2)what several search strategies for innovation. In the context of poor customers in india, explain which search strategies is the best.

With regards to cannibalism, it seems to me that these goods are different from the products that high-value consumers use.

A $70 Godrej refrigerator is undoubtedly a great value for India’s poor who are willing to sacrifice size for dollar savings. In the United States, however, this refrigerator would probably be too small to satisfy a family of five, despite the low price.

Consequently, individuals with large disposable incomes will value more expensive products enough such that little cannibalism occurs.

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In addition, I do not think that the ultimate goal of these companies is the production of inexpensive/more efficient products. Instead, they are building a base from which to enter high-value markets.

In the 1970s Japanese cars were very much like Tico’s and Tata Motors’ present cars. They were small, cheap, and functional, but unappealing to the wealthy consumer. All the Japanese auto manufactures began on the low end and worked their way up, improving their technology along the way. Auto companies like Tico and Tata Motors are likely following a similar path. In the future, we will likely see them produce cars that compete directly with the current major auto manufactures.

The car in Kyrgyzstan is called the Tico. It is $2000 and very small, similar to the Smartcar, only with a tiny backseat and four doors. They are affordable to the villagers and everyone wants one. It is a sign of pride and modernization to drive a Tico.

Cell phones are inexpensive with inexpensive plans. Usually people buy pre-paid phone cards with a set amount of units. They use the phone until they run out of units and can afford to buy more. Similar to the Tico, it is a mark of pride and modernization to own a cell phone.

The villages have very little heat, very little food variety, and very few possessions. But they are anxious to join the “modern” and more specifically, “western” world. The money they have, they are willing to spend on these inventions and this type of commerce.

You posed some interesting questions…”How will India’s success in leveraging the untapped growth potential of its’ poor constituents influence the direction of innovation and marketing for other countries?” I don’t know if Krygyzstan is being influenced by India directly, but it seems that there is an emerging market and growth potential of commerce for the poor constituents. As you mentioned, these are not poorly made items either. They are made to be less expensive, but also made to last.

“What do you think this will do for the standard of living in India and abroad?” As far as standard of living, it increases in someways and it stays the same in others. A Kyrgyz family may own a car and phone, but still not be able to afford proper winter clothes or proper heating. As far as basic standard of living, they made a life choice to own a car, instead of heat their house for the winter. One would think that heat and warm clothes would increase their actual standard of living, but the Kyrgyz family seems to think that owning a Tico and a cell phone does. I guess this brings up another issue… What increases the standard of living? What factors do we include when measuring?

My only concern regarding the sustainability of this approach is the threat of cannibalism. The poor are the low-value customers. Engineers are designing quality products at affordable prices for the poor. This is clearly price disrimination. So the question is how these companies can prevent their high-value consumers from purchasing the products at prices set for the low-value consumers? In respect to healthcare, one of the biggest contibutors to the rising U.S. healthcare expenditures is the cost of medical devices and pharmaceuticals. If it is clear that GE can develop of device, such as an electrocardio graph for the one-tenth the cost is has done in the past, will they pass those savings on to all consumers? If they don’t, how will high-value consumers react? If high-value consumers cannibalize the products priced for low-value consumers, the companies serving the “poor market’ may not be able to sustain profitability.

I think there is a place in the business world to serve and profit from the “poor market”. As mentioned earlier, inflation has played a key role in dimishing the quality of life for our underserved populations. By making products available to the poor at affordable prices, we can fight the war on poverty. However, It will be interesting to see how this trend can maintain economic stability…if at all.