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 / Spring 2006 / Issue 42(originally published by Booz & Company)


City Planet

Tomorrow’s Markets
by C.K. Prahalad

For those focused on building the markets of tomorrow, the visible poverty and squalor of the “city planet” hides a less visible reality. Whether located in São Paulo, Mexico City, or Mumbai, any emerging shantytown is a vibrant economic hub. The people who live there have the same aspirations as the urban rich and brand-conscious middle class. They are tomorrow’s market for televisions, cell phones, pharmaceuticals, and video games. They are also entrepreneurs. For example, in Dharavi, one of the largest shantytowns in India, local manufacturers make leather goods (jackets, wallets, handbags), gold jewelry, packaged food, recycled plastic (which they sell as raw material), and medical supplies. There are one- to two-person entrepreneurial shops, and well-organized workshops employing 50 to 100 people.

Unfortunately, this emerging, vibrant economic hub of consumers and producers tends to exist in what is called the extra-legal or unorganized sector. These terms are often used to dismiss this sector’s importance. But they simply indicate that the sector is not part of the formally recognized economy of the country. It is important for governments to recognize these emerging hubs of economic activity and make it easier for them to become integrated with the formal economy.

Large firms can help in this process. For example, banks can simultaneously double their customer base (if not assets under management) and learn how to provide world-class financial services at low cost. The opportunity for “doing well by doing good” for global firms is considerably enhanced by the urbanization of developing countries.

The poor are voting with their feet. They seek market-based work opportunities for themselves, through proximity to higher-paying nonseasonal and nonagricultural employment; and they seek opportunities for their children to escape the “poverty trap.” Because of the negative side of this urbanization process — congestion, pollution, shantytowns, transportation bottlenecks, and crime — some critics argue that we have to stop this trend. But with imaginative public–private–civil society partnership, this trend can lead to a new approach to eradicating poverty through social and business innovations.

C.K. Prahalad ([email protected]) is the Paul and Ruth McCracken Distinguished University Professor at the University of Michigan’s Ross School of Business and the author of The Fortune at the Bottom of the Pyramid (Wharton School Publishing, 2005).

Reprint No. 06109

Author Profile:

Stewart Brand ([email protected]) lives in a squatter houseboat community in Sausalito, Calif. He is the founder of the Whole Earth Catalog and a cofounder of Global Business Network. His books include The Clock of the Long Now (Basic Books, 1999), How Buildings Learn (Viking, 1994), and The Media Lab: Inventing the Future at M.I.T. (Viking, 1987).
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  1. Mike Davis, Planet of Slums (forthcoming, Verso, 2006: Views massive urbanization as a crisis caused by capitalism, “rushing backwards to the age of Dickens.” Click here.
  2. Arie de Geus, The Living Company (Harvard Business School Press, 1997): Source on the oldest surviving corporations and why “economic purpose,” as Mr. de Geus puts it, makes many companies short-lived.
  3. “Green Cities” issue, Our Planet (magazine of the United Nations Environment Programme), vol. 16, no. 1, 2005: Emerging movement of ecologically conscious urbanism, highlighted with examples from Bangkok to London to Sevastopol to Bogotá. Click here.
  4. Art Kleiner, “The Philosopher of Progress and Prosperity,” s+b, Summer 2004: Hernando de Soto’s concept: fostering wealth creation by building ownership legitimacy in squatter cities everywhere. Click here.
  5. Phillip Longman, The Empty Cradle: How Falling Birthrates Threaten World Prosperity [and What to Do about It] (Basic Books, 2004): “Not since the fall of the Roman Empire has the world ever experienced anything on the scale of today’s loss of fertility.”
  6. Suketu Mehta, Maximum City: Bombay Lost and Found (Knopf, 2004): “Bombay is the future of urban civilization on the planet. God help us.” Portrait of Mumbai with the perspective of decades.
  7. Robert Neuwirth, Shadow Cities: A Billion Squatters, A New Urban World (Routledge, 2004): The thriving and vibrant dimension of the squatter neighborhoods, by a journalist who lived there and spoke the languages.
  8. C.K. Prahalad and Stuart L. Hart, “The Fortune at the Bottom of the Pyramid,” s+b, First Quarter 2002: Impoverished urbanites as an emerging global market... Click here.
  9. C.K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Wharton School Publishing, 2005): …plus cases and practices for companies seeking to reach them.
  10. Robert Skeldon, Migration and Development: A Global Perspective (Addison-Wesley Longman Higher Education, 1997): How rural-to-urban migration can unexpectedly lead to economic growth.
  11. United Nations Human Settlements Programme, The Challenge of Slums: Global Report on Human Settlements (Earthscan Publications, 2003): Statistics and figures to make visible the trends. As Mike Davis says, it’s “the first truly global audit of urban poverty.” Click here.
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