{"id":1302,"date":"2015-10-07T12:00:38","date_gmt":"2015-10-07T11:00:38","guid":{"rendered":"https:\/\/blog.iese.edu\/africa\/?p=1302"},"modified":"2016-10-27T14:56:44","modified_gmt":"2016-10-27T13:56:44","slug":"creating-a-middle-class-the-role-of-companies","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/africa\/2015\/10\/07\/creating-a-middle-class-the-role-of-companies\/","title":{"rendered":"Creating a Middle Class: The Role of Companies"},"content":{"rendered":"

A frequent comment in my interviews with executives from sub-Saharan African (SSA) companies has been, \u201cWhat really drives this company is job creation\u2026 of course, we want to make money, and we do make money\u2026 but our real driver is to create employment.\u201d<\/strong> I mentioned this in a previous post.<\/a> But I want to bring it to our conversation again\u00a0because something just clicked in my mind \u2013 it may sound simple and obvious, but it just clicked.<\/p>\n

Over the last few days, I have been attending the annual meeting of the Strategic Management Society<\/a> where one of the presenters made a simple point: Explicit needs are the ultimate source of profit, and he linked this to purchasing power.<\/p>\n

\"A<\/a>
A middle-class neighborhood in Main Land Lagos<\/figcaption><\/figure>\n

There\u2019s much talk about \u201cthe rise of the African middle class<\/a>.\u201d<\/strong> It increased from 111 million people in 1980 to 313 in 2010 \u2013 or from 26% to 34.3% of the continent\u2019s population in that period, according to data from the African Development Bank<\/a>. Middle class is defined in relation to average income, which is lower in Africa than in the rest of the world. In Africa, daily expenses for the upper middle class are US$10-20; US$4-10 for the lower middle class, and US$2-4 for those in the \u201cfloating class.\u201d The poverty line in the developing world was set at US$2\/day<\/strong> at the time these estimates were provided (2011 \u2013 not fully up to date, but good enough to make sense). Thus, Africa\u2019s middle class is not quite comparable to that in the developed world. (For an illustration of how a taxi driver lives in Kenya, see the related post on Kenya\u2019s middle class and economic growth<\/a><\/strong>).<\/p>\n

And here is where my click comes in:<\/strong><\/p>\n

It\u2019s often the case that companies from developed countries take individuals\u2019 purchasing power as a given<\/strong>. Some enjoy higher purchasing power, others\u00a0little. Some belong to the upper economic class, some to the middle class, and most to the so-called \u201cBottom of the Pyramid\u201d (about 4 billion people according ot the Bottom of the Pyramid Knowledge Center<\/a>).\u00a0Companies decide which group(s) to target, and adjust their products and prices taking into account the willingness to pay and the purchasing power of the various groups. Most companies ignore the \u201cBottom of the Pyramid\u201d; others realize they are an important market segment, and adapt their products in such a way that the cost structure makes them affordable at as low a price as possible while\u00a0the company can still make a profit.<\/strong><\/p>\n

What we tend to forget is that the rise of the middle class is not independent of a company\u2019s actions.<\/strong> To the extent that companies take job creation as a central purpose, and compensate their employees fairly, the \u201cBottom of the Pyramid\u201d will be able to move up to the middle class \u2013 one that can not only access products to cover basic needs but that can also have a minimum level of comfort that allows a more dignified life. In turn, this will boost company profits<\/strong> \u2013 needless to say, provided companies do the right things in the right way.<\/p>\n

Any thoughts on this?<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

A frequent comment in my interviews with executives from sub-Saharan African (SSA) companies has been, \u201cWhat really drives this company is job creation\u2026 of course, we want to make money, and we do make money\u2026 but our real driver is to create employment.\u201d I mentioned this in a previous post. But I want to bring […]<\/p>\n","protected":false},"author":1654,"featured_media":1304,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[85385,993],"tags":[274,83363,121,585,7998,951,5461,1147,80124,100381,100378,1313],"class_list":["post-1302","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-doing-business-in-africa","category-living-conditions","tag-african-development-bank","tag-company","tag-economic-growth","tag-employment","tag-job-creation","tag-kenya","tag-middle-class","tag-poverty","tag-purchasing-power","tag-pyramid","tag-strategic-management-society","tag-sub-saharan-africa","megacategoria-mc-africa"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/posts\/1302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/users\/1654"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/comments?post=1302"}],"version-history":[{"count":6,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/posts\/1302\/revisions"}],"predecessor-version":[{"id":1311,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/posts\/1302\/revisions\/1311"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/media\/1304"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/media?parent=1302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/categories?post=1302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/africa\/wp-json\/wp\/v2\/tags?post=1302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}