Step-change: how micro-entrepreneurs enter the upcoming middle-class market in developing and emerging countries

In developing and emerging (D&E) countries, the large number of poor people, most of whom are female, earn a living based on small-scale self-employed units established in subsistence marketplaces in the large informal sector. With the recent rise of middle-classes in developing and emerging countries, micro-entrepreneurs, can potentially lift themselves out of poverty by seizing the opportunities provided by the new upcoming middle-class (UMC) customers. To exploit these opportunities micro-entrepreneurs have to make a step-change away from their current customers in subsistence marketplaces to create higher value propositions for UMC customers. As a strategic marketing decision, the step-change inherently comes with challenges in developing resources and capabilities required to cater to UMC customers. It hosts potential conflicts between informal- and formal-sector stakeholders as it requires both new resources and continued access to existing resources. The findings suggest that step-change is a three-step process consisting of three market entries, into, “passing-by customers”, UMC, and business markets. The value propositions associated with these markets are also hierarchical in terms of quality, quantity, consistency, and complexity. Although the processes within the steps (motivations, opportunity recognition, assessing the need of resources, resource accumulation and (re-)integration, value proposition, and market entry) have a similar structure, their content differs between steps.  The findings also indicate that gender issues vary by step. Whereas, in step 1 and 3 gender differences are less remarkable, they are more pronounced in step 2, where women mainly use their relationships with individuals to access resources whereas men use both individuals and groups to access resources. The thesis suggests that to initiate and sustain step-changes, both female and male entrepreneurs have to invest in capability-building.