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Strategic motivations and choice in subsistence markets
Journal of Business Research 63 (2010) 651–655
Contents lists available at ScienceDirect
Journal of Business Research
Strategic motivations and choice in subsistence markets Raed Elaydi a,⁎, Charles Harrison b,⁎ a b
University of Illinois at Chicago, United States University of Pennsylvania, United States
a r t i c l e
i n f o
Article history: Accepted 1 April 2009 Keywords: Subsistence marketplaces Base of the pyramid Poverty alleviation Micro-lending Microfinance Sri Lanka
a b s t r a c t This paper examines the different motivations behind strategic choice in base of the pyramid or subsistence markets. Two strategies are examined through comparative analysis: market extension and strategic intent. Using two commercial bank's micro-lending business strategies in Sri Lanka, a comparative case study suggests that strategic intent is motivated by building capabilities over time that results in successful poverty alleviation, whereas market expansion is motivated by an immediate desire to expand overall sales revenue. This conclusion may help reframe subsistence market or BoP arguments away from such false choices as appropriate size (e.g., multinational corporations versus small and medium size enterprises) toward more useful discussion on understanding why firms participate in subsistence markets and what is the motivation behind their strategic choice. By considering more than just size and scope and studying the motivations behind long-term solutions to poverty alleviation, firm success can be better understood and achieved. © 2009 Elsevier Inc. All rights reserved.
1. Introduction The current discussion investigates to what extent firms' motivations for participating in subsistence markets informs their business strategy and ultimately results in long-term poverty alleviation. This paper analyzes the participation of a large national and multinational firm in subsistence markets. This analysis and comparison of two commercial bank's micro-lending business strategies in Sri Lanka suggests that the motivation for entering into a subsistence market has a large impact on choice of strategy, partnerships, scale, and means of entry. Firms motivated by strategic intent while engaging in subsistence markets build on past initiatives, engage and grow with the community, and create local knowledge and expertise (Hamel and Prahalad, 1989). On the other hand, firms with a market expansion strategy exploit existing pent-up demand and novelty expertise (Bang and Joshi, 2008). The contrast between the two strategies suggests that strategic intent is motivated by building capabilities over time that result in successful poverty alleviation, whereas market expansion is motivated by an immediate desire to expand overall sales revenue expertise. This case study highlights how the subsistence market needs imaginative, long-term responses to poverty alleviation to create what is possible in subsistence markets. The paper first discusses both Hatton National Bank (HNB) and Hong Kong Shanghai Banking Corporation's (HSBC) participation in ⁎ Corresponding authors. Elaydi is to be contacted at the University of Illinois at Chicago, 2231 University Hall, 601 S. Morgan, M/C 243, Chicago, IL 60607-7123, United States. Harrison, University of Pennsylvania, The Caster Building, Room C-15, 3701 Locust Walk, Philadelphia, Pennsylvania 19104-6214, United States. E-mail addresses: [email protected] (R. Elaydi), [email protected] (C. Harrison). 0148-2963/$ – see front matter © 2009 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2009.04.026
Sri Lanka's subsistence market with an introductory history of each firm. Second, the paper provides a comparative case analysis of the two firms' strategies, motivations, and outcomes. From the insights of the case analysis, a discussion and interpretation of the events focuses on the firm's strategic motivation. Motivations are defined and interpreted by two strategies — market extension and strategic intent. 2. Case studies in subsistence markets Case analysis is an effective way to examine the textured role motivation and strategy play when firms engage in subsistence markets. The main bank initiatives discussed are HNB's Barefoot Banker and HSBC's credit card business. HNB's micro-lending initiatives focused on bringing world-class financial services to the subsistence markets through their village adoption program and having employees of the bank become members of the community. This long-term strategy to grow and develop with the community is a multi-decade approach that is fully incorporated into the bank's overall business strategy (Gallardo et al., 1997). In contrast, HSBC's entrance into the Sri Lankan credit card business grew to a dominating 36% market share with the help of new customers from the subsistence markets (Nicolaou, 2008). Though engaging the subsistence market and making credit cards available to the poor, unforeseen consequences led to government intervention and new regulations (Sirimanna, 2007). Banking is a fitting industry to analyze subsistence markets because of its thirty-year history in micro-financing. Further, the two traditional commercial banks, HNB and HSBC, are exemplary because of their long history in Sri Lanka and their different
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approaches to engaging with poverty and the rural community, specifically, HNB's thirty-five-year history of engaging with the poor. Lastly, Sri Lanka is an understudied nation with a rich tradition of poverty alleviation, with various firms trying to have an impact on their communities. As such, Hatton National Bank and HSBC are reviewed separately discussing each firm's history and engagement strategy in subsistence markets. 2.1. Hatton National Bank The Bank known as Hatton National Bank was established in 1888 as the Hatton Bank primarily to attend to the developing tea industry of central Sri Lanka. Hatton National Bank (HNB) is a public limited liability company incorporated on March 5, 1970 in Colombo, Sri Lanka. Prior to incorporation, HNB joined with some branches of National and Grindlays Bank and was renamed Hatton National Bank in 1970 (Theagarajah, 2009). HNB is a premier private-sector bank in Sri Lanka. HNB manages and operates 177 Customer Centers in Sri Lanka and two representative offices in India and Pakistan with a total of 4395 employees (HNB Annual Report, 2008). This traditional commercial bank offers a wide variety of financial services, including corporate and investment banking, retail banking, international banking, development finance, equities, fixed income, and insurance. HNB also addresses the span of markets from large corporations and high net-worth individuals to mass-market retail and microfinance. Corporate banking represents the bulk of the HNB's income and credit portfolio. HNB's stature and reliability have led to the development of banking relationships with most Sri Lankan bluechip companies and foreign multinational corporations (FMNCs) within the country (HNB Annual Report, 2008). However, this traditional commercial bank's core business strategy incorporates the development of subsistence markets and poverty alleviation (Gallardo et al., 1997). HNB has worked with the rural poor in Sri Lanka for over 35 years. Over these decades, HNB has developed and grown with these communities. HNB entered rural financing in 1973 almost immediately after its establishment, beginning a village adoption program in the southern Monaragala district (Gallardo et al., 1995). The village adoption program included supporting community activities and providing financial services such as cultivation, animal husbandry, trading, and other self-employment projects. HNB's work in their village adoption program was borne out of their initial work (as Hatton Bank) in villages, which focused on helping local tea farmers in their “small industry-financing program” (Gallardo et al., 1997). HNB's involvement in microfinance occurred shortly after becoming aware of, and gaining knowledge from Grameen Bank in Bangladesh (Gallardo et al., 1997). Inspired by Muhammad Yunus, HNB created its own model based on community engagement and participation (Gallardo et al., 1997). HNB's Barefoot Banker microlending initiative, created in 1989, permanently immerses an individual employed by HNB into the social fabric of a small rural village (Gallardo et al., 1997). The Barefoot Banker attends weddings, festivals and community events, while playing a leadership role and giving expertise to the community. Currently the bank has 117 Barefoot Bankers across Sri Lanka (HNB Annual Report, 2008). The many bare feet on the ground implement HNB's strategy, making investments in each individual, beyond traditional money transfers. These initiatives are part of HNB's long-term strategy of having a competitive platform in the rural sector (Gallardo et al., 1997). HNB, motivated by the desire to think differently and approach their environment from a “what can we create” perspective, transformed rural banking in Sri Lanka. Such motivation has led to a microfinance portfolio with 70,000 micro-loans worth 5.4 billion LKR, and a successful repayment rate of 95% (Theagarajah, 2009). HNB's program, which has helped 50,000 rural families and over 500,000 people, has reconceptualized microfinance and pushed HNB to be the model of sustainable
development (Theagarajah, 2009). Through social progress and a focus on customer care, HNB's microfinance initiative has emerged as a profitable banking model. HNB has now fully integrated their microfinancing program into their normal commercial banking operations (HNB Annual Report, 2008). HNB's programs provide a means for people in rural Sri Lanka to gain access into the formal economy. For over 35 years, HNB has provided the rural poor access to world-class financial services. They accomplished this by first establishing the small industry-financing program, then a village adoption program and the Barefoot Banker, and most recently insurance for micro-entrepreneurs, (Gallardo et al., 1997; Theagarajah, 2009). Further, HNB set an ambitious goal of making banking accessible to subsistence markets by becoming part of the social network. The Barefoot Banker's membership and lifelong connection with the community is an example of relationship success leading to business success (Gallardo et al., 1997). Lastly, HNB focused their microfinance on uplifting and developing subsistence markets. For example, the Barefoot Banker initiative was introduced during a major youth insurgency in Sri Lanka (Gallardo et al., 1997). HNB's plan attempted to create jobs, investment, and entrepreneurship at the epicenter of the insurgency (Gallardo et al., 1997). The motivations and long-term strategies implemented and integrated in HNB's core business is in stark contrast to HSBC's engagement and involvement in the subsistence market. 2.2. Hong Kong Shanghai Banking Corporation The Hong Kong Shanghai Banking Corporation (HSBC) was founded in 1865 by Thomas Sutherland to finance trade in the Far East. Since then HSBC has grown exponentially. HSBC maintains locations worldwide and surpassed Citigroup as the largest banking and financial services organization in the world, with profits of $16 billion and assets under three trillion dollars (Lanka Newspapers, 2006). In addition to their strong foothold in mature markets such as Hong Kong, Europe and the U.S., HSBC's business operations in emerging markets continues to grow rapidly. HSBC is operating in a variety of countries, including Sri Lanka, the Philippines, Singapore, Thailand, Myanmar, and Vietnam, with the Sri Lanka operations being the focus of this discussion (HSBC History, 2008). HSBC's entrance and relationship with Sri Lanka is a long and tenuous one. Their venture into Sri Lanka began during the late 19th century after the Oriental Bank ceased operations. HSBC swiftly took the opportunity to profit during a very difficult time when the country was suffering economic turmoil from diseased coffee plants. HSBC is the first bank in Sri Lanka to develop an electronic banking system, which was connected to HSBC's Global Data Network, enabling financial information to interchange with clients instantaneously. From this, HSBC introduced the first ATM machines in Sri Lanka. With this significant strategic advantage, the bank gained a large share of the Sri Lankan credit card market (HSBC History, 2008). Without tellers or branches, HSBC extended their world-class electronic banking system of credit cards, ATMs and mobile phone banking to the subsistence market. In Sri Lanka, HSBC was particularly successful with their credit card venture, selling roughly 100,000 credit cards before the completion of its inaugural year in 2006. In a little over 2 years, HSBC managed nearly 300,000 out of the approximately 828,000 credit cards in Sri Lanka (Nicolaou, 2008). HSBC began their venture by fully extending their credit card business into the subsistence market. To obtain an HSBC credit card, applicants could have limited identification and residency requirements, highly flexible employment verification, and minimal proof of monthly income — roughly Rs.10,000 or roughly $90.00 per month (Sirimanna, 2007). While the firm's strategy in Sri Lanka is a case example of being profitable, innovative, scalable, and accessible to the subsistence marketplace, the extension of existing products into these markets was not necessarily a responsible, long-
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term approach. Though the ideals of the BoP may have been reached (Prahalad, 2006), the reality told a different story, causing the government to intervene and stop this product extension into subsistence markets (Sirimanna, 2007). Within 2 years of HSBC's entrance into the credit card market, the Sri Lankan government was alarmed by how quickly the nation accrued billions of dollars worth of debt and how easily the poor gained access to such products. The government reacted swiftly by tightening provision requirements and encouraging banks to be more prudent in lending (Lanka Business Online, 2007). Subsequently, the Central Bank of Sri Lanka introduced new regulations for credit cards partially in response to HSBC's wild growth and market share of credit card sales (limiting HSBC to 13% market share) and the country's subsequent mounting debt. With the new regulations, employment must be verified with more identification and verifiable monthly income of at least Rs.15,000 not the Rs.10,000 that reached the subsistence markets (Sirimanna, 2007). This intervention blocked access to the subsistence markets and was viewed as a responsible measure for the safety of the impoverished consumer. Such sweeping government intervention is in stark contrast to HNB's barefoot banker initiatives, which were allowed to grow and prosper over decades with no government intervention. The contrast between the motivations and outcomes of the two banks is discussed using the strategic framework of market extension and strategic intent. 3. Case analysis and framework The local Hatton National Bank (HNB) of Sri Lanka and the multinational HSBC both entered the subsistence marketplace in Sri Lanka using different strategies. The following discussion frames the economic behaviors of HSBC in terms of market expansion, while framing HNB's behaviors in terms of strategic intent. In each case, the business strategy and conceptual framework is developed (e.g., strategic intent and market expansion), followed by a comparison of relative outcomes for each approach in subsistence markets. 3.1. Market expansion The work of Bang and Joshi (2008) on the base of the pyramid (BoP) defines market expansion as an extension of a particular product category by converting non-customers into customers and increasing the usage rate of the product. The authors use the example of non-durables (i.e., toilet soaps and detergent cakes/powders) in India to suggest the term market expansion represents a reaching out to new market segments in existing areas. This definition goes beyond the traditional view that market expansion occurs when firms at the corporate level expand their overall sales revenue into new regional, national, or international geographic areas. Bang and Joshi suggest that subsistence markets are prime ground for a market expansion strategy by traditional firms. However, the BoP work of Bang and Joshi (2008) suggests that consumption ability moderates such market expansion. Customer's competence, knowledge, and skill to use the product best represent consumption ability. The authors argue that most customers in subsistence markets are first time users and may lack the wherewithal to successfully navigate and use the product. A desire to increase sales revenue and market share without expanding to new regions motivates market expansion (Bang and Joshi, 2008). This motivation is fundamentally different than a strategic intent perspective, discussed next. 3.2. Strategic intent The work of Hamel and Prahalad (1989) on strategic intent focuses on a long-term what is possible strategic view. The authors criticize traditional firms' focus on today's problems and give attention to available resources and the feasibility of initiatives based on existing
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resources. Hamel and Prahalad argue that the traditional approach is reactionary and tends to be based on imitation, which does not lead to a competitive advantage. To aid in surpassing the traditional methods of competing, Hamel and Prahalad (1989) suggest firms focus on their resourcefulness and ability to gain resources by being proactive and having ambitious goals. Therefore, strategic intent attempts to empower firms with limited resources or in a limited resource environment to think beyond limitations and approach the environment from a “what can we create” perspective. Adopting a “what is possible” perspective requires a sizable stretch from a firm's existing resources to close the gap between available resources and ambitious goals (Hamel and Prahalad, 1989). To close the gap firms should to be more inventive and long-term focused. As Hamel and Prahalad (1989) note “strategic intent is like a marathon run in 400-meter sprints.” The case study of Hamel and Prahalad (1989) of Komatsu, Cannon, and Honda each span over 20 years. This long-term focus is essential to subsistence markets, and allows firms entering the subsistence market to keep their sights on the end goal of poverty alleviation. Poverty alleviation can be attained over many decades, but each year new challenges are achieved (Hamel and Prahalad, 1989). The authors further emphasize that firms need time to digest each challenge before attempting to launch a new challenge. If one challenge takes 2 or 3 years, that should be the firms focus for that time. One year the focus can be on learning and education of market and suitable products. The second year challenge can focus on community engagement and relationship building. The third year can focus on consumption ability. Hamel and Prahalad (1989) note that firms may understand “various sources of competitive advantage as mutually desirable layers, not mutually exclusive choices.” Strategic intent focuses on building overtime, and each year the firm invents, builds layers, acquires new resources, learns and educates with the community, and develops new and stronger relationships with the community. Hamel and Prahalad (1989) discuss three general approaches to strategic intent: searching for loose bricks, changing the terms of engagement, and building layers of advantage. The authors explain that building layers of advantage involves steadily expanding arsenals of competitive weapons and adding new strategies to current ones in order to gain greater competitive advantage. Further, they describe searching for loose bricks as staking out under defended territory, including careful analysis of competitor's conventional wisdom. A loose brick strategy attempts to stay below traditional competitors' response threshold. Lastly, they detail changing the terms of engagement as the refusal to accept the front-runner's definition of industry and segment boundaries. The following analysis shows how HNB exhibits all three approaches, contributing to its success and growth in the subsistence markets of Sri Lanka. HNB shows a knack for finding loose bricks. Banking the unbanked and going into rural Sri Lanka where competitors are not interested and unaware is a classic example of a successful loose brick strategy. Further, HNB began participating in microfinance in the 1980s, suggesting an ability find opportunity where others do not. HNB entered the subsistence market and had a virtual monopoly in Sri Lanka, without a traditional competitor response for close to a decade. HNB exhibits a multi-decade approach to building layers of advantage. First, HNB began helping local tea farmers in their “small industry-financing program” (Gallardo et al., 1997). This program led to creating the Barefoot Banker, which resulted in their newest addition of microfinance insurance, designed to provide life and liability insurance for any micro entrepreneur (HNB Annual Report, 2008). Lastly, HNB changed the terms of engagement by going against the traditional banking model of focusing on international trade when domestic instability occurs (Gallardo et al., 1997). HNB's Barefoot Banker micro-lending initiative was launched during an insurgency, transformed the traditional terms of engagement by engaging with the community where the strife grew.
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This behavior of engaging with subsistence markets during times of conflict is not solely motivated by profit, but is best described as an ingrained social good in the mindset of the entire business (Viswanathan et al., 2007). Viswanathan et al. (2009-this issue) define an organization with an ingrained social good agenda as a firm with a sustainable market orientation. HNB looked to improve the welfare of the villages they operated in and were committed to the people in the rural village for the long-term. HNB's ingrained social good allowed investment in rural communities when needed most, and HNB's long-term survival relied on the rural community's ability to grow and develop. This level of longterm commitment to a community is motivated by a strategic framework that is aspirational, with a what is possible mindset. Hamel and Prahalad (1989) draw on the aspirations of the firm without considering their current limited resources and capabilities. From a strategic intent perspective, Hamel and Prahalad (1989) note that businesses with a Western mindset often engage in pathology of surrender — the behavior of fleeing the domestic market during times of strife. For example, competitors leave a market for more “attractive” segments and focus on international trade during times of insurgency. As a result, firms that employ a strategic intent strategy are allowed to have a virtual monopoly and capture the eventual renaissance of the subsistence markets (i.e., Hamel and Prahalad (1989) discuss how the TV industry became unattractive, but eventually was transformed by high-definition televisions). Grameen Bank, which took decades to develop and grow (Yunus, 1999), is another example of poverty alleviation through strategic intent. At its core, Grameen is both aspirational and innovative. The subsistence market may benefit from a reorientation of firm strategy that incorporates strategic intent and allow firms to commit and invest decades into the market and the community (Yunus, 1999). This strategic reorientation does not focus on the lack of existing resources or institutions in subsistence markets, but instead the focus is on the possibilities. If a firm is motivated by the possibilities of subsistence markets and poverty alleviation (e.g., Grameen Bank) they are more likely to accomplish long-term success (Yunus, 1999). To break out of the vicious cycle of poverty firms must think beyond their own limitations and the limitations of the environment they operate in. The development of strategic intent as a core subsistence market strategy captures the greater purpose and potential of such a market. 4. Comparative case analysis Case analysis from the two commercial banks shows how each strategy is motivated by different objectives. Ambitious goals to transform the market and have a platform to create long-term growth mark motivation from strategic intent. This framework can help an organization understand the necessary long-term, ambitious commitment that is needed to create poverty alleviation at the firm level. However, a market expansion strategy is a hit-or-miss exploitation strategy to expand a traditional firm's overall sales revenue by extending products and services to individuals with low consumption ability. In comparing the two, HSBC's market expansion strategy suggests a failure in engaging with the community and educating the consumer, and in this case, making government intervention necessary. HSBC's entrance into the subsistence market underscores the pitfalls of a strategy built for one market and extended to another, without taking into account the wide variety of needs of the consumer. These needs can be met by a firm willing to invest in the aspirations of the people and help them achieve their potential. The poor do not just lack income or access to products, as suggested by a pure market expansion strategy. Bang and Joshi (2008) argue that those in the subsistence market also need skills and ability to use the product. Further Viswanathan et al. (2009-this issue) emphasize the need for firms to foster both individual and community welfare, suggesting that in a 1-1 interactional environment firms must
have employees that develop relationships and community status over many years (e.g., Barefoot Banker). Success stories from the BoP (London and Hart, 2004), such a Hindustan Lever, required new employees working in their low-income division to spend 6 weeks living in subsistence markets, before returning to their headquarters for regular work (Ellison et al., in press). This practice may create an understanding of the constraints the poor deal with, but does not create the demand for the poor to transact with a firm. Viswanathan et al. (2009-this issue) argue that due to relentless resource constraints from the marketplace, people survive on a relational, reciprocation based system. Subsistence markets are tight-knit communities that can view going outside this system as betrayal, and outsiders as “exploitive and uncaring” (Viswanathan et al., 2009this issue). Individuals operating in this system for only 6 weeks, similar to the Hindustan Lever employees, will have difficulty building trust and relationships in the community. A firm must think about investing in the community and individuals over many years with a singular agent or a team that grows with the community and is part of the community. Therefore, strategic intent's usefulness as a perspective may be its lifetime commitment to grow with and be part of the transformation of the market. The analysis from HNB suggests that successful firms also need community leadership and support. The poor need their community first. HSBC's technology based market expansion strategy had no feet on the ground to create community leadership or engagement to understand the limitations and aspirations of the impoverished. HSBC entered the market without thinking of the ramifications of giving credit cards to individuals who have never used such a product, which led to swift government reaction to perceived abuse and lack of consumer education programs. This tactical approach eventually denied HSBC access to subsistence markets in Sri Lanka. 5. Insights and conclusion Karnani (2007) posits that opportunities to sell to the poor are generally limited, and the small to medium sized local enterprises (SMEs) that are best suited for exploiting these opportunities. The author argues that the subsistence market usually does not involve economies of scale, instead he suggests that private institutions, not MNCs, should lead the way. Karnani further states, “It is interesting, and not accidental, that in spite of the BOP emphasis on MNCs, virtually all of the examples cited in Prahalad (2006) book are fairly small not-for-profit organizations or local firms, not MNCs.” Though Karnani (2007) frames the argument in terms of MNCs versus SMEs, the real argument may be in motivation and why the firm is entering into a market. Market expansion versus strategic intent could be the core of the debate. Case in point, HNB is a large national bank with global reach that found great success in Sri Lanka's subsistence market. More than just size and scope, the bank's success can be attributed to their motivations to grow with the poor and build what is possible. Through Hamel and Prahalad's framework, a new view of subsistence markets can be developed which includes a reorientation of firm strategy. This strategic reorientation does not focus on the lack of existing resources or institutions in subsistence markets, but rather on possibilities. In summary, the current case analysis compares two traditional commercial banks, HSBC and HNB, who are providing financial services to the impoverished in Sri Lanka. Findings suggest that their motivation and intent for entering the market that really drives strategy and longterm poverty alleviation, rather than the size or scale of the firm. Firms motivated by strategic intent, such as HNB, may result in best efforts to engage in real poverty alleviation. Strategic intent is a long-term “what is possible” approach to the growth and transformation of the subsistence market. Because this approach capitalizes on the hopes, aspirations, and imaginative nature of the impoverished, firms with strategic intent engage the community and grow with them. Conversely, entrance in
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subsistence markets motivated by a market expansion strategy, which involves extending existing services to increase immediate sales revenue, may exploit consumers with low consumption ability and have little or negative impact on poverty alleviation. Firms should ask “why are we entering this market, what do we hope to accomplish, and what will be the long-term impact of our presence.” Further research and questioning is necessary in order to define the criteria for successful market engagement and provide a roadmap for long-term transformation of subsistence markets. References Bang V, Joshi S. Conceptualization of market expansion strategies in developing countries. Acad Mark Sci Rev 2008;12(4). Ellison B, Moller D, Rodriguez MA. Hindustan lever re-invents the wheel, IESE, University of Navarra: Barcelona, Spain; in press. Gallardo J, Randhawa B, Sacay O. A commercial bank's microfinance program: the case of Hatton National Bank in Sri Lanka. The World Bank discussion papers number 369; 1997. Hamel G, Prahalad CK. Strategic intent. Harv Bus Rev 1989:63–76 May–June. HNB. Annual Report. HNB Website; (2008). Retrieved from http://www.hnb.net/ annualreport2008/annual_report2008.pdf. HSBC. History. HSBC Sri Lanka Website; (2008). Retrieved from http://www.hsbc.lk/1/ 2/home-page/about-hsbc/history.
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Karnani A. Fortune at the bottom of the pyramid: a mirage how the private sector can help alleviate poverty. Calif Manag Rev 2007;49(4):13–6 Summer. Lanka Newspapers. HSBC beats Citigroup as largest bank in the world. Lanka Business Online; 2006 (August 5). Retrieved from http://www.lankanewspapers.com/news/ 2006/8/8005.html. Lanka Business Online. Credit card: Sri Lanka's HSBC tightens credit card lending. Lanka Business Online; 2007 (August 17). Retrieved from http://www.lankabusinessonline. com/fullstory.php?nid=1915150031. London T, Hart SL. Reinventing strategies for emerging markets: beyond the transnational model. J Int Bus Stud 2004;35: 1–21. Nicolaou N. HSBC Home Page; (2008). Ceo's message. Retrieved from http://www.hsbc. lk/1/2/home-page/about-hsbc. Prahalad CK. Fortune at the bottom of the pyramid: eradicating poverty through profits. Wharton School Publishing Inc.; 2006. Sirimanna B. New criteria for credit cards as default rate rises. (2007, December 27). Retrieved from http://sundaytimes.lk/071223/FinancialTimes/ft339.html. Theagarajah R. Hatton National Bank PLC. People and Flagship Projects; 2009. March 11, 2008, from http://www.apraca.org/content_detail.php?cid=32. Viswanathan R, Anju R, Gau R, Chaturvedi R. Doing well by doing good: commercial success through social good in subsistence markets. Best paper proceedings, Academy of Management Meeting, Philadelphia; 2007. August. Viswanathan M, Seth A, Gau R, Chaturvedi A. Ingraining product relevant social good into business processes in subsistence marketplaces: the sustainable market orientation. 2009;29: 406–425 (this issue). Yunus Muhammad. Banker to the poor: micro-lending and the battle against world poverty. Public Affairs 1999.
Contents lists available at ScienceDirect
Journal of Business Research
Strategic motivations and choice in subsistence markets Raed Elaydi a,⁎, Charles Harrison b,⁎ a b
University of Illinois at Chicago, United States University of Pennsylvania, United States
a r t i c l e
i n f o
Article history: Accepted 1 April 2009 Keywords: Subsistence marketplaces Base of the pyramid Poverty alleviation Micro-lending Microfinance Sri Lanka
a b s t r a c t This paper examines the different motivations behind strategic choice in base of the pyramid or subsistence markets. Two strategies are examined through comparative analysis: market extension and strategic intent. Using two commercial bank's micro-lending business strategies in Sri Lanka, a comparative case study suggests that strategic intent is motivated by building capabilities over time that results in successful poverty alleviation, whereas market expansion is motivated by an immediate desire to expand overall sales revenue. This conclusion may help reframe subsistence market or BoP arguments away from such false choices as appropriate size (e.g., multinational corporations versus small and medium size enterprises) toward more useful discussion on understanding why firms participate in subsistence markets and what is the motivation behind their strategic choice. By considering more than just size and scope and studying the motivations behind long-term solutions to poverty alleviation, firm success can be better understood and achieved. © 2009 Elsevier Inc. All rights reserved.
1. Introduction The current discussion investigates to what extent firms' motivations for participating in subsistence markets informs their business strategy and ultimately results in long-term poverty alleviation. This paper analyzes the participation of a large national and multinational firm in subsistence markets. This analysis and comparison of two commercial bank's micro-lending business strategies in Sri Lanka suggests that the motivation for entering into a subsistence market has a large impact on choice of strategy, partnerships, scale, and means of entry. Firms motivated by strategic intent while engaging in subsistence markets build on past initiatives, engage and grow with the community, and create local knowledge and expertise (Hamel and Prahalad, 1989). On the other hand, firms with a market expansion strategy exploit existing pent-up demand and novelty expertise (Bang and Joshi, 2008). The contrast between the two strategies suggests that strategic intent is motivated by building capabilities over time that result in successful poverty alleviation, whereas market expansion is motivated by an immediate desire to expand overall sales revenue expertise. This case study highlights how the subsistence market needs imaginative, long-term responses to poverty alleviation to create what is possible in subsistence markets. The paper first discusses both Hatton National Bank (HNB) and Hong Kong Shanghai Banking Corporation's (HSBC) participation in ⁎ Corresponding authors. Elaydi is to be contacted at the University of Illinois at Chicago, 2231 University Hall, 601 S. Morgan, M/C 243, Chicago, IL 60607-7123, United States. Harrison, University of Pennsylvania, The Caster Building, Room C-15, 3701 Locust Walk, Philadelphia, Pennsylvania 19104-6214, United States. E-mail addresses: [email protected] (R. Elaydi), [email protected] (C. Harrison). 0148-2963/$ – see front matter © 2009 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2009.04.026
Sri Lanka's subsistence market with an introductory history of each firm. Second, the paper provides a comparative case analysis of the two firms' strategies, motivations, and outcomes. From the insights of the case analysis, a discussion and interpretation of the events focuses on the firm's strategic motivation. Motivations are defined and interpreted by two strategies — market extension and strategic intent. 2. Case studies in subsistence markets Case analysis is an effective way to examine the textured role motivation and strategy play when firms engage in subsistence markets. The main bank initiatives discussed are HNB's Barefoot Banker and HSBC's credit card business. HNB's micro-lending initiatives focused on bringing world-class financial services to the subsistence markets through their village adoption program and having employees of the bank become members of the community. This long-term strategy to grow and develop with the community is a multi-decade approach that is fully incorporated into the bank's overall business strategy (Gallardo et al., 1997). In contrast, HSBC's entrance into the Sri Lankan credit card business grew to a dominating 36% market share with the help of new customers from the subsistence markets (Nicolaou, 2008). Though engaging the subsistence market and making credit cards available to the poor, unforeseen consequences led to government intervention and new regulations (Sirimanna, 2007). Banking is a fitting industry to analyze subsistence markets because of its thirty-year history in micro-financing. Further, the two traditional commercial banks, HNB and HSBC, are exemplary because of their long history in Sri Lanka and their different
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approaches to engaging with poverty and the rural community, specifically, HNB's thirty-five-year history of engaging with the poor. Lastly, Sri Lanka is an understudied nation with a rich tradition of poverty alleviation, with various firms trying to have an impact on their communities. As such, Hatton National Bank and HSBC are reviewed separately discussing each firm's history and engagement strategy in subsistence markets. 2.1. Hatton National Bank The Bank known as Hatton National Bank was established in 1888 as the Hatton Bank primarily to attend to the developing tea industry of central Sri Lanka. Hatton National Bank (HNB) is a public limited liability company incorporated on March 5, 1970 in Colombo, Sri Lanka. Prior to incorporation, HNB joined with some branches of National and Grindlays Bank and was renamed Hatton National Bank in 1970 (Theagarajah, 2009). HNB is a premier private-sector bank in Sri Lanka. HNB manages and operates 177 Customer Centers in Sri Lanka and two representative offices in India and Pakistan with a total of 4395 employees (HNB Annual Report, 2008). This traditional commercial bank offers a wide variety of financial services, including corporate and investment banking, retail banking, international banking, development finance, equities, fixed income, and insurance. HNB also addresses the span of markets from large corporations and high net-worth individuals to mass-market retail and microfinance. Corporate banking represents the bulk of the HNB's income and credit portfolio. HNB's stature and reliability have led to the development of banking relationships with most Sri Lankan bluechip companies and foreign multinational corporations (FMNCs) within the country (HNB Annual Report, 2008). However, this traditional commercial bank's core business strategy incorporates the development of subsistence markets and poverty alleviation (Gallardo et al., 1997). HNB has worked with the rural poor in Sri Lanka for over 35 years. Over these decades, HNB has developed and grown with these communities. HNB entered rural financing in 1973 almost immediately after its establishment, beginning a village adoption program in the southern Monaragala district (Gallardo et al., 1995). The village adoption program included supporting community activities and providing financial services such as cultivation, animal husbandry, trading, and other self-employment projects. HNB's work in their village adoption program was borne out of their initial work (as Hatton Bank) in villages, which focused on helping local tea farmers in their “small industry-financing program” (Gallardo et al., 1997). HNB's involvement in microfinance occurred shortly after becoming aware of, and gaining knowledge from Grameen Bank in Bangladesh (Gallardo et al., 1997). Inspired by Muhammad Yunus, HNB created its own model based on community engagement and participation (Gallardo et al., 1997). HNB's Barefoot Banker microlending initiative, created in 1989, permanently immerses an individual employed by HNB into the social fabric of a small rural village (Gallardo et al., 1997). The Barefoot Banker attends weddings, festivals and community events, while playing a leadership role and giving expertise to the community. Currently the bank has 117 Barefoot Bankers across Sri Lanka (HNB Annual Report, 2008). The many bare feet on the ground implement HNB's strategy, making investments in each individual, beyond traditional money transfers. These initiatives are part of HNB's long-term strategy of having a competitive platform in the rural sector (Gallardo et al., 1997). HNB, motivated by the desire to think differently and approach their environment from a “what can we create” perspective, transformed rural banking in Sri Lanka. Such motivation has led to a microfinance portfolio with 70,000 micro-loans worth 5.4 billion LKR, and a successful repayment rate of 95% (Theagarajah, 2009). HNB's program, which has helped 50,000 rural families and over 500,000 people, has reconceptualized microfinance and pushed HNB to be the model of sustainable
development (Theagarajah, 2009). Through social progress and a focus on customer care, HNB's microfinance initiative has emerged as a profitable banking model. HNB has now fully integrated their microfinancing program into their normal commercial banking operations (HNB Annual Report, 2008). HNB's programs provide a means for people in rural Sri Lanka to gain access into the formal economy. For over 35 years, HNB has provided the rural poor access to world-class financial services. They accomplished this by first establishing the small industry-financing program, then a village adoption program and the Barefoot Banker, and most recently insurance for micro-entrepreneurs, (Gallardo et al., 1997; Theagarajah, 2009). Further, HNB set an ambitious goal of making banking accessible to subsistence markets by becoming part of the social network. The Barefoot Banker's membership and lifelong connection with the community is an example of relationship success leading to business success (Gallardo et al., 1997). Lastly, HNB focused their microfinance on uplifting and developing subsistence markets. For example, the Barefoot Banker initiative was introduced during a major youth insurgency in Sri Lanka (Gallardo et al., 1997). HNB's plan attempted to create jobs, investment, and entrepreneurship at the epicenter of the insurgency (Gallardo et al., 1997). The motivations and long-term strategies implemented and integrated in HNB's core business is in stark contrast to HSBC's engagement and involvement in the subsistence market. 2.2. Hong Kong Shanghai Banking Corporation The Hong Kong Shanghai Banking Corporation (HSBC) was founded in 1865 by Thomas Sutherland to finance trade in the Far East. Since then HSBC has grown exponentially. HSBC maintains locations worldwide and surpassed Citigroup as the largest banking and financial services organization in the world, with profits of $16 billion and assets under three trillion dollars (Lanka Newspapers, 2006). In addition to their strong foothold in mature markets such as Hong Kong, Europe and the U.S., HSBC's business operations in emerging markets continues to grow rapidly. HSBC is operating in a variety of countries, including Sri Lanka, the Philippines, Singapore, Thailand, Myanmar, and Vietnam, with the Sri Lanka operations being the focus of this discussion (HSBC History, 2008). HSBC's entrance and relationship with Sri Lanka is a long and tenuous one. Their venture into Sri Lanka began during the late 19th century after the Oriental Bank ceased operations. HSBC swiftly took the opportunity to profit during a very difficult time when the country was suffering economic turmoil from diseased coffee plants. HSBC is the first bank in Sri Lanka to develop an electronic banking system, which was connected to HSBC's Global Data Network, enabling financial information to interchange with clients instantaneously. From this, HSBC introduced the first ATM machines in Sri Lanka. With this significant strategic advantage, the bank gained a large share of the Sri Lankan credit card market (HSBC History, 2008). Without tellers or branches, HSBC extended their world-class electronic banking system of credit cards, ATMs and mobile phone banking to the subsistence market. In Sri Lanka, HSBC was particularly successful with their credit card venture, selling roughly 100,000 credit cards before the completion of its inaugural year in 2006. In a little over 2 years, HSBC managed nearly 300,000 out of the approximately 828,000 credit cards in Sri Lanka (Nicolaou, 2008). HSBC began their venture by fully extending their credit card business into the subsistence market. To obtain an HSBC credit card, applicants could have limited identification and residency requirements, highly flexible employment verification, and minimal proof of monthly income — roughly Rs.10,000 or roughly $90.00 per month (Sirimanna, 2007). While the firm's strategy in Sri Lanka is a case example of being profitable, innovative, scalable, and accessible to the subsistence marketplace, the extension of existing products into these markets was not necessarily a responsible, long-
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term approach. Though the ideals of the BoP may have been reached (Prahalad, 2006), the reality told a different story, causing the government to intervene and stop this product extension into subsistence markets (Sirimanna, 2007). Within 2 years of HSBC's entrance into the credit card market, the Sri Lankan government was alarmed by how quickly the nation accrued billions of dollars worth of debt and how easily the poor gained access to such products. The government reacted swiftly by tightening provision requirements and encouraging banks to be more prudent in lending (Lanka Business Online, 2007). Subsequently, the Central Bank of Sri Lanka introduced new regulations for credit cards partially in response to HSBC's wild growth and market share of credit card sales (limiting HSBC to 13% market share) and the country's subsequent mounting debt. With the new regulations, employment must be verified with more identification and verifiable monthly income of at least Rs.15,000 not the Rs.10,000 that reached the subsistence markets (Sirimanna, 2007). This intervention blocked access to the subsistence markets and was viewed as a responsible measure for the safety of the impoverished consumer. Such sweeping government intervention is in stark contrast to HNB's barefoot banker initiatives, which were allowed to grow and prosper over decades with no government intervention. The contrast between the motivations and outcomes of the two banks is discussed using the strategic framework of market extension and strategic intent. 3. Case analysis and framework The local Hatton National Bank (HNB) of Sri Lanka and the multinational HSBC both entered the subsistence marketplace in Sri Lanka using different strategies. The following discussion frames the economic behaviors of HSBC in terms of market expansion, while framing HNB's behaviors in terms of strategic intent. In each case, the business strategy and conceptual framework is developed (e.g., strategic intent and market expansion), followed by a comparison of relative outcomes for each approach in subsistence markets. 3.1. Market expansion The work of Bang and Joshi (2008) on the base of the pyramid (BoP) defines market expansion as an extension of a particular product category by converting non-customers into customers and increasing the usage rate of the product. The authors use the example of non-durables (i.e., toilet soaps and detergent cakes/powders) in India to suggest the term market expansion represents a reaching out to new market segments in existing areas. This definition goes beyond the traditional view that market expansion occurs when firms at the corporate level expand their overall sales revenue into new regional, national, or international geographic areas. Bang and Joshi suggest that subsistence markets are prime ground for a market expansion strategy by traditional firms. However, the BoP work of Bang and Joshi (2008) suggests that consumption ability moderates such market expansion. Customer's competence, knowledge, and skill to use the product best represent consumption ability. The authors argue that most customers in subsistence markets are first time users and may lack the wherewithal to successfully navigate and use the product. A desire to increase sales revenue and market share without expanding to new regions motivates market expansion (Bang and Joshi, 2008). This motivation is fundamentally different than a strategic intent perspective, discussed next. 3.2. Strategic intent The work of Hamel and Prahalad (1989) on strategic intent focuses on a long-term what is possible strategic view. The authors criticize traditional firms' focus on today's problems and give attention to available resources and the feasibility of initiatives based on existing
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resources. Hamel and Prahalad argue that the traditional approach is reactionary and tends to be based on imitation, which does not lead to a competitive advantage. To aid in surpassing the traditional methods of competing, Hamel and Prahalad (1989) suggest firms focus on their resourcefulness and ability to gain resources by being proactive and having ambitious goals. Therefore, strategic intent attempts to empower firms with limited resources or in a limited resource environment to think beyond limitations and approach the environment from a “what can we create” perspective. Adopting a “what is possible” perspective requires a sizable stretch from a firm's existing resources to close the gap between available resources and ambitious goals (Hamel and Prahalad, 1989). To close the gap firms should to be more inventive and long-term focused. As Hamel and Prahalad (1989) note “strategic intent is like a marathon run in 400-meter sprints.” The case study of Hamel and Prahalad (1989) of Komatsu, Cannon, and Honda each span over 20 years. This long-term focus is essential to subsistence markets, and allows firms entering the subsistence market to keep their sights on the end goal of poverty alleviation. Poverty alleviation can be attained over many decades, but each year new challenges are achieved (Hamel and Prahalad, 1989). The authors further emphasize that firms need time to digest each challenge before attempting to launch a new challenge. If one challenge takes 2 or 3 years, that should be the firms focus for that time. One year the focus can be on learning and education of market and suitable products. The second year challenge can focus on community engagement and relationship building. The third year can focus on consumption ability. Hamel and Prahalad (1989) note that firms may understand “various sources of competitive advantage as mutually desirable layers, not mutually exclusive choices.” Strategic intent focuses on building overtime, and each year the firm invents, builds layers, acquires new resources, learns and educates with the community, and develops new and stronger relationships with the community. Hamel and Prahalad (1989) discuss three general approaches to strategic intent: searching for loose bricks, changing the terms of engagement, and building layers of advantage. The authors explain that building layers of advantage involves steadily expanding arsenals of competitive weapons and adding new strategies to current ones in order to gain greater competitive advantage. Further, they describe searching for loose bricks as staking out under defended territory, including careful analysis of competitor's conventional wisdom. A loose brick strategy attempts to stay below traditional competitors' response threshold. Lastly, they detail changing the terms of engagement as the refusal to accept the front-runner's definition of industry and segment boundaries. The following analysis shows how HNB exhibits all three approaches, contributing to its success and growth in the subsistence markets of Sri Lanka. HNB shows a knack for finding loose bricks. Banking the unbanked and going into rural Sri Lanka where competitors are not interested and unaware is a classic example of a successful loose brick strategy. Further, HNB began participating in microfinance in the 1980s, suggesting an ability find opportunity where others do not. HNB entered the subsistence market and had a virtual monopoly in Sri Lanka, without a traditional competitor response for close to a decade. HNB exhibits a multi-decade approach to building layers of advantage. First, HNB began helping local tea farmers in their “small industry-financing program” (Gallardo et al., 1997). This program led to creating the Barefoot Banker, which resulted in their newest addition of microfinance insurance, designed to provide life and liability insurance for any micro entrepreneur (HNB Annual Report, 2008). Lastly, HNB changed the terms of engagement by going against the traditional banking model of focusing on international trade when domestic instability occurs (Gallardo et al., 1997). HNB's Barefoot Banker micro-lending initiative was launched during an insurgency, transformed the traditional terms of engagement by engaging with the community where the strife grew.
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This behavior of engaging with subsistence markets during times of conflict is not solely motivated by profit, but is best described as an ingrained social good in the mindset of the entire business (Viswanathan et al., 2007). Viswanathan et al. (2009-this issue) define an organization with an ingrained social good agenda as a firm with a sustainable market orientation. HNB looked to improve the welfare of the villages they operated in and were committed to the people in the rural village for the long-term. HNB's ingrained social good allowed investment in rural communities when needed most, and HNB's long-term survival relied on the rural community's ability to grow and develop. This level of longterm commitment to a community is motivated by a strategic framework that is aspirational, with a what is possible mindset. Hamel and Prahalad (1989) draw on the aspirations of the firm without considering their current limited resources and capabilities. From a strategic intent perspective, Hamel and Prahalad (1989) note that businesses with a Western mindset often engage in pathology of surrender — the behavior of fleeing the domestic market during times of strife. For example, competitors leave a market for more “attractive” segments and focus on international trade during times of insurgency. As a result, firms that employ a strategic intent strategy are allowed to have a virtual monopoly and capture the eventual renaissance of the subsistence markets (i.e., Hamel and Prahalad (1989) discuss how the TV industry became unattractive, but eventually was transformed by high-definition televisions). Grameen Bank, which took decades to develop and grow (Yunus, 1999), is another example of poverty alleviation through strategic intent. At its core, Grameen is both aspirational and innovative. The subsistence market may benefit from a reorientation of firm strategy that incorporates strategic intent and allow firms to commit and invest decades into the market and the community (Yunus, 1999). This strategic reorientation does not focus on the lack of existing resources or institutions in subsistence markets, but instead the focus is on the possibilities. If a firm is motivated by the possibilities of subsistence markets and poverty alleviation (e.g., Grameen Bank) they are more likely to accomplish long-term success (Yunus, 1999). To break out of the vicious cycle of poverty firms must think beyond their own limitations and the limitations of the environment they operate in. The development of strategic intent as a core subsistence market strategy captures the greater purpose and potential of such a market. 4. Comparative case analysis Case analysis from the two commercial banks shows how each strategy is motivated by different objectives. Ambitious goals to transform the market and have a platform to create long-term growth mark motivation from strategic intent. This framework can help an organization understand the necessary long-term, ambitious commitment that is needed to create poverty alleviation at the firm level. However, a market expansion strategy is a hit-or-miss exploitation strategy to expand a traditional firm's overall sales revenue by extending products and services to individuals with low consumption ability. In comparing the two, HSBC's market expansion strategy suggests a failure in engaging with the community and educating the consumer, and in this case, making government intervention necessary. HSBC's entrance into the subsistence market underscores the pitfalls of a strategy built for one market and extended to another, without taking into account the wide variety of needs of the consumer. These needs can be met by a firm willing to invest in the aspirations of the people and help them achieve their potential. The poor do not just lack income or access to products, as suggested by a pure market expansion strategy. Bang and Joshi (2008) argue that those in the subsistence market also need skills and ability to use the product. Further Viswanathan et al. (2009-this issue) emphasize the need for firms to foster both individual and community welfare, suggesting that in a 1-1 interactional environment firms must
have employees that develop relationships and community status over many years (e.g., Barefoot Banker). Success stories from the BoP (London and Hart, 2004), such a Hindustan Lever, required new employees working in their low-income division to spend 6 weeks living in subsistence markets, before returning to their headquarters for regular work (Ellison et al., in press). This practice may create an understanding of the constraints the poor deal with, but does not create the demand for the poor to transact with a firm. Viswanathan et al. (2009-this issue) argue that due to relentless resource constraints from the marketplace, people survive on a relational, reciprocation based system. Subsistence markets are tight-knit communities that can view going outside this system as betrayal, and outsiders as “exploitive and uncaring” (Viswanathan et al., 2009this issue). Individuals operating in this system for only 6 weeks, similar to the Hindustan Lever employees, will have difficulty building trust and relationships in the community. A firm must think about investing in the community and individuals over many years with a singular agent or a team that grows with the community and is part of the community. Therefore, strategic intent's usefulness as a perspective may be its lifetime commitment to grow with and be part of the transformation of the market. The analysis from HNB suggests that successful firms also need community leadership and support. The poor need their community first. HSBC's technology based market expansion strategy had no feet on the ground to create community leadership or engagement to understand the limitations and aspirations of the impoverished. HSBC entered the market without thinking of the ramifications of giving credit cards to individuals who have never used such a product, which led to swift government reaction to perceived abuse and lack of consumer education programs. This tactical approach eventually denied HSBC access to subsistence markets in Sri Lanka. 5. Insights and conclusion Karnani (2007) posits that opportunities to sell to the poor are generally limited, and the small to medium sized local enterprises (SMEs) that are best suited for exploiting these opportunities. The author argues that the subsistence market usually does not involve economies of scale, instead he suggests that private institutions, not MNCs, should lead the way. Karnani further states, “It is interesting, and not accidental, that in spite of the BOP emphasis on MNCs, virtually all of the examples cited in Prahalad (2006) book are fairly small not-for-profit organizations or local firms, not MNCs.” Though Karnani (2007) frames the argument in terms of MNCs versus SMEs, the real argument may be in motivation and why the firm is entering into a market. Market expansion versus strategic intent could be the core of the debate. Case in point, HNB is a large national bank with global reach that found great success in Sri Lanka's subsistence market. More than just size and scope, the bank's success can be attributed to their motivations to grow with the poor and build what is possible. Through Hamel and Prahalad's framework, a new view of subsistence markets can be developed which includes a reorientation of firm strategy. This strategic reorientation does not focus on the lack of existing resources or institutions in subsistence markets, but rather on possibilities. In summary, the current case analysis compares two traditional commercial banks, HSBC and HNB, who are providing financial services to the impoverished in Sri Lanka. Findings suggest that their motivation and intent for entering the market that really drives strategy and longterm poverty alleviation, rather than the size or scale of the firm. Firms motivated by strategic intent, such as HNB, may result in best efforts to engage in real poverty alleviation. Strategic intent is a long-term “what is possible” approach to the growth and transformation of the subsistence market. Because this approach capitalizes on the hopes, aspirations, and imaginative nature of the impoverished, firms with strategic intent engage the community and grow with them. Conversely, entrance in
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subsistence markets motivated by a market expansion strategy, which involves extending existing services to increase immediate sales revenue, may exploit consumers with low consumption ability and have little or negative impact on poverty alleviation. Firms should ask “why are we entering this market, what do we hope to accomplish, and what will be the long-term impact of our presence.” Further research and questioning is necessary in order to define the criteria for successful market engagement and provide a roadmap for long-term transformation of subsistence markets. References Bang V, Joshi S. Conceptualization of market expansion strategies in developing countries. Acad Mark Sci Rev 2008;12(4). Ellison B, Moller D, Rodriguez MA. Hindustan lever re-invents the wheel, IESE, University of Navarra: Barcelona, Spain; in press. Gallardo J, Randhawa B, Sacay O. A commercial bank's microfinance program: the case of Hatton National Bank in Sri Lanka. The World Bank discussion papers number 369; 1997. Hamel G, Prahalad CK. Strategic intent. Harv Bus Rev 1989:63–76 May–June. HNB. Annual Report. HNB Website; (2008). Retrieved from http://www.hnb.net/ annualreport2008/annual_report2008.pdf. HSBC. History. HSBC Sri Lanka Website; (2008). Retrieved from http://www.hsbc.lk/1/ 2/home-page/about-hsbc/history.
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