Operational Strategies for Distributing Durable Goods in the Base of the Pyramid

• 成果类型: Article
• 署名作者: Calmon, Andre P.; Jue-Rajasingh, Diana; Romero, Gonzalo; Stenson, Jackie
• 署名单位: University System of Georgia; Georgia Institute of Technology; University of Michigan System; University of Michigan; University of Toronto; Technical University of Denmark
• 刊物名称: M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1523-4614
• DOI: 10.1287/msom.2022.1106
• 发表日期: 2022
• 页码: 1887-1905
• 关键词: social entrepreneurship; base of the pyramid; sustainability; Supply chain management

摘要

Problem definition: Novel life-improving products, such as solar lanterns and energy-efficient cookstoves address essential needs of consumers in the base of the pyramid (BOP). However, their profitable distribution is often difficult because BOP customers are risk-averse, their ability to pay (ATP) is lower than their willingness to pay, and they face uncertainty regarding these products' value. Academic/practical relevance: We examine two practical strategies from distributors in the BOP: (1) improving the product's affordability through a discount and (2) increasing awareness of the product's value. Our results identify BOP-specific operational trade-offs in implementing these strategies. We also propose strategies to manage these trade-offs that can increase consumer surplus in the BOP. Methodology: We introduce a supply chain model for the BOP and analyze the distributor's pricing problem with refunds as well as the distributor's optimal budget allocation between strategies (1) and (2). Results: We find that, in the BOP, the distributor's profit-maximizing budget allocation often yields the lowest consumer surplus. This misalignment between profits and consumer surplus disappears if customers' ATP is high. Moreover, the-misalignment can be resolved if the distributor offers free product returns and commits to a maximum retail price. We confirm the robustness of our results through numerical simulations. Managerial implications: Best operations strategy practices in the BOP can differ significantly from developed markets. Furthermore, BOP customers' limited ATP and high risk aversion generate a BOP-specific misalignment between profits and consumer surplus. Operational commitments, such as free returns, reduce this misalignment and can serve as a signal to investors of a social enterprise's focus on consumer surplus.