The Fortune at the Bottom of the Pyramid – C.K. Prahalad

Book Review Chapter 5:

Reducing Corruption: Transaction Governance Capacity

Library Reference: N/A

Amazon:

http://www.amazon.com/Fortune-Bottom-Pyramid-Eradicating-Publishing/dp/0131877291/ref=sr_1_1?ie=UTF8&s=books&qid=1234441981&sr=1-1

Quote:  “Most developing countries do not fully recognize the real costs of corruption and its impact on private-sector development and poverty alleviation”

    In most countries that has corruption including the Philippines, people do not really understand the effect of corruption. Just because these corrupt people are getting richer by the day, it doesn’t mean they are just stealing from people. They haven’t realized how it affects in private-sector development and poverty alleviation. So it is very crucial that people understand these things.   

Learning Expectation:

    Based on the title of the chapter itself, I want to learn how the Bottom of the Pyramid can actually reduce corruption. Here in our country alone, corruptions are everywhere. And if you join the Philippines with all the corrupted countries, you get major corruption. So basically, I want to know how and what process the Bottom of the Pyramid has to do such thing. Although in my opinion, I think it would be hard to have a hundred percent corruption free, as there are people who live by them. So, it would be interesting how this turns out.

Review:

    It has been discussed that the private sector as in the previous chapters can be a major facilitator of poverty alleviation through the creation of markets at the Bottom of the Pyramid. Although managers might be convinced about the opportunity, it is likely that there are lingering doubts about the ability of large firms to operate in these markets. The main source of this concern is corruption.

There are many cases like the impact of micro regulations and local customs that are opaque to MNC managers may be interpreted as corruption. An example given was when the criticality of relationships in Japanese and Chinese business, opaque to the Western MNCs, can appear to be corruption.

Basically, we must understand the difference between corruption and local practices. Alliances with local firms and NGOs can provide visibility to these “understood but not explicit” local practices. It is also stated that we must reduce frictional losses in doing business at the Bottom of the Pyramid.

The focus of this fifth chapter is overt corruption.  Corruption in various forms adds to this cost burden and business uncertainty. Most developing countries do not fully recognize the real costs of corruption and its impact on private-sector development and poverty alleviation. That is why it is very important for people to understand this and prevent corruption. The capacity to facilitate commercial transactions through a system of laws fairly enforced is critical to the development of the private sector.

So basically, this chapter is all about how corruption affects us and why it should be prevented and how.

What I’ve learned:

    I have learned that people who do corruption or most countries for that matter do not realize the effect or impact of corruption to the private-sector and the poverty alleviation. It is best if we know and understand these things and stop corruption.

Questions:

1.    Will the corrupt pay attention at all?

2.    What if they don’t wan to listen?

3.    How great is the impact on the private-sector and poverty alleviation?

4.    Is there an alternative way?

5.    How long will it take to stop corruption?

Citation: (C.K. Prahalad, 2006)