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A local bakery of a village is happily baking 100 breads every night for his 100 customers. The breads cost 1 euro a piece and the daily turnover is 100 euro. All 100 families in the village are loyal customers. It has been like this for many years and everyone is happy.
One day the wheat salesman came by to say that there is a growing shortage. The price of the key resource has to go up. The baker can still get the usual supply but the situation is critical. The salesman said that everything was done to bring the situation back to what it was before. The baker had no choice and raised the price of his bread with 10 cent. The loyal customers understood and paid the difference gladly, knowing that is was only temporary. The turnover of the bakery raised by to 110 euro per day.
The situation did not change. The wheat salesman returned to say that the prices did not only go up further, he would also have to half the supply. The baker was desperate and went to the local politicians. They promised that everything would be better if they were re-elected but meanwhile he would have to cope with the dip. The baker raised his bread price to 2 euro but could not make more than half the usual amount. He decided to sell the bread in halves. The loyal customers were furious but had little choice. They bought the half’s for 1,50 euro. The turnover of the bakery had risen to 150 euro even though he had produced only half his usual amount. The local newspaper was talking about an economy of growth and certain local business people taking good benefit.
The resource problem continued and got worse, despite the promises of the suppliers and the politicians. In the end the half’s would cost 3 euros and the baker even sold bread by the slice. His turnover went further up, his productivity down and his customers became less and less loyal. They could not afford it anymore. Newspapers report that “the market was grimm”.
One day certain wealthy local citizens decided to make the bakery the deal of a lifetime. They were fed up with the half’s and slices of bread. They wanted their entire loaf of bread every day and were willing to pay 10 euros per piece. The bakery accepted, of course. He had been tought about market working in business workshops. His turnover shot up to record sales. The baker even became entrepreneur of the year and was invited to membership of the local Rotary to discuss “common interests” among the “powerful” every week. His status had grown but in his shop many people could not buy slices anymore, not even breadcrumbs. There were people now living in poverty and hunger in the village. And they are angry…….but the economy was growing.
Now you can think of your own happy ending of the story. What will happen?
Moral of the story: When you hear powerful people say that the economy needs to grow and that it is going to solve all the problems, please think twice, unless you are this baker of course and you have not thought yet of a happy ending 😉
Most business policies focus on welfare and growth communities because that is where the money goes around. Hardly any of the business plans involve the markets of the poor. The companies that do actually included those markets structurally in their policies tend to score better on the Multidimensional Index of the 5K Group. Why is that?
There is nothing noble about combating poverty. It is good business practice. During the credit crisis we have seen the down fall of big, so called “solid”, institutions s.a. banks due to a moral crisis rather than financial. Typically this moral crisis was caused over the backs of the financially unstable and unwealthy. Does this indicate a contradiction in my argument? Not at all.
The risktaking of the banks by entering bad credit zones was caused by greed and self interests of high level executives who covered their backs by insuring bad credits with others misplacing the trust relationship in the chain. As the entire chain was based on the same material principles of greed the business was a pure speculation that unnoticed inflated the ballon of risk until it exploded into the face of the world. One can hardly argument that all this was a policy to help the poor.
When we design a policy to develop markets with poor people we do that from the moral multidimensional principle of the ideal market development through healthy and motivated people. To achieve this poverty needs to be eradicated from the entire world. We do not talk only about poverty in complex, unstable, tribe oriented third world countries. We talk also about the growing poverty in the rich welfare countries. When a company decided to address this market too, not just by making products available to it but by truely developing a strategy to address the issue effectively, it shows moral integrity. Nobody will ask the company to finance such development our of their own pocket because such strategies of sensitivity to the reality of the world finds many partners in government, institutions and foundation to join forces for a common goal.
The willingness to address such markets by connecting with other organizations and creating serious policy shows and develops an authentic and responsible company culture that is filled with sense and that subsequently will radiate also into the wealthier markets where competition is strong and one does not distinguish anymore through price or quality but with company integrity and authenticity. And this is the basis of any sustainable success and therefore the reason for a company to score high in our Index.