analysis of macro economy and demographic change

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Analyse the macro environment and demographic change

Fads, Trends and Megatrends

Fad - A fad is “unpredictable, short-lived, and without social, economic or political significance.” A company can cash in on such circumstances although there is an element of luck involved. It may sell for a few months and then the demand dries off.

 provides examples.

Trend - A trend is a direction or sequence of events that has some momentum and durability. Trends are more predictable and durable than fads. A particular type of clothing might be in fashion for several years. The number of people valuing fitness and well-being has risen over the years, particularly in under 30s, women, higher social groups.

Megatrend - Then there is what has been termed as the megatrend. As John Naisbitt and Patricia Aburdene (Megatrends 2000, New York: Avon Books, 1990) put it, “large, social, economic, political and technological changes are slow to form, and once in place, they influence us for some time – between seven and ten years, or longer.”

A new product or marketing programme is likely to be more successful if it is in line with such trends. But detecting a new market opportunity does not guarantee success. Kotler and Keller provide the example of portable electronic books. The technology has made it feasible. But most people continue to prefer the paper variety, at least so far. Market research remains necessary in order to discover an opportunity’s profit potential.

Examples of Megatrends

(Peter Francese, ‘Top Trends for 2003’, American Demographics (December 2002/January 2003): 48-51.

Aging Boomers

As baby boomers grow older, their impact on consumer spending can hardly be overstated. That’s because unlike older generations, boomers are deciding to delay the aging process and will continue to earn and spend as they age. The ‘baby boomers’ are people born between 1946 and 1964, during a period when the birth rate rose after the Second World War.

Delayed Retirement

Baby boomers have delayed every life stage transition, such as getting married and having children. So it’s highly likely they will also delay their retirement. Between 2000 and 2010, the Bureau of Labor Statistics (US) forcecasts a 33 percent increase in the number of people ages 65 to 74 in the workforce.

The Changing Nature of Work

More than half of all US workers are employed in management, in professional, or related occupations, or in a sales or other office-based position.

Greater Educational attainment – Especially Among Women

More jobs require intellectual skills. In the US, men and women are equally likely to graduate from high school. But women are more likely to go and attend college. As college graduates have higher incomes, so women are likely to see an increase in their earnings relative to men.

Labour Shortages

Although more service workers are needed in suburban areas, fewer people can afford to live there. Suburban locales will turn more to automation or increased reliance on immigrant labour. (A particularly American difficulty, as in Britain the suburbs tend to be cheaper to live in!)

Increased Immigration

According to the 2000 census, 40 percent of American population growth was due to immigration. As citizens age, population growth as a result of newborns will be outpaced by growth due to immigration.

Rising Hispanic Influence

Hispanics are the largest minority group in the US, with 35 million people, about 12 percent of the population. And they accounted for 20 percent of all births in 2000. Their share of the population is increasing.

Shifting Birth Trends

  1. More births to women aged 35 and over.
  2. Declining births to teenagers
  3. Two-thirds of women of childbearing age are white, but they accounted for only 43.5 percent of births

Widening Geographic Differences

Low population growth in New England (North East US), 84 percent white, average age 37.1

Higher growth in west and south

Western states, including California are only 53 percent white

Average age in California is 33.2, while that in Texas is 32.3.

Changing Age Structure

Stable birth rates have meant that there is little change in number of consumers in each cohort younger than 35

The first years of the new century have seen a number of major challenges:

Fall in the stock market after 2000 as well its recovery during the middle of the decade. This has affected savings, investment, retirement funds

House price boom, which could be a bubble.

Raised interest rates and slower economic growth

The War on Terror

The firm must monitor six major forces:

1. Demographic – explosive population growth may for example lead to more resource depletion and pollution

2. Economic – if people have more money, that is more to spend on your product

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3. Socio-cultural – changing attitudes and behaviour

4. Natural – global warming?

5. Technological – advances in IT, use of the internet, for example

6. Political-legal – consumers calling for more laws perhaps, or more willing to sue companies

The Demographic Environment

Worldwide population growth

6.1 billion people in 2000. Could be 7.9 billion in 2025.

A breakdown carried out back in 1993 showed that if the world were a village of 1,000 people, it would consist of:

- 520 women and 480 men, 330 children, and 60 people over age 65,

- ...

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