beliefs are responsible for productdiffusion and success at the BoP.We use this framework as an analytical tool to investigate how informal institutions (De Soto,2000; Rivera-Santos and Rufín, 2010) may shape inter-firm competitive dynamics in low-income markets.

Research methods

In light of the exploratory nature of our research and of the limited theory about the competitive dynamics betweendomestic companies and MNCs in BoP marketplaces, we chose an inductive approach. The case study methodology enablesan in-depth examination of the selected phenomenon, both by considering the instantaneous situation and by gathering



information about its evolution over time (Lee, 1999; Eisenhardt, 1989; Yin, 1994). Case studies represent a commonlyadopted research approach when evolution and change processes are to be systematically observed (Arino and de la Torre,1998; De Rond and Bouchikhi, 2004; Doz, 1996; Koza and Lewin, 1999).

The case selection relies on theoretical sampling (Eisenhardt and Graebner, 2007). In order to explore the competitivedifferences due to multiple institutional frameworks, we shortlisted companies that were either facing only one institutionalenvironment or companies facing multiple. In particular, for selecting MNCs, we considered the companies operating inmultiple market segments (BoP and ToP). We then selected one MNC, which is multi-country and multi-segment as opposedto two domestic companies, active in only one country on a single market segment (Born-BoP). Through this distinction weaim to highlight the idiosyncratic capabilities that Born-BoP may hold, since they are focused specifically on the BoP marketsince inception.

Anglo-Dutch Unilever is a renownedMNC holdingmulti-country, multi-segment operations. Its subsidiaries are present inmultiple countries, and it operates in both high- and low-income markets. At the same time, HUL has a long-lasting tenurewithin the Indian market, approximately 80-90 years (Butler and Ghosal, 2002), which makes it almost an “Indian company”in the collective mind. In fact, Unilever follows a multi-domestic strategy (Bartlett and Ghoshal, 1986), where subsidiaries arehighly independent from the parent company and the priority is given to local adaptation. These characteristics minimize thedifferences between the selected MNC and the domestic companies and allow for the observation of residual differences inthe competitive behavior owing to their multinational vs. domestic characters. As opposed to HUL, Nirma in the shampoobusiness and CavinKare in the detergent sector are Indian companies. Both companies started their operations by focusing onthe low-income consumer segment in the domestic market. Their characterization is therefore single-country, singlesegment. Our choice of cases enables the comparison between the strategic behavior of MNCs vs. local companies, byillustrating the competitive strategy of HUL in respect to Nirma in the detergent business and against CavinKare in shampoomarket in India. The choice of one MNC as opposed to two domestic companies is particularly thought to ensure highcomparability of the competitive dynamics in the two observed industries, and to reduce to a minimum the observationalnoise due to differences between MNCs, rather than to the competitive discourse.

Data gathering has drawn on a variety of information sources, to ensure data triangulation: corporate archives; pressreleases; business reports; semi-structured interviews; and, follow-ups with emails, phone-calls, informal conversations andobservations. We conducted semi-structured direct interviews with six executives in CavinKare and four executives in HUL,operating at different levels of the organizational hierarchy. In the case of HUL, one out of four interviewees was a formerexecutive, currently serving in a different organization. We conducted a total of 21 hours of interviews, which have beentranscribed verbatim. Furthermore, we directly consulted industry experts and researchers, conducting eight interviews witha total of 10 hours transcribed verbatim. We relied on experts and secondary data to obtain information on Nirma’s businessstrategy over time against HUL. Finally, we triangulated interview data with information gathered through newspaper items,corporate archives of companies, their annual reports, and business reports. We gathered and analyzed 72 newspaper itemsfor CavinKare,156 for HUL, 201 on CavinKare and HUL, and 67 for Nirma.We also consulted an average of 5 corporate archivesfor each company and 15 business reports.

We analyzed the transcripts of interviews following the procedure suggested in literature (Glaser and Strauss, 1967;Sharma and Vredenburg, 1998). In the first stage, we categorized the responses, opinions and ideas from the transcripts. Inorder to identify the recurrent themes we looked for emerging concepts, phenomena and variables and alsomade continuouscomparisons of these. We found and assembled verbatim from transcripts dealing with each recurrent theme. Looking at thefrequency of mention and using qualitative judgment, we retained or removed themes in accordance with their theoreticalmeaningfulness and substance. We also looked for interconnectedness and linkages between emergent themes.

The competitive race in the shampoo and detergent segments of Indian BoP market

Nirma and CavinKare2 provide two important examples of how domestic, Born-BoP companies could establish acompetitive edge over MNCs, by successfully identifying and exploiting the business opportunities in the low-incomemarkets. For a long time, HUL had viewed the BoP consumers as a low-margin, inaccessible segment, until companies likeNirma and CavinKare showed the real profit potential of these markets.

Nirma started selling detergent powder to lower- and middle-income customers in 1969. Its product was priced at a thirdof the price of Surf, a brand owned by HUL. Nirma grew dramatically; by 1980, it had overtaken Surf in the market share. In1985, it cornered a market share of 58% in comparison to 8.4% of Surf. It became the number one detergent brand in India andone of the largest selling detergents worldwide (Butler and Ghosal, 2002).

In 1977, HUL’s marketing director noticed for the first time that during his field visits he could spot Nirma’s brandeverywhere, whether in shops in urban areas or shops in villages across northern India. However, HUL continued perceivingNirma not as a competitor and ignored its presence altogether. In their assessment, Nirma’s business model was not sus-tainable because of its very thin margins and it could not survive in the long term. HUL’s strategic mindset was focused on

2 The description of the competitive dynamics between Nirma and HUL extensively relies on published case studies (e.g., Ahmad and Mead, 2004; Butlerand Ghosal, 2002) and other published material. The discussion on competition between CavinKare and HUL is based on published case studies (e.g. Jaiswaland Venugopal, 2008) as well as variety of other primary and secondary sources.



margins and thus on differentiation, while Nirma’s was concentrated on scale and cost-effectiveness. In the words of a globalbrand manager at HUL, “Nirma’s business model was a very different model and I think the way we operated we failed to see howNirma could be making this kind of money from its products.”

In fact, Nirma’s profits came not from higher margins but as a result of extremely high volume, high capital efficiency andits lower costs structure. In 1999, Nirma’s gross margin and return on capital employed (ROCE) were 18% and 121%respectively, in comparison to 25% and 22% for high-end detergents of HUL (Prahalad and Hart, 2002). HUL realized itsvulnerability in the detergents markets only after more than 15 years since Nirma started off its operations. In order tocounteract the rapid growth of Nirma, it started a project called STING – Strategy to Inhibit Nirma Growth. As part of thisproject, HUL developed and offered its own low-cost detergent under the Wheel brand name in 1988.

CavinKarewas founded in 1983 by C. K. Ranganathan, with a modest capital of Indian Rupees 15,000. The company startedoffering Chik brand of shampoo in a sachet, a small volume pack, to lower middle-income consumers in rural and semi-ruralareas in the southern part of India. Like Nirma, CavinKare’s Chik shampoo gradually expanded its presence in the ruralmarkets across the country. In 2003, it emerged as the most selling brand in rural India with about 40% market share against31% of Clinic Plus brand of HUL. Chik, with its 23% share of the overall market, was the second largest selling shampoo in India.In 2003, Chik’s large market presence was also recognized with the best brand performance award given by AdvertisingAgencies Association of India. In 2004, it was among the top 100 consumer brands in the country (Economic Times, 2004). Chikwas instrumental in the significant rise of shampoo consumption in rural areas. The share of rural market in the overallshampoo market increased from 15% in the late 1980s to 35% in 2002 (Economic Times, 2002).

It took several years for HUL to recognize CavinKare as a serious competitor. Confronted with the rising market share ofChik, HUL realized the profit prospects in the invisible buying power of rural population in the shampoo market. As acompetitive response it introduced Lux shampoo in low unit packs at the price of 50 paise and one rupee. In 2002, HUL alsooffered its Clinic Plus and Sunsilk brands in small packs. Despite HUL’s competitive response, Chik continued its dominance inthe rural markets.

Developing acceptable products through keen understanding of BoP markets

In the late 1960s, Karsanbhai Patel, founder of Nirma, recognized that women in the rural areas of India did not have anaffordable detergent. They were using inferior quality soap bars that took too much of their daily time in washing clothes.These women used to scrub wet clothes with soap bars, often beating the clothes with a club-shaped wooden bat, orrepeatedly hitting the clothes mildly against a hard surface. Thewhole process was laborious and burdensome. Although HULwas offering superior quality detergent powder under the Surf brand, it was too expensive and only a small percentage ofwomen could afford it.

Unlike HUL, Nirma and CavinKare were able to introduce detergent powder and shampoo respectively that were of good(or at least decent) quality at a price affordable to most consumers. An important factor has been the understanding ofconsumers’ perceptions, which might not necessarily mirror the objective reality. In fact, some laboratory experiments doneby HUL’s researchers showed that Nirma was harsh on the skin and could result in skin irritancy (Ahmad and Mead, 2004).HUL initially believed consumers would not accept Nirma’s product because of its harshness on hands. However, it failed torealize that Nirma was commercializing a product of comparatively lower quality but more suitable to the specific BoP utilityfunction, because of the widespread belief that harshness indicates effectiveness. The perceived value of Nirma product wasthus higher. A global brandmanager at HUL commented, “So, initially it’s certainly yes, the whole bit about consumers, we didn’texpect them to be willing to make that trade-off on acceptable wash with poorer impact on hands.”

A regional brand director at HUL underlined, “Ultimately people are buying Nirma for cleaning clothes and consumers in theearly phases were accepting to have little harshness on hands. In fact, earlier when Wheel was launched people believed that fordetergent to be effective it has to have some harshness. And we had to actually counter that myth that Nirma had created.”

Also, idiosyncratic factors such as water conditions at the BoP contributed to the success of Nirma. In the words of a seniorexecutive responsible for global branding at HUL, “If you look at the product content, essentially soda turns very effective in hardwater conditions, which characterize the available water these consumers have. So, Nirma in hardwater gave better neutralizer andbetter lather and better soapiness which were associated with good quality. So, in the housewife’s mind she was getting a goodproduct or she was getting a product which was not bad. So it was decent cleaning and not bad.”

While developing product for rural markets, CavinKare demonstrated a deep understanding of the latent need of its ruralconsumers in terms of hair cleansing. Compared to urban wealthy consumers, rural customers were more interested incleansing their hair. A senior marketing executive at CavinKare noted, “When we entered the rural markets with Chik, we had afair understanding regarding basic need for a shampoo user. For a rural consumer, shampoo was just a product and their un-derstanding about it was limited to what the product should deliver. Basically, the foremost feature a shampoo required in such amarketplace was removal of dust grind and tough hair oil layers. The shampoo was expected to take care of that weekly load of dirtcleaning and oiling habits. When you look at shampoo category, the three most important factors impacting buyer behaviour areconditioning, cleansing, and fragrance. Now, a rural consumer working in fields will require higher level of cleansing compared tohis urban counterpart who seeks more conditioning for making his hair look more shiny, soft, and bouncy. Now, this is where theunderstanding of needs comes into consideration. When you look at Chik it would have a very high level of surfactant compared toPantene, or Head and Shoulders, etc. The type of surfactant we use makes a lot of difference. In rural areas we use surfactant withhigher alpha olefin sulfonate (AOS) which possesses superior cleansing capability. What your consumer exactly needs therefore



becomes a lot more important. The surfactant quotient along with other factors like appealing black-colored shampoo signifyingdark black hair, convenient sachet packaging, and affordable pricing gave an instant acceptance amongst our consumers.”

The close understanding of consumers’ behavior that led to the launch of BoP tailor-made products has been possibleprimarily because both Nirma and CavinKare have focused on the BoP consumers since the onset of their operations. Bycontrast, HUL turned its attention to BoP markets fully long after it started offering its products in middle and high-incomemarkets. Moreover, even after it started targeting BoP segments, HUL maintained a strong presence in both high- and low-income markets. The simultaneous presence of the company in both segments affected the way HUL’s managers perceive theneeds of BoP consumers. When asked to characterize the BoP, several managers stressed that BoP consumers are intrinsicallyaspirational, in that they tend to “want what wealthy consumers have.” Along a similar line, a divisional vice president com-mented, “BoP consumers havemore or less the same needs as wealthy consumers. Rural and urban BoP consumers may be differentto some extent but their needs are similar. Rural consumers require little more education, their ability to communicate is a littlelower, water availability might be lower, but needs are more or less the same.”

The emphasis on the aspirational character of BoP consumers reveals that HUL tends to focus more on the similaritiesrather than on the differences between BoP and affluent consumers. Because the company simultaneously engages with bothmarket segments, the need to leverage cost-effective synergies influences managerial perceptions regarding market needs. Infact, the same divisional vice president further noted that, “It is important to understand what people want and what they arewilling to pay for; whether it is high-income or low-income consumers does not matter, the needs do not change. There is not adisadvantage in serving affluent and low-income consumers, there is more in common than differences. There is economy of scale atboth back and front end.”

Views on this point are however heterogeneous. HUL managers who recognize the difficulty to reconcile BoP and ToPconsumers’ needs emphasize the complexity that serving both markets entails. A very vivid illustration provided by a globalbrand manager at HUL is the following, “.it brings lot of complexity in terms of allocation of people, and there is a lot ofcomplexity in terms of certain people who are shared and their ability to switch their mind from a high-end consumer to a low-endconsumer. So it creates some friction bymistake within the company on resources and how they allocate it on various brands and soforth. Let’s take an example of Surf Excel. When a Surf Excel is being made there are certain elements in the mix and given that it isdesigned for wealthy consumers, we will not compromise on the kind of enzymes we use the quantity of, quality of salt, fragranceand it will be a subtler fragrance which stays for longer, hedonic use will be very different and so on and so forth. Now, if the samebrand manager tomorrow had to design Wheel, then it will be tough and it will take some time to make that transition for him orher.”

All in all, it emerges that serving both high- and low-income markets creates complexities for HUL. In some instances, themanagement handles these frictions by posing a higher emphasis on similarities rather than differences between the mar-kets. While driving away attention from the difficult-to-reconcile aspects, this approach may however select out thosedifferentiating elements of BoP markets that are critical to successful product development for low-end consumers, such asthe value attributed to the “harshness” of the detergent, or to its fragrance, or the black color of the shampoo. Hence, the co-existence of high- and low-end products within HUL has influenced its competitive behavior at the BoP, by creating internalcomplexities and by shaping the perception of consumer needs.

HUL’s difficulty to develop products crafted on BoP consumers’ needs also relates to its characterization as an MNC. As anMNC subsidiary, the company is expected to adhere to stringent quality controls and safety standards shared across thesubsidiaries worldwide. The presence of MNC-centered approval policies slowed down HUL’s response to BoP markets’needs; as one executive in HUL highlighted, “Sowhen you are operating on amass market you have to have two different businessprocesses to take on low-cost competition. Cost and speed aremindsets. Therefore basic mindset on speed or response time has to bevery different. If we were to adopt a cost mindset, as an MNC we cannot be fast.”

This evidence is in line with the study by Bartlett and Ghoshal (1986), which highlighted the constant tension betweenMNCs’ drive for local adaptation as opposed to the search of global efficiency. In particular, one interviewee pinpoints that,when HUL responded to the Nirma threat by launching its own low-cost detergent under the Wheel brand, its room fortailoring product formulations increased significantly. This flexibility was given much later by the parent company. A regionalbrand director at HUL pointed out, “Unilever is very lucky in India to get a lot of latitude in terms of speed to take on competition,especially in the mass market. [.] Now we have a lot of flexibility. Especially for Wheel, we have all the latitude. For your in-formation, Wheel has a lot of flexibility. We supply Wheel in different states in different formulations which was not the case earlierwith us.”

Furthermore, because theMNC had specific policies regulating the quality and safety of rawmaterial supply, HUL could notuse some product features that had been successful in competitors’ formulations. For example, it realized that the fragrancerequirement of BoP consumers is very different, as they need intense fragrance with a stronger initial burst. However, HULcould not use a class of compound in its product formulation as the parent company does not allow it usage. The samecompound is used though by its local competitors, which resulted in more intense and longer lasting fragrance of theirproducts. In the words of a global brand manager at HUL, “Just to give an example for fragrance, two of three classes of com-pounds were ruled out or banned globally because of environmental reasons. The third that we selected [.] is tougher tomanufacture and creates other complexities. But we are aware that some of our local competitors use the other two compounds asIndian regulatory environment allows their use. This impacted us as acceptability of competitors’ products improves as thosebanned compounds have better delivery in terms of fragrance intensity and duration in time”. HUL faced many other constraints.Unlike Nirma, it used phosphate instead of caustic soda in the formulation of its detergents due to product standard norms.



Two factors thus emerge that influence the competitiveness of HUL at the BoP and specifically its ability to deliver productsacceptable to the BoP consumers, 1) the MNC’s simultaneous presence in both BoP and ToP markets; and, 2) its simultaneousneed to adapt to both local conditions and to globally shared standards. In these phenomena we recognize two facets ofinstitutional dualism (Hillman and Wan, 2005). First, the simultaneous presence of HUL in both BoP and wealthy marketshinders HUL’s capability to fully abide to BoP idiosyncratic requirements. The lack of cognitive tuning creates cognitivedistance and myopia. The BoP market displays an isolated institutional set (Rivera-Santos et al., 2012), where informal in-stitutions – social norms, beliefs, cultures, ethics – have a larger influence on social behavior than formal institutions, like lawsand regulations (Chelekis and Mudambi, 2010; De Soto, 2000; London, 2009; Khanna and Palepu, 1999; Rivera-Santos andRufín, 2010). Therefore, the search for legitimacy in BoP markets will require very different organizational actions than forwealthy consumers, thus producing conflicting institutional demands (Pache and Santos, 2010).

Secondly, part of HUL’s rigidity can be ascribed to the overlap of institutional domains faced by the MNC’s subunit, and inparticular to the tension between internal and external legitimacy (Kostova and Zaheer, 1999). As an MNC subsidiary, thecompany needs to maintain consistency with the MNC at large. New product development routines, raw material supply,manufacturing processes, need to adhere to institutionalized practices within theMNC and fall within the latitude establishedby the MNC, since adopting markedly different models would undermine its internal legitimacy. However, it also needs toadapt its value proposition to the local domain, to pursue external – local – legitimacy. While subsidiaries may enjoydiscretion in tailoring appropriate strategies of product advertising and promotion according to local needs, the productquality and safety are typically sacrosanct and not subject to local modifications. Once again, the conflicting demands (cf.Pache and Santos, 2010) stemming from external and internal institutional domains curtail the MNC subsidiary’s ability tooffer acceptable and timely product innovation. On the contrary, without having to adhere to any such requirements, do-mestic firms are able to design their new product development on the specific needs of BoP consumers, thus maximizingproduct acceptability. We thus advance our first proposition:

PleasBase

Prop 1. MNC’s simultaneous pursuit of legitimacy, both a) in BoP and ToP markets, and b) externally and within the MNCnetwork, creates two facets of institutional dualism, which can hamper ad hoc product development and undermine productacceptability among BoP consumers.

Creating awareness through effective promotion

Nirma and CavinKare realized early on that, in a competitive market where global players dominated the marketplace,appropriate branding was imperative for building a base of sustainable and loyal consumers. The Nirma brand name wascoined from the name of Krasanbhai Patel’s daughter Niru. He put her picture on the package itself, which gave a distinctiveand personal touch to the whole product. In 1982, it started distributing Nirma calendar and plastic shop boards. Thecompany adopted innovative strategy to gain trade acceptance – for example, it hired women to visit retail stores and ask forNirma powder. Through cost-effective advertising media like posters, banners, wall paintings and transportation vehicles,Nirma reached its consumers deep in several territories which HUL always overlooked. The company also invested signifi-cantly in radio advertisements and from the late 1970s on television, when the latter started entering Indian homes.Emphasizing the value-for-money concept, the company’s advertising focused on touching the psyche of price-consciousIndian housewives. Through jingles – like Dudh Si Safe di Nirma Se Aye, Rangeen Kapda Bhi Khil Khil Jaye (Nirma’s whitenessis as white as milk, even the most resplendent clothes blossomwith it) – the company successfully found its way into the hearts ofconsumers. While maintaining its value-for-money product proposition, Nirma’s focus always remained on creating superiorbrand loyalty amongst its consumers. For promoting its products, Nirma largely relied on an umbrella branding approach, asthe company believed it offered Nirma products an instant recall amongst its consumers without essentially increasing theadvertising spend.

In the words of Chairman of Nirma, “Nirma is the only brand name its products will ever have. Sony is an umbrella brand, as isFord or Omega. The point is that Nirma stands for freshness and quality and all its products reflect the brand.The Levers spend overRs 150 crore [1500million] per year for brand development which is all charged to the consumer, while our advertising costs are lessthan Rs 20 crore [200 million].” (Outlook India, 2007)

When CavinKare entered the shampoo market, it realized that low-income consumers in rural and semi-urban areassimply did not know how to use the product. Several consumer education initiatives followed to convince consumers to tryout a shampoo: its sales team went into villages to provide live demonstrations on how to use shampoo and how shampooimproves quality of hair wash; road showswere organized to create awareness of shampoo usage and its benefits among ruralconsumers; videos onwheels were used to play out hit movies for the villagers, while free samples were distributed to induceproduct trials of Chic brand. Company sales team also distributed free samples door-to-door. Radio was used as a primary toolfor advertising and brand communication. Radio advertising campaigns used film dialogues endorsing Chik brand. Film starsfrom regional movie industry, very popular among the population targeted by CavinKare, endorsed the brand. These marketdevelopment initiatives significantly contributed to rural consumers gradually shifting away from bathing soap and home-made preparations to shampoo for washing hair. In the words of the Chairman andManaging Director of CavinKare, “Wewentto the rural areas of South India where people hardly used shampoo. We showed them how to use it. We did live demonstration on ayoung boy. We asked those assembled to feel and smell his hair [.] Next, we planned Chik Shampoo-sponsored shows of Rajni-knath’s [a popular movie star in South India] films. We showed our advertisements in between, followed by live demonstrations. We

e cite this article in press as: Angeli, F., Jaiswal, A.K., Competitive Dynamics between MNCs and Domestic Companies at theof the Pyramid: An Institutional Perspective, Long Range Planning (2013), http://dx.doi.org/10.1016/j.lrp.2013.08.010


also distributed free sachets among the audience after these shows. This worked wonders in rural Tamil Nadu and Andhra Pradesh[two southern states in India]. After every show, our shampoo sales went up three to four times.” (Rediff.com, 2007)

Following the approach utilized by Nirma and CavinKare, HUL also made use of innovative advertising solutions, such asradio, street performance, magicians, singers, dancers and actors (Anderson and Billou, 2007). In the competitive dynamics atthe BoP, HUL’s adoption of these strategies exemplifies mimetic isomorphism (DiMaggio and Powell, 1983). As one formerexecutive pointed out, “HUL was inspired by local companies to adopt these marketing strategies." As followers, however, HUL’smanagers recognize their strategy to be somewhat less successful than competitors. Nirma and CavinKare are recognized tohavemore skills to leverage tailor-made communication, and to craft “a simple message.” These two domestic companies usedtheir fine-grained consumer insights to increase awareness. In fact, while CavinKare – which mostly concentrated on SouthIndian consumers – employed movie stars because of their high appeal for a South Indian audience, at the national level theperception of celebrities is somewhat different. This point has been rightly captured by Nirma, who employed everydaycharacters for its national advertisements, as opposed to HUL.

Illustrating this, a former zone sales manager at HUL stated, “Nirma employed for ads day-to-day characters, could have beennext-door people, as opposed to HUL which hired models, superstars, people difficult to relate to.”

An important aspect of creating product awareness deals with brand building at the BoP. Low-income consumers oftenexhibit high brand loyalty. Since they “don’t have too much money to try many different things, and since the consequences ofgetting it wrong are farmore expensive than for urban consumers,” as noted by a divisional vice president in HUL, BoP consumersdo not easily change brand. Capturing the market opportunity, Nirma and CavinKare acted as first movers in a highly brand-loyal market, thus establishing a sizable advantage. Moreover, BoP consumers’mindset more commonly associates HUL withexpensive products, or in the best-case scenario the BoP market does not attach to HUL’s shampoo and detergent brands anyspecial connotation. By contrast, Nirma and CavinKare have characterized their brands as vehicles of inexpensive usefulproducts specifically targeted to the poor, which increased their legitimacy in the BoP market segment. The lack of HUL’sbrand characterization in the BoP markets is linked to a deliberate strategy, which takes into account the simultaneouspresence of HUL in high- and low-end markets. Supporting this, one former executive pointed out, “The problem is that thenyou associate your image with low-income products and will not be able to sell anything profitable (to high-end consumers). I didnot see Nirma coming out on any other category than detergent powder or than rural consumers, they had a very narrow focus,they remained very confined, they could not leverage their expertise and knowledge of the market in other categories: howwill yougrow?”

The presence of HUL in both low- and high-income market segments, and the subsequent inability to gain fine-grainedinsights into BoP market, has led to it adopting follower advertising strategies that weakened the innovativeness ofawareness creation efforts. In addition to that, it imposed specific brand-related choices, which prioritized segmentexpansion over strong brand building at the BoP. On the product awareness dimension, we see the influence of only one of thetwo facets of institutional dualism highlighted earlier, namely the tension between BoP and ToP institutional environments.Our second proposition follows:

PleasBase

Prop 2: MNC’s simultaneous pursuit of legitimacy in both BoP and ToP markets creates institutional dualism, which canhamper ad hoc advertising campaigns and brand building and undermine product awareness among BoP consumers.

Reinventing affordability through innovative operations

The key factor that gave Nirma and CavinKare an edge over its competitors was the extreme affordability of their product.For making its products affordable to price sensitive low-income consumers, Nirma followed a very simple approach toproduct development, manufacturing, packaging and distribution. Nirma’s formulation was developed by its founder Kar-sanbhai himself. He utilized his chemistry background, conducted experiments in his kitchen, and finally developed awhitish-yellow powder, without using many ingredients present in HUL’s formulation, such as whitener, builder, buffer,softener, perfumes. The main ingredient in Nirma’s detergent powder was soda ash, which was 65% of total volume. As it wasabundantly available in Gujarat state where Nirma’s operations were located, the company was able to source the same atcompetitive rates, helping the company reduce its overall costs. The company preferred purchasing its raw materials in cashto avail of the cash discounts. It set its own small scale unit producing in-house printing and packaging material that alsoresulted in the cost reduction. The possibility to source locally with fewer concerns for quality is recognized by HUL as oneelement of competitive advantage for low-cost players in general and Nirma in particular, because of the lower logistic costsand lower prices of the rawmaterials. A senior regional brand director at HUL said, “See, one of the big differentiators that low-cost players have on cost is due to the raw material sourcing. They source it locally from the nearest player available. They don’thave any consideration regarding the quality of the same. For instance, salt which is the big filler in detergents. The low-cost playerssource salt of any quality at lowest available price. They will not give much consideration to quality but will give more importance tothe freight distance.”

To further reduce its production costs, the company relied on contract laborers. When it started its operations the min-imum wage rule for laborers was not applicable on smaller firms. The workers were paid based on the task completed, likevolume of raw material mixed and number of final packs made. In 1989, the company paid Rs 15-25 per person per day to itsworkers. On the other end, HUL spent Rs 30-40 as labor cost per person per day. In the initial years, Nirma had a completelymanual production process. All the rawmaterials were put on the floor andmixed by hands. Until 1985, Nirma did not use any



electricity for the production process, and thus enjoyed the waiver of 15% excise duties. This allowed the company to operateat a production cost of only Rs 200 per ton in plant andmachinery, against Indian Rs 4000 expenditure per ton for HUL. Nirmaalso outsourced accounting and other technical services, giving flexibility to the company to concentrate on businessdevelopment and other important areas (Butler and Ghosal, 2002).

The strategy of low-cost operations helped the company offer products at significantly lower prices compared to itscompetitors. For instance in 1977, the price of HUL’s Surf in the market was over Rs 32 per kg. On the other end, Nirmadetergent was available at Rs 10.50 per kg, almost one-third the price of Surf (Citeman Network, 2006). In later years, when theproduction volume expanded, Nirma went for backward integration, which seemed a reasonable strategic choice given thecompetitive context and the existing fragmented and costly practices guiding the sourcing of raw materials. The in-houseproduction helped the company in attaining self-sufficiency for its key raw materials, giving the company a protectionagainst commodity cycles besides significant savings in raw material cost. Owing to backward integration, almost 90% ofcompany’s entire raw materials were manufactured in-house, which allowed Nirma significant cost savings (India Infoline,2010). In the words of its Chairman, “We will be the only soaps and detergent company in the country, perhaps the first of itskind in Asia, to adopt backward integration in its manufacturing processes.. I had backward integration in mind from day one.”(Outlook India, 2007)

Product affordability also played an important role in CavinKare’s success. When CavinKare entered the market, HUL wasselling shampoo in large bottles in urban areas. CavinKare realized the opportunity of selling the same product in sachets toBoP consumers. The company pioneered the concept of single-serve sachets in Indian markets. Consumers preferred sachetsbecause they allowed them to use the shampoo by incurring only a small expenditure on every purchase occasion. The shareof sachets in overall shampoo market went up steadily. In 2002, they represented about 64% and 60% of the overall shampoomarket in volume and value terms respectively (Prahalad, 2004).

CavinKare adopted value pricing strategy for its shampoo products. Through its research, CavinKare found that if theoverall expenditure on hair wash for each rural consumer could be reduced to Rs 2 in a month, then she would be ready to tryout a shampoo for her hair wash. Leveraging this insight, it developed and introduced a 4ml sachet of shampoo at a price of 50paise (Rs 0.5) shampoo in 1999. The launch achieved dramatic success in themarket. Chik had amarket share of 5.61% in 1999which increased to about 23% in 2003. Low-priced shampoo significantly expanded the shampoo market, and made Chik therecruitment brand (Jaiswal and Venugopal, 2008). Making the quality shampoo affordable, it created an entirely newmarketout of non-users or infrequent users. Through extreme affordability of its products, both Nirma and CavinKare adoptedmarket creation strategy (Seelos and Mair, 2007). Similar to Nirma, CavinKare was obtaining its packaging supplies from itssister organization, Packaging India Private Limited. This resulted in company spending less on packaging materials than itscompetitors. Offering lower-priced product without compromising on quality provided an edge to CavinKare’s products in themarket. The senior marketing executive at CavinKare commented, “Offering value through good design plays an important rolein FMCG (fast moving consumer goods) market. When it comes to this, we first assess what type of value customers want and thendesign the product accordingly. One should understand the difference between cheap and affordable while offering any product.Cheap is something which is inferior in quality while affordable is something which is of reasonably good quality, but offered in anaffordable price range and quantity.”

However, it is important to underline that the strategy displayed by Nirma and CavinKare at the BoP is not merely low-cost, as opposed to a differentiation strategy that was pursued by HUL. The dichotomy advanced by Porter (1980) appearsto be more nuanced, in that domestic companies display a low-cost strategy which also combines differentiation charac-teristics, such as ad hoc brand building initiatives and innovative solutions. In the words of a regional brand director in HUL,“So, contrary to the belief that low-cost players win because of low cost, actually they always win because they have a differentiatedconsumers proposition. Low-cost models have a lower distribution cost, they have lower conversion cost in terms of manufacturing,and they have lower company overheads. I have competed with Nirma but in my view people attribute low cost for winning butactually the reason for winning is due to some innovation that they come up with. They defend the MNCs due to their low coststructure.”

HUL recognizes its difficulty in developing such an innovative model to target BoP consumers. As already emerged in theprevious discussion on product dimensions, HUL is present not only in BoP but also in high-income markets. The twodisparate customer segments obviously display very different sensitivity to price, which is reflected in the managerialattention devoted to cost-effectiveness. If Nirma and CavinKare developed their products around the driving principle of cost-containment, HUL was less focused on costs, because of its presence in other markets where price is less crucial. In the wordsof a regional brand manager at HUL, “I think the one thing that brings in marketers mind who are handling two types of brands[BoP vs. ToP] are majority of the times marketers tend to be not very cost-focused but they tend to be revenue-focused people. Youknow they are very casual about cost. See, this is the dichotomy I feel in the company in large MNC who have low volume, highmargin products; the kind of focus on cost is not as high as the BoP business.”

HUL’s capability to dramatically alter its structure to develop affordable products is also undermined by the “MNCs’ typicalway of working”. The characterization of HUL as an MNC imposes the adherence to MNC-imprinted approval policies, qualitycontrols, and safety standards shared across its subsidiaries worldwide. Even though HUL has considerably adapted its in-ternal operations to serve low-income consumers, the imposition of MNC-centered strict manufacturing policies and stan-dards intrinsically constrains the room for further adaptation and for innovative organizational solutions. On the need tocomply to standard procedures, a global brandmanager at HUL elaborated, “As an MNC, we need to stick to very stringent safetynorms. So, there are many ingredients which local companies use but we can’t, as globally we don’t use them. Local companies are



governed by only the Indian regulatory environment whereas for us we need to follow American and European regulation. Thisimpacted us by increasing our product costs.”

The competitiveness of HUL at the BoP and specifically its ability to deliver affordable products is thus influenced by, 1) theMNC’s simultaneous presence in both BoP and ToP markets; and, 2) its simultaneous need to adapt to both local conditionsand to globally shared standards. These two factors provide a second illustration of the two-faceted institutional dualismalready encountered on the product acceptability dimension. First, the use of the same operational structure for both wealthyand BoP-oriented products undermines extreme cost reduction, local adaptation, and therefore product affordability. Second,the necessity for the MNC to adhere to both local demands andMNC-centered policies produce a tension between the actionsneeded to establish and maintain legitimacy in the local market and the actions to be undertaken to maintain legitimacywithin the MNC. Our third proposition thus follows:

PleasBase

Prop 3. MNC’s simultaneous pursuit of legitimacy both a) in BoP and ToP markets, and b) externally and within the MNCnetwork, creates two facets of institutional dualism, which can hamper the design of ad hoc operations and undermineproduct affordability among BoP consumers.

Boosting availability through ad hoc distribution models

For accessing rural consumers, the major obstacle is distribution. Rural markets in India are harder to reach and spreadover 600,000 villages. Over three-fourth of the rural masses reside in small villages with a population of 5000 or lower. Retaildensity, measured as number of shops per thousand people, is particularly thin. These markets are also characterized by poorphysical infrastructure and aremostly not connected by road. The thinly scattered rural population results inmajor difficultiesfor companies in transportation and delivery of stocks to retailers.

HUL has always been seen as having one of the best distribution networks in India, covering most market geographies.However, its distribution structure is very complex and cost-centric. It has a four-layer structure encompassingmanufacturing plants, carrying and forwarding agents (C&F), redistribution stockists, and retailers. Although this structuregave the company much better reach to remote rural markets, it also added significant costs to its distribution expenses. As aformer zonal sales manager in HUL puts it, “Given the number of distribution layers selling prices have to be high because youhave to ‘give a margin to all layers’ – on the contrary, local companies gave products only to wholesalers. Nirma is not directlyserving small retailers; it managed to achieve great distribution only because of demand-pull.”

One of our interviewees characterizes HUL distribution as a “diamond –shaped model,”which is uniformly adopted by HULfor the entire Indian market. However, this might be inconsistent or even counter-productive in the BoP segment, not onlybecause it adds costs, but also in light of the peculiar conditions of the market, “HUL was always a distribution-led business. Inrural market you will not have a distributor who buys your product and then distribute it and then controlling and monitoring willalways be extremely difficult. The realization that dramatic changes were needed came from the competition by CavinKare.”

Moreover, HUL’s distribution strategy is shaped with the objective of developing synergies with the other brands targetedto high- and middle-income consumers. A regional brand director at HUL noted, “See, for a company like Nirma or Ghadi[another local company manufacturing detergents] what their innovative distribution allows them to do is to cut the C and F costs.So, if you take a variable distribution cost for various brands, for instance if Ghadi has index of 100,Wheel will have index of 200 andSurf or P&G’s brands will have a distribution cost of may be 1000. Now, this is a massive component of cost difference. And let me tellyou that 70% of cost variance between Wheel and Nirma/Ghadi is basically due to the distribution model.”

Nirma’s distribution network was virtually considered “flat.” It is comprised of factory, district level agent or distributor,and stockists. To save central sales tax, the company stockists were appointed as commission agents. The retail stores receivedNirma’s products through these stockists or commission agents, which ensured superior reach even to the remotest of placesand gave the company the ability to quickly respond to market needs. Moreover, the stockists shared 50% of promotionalexpenses with the company. Nirma’s stockists had to bear several operational expenses and they received lower than normaltrade margins. Despite this, they displayed personal commitment and a high level of loyalty towards the company. Theyappreciated that Nirma generated a very large sales volume for them, and sustainable business growth (Butler and Ghosal,2002).

Moreover, Nirma considerably cut costs by avoiding shipment of small truck loads and by realizing economies of scale inthe transportation, while HUL modeled its distribution network in order to ensure direct supply even to small shops. Thisstrategy translated into a sizable cost advantage for Nirma. As a top executive, divisional vice president in HUL highlighted,“So, when Nirma first came in they have a powder that was in a preferred format at a price that was never offered before. Hemanaged to do so bymaking sure that in the entire value chain he took out all the costs which consumers were not willing to pay for.For example, the manner in which the goods were transported, in wholesale market, Nirma will sell only a truckload. They wouldnot deliver which is anything short of a truckload. [.] MNCs were happy to shift 100 kg, 200 kg, and bearing the cost of a truck.Nirma would not shift anything less than 12 tons or 15 tons. So, innovation was in cutting down cost dramatically without affectingquality.”

The target market for Chik brand was rural population; a distribution channel innovation helped CavinKare in accessingrural markets. The company began selling its product in haats andmelaswhich function as periodic markets in rural areas. Inperiodic markets a large number of buyers and sellers congregate at a particular place. Haats are organized weekly and serveabout 4000 rural population from ten to fifteen neighboring villages living within a distance of 12–15 km. In most casesmelas



or village fairs are held once crop harvesting is over and hence rural consumers are cash rich to purchase various products.Unlike haats,melas are also visited by people living in distant locations. Rural consumers generally prefer to purchase from thehaats andmelas owing to relatively lower prices, better quality andwide range of product varieties offered. It is estimated thatin each year over 47,000 haats and 25,000 melas are organized in different places in India. Goods worth about Rs 0.2 millionand Rs. 1.43 million are bought and sold in haats and melas respectively every day (Businessworld Marketing Whitebook,2003). CavinKare succeeded in achieving wider coverage of rural markets by banking upon on this newer distributionmodel. The overall reach of its distributional channel was equal if not better than its rival HUL.

Through their focused consumer insights, Nirma and CavinKare succeeded in gaining local legitimacy, which in turnfavored their access to the local distribution channels – like the haats and melas – and in employing fewer intermediaries.Moreover, the companies managed to develop innovative organizational solutions to adapt their distribution system to theidiosyncratic needs and contextual conditions of rural low-income consumers. On the contrary, the complex distributionnetwork of HUL added significant costs and in some cases reduced the reach, because of the absence of context-specificchannels in the rural markets.

The imperfect fit between HUL’s distribution network and the necessities of the BoP segment appears to be related to someextent to the search for distribution synergies between BoP and ToP markets. This tendency hampered strong customizationof the distribution network based on BoP market conditions, and unfavorably affected the availability of the final products,with respect to leaner and more flexible domestic competitors. This evidence points to the form of institutional dualismwhich was observed earlier on the previous three dimensions. We thus advance our fourth proposition:

PleasBase

Prop 4. The MNC’s simultaneous pursuit of legitimacy in both BoP and ToP markets creates institutional dualism, which canhamper the design of ad hoc distribution channels, thereby undermining product availability for BoP consumers.

Discussion and conclusions

By analyzing competitive dynamics at the BoP through the 4As framework of acceptability, availability, affordability andawareness (Anderson and Markides, 2007; Balakrishna and Sidhart, 2004), this work highlights that MNCs may encounterdifficulties in competing at the BoP in comparison to domestic, Born-BoP companies. Using the institutional perspective, weexplain the MNCs’ possible competitive disadvantage in BoP markets through the concept of institutional dualism as a resultof multiple and contradicting institutional demands (Pache and Santos, 2010). With respect to the previous studies thathighlighted the risk of institutional pluralism faced by MNCs (Hillman and Wan, 2005; Kraatz and Block, 2008), our quali-tative insights provide an in-depth elaboration of the concept, which emerges as two fold. A first dimension of institutionaldualism ascribes to the institutional clash stemming from MNCs simultaneously serving both high-income and low-incomemarkets in the same host country. The two realms present considerably different sets of norms, values, routines, beliefs andrelevant stakeholders (Rivera-Santos et al., 2012) and thus require burdensome and costly ad hoc actions to establish andmaintain legitimacy in both domains. The second dimension of institutional dualism refers to the need for anMNC to developisomorphic actions to both adapt to the local needs and to maintain consistency with the standardized routines within theMNC.

Consistently, this work highlights how two major elements may foster “Born-BoP” domestic companies’ competitiveadvantage in low-incomemarkets against MNCs. The first element is related to the BoP focus of domestic companies, in termsof a primary and long-lasting commitment to develop highly customized offer and marketing communication programs forthe BoP. The second element considers the high organizational flexibility of domestic, Born-BoP companies, who have beenable to adapt – and even shape since inception – their new product development, manufacturing processes, raw materialsourcing choices on the requirements of low-income consumers.

Figure 2 summarizes the competitive strengths of the Born-BoP domestic companies in our analysis, namely BoP-focusand organizational flexibility, and the corresponding weaknesses of the MNC, which refer to the two emerging facets ofinstitutional dualism.

Academic contribution

This work advances extant literature in three main directions. First, it sheds new light on the competitive dynamics be-tween MNCs and domestic companies in the host countries, thereby addressing international business audience. This line ofcontribution builds on the rich and well-known stream of studies that have conceptualized and tested the potential ad-vantages (e.g., Dunning, 1973) and disadvantages (e.g., Kostova and Zaheer, 1999; Zaheer, 1995) of MNCs in foreign countries.By observing the competitive dynamics between a multi-domestic MNC such as HUL and two Born-BoP companies such asNirma and CavinKare in the low-income market, we empirically establish that institutional dualism may affect the MNCs’success in the Indian market. Institutional dualism (or pluralism) thus emerges as a theoretical candidate to side liability offoreignness (Zaheer, 1995) as a possible determinant of competitive disadvantage of MNCs in BoP markets. In this sense, wehighlight that the multinational nature – or “foreignness” of theMNC is not sufficient per se to explain potential disadvantageof MNCs. The Born-BoP domestic competitors reveal strength not only because they are geographically localized, but alsobecause they focus on a single market segment. The two dimensions combined provide the domestic companies with uniquecapabilities to compete at the BoP. Since liability of foreignness is typically defined at country level (Zaheer,1995), our findings


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suggest that a redefinition at segment level may be appropriate, even more so when the segments present such markedlydifferent institutional environments.

The use of institutional theory to frame empirical insights provides a second theoretical contribution, as it advances theunderstanding of how institutional environments influence the competitiveness of MNCs in host countries and specifically inBoP segments. Buildingonprevious scholarlywork (Hillman andWan, 2005), this article provides novel theoretical elaborationand empirical depth to the concept of institutional dualism. It is worth noting here how institutional theory has provided avaluable lens in analyzing the competitive dynamics at the BoP. An alternative explanation could have drawn on thecompetitive theory of Porter (1980), who theorizes two generic strategies guiding inter-firm competition: cost leadership anddifferentiation. It might be argued that successful competing at the BoP markets follows a cost leadership paradigm, and thisconcept is adequate enough to understand their competitive advantage. However, we contend that BoP markets and theresulting inter-firm competition are different in kind, for at least two reasons. First, BoP consumers are typically isolated fromwealthier consumers but also from other BoP niches located in other geographies (e.g., urban BoP as opposed to rural), due todifferent lifestyle, beliefs, values, use of and access to information channels, media exposure, education, technology sophis-tication and need awareness (Chelekis and Mudambi, 2010; Rivera-Santos et al., 2012; London, 2009). This isolation createsextreme heterogeneity in BoP markets, which entails highly idiosyncratic challenges in terms of product innovation, distri-bution, promotion, well beyond the affordability issue. In particular, these consumers attach higher importance to traditions,culture, beliefs, cognitive schemes, social rules and norms, which heavily influence the success of a product. Informal, ratherthan formal, institutions rule life at the BoP (De Soto, 2000; Rivera-Santos and Rufín, 2010). As a result, while Porter’s seg-mentation and theorization on the basis of affordability only may be valuable in traditional, homogeneous markets, thecomplexity in BoP markets suggests need for a multifaceted segmentation, which also takes into account different levels ofproduct awareness, availability and acceptability (Anderson and Markides, 2007; Balakrishna and Sidhart, 2004). Beyondproviding an inexpensive product, institutional theory highlights that crucial challenges lie in establishing and gaining legit-imacy across this complex consumer base. Second, and consequently, the traditional dichotomy of cost leadership and dif-ferentiation display a lower applicability in BoPmarkets than in traditionalmarkets. An inexpensive productwhich fails to alsobe acceptable, available and to respond to a need towhich consumers are aware is unlikely to succeed at the BoP (cf. Prahalad,2004). Low-income consumers, both rural and urban, need ad hoc product propositions, which are able to tackle not only theaffordability dimensionbut differentiate theoffer in termsof product availability, awareness andacceptability. A strategy that isable to combine affordability with differentiated propositions seems to be best suited to the BoP markets, in contrast to thetraditional tensions between cost leadership and differentiation. In sum, the institutional lens of legitimacy appears to bemoresuccessful at grasping the complexity of the competitive discourse in BoP markets.

As a third contribution, this work advances the current understanding of the constraints that MNCs face when serving BoPconsumers, thereby addressing the BoP-related stream of literature and the debate around the effective role of MNCs in low-income markets. Even though Prahalad and Hart (2002) had expressed enthusiastic predictions, several voices of criticismhave followed, particularly on the inability of MNCs to address BoP marketplace realities (Jaiswal, 2008; Karnani, 2007). Bybuilding on a number of recent works adopting institution-based view (e.g., Rivera-Santos et al., 2012), this study provides in-depth qualitative evidences of the institutional dualism undercutting competitive edge of MNCs in BoPmarkets. In fact, whilethe degree of institutional dualismmay vary acrossMNCs, it is true that MNCs addressing BoPmarkets are likely to serve bothhigh-income and low-income consumers, besides responding to internal as well as external forces pushing for institutionalisomorphism. Therefore, BoP markets allow for observing the institutional dualism forces affecting MNCs in their fullspectrum of nuances.

The capability of MNCs to face such constraints will of course be dependent on the specific organizational mechanisms, aswell as the external strategy designed by MNCs to operate in BoP markets. Literature provides evidence of a number ofsuccessful MNCs in low-income markets, such as Coca-Cola or MTN (Rivera-Santos and Rufín, 2010). In this respect, manystudies have underlined the benefits associated with collaborative strategies between MNCs and local entrepreneurs(Chelekis and Mudambi, 2010; Seelos and Mair, 2005; Thompson and MacMillan, 2010; Webb et al., 2010) or with local NGOs(Dahan et al., 2010; Rivera-Santos et al., 2012; Rivera-Santos and Rufín, 2010; Seelos andMair, 2007). However, this is the firststudy to our knowledge that considers competitive dynamics at the BoP, and thus garners in-depth understanding about theweakness that MNCs might display against domestic players in low-income markets. By highlighting the presence andrelevance of institutional dualism and by articulating its nature, this study provides fruitful insights for MNCs willing toformulate an appropriate business strategy to succeed in BoP markets.

At the same time, these findings have to be considered with certain caution. Our study has limited generalizability as aresult of our research design, which observes one MNC with a specific strategy (multi-domestic), in a specific country (India),in two specific industries (detergent and shampoo). The competitive segment is also highly idiosyncratic. As rural BoPconstitutes 78% of the overall Indian BoP base, it also largely dominates the BoP markets of Nirma, CavinKare and HUL. Thisprevalence may hamper the generalizability of the findings to firms competing solely in urban BoP. Although generally it canbe true that MNCs face the demands of the internal environment (the MNC network) as well the idiosyncratic host country(dimension 1 of institutional dualism), it may not necessarily be active in both high- and low-incomemarkets (dimension 2 ofinstitutional dualism). Moreover, the strength of the demands of the internal environment may vary greatly, depending onthe specific strategy drivingMNCs. Our research design has tried to consider the institutional demands of the parent companyin an MNC design where they are supposedly minimal: the multi-domestic MNC. However, this overall picture suggests that,while institutional dualismmay always be present in MNCs’ operations to some extent, its relationship to MNCs’ competitive



advantage can largely vary. This line of reasoning suggests a contingent view of MNCs’ advantage. The behavior of MNCsversus domestic companies cannot be fully understood without a careful consideration of the contextual conditions and thespecificities of the geography, of the industry and – as in this case – of the specific marketplace. In this sense, we build on thestrategic view advanced by Lavie and Fiegenbaum (2000), Jaffe et al. (2005) and Wu and Pangarkar (2006), who suggest acontingent view of the competitive dynamics between MNCs and domestic companies and emphasize the role of organi-zational strategy and industry.

A second line of limitations considers the use of qualitative enquiry, which entails an inherent bias in the informants’claims. What respondents deliver to the researcher is ultimately a personal viewpoint, formulated against individual inter-pretative lenses and mental schemes, within a specific organizational and competitive context. To mitigate the influence ofbiased claims, we formulated each interpretation by drawing on at least two statements issued by different respondents.Moreover, wemade a deliberate effort to contextualize the quotations, by portraying not only the informants’ viewpoints butalso the contextual conditions that might have contributed to form such opinions.

Managerial lessons

Our works offers several insights for practicing managers. What emerges powerfully from our empirical evidence is theneed for a within-country segmentation (London and Hart, 2004), with separate organizational units entirely dedicated to theBoP business. This strategy can mitigate the institutional frictions between high- and low-income markets and promote thenecessary organizational flexibility, away from the stringent standardized practices imposed by the MNCs. The case of HULexemplifies this point very well. The Indian division of HUL had to subsequently open a brand new company to facecompetition from Nirma. In the words of two executives in HUL, “Several factors made HUL incapable to match cost-advantageof its domestic rivals, within HUL it was not possible – they opened a new company to compete with Nirma in the detergent powdermarket, which had different agreements with third parties and distributors, different discounts, not in line with HUL.”; and,“Unilever created a different division with the name Stephan Chemicals. We recognized to win in low-income markets you need tohave a different cost structure and different mindsets. A mindset where flexibility was much more important.”

Therefore, MNCs’ subsidiaries willing to serve low-income markets have to maximize their independence from theinstitutionalized network of standardized practices and develop innovative organizational solutions to devote a stronglyidiosyncratic focus on BoP. In this framework, strategic alliances with local partners and NGOsmay constitute a key to success,as suggested by recent studies (Dahan et al., 2010; Webb et al., 2010). A deep understanding encompassing not only thegeneral challenges that MNCs face in entering foreign countries, but also the specific idiosyncrasies of BoP markets can leadbothMNCs and their domestic partners to develop more effective business strategies. The examples we provided in this workare aimed to offer practitioners new empirical insights and new theoretical developments, in the overall attempt to fostersocially relevant initiatives directed to billions of consumers living in desperate poverty.

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Biographies

Federica Angeli is Assistant Professor of Healthcare Management at the School for Public Health and Primary Care (CAPHRI) at Maastricht University, theNetherlands. She obtained her PhD in Business Administration from University of Bologna, Italy, and has been Visiting Scholar at the Indian Institute ofManagement Bangalore, India. Her current research centers on inter-organizational strategies and networks, with a particular interest in the base of thepyramid (BoP) markets and in the healthcare sector. She recently published articles on Industry&Innovation, Health Policy, Health Policy and Planning, andRegional Studies. Her work has been honored with several awards, including the Best International Paper of the HCM Division at the 2013 Academy ofManagement conference, Best Theory to Practice Paper of the HCMDivision at the 2013 Academy ofManagement conference, Best Paper Proposal at the 2008Strategic Management Society's special conference on India, Finalist for the 2012 Academy of Management's Skolkovo Best Qualitative Paper award, Finalistfor the 2013 Academy of Management Carolyn Dexter Best International Paper award.E-mail: [email protected]

Anand Kumar Jaiswal is Associate Professor of Marketing at Indian Institute of Management Ahmedabad, India. He obtained his doctorate from XLRI Jam-shedpur, India. His research interests include bottom of the pyramid (BoP) markets, services management, customer satisfaction, business-to-consumer e-commerce, and brand extension management. He has published articles in journals such as the Journal of Interactive Marketing, Journal of ServicesMarketing, Innovation, Managing Service Quality, Journal of Academy of Business and Economics, Asian Case Research Journal, Economic and PoliticalWeekly and Decision. He won Distinguished Young Professor Award for excellence in research in 2011 at Indian Institute of Management Ahmedabad, thebest case award in 2011 international EFMD Case Competition and Skolkovo Best Paper Finalist award in 2012 Annual Meeting of the Academy ofManagement, Boston. E-mail: [email protected]





















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