The Demographical Forces

Introduction

Demography is the study of populations both in terms of their overall size and their structural characteristics. From a business point of view the key as of interest include the age structure of a given population, its gender balance, its geographical distribution and the tendency for both the size and structure of the population to change over time. Demographic change can have important implications for both the demand and supply side of the economy and hence for organisations of all types.

The Population A country’s population normally increases over time and will vary according to such factors as changes in the birth and death rates and in the rate of net migration. For example, the Nigerian population as at 2015 is estimated to be 170 million people. In comparison, Russia’s current population of around 145 million is projected to fall to about 100 million by 2050 as a result of a declining birth rate and a rising death rate in the wake of the country’s economic collapse. If this occurs the world’s biggest country will have fewer people than countries such as Uganda and Egypt. It is worth remembering, however, that future population changes are only projections and that these can vary considerably over time as new data become available. For example, in late 2007 the UK’s Office for National Statistics provided three projections for the UK population by 2081: 63 million (lowest estimate); 108.7 million (highest estimate); 85 million (most likely estimate). These estimates show considerable variation and indicate how future population changes are relatively unpredictable, which can make forward planning difficult. 3.1.1 The age and sex distribution of the population In addition to examining the overall size of a country’s population, demographers are also interested in its structural characteristics, including the balance between males and females and the numbers of people in different age categories.

Other structural characteristics

Populations can also be examined in a number of other ways including their ethnicity and geographical distribution.

Population change

As the previous analysis indicates, populations can change in either size and/or structure, with important consequences for economic activity both within and between countries. The size and structure of a country’s population depend on a number of variables, the most important of which are the birth rate, the death rate and the net migration rate.

a. The birth rate

Birth rates tend to be expressed as the number of live births per thousand of the population in a given year. In many countries this figure has been falling steadily over a long period of time for a number of reasons.

These include:

  • A trend towards smaller families as people become better off and health improves and death rates fall.
  • The increased availability of contraception.
  • The trend towards later marriages and later childbearing for social and/or economic reasons.
  • Declining fertility rates.
  • Changing attitudes towards women and work.  In some countries governments have offered financial and other incentives to married couples to try to reduce the birth rate (e.g. China) as a means of controlling population growth.

In other countries incentives have been offered to try to reverse the actual or potential decline in the birth rate because of its economic consequences (e.g. France, Singapore). Declining birth rates are, of course, an important contributor to an ageing population; they can also have other consequences. For instance, a recent increase in the birth rate in the UK has led to a call by the Optimum Population Trust for British couples to restrict themselves to 2 children in order to reduce the impact of population growth on the natural environment. In Nigeria and some other African countries, various governments have tried to restrict couples to four children per couple but this has not been effectively handled.

b. The death rate

Like birth rates, death rates are usually measured per thousand of the population in a given year. For developed economies, this figure has tended to fall over time before reaching a plateau. Among the main contributors to this trend have been:

  • Rising living standards, including better housing, sanitation and nutrition.
  • Developments in medical technology and practice.
  • Better education.
  • Improved working conditions.
  • The difference between the birth rate and the death rate represents the natural change in the population (i.e. increase or decrease).

c. Net migration

Apart from the movement of population within a country (internal migration), people may move from one country to another for a variety of reasons. The balance between those leaving (emigrants)  and those entering (immigrants) a country over a given period of time represents the rate of net migration. Along with changes in the birth and/or death rate, this can be a significant factor in population change and can have important consequences for the economy. Influences on the rate of net migration include:

  • Legal barriers (e.g. immigration laws).
  • Economic migrancy.
  • The numbers fleeing persecution.
  • Government policy.
  • Political developments.

Demographic change and business

Changes in the size and/or structure of a country’s population can have important consequences for enterprises in the public, private and voluntary sectors both in the short and long term. Given increased globalisation and international trade, the impact of demographic change has an international as well as a national dimension for a growing number of trading organisations.

The following examples provide illustrations of how a changing demography can influence both the level and pattern of demand within an economy and in turn help to explain why changes can occur in a country’s economic and industrial structure. Demographic change can also have important effects on the supply side of the economy.

You should try to think of other examples.

  • As populations grow in size the demand for many types of goods and services also tends to grow (e.g. energy, consumer durables, food). A growing population also provides a larger workforce, other things being equal.
  • An ‘ageing population’ increases the demand for a range of public, private and voluntary sector goods and services (e.g. healthcare, pensions, specialist holidays, sheltered housing). It also creates an increasingly dependent population.
  • A declining birth rate influences the demand for education, children’s products, childcare, certain TV programmes, comics, toys, etc. It can also reduce the numbers of young people available to enter the workforce to replace those who retire.
  • Changes in the ethnic makeup of the population can affect the demand for particular food products, clothing and media services and can place increased demands on public authorities (e.g. documents printed in different languages). Some researchers also argue that a more diverse workforce can improve an organisation’s performance.
  • The regional redistribution of the population will affect the consumption of a range of goods and services including housing, education, healthcare, transport, energy and many day-to-day products. It can also affect prices (e.g. in the housing market) and the makeup of the local labour market.

On a more general level, it is also worth noting that demographic change can impact on a country’s social as well as its economic structure and that this can result in increased (or reduced) demands on a range of organisations, particularly those in the public sector. For example, the growing imbalance being experienced in many countries between an increasing and dependent elderly population and a diminishing population of working age touches on many areas of public policy, from healthcare and social provision on the one hand to pensions and fiscal policy on the other. Governmental responses to the consequences of demographic change can have both direct and indirect consequences for a wide variety of organisations across the economy.

The Social context

Since organisations exist and operate in society, they are subject to a variety of societal influences that operate at both a general and specific level. In this section we consider some of the key factors within an organisation’s social environment, starting with the concept of social class.

Social class

Throughout history, all societies have normally exhibited a certain degree of social and economic inequality that has given rise to the tendency to classify individuals into different social categories. For example, in India the ‘caste system’ has been an important source of social differentiation and one which has exerted a key influence over the life and opportunities available to members of the different castes. In other countries, including Nigeria, the categorisation of individuals has often been based around notions of social class, the idea of grouping people together who share a similar social status which is related to certain common features such as educational background, income and occupation. Whereas in some types of social system, movement between groups is either very difficult or impossible (e.g. the caste system), in others social mobility is frequently observed, with some individuals able to move relatively quickly between the different social strata (e.g. upper class, middle class, working class) as their personal circumstances change.

Another factor that can clearly affect people’s attitudes and behaviour is the lifestyle that they choose to adopt. Lifestyles are basically concerned with the way in which people live and how they spend their money, decisions which are not necessarily always linked to their socio-economic position. Two individuals with the same occupation – and nominally in the same social class – may have entirely different lifestyles, a point well illustrated by examining two university lecturers. My own lifestyle is highly sophisticated, environmentally sensitive, artistic and cosmopolitan; that of a colleague – who happens to teach marketing – is narrow, parochial, philistine and consumption-driven. Then, what would one expect?!

Lifestyle analysis provides another way of seeking to categorise and explain human behaviour, based on factors such as an individual’s interests, activities and opinions as well as on their demographic characteristics. In essence, the proposition is that by examining distinctive patterns of consumer response, a marketing organisation can build up a clearer picture of an individual’s habits, preferences and behaviour and by doing so can design more effective and appealing products, marketing programmes and/or communications that can be aimed at specific lifestyle groups.

Other social influences

While it is important to consider the influence of broad social factors such as class and lifestyles, it is also worth remembering that consumers are individuals and that they are subject to influences that operate at a personal level. Such influences include the wide variety of individuals and groups with whom we come into contact during our lifetime and who may influence our attitudes, values, opinions and/or behaviour. Primary among these are our interactions within the family, with friends or work colleagues and through our involvement with sports and social clubs, religious organisations, trade unions and so on. Such groups are sometimes referred to as reference groups.

Groups that have a regular or direct (i.e. face-to-face) influence on us are known as primary reference groups while those whose influence tends to be more indirect and formal are known as secondary reference groups. The former, in particular, can be very influential in shaping our attitudes and behaviour including our decisions on consumption.

The importance of reference groups, especially family and friends, is recognised by both economists and marketers. Economists, for example, use the notion of ‘households’ to indicate that the consumption of goods and services often takes place within a collective family framework, as in the case of groceries, holidays, vehicles and many other everyday products. Marketers use concepts such as the family life cycle to show changing patterns of consumption as the individual moves from being a child in a family to being a parent with different needs and responsibilities.

While it is difficult to be precise about when and how far an individual’s demand is shaped by the family and other reference groups, it is not difficult to think of particular examples when this is likely to be the case. For many services such as builders, restaurants, hotels, hairdressers and car repairs, consumers often rely on the advice of a trusted friend or colleague and many firms can gain new business through such word-of-mouth recommendations. Equally, through membership and/or support of a particular group or club, individuals may be tempted to purchase particular goods and/or services (e.g. football kit, trainers, a CD, tickets), especially those with a desirable ‘brand name’ and endorsed by a well-known personality (e.g. sportsperson, musician, singer, film star). In such cases, the demand for the product is often less price sensitive since it is a ‘must have’ product.

Conclusion

From the above discussions, it is evident that the size, density, distribution and the growth rate of a Nation‘s population affect business activities. In addition, the social contexts have great impact of business activities. The composition of population in terms of age, social class, reference groups and citizens‘ lifestyles all play a great role in business growth and development.

Summary

The Demographic environment is concerned with the study of the population characteristics both in terms of their overall size and their structural characteristics. Areas of interest in a business setting include the age structure of a given population, its gender balance, its geographical distribution and the tendency for both the size and structure of the population to change over time. As we have observed, demographic change can have important implications for an organization‘s human resources management as well as the demand and supply side of the economy. The social context of business includes factors such as social class, lifestyles and reference group influences. The consumption of goods and services in an economy can be linked to such factors.