demographic changes at local, national and global level

6.1 External Influences – Social and Demographic

Learning Objective

Analyse how demographic changes at local, national and global levels influence business strategy, operations, finance and corporate responsibility.

Key Concepts

• Demography: Statistical study of populations – size, density, distribution and vital statistics.
• Population Structure: Age, gender, ethnicity, household composition and marital status.
• Population Dynamics: Birth rate, death rate, migration and life expectancy.
• Dependency Ratio: Ratio of non‑working (young + elderly) people to the working‑age population.

Key Demographic Variables (Cambridge 6.1.3)

Why Demography Matters to Business

Businesses must anticipate changes in market size, consumer preferences, labour supply, purchasing power, and cost structures. Demographic trends create opportunities (e.g., ageing populations increase demand for health‑care) and threats (e.g., declining birth rates shrink markets for children’s goods).

Measuring Demographic Change

Basic growth‑rate formula:

$$r = \frac{(P_{t} - P_{0})}{P_{0}} \times 100$$

where P₀ = initial population, Pₜ = population at time t, r = percentage growth rate.

Local‑Level Demographic Changes

National‑Level Demographic Changes

• Birth‑rate decline: Sub‑replacement fertility → ageing workforce, higher dependency ratios.
• Immigration policy changes: Alters size and skill composition of the labour market.
• Urbanisation: Rural‑to‑urban migration expands city markets while shrinking rural demand.
• Changing marital patterns: Later marriage and higher cohabitation affect housing and consumer‑goods demand.

Global‑Level Demographic Changes

1. Population ageing in developed regions: Higher dependency ratios drive innovation for older consumers (e.g., ergonomic design, tele‑health).
2. Youth bulge in emerging economies: Large cohorts under 25 create future markets for technology, education and consumer goods.
3. Urbanisation at scale: By 2050, >68 % of the world’s population projected to live in cities – massive demand for infrastructure, housing and urban services.
4. Ethnic diversification through migration: Global mobility increases cultural heterogeneity, influencing product localisation and CSR focus.

Population‑Pyramid Analysis (Syllabus Requirement)

When analysing a pyramid, consider:

• Base width: Indicates youth‑bulge or low fertility.
• Top width: Shows proportion of elderly (dependency).
• Shape change over time: Reveals ageing, “demographic dividend” or shrinking‑population trends.

Implications for Business Strategy

• Market segmentation (4 Ps): Use age, gender, ethnicity, household composition and marital status to define target groups for Product, Price, Place and Promotion.
• Product development: Adapt features for ageing consumers (larger fonts, ergonomic design) or for tech‑savvy youth (mobile‑first platforms).
• Place (location decisions): Site new stores, factories or service centres where demographic trends indicate growth in the desired customer base.
• Price & Promotion: Align price points and communication channels with income levels and media habits of the target demographic.
• Operations & Capacity Planning: Scale production or service capacity to match youth‑bulge markets (high volume, low margin) versus ageing markets (lower volume, higher service intensity).
• Financial Planning: Budget for longer product life‑cycles in ageing markets, higher R&D spend for assistive technologies, and potential changes in tax or pension liabilities.
• Human‑Resources: Anticipate labour shortages or surpluses; invest in training, flexible working, automation or recruitment from migrant pools.

Labour‑Market Effects of Demographic Change

• Ageing workforce: Skill shortages in physically demanding roles; higher wage pressure; need for retraining and flexible retirement schemes.
• Youth bulge: Larger pool of entry‑level workers; increased competition for jobs; potential downward pressure on wages for low‑skill occupations.
• Gender balance shifts: Greater female labour‑force participation → demand for family‑friendly policies and childcare support.
• Household‑size changes: Rise in single‑person households may increase part‑time or gig‑economy work.

Migration, Skill Composition & Economic Impact

• Net migration: Adds to overall population size and can offset natural decline.
• Skill‑based migration: Inflows of highly‑qualified workers raise the average skill level, encouraging innovation and higher wages in knowledge‑intensive sectors.
• Low‑skill migration: Supports sectors such as agriculture, construction and hospitality; may depress wages if supply exceeds demand.
• Policy implications: Changes in visa rules or points‑based systems directly affect the availability of specific skill sets.

CSR & Pressure‑Group Framework (Syllabus Requirement)

Use the following three‑step structure when answering exam questions:

1. Identify the stakeholder group (e.g., senior‑citizen advocacy groups, ethnic‑community organisations, labour unions).
2. Assess the demographic demand or pressure (e.g., need for accessible retail environments, culturally appropriate products, fair wages for migrant workers).
3. Design a business response – either a CSR initiative (community centre, scholarships, environmental projects) or a strategic adjustment (product redesign, staffing policy, supply‑chain change).

Examples

• Age‑advocacy groups lobby retailers to improve store accessibility; the retailer redesigns aisles and introduces senior‑friendly product ranges, boosting sales by 4 %.
• Multicultural NGOs pressure a fast‑food chain to offer halal and vegetarian options; the chain adds certified menu items, gaining market share in ethnic neighbourhoods.
• Trade unions representing migrant workers demand fair wages and language training; the firm launches a skills‑development programme and adjusts pay scales, reducing turnover.

Case Study Snapshots

Case 1 – Retailer in a Shrinking Town: A high‑street clothing chain saw footfall fall as the town’s population aged and youth migrated to larger cities. The retailer introduced a comfortable, easy‑care line for older adults and converted part of the store into a community health‑screening hub, increasing footfall by 7 % and improving profit margins.

Case 2 – Tech Firm Targeting Africa’s Youth Bulge: A mobile‑app developer launched a low‑data‑usage social platform aimed at 15‑24‑year‑olds in Kenya and Nigeria. By aligning product design with rapid smartphone adoption among this cohort, the app reached 3 million active users within 12 months and attracted regional advertising partners.

Summary Checklist

• Identify the five key demographic variables (age, gender, ethnicity, household composition, marital status).
• Analyse trends at local, national and global levels.
• Explain how each trend creates opportunities or threats for product, price, place, promotion, operations, finance and HR.
• Link demographic insights to labour‑market effects (skill mix, wage levels) and migration patterns.
• Use population‑pyramid analysis to support strategic recommendations.
• Apply the three‑step CSR/pressure‑group framework to structure answers.
• Translate trends into specific, measurable business objectives.

Potential Exam Questions

1. Explain how a declining birth rate in a developed country can affect the product mix and financial planning of a consumer‑goods company.
2. Using a population‑pyramid diagram, discuss the challenges and opportunities that an ageing population presents for the financial‑services sector.
3. Analyse the impact of rapid urbanisation in emerging economies on the location decisions of multinational retailers.
4. Evaluate how changes in migration patterns and skill composition influence the labour market and wage levels in a national economy.
5. Discuss how pressure‑group activity and CSR initiatives can shape a company’s response to an ageing local population.