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After finishing Chapter 5 and reading the notes on each external environment, clink the link below to watch a 15 minute video which links economics and global population growth. Afterwards, make a posting to Discussion Forum #2 with your thoughts about Dr. Rosling’s video. Deadline for submission to Discussion Forum #2 is Saturday, May 25th.Here is the link: http://www.ted.com/talks/hans_rosling_on_global_population_growth.html (Links to an external site.)
demographic_environment__updated_march_2019.doc

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Demographic Environment
SWOT Analysis – a method of monitoring the external and internal
environment in which the company is operating. A business
must monitor key macroenvironment and microenvironment
factors that affect its ability to earn profits.
Strengths and Weakness (SW) are internal to the company.
Opportunities and Threats (OT) are external to the company and
represent noncontrollable forces.
• Opportunities can be evaluated for attractiveness and
probability of success (see above).
• Threats are challenges posed by an unfavorable trend or
development that would lead (in the absence of an effective
defensive marketing response) to lower sales and/or
profitability. Threats can be classified according to
seriousness and probability of occurrence. Minor threats can
be ignored; more serious threats need careful monitoring;
major threats require development of actionable plans.
The Macroenvironment consists of 6 major forces or environments:
1.
2.
3.
4.
5.
6.
Demographics
Economics
Social-Cultural
Physical/Natural
Technological
Political/Legal (also called government or regulatory)
The Demographic Environment:
Demography is the study of human populations in terms of size, density,
location, age, gender, race, occupation and other statistics.

Worldwide Population Growth
o More than 7.7 billion people (2019), growing to 8.1 billion by
2025, 9.8 billion by 2050 and 11.2 billion by 2100 (cnbc)

Changing Structure of the Population
o U.S. population 328 million in March 2019 (U.S. Census) –
projected to reach 400 million by 2058
o Several generation groups in the population.


The Baby Boomers (75 million born between 1946 and
1964) currently are 26% of the U.S. population

Generation X (49 million born between 1965 and 1976)

Millennials (also called Generation Y and the echo
boomers) (83 million born between 1977 and 2000)

U.S. is entering another baby boom (27.3% of the total
population is age 18 or younger).
Changing American Family
o “traditional household” consisting of husband, wife and
children
o Of the total 127 million households in U.S. in 2018, only 48%
are married couples. (U.S. Census Bureau)
o In 1970 45 million people were married; in 2018 62 million
(U.S. Census Bureau)
o New parents tend to be older in general. The average age of
first-time mothers is 26, up from 21 in 1972, and for fathers it’s
31, up from 27. Women are having babies later in other
developed countries, too: In Switzerland, Japan, Spain, Italy
and South Korea, the average age of first birth is 31.
o Single persons currently comprise 18% of American
households. Singles have quite different spending patterns
than couples with children. They are less likely to own homes
and thus buy less furniture and fewer appliances. They spend
more heavily on convenience foods, restaurants, travel,
entertainment, and recreation. They tend to prefer smaller
package sizes, whereas families often buy bulk goods and
products packaged in multiple servings.
o Non-traditional households are growing more rapidly than
traditional. Divorce, choosing not to marry, marrying later,
marrying without intending to have children. Each group has
distinctive needs and buying habits.
o Among younger couples the divorce rate has been declining,
but it has increased 50% among baby boomers in the last 20
years (AARP the Magazine, June/July 2014).
o 70 million Americans are now grandparents, more than ever
before. Of all adults over the age of 30, more than 1 in 3 were
grandparents as of 2014. “The same boomers who famously
doted on their children are now lavishing attention on the next
generation – and with an average of 5 to 6 grandchildren per
grandparent, that can mean quite a financial investment. An
AARP study showed that 25% of grandparents have spent
more than $1,000 in the past year on their grandchildren.”
Source: AARP Bulletin, May 2017).

Geographical Shifts in Population
o 14% of Americans move each year
o U.S. population shifting to the West and South.
o Midwest and Northeast have lost population.
o Movement from rural to metropolitan areas from 1850 to
1950s; then from cities to suburbs. Today “micropolitan
areas” are the draw – small cities located beyond congested
metropolitan areas. One result: increase in telecommuters.

A Better-Educated, More White Collar, More Professional Population
o The population in any society falls into five educational
groups: illiterates, high school dropouts, high school degrees,
college degrees and professional degrees.
o Over 2/3 of the world’s 785 million illiterate adults are found in
8 countries (India, China, Bangladesh, Pakistan, Nigeria,
Ethiopia, Indonesia and Egypt).
o In 2016 84% of U.S. population over age of 25 had completed
high school. In 2016 32% had completed college. This
compares to 69% and 17% in 1980.
o Job growth is strongest for professional workers and weakest
for manufacturing workers.

Increasing Diversity
o U.S. used to be called a melting pot, where people from
many nations and cultures blended into a single, more
homogenous whole.
o Now the salad bowl analogy seems more appropriate,
where various groups have mixed together while retaining
and valuing important ethnic and cultural differences.
o U.S. population is now about 66% white, 15% Hispanic, 13%
African American; 5% Asian, with the other 1% comprised
of American Indian, Eskimo, and Aleut.
o Over 34 million people (12%) now living in the U.S. were
born in another country.
o The U.S. ethnic population will continue to grow. By 2050,
Hispanics are estimated to make up 36% of the population
and Asians 11%.
o The Lesbian, Gay, Bisexual, and Transgender (LGBT)
community has increasing emerged into the public eye.
21% of same-sex households include children (AARP the
Magazine, June/July 2014).
o 57 million adults with disabilities represent more than $175
billion in discretionary purchasing power.

Social class
o American children have a harder time rising up from their
parents’ class than children in countries such as Denmark,
Norway, Finland and Canada. This is attributed to
educational disparities. Finland’s educational system is
centrally funded, giving non-wealthy kids equal educational
opportunities.
o “In Europe, if you’re a duke, a count, a king, or a prince, and
you lose everything, you’re still a duke, a count, a king or a
prince. Even if people make fun of that, they still
acknowledge it.” (WSJ)
o Americans care more about achievement than lineage.
“We don’t have a royal aristocracy. We have a literary
aristocracy; a rock-musician aristocracy.” (Sugar Rautbord
quoted in WSJ)
o In Europe young people aren’t expected to marry out of
their class. In the U.S. marriage remains one of clearest
paths to a higher class.
o On the other hand, “assertive mating” (the human urge to
pair up with someone who is similar to you) is on the
increase in the U.S. (according to sociologists Robert Mare
of UCLA and Christine Schwartz of the University of
Wisconsin-Madison). Those with college degrees are
marrying people with college degrees at higher rates than
at any time in the last 50 years.
o The average age of first marriage keeps rising; the average
age of first marriage for women in 2017 was 27.4 years. For
men, it’s slightly older at 29.5 years. (U.S. Census Bureau)
Economic Environment
The Economic Environment:
Markets require buying power as well as people. The economic
environment consists of factors that affect consumer purchasing
power and spending patterns.

Four types of economic structures:
o Subsistence economies, which offer few marketing
opportunities
o Raw-material-exporting economies (like Zaire for copper
and Saudi Arabia for oil), which are good markets for
equipment, tools, and luxury goods for the rich
o Industrializing economies, like India and the Philippines,
where the rich and middle class demand new types of
goods and services
o Industrial economies, like those in Western Europe, good
markets for all types of products.

Income Distribution: 5 different income distribution patterns –
o Very low incomes
o Mostly low incomes
o Very low, very high incomes
o Low, medium, high incomes
o Mostly medium incomes

In the U.S. income distribution is very skewed.
o Upper-class: consumers whose spending patterns are not
affected by current economic conditions and who are a
major market for luxury goods
o Middle-class: comfortable consumers who are somewhat
careful about spending but can still afford the good life
some of the time
o Working class: consumers who must stick close to the
basics of food, clothing and shelter and must try hard to
save
o Underclass (persons on welfare and many retirees) who
must count their pennies when making even the most basic
purchases

Over the past three decades the rich have grown richer, the
middle class has shrunk, and the poor have remained poor.

The top 1% of American families now controls over 33% of the
nation’s net worth.

The top 20% of Americans own more than 85% of the wealth in
the U.S. in 2010.

The bottom 90% of families now control only about 30% of the
net worth.

Given their debt, the bottom 40% own almost nothing, making
this the widest gap since the 1930s depression.

Changes in consumer spending patterns:
o Engel’s Laws: As household income increases,

% spent on food decreases

% spent on housing stays the same

% spent on other areas increases
Physical/Natural Environment
The Physical/Natural Environment: the natural resources that are
needed as inputs by businesses or that are affected by business
activities

Water pollution

Air pollution

Global warming

Disposal of trash
Trends in the Physical/Natural Environment:

Shortages of raw materials
o Air pollution chokes many of the world’s large cities
o Water shortages are a major problem in some parts of the
U.S. and the world
o By 2030, more than 1 in 3 people will not have enough
water to drink.
o Renewable resources (forests and food) must be used
wisely.
o Nonrenewable resources (oil, coal, minerals) face serious
shortages.

Increased pollution: Industrial activity almost always damages
the quality of the natural environment.
o Disposal of nuclear and chemical waste
o Mercury levels in the ocean
o Chemical pollutants in the soil and food supply
o Littering of the environment with bottles, plastics, etc.

Increased governmental regulation and intervention
o Countries vary in their efforts to protect the natural
environment.
o Germany vigorously purses environmental quality.
o Many poorer nations aren’t doing much, because they are
directing their resources to other needs.
o In the U.S. the EPA was created in 1970 to set and enforce
pollution standards and to conduct pollution research.

Green movement: Individuals and companies going beyond the
minimum governmental standards and developing
environmentally sustainable strategies. Companies are learning
that embracing environmentally responsible practices is good
business.
o More environmentally friendly products
o recyclable or biodegradable packing materials
o recycled materials
o better pollution controls
o more energy-efficient operations and products

Two problems companies may face with green programs:
o Consumers may believe the product is of inferior quality as
a result of being green
o Consumers may feel that the product is not really green to
begin with

“Green marketing myopia” refers to the tendency by companies
to focus too much on the product’s greenness and not enough on
the other benefits
Political/Legal/Regulatory Environment
The Political/Legal/Regulatory Environment: the laws, government
agencies, and pressure groups that influence or limit various
organizations and individuals in a given society

Increasing Legislation affecting businesses
o Not just in the U.S. The European Commission has been
actively establishing a new framework of laws covering
competitive behavior, product standards, product liability, and
commercial transactions for the nations of the European
Union.
o Norway bans several forms of sales promotion (trading
stamps, contests, premiums) as being inappropriate or unfair
ways of promoting products.
o Thailand requires food processors selling national brands to
also market low-price brands.
o In India, food companies must obtain special approval to
launch brands that duplicate those already existing on the
market, such as additional cola drinks or new brands of rice.
o In the U.S., many laws are created at the national, state and
local levels, and sometimes these laws overlap. For example,
aspirin sold in Dallas are governed both by federal labeling
laws and by Texas state advertising laws.
o Reasons for business legislation:

To protect companies from each other (to prevent unfair
competition).

To protect consumers from unfair business practices

To protect the interests of society against unrestrained
business behavior.

Changing Government Agency Enforcement

Increased Emphasis on Ethics and Socially Responsible Actions
o Increased concern about the physical environment
o Recent rash of business scandals
o Boom in internet marketing has raised concerns about privacy
and protection of minors
o Cause-related marketing has become a primary focus of
corporate giving.

Growth of Special-Interest Groups
o Consumerist movement
o Green movement activists
Technological Environment
The Technological Environment: forces that create new technologies,
creating new product and market opportunities
Creative destruction: every new technology replaces an older technology
(CDs hurt the phonograph records; digital photography hurt the film
business; television hurt radio; xerography hurt the carbon paper
business)
Major trends in the technological environment:

Accelerating pace of technological change

Unlimited opportunities for innovation (biotechnology, computers,
microelectronics, telecommunications, robotics; medicine,
materials science; space colonies)

Varying research and development (R&D) budgets.
o Basic research vs. applied research
o U.S. leads the world in R&D spending (about $511 billion in
2016).
o China is second with $452 billion.
o The challenge is not just technical, but also commercial – how
to make practical, affordable versions of products based on
new technology.

Increased regulation of technological change (FDA approval
required for all new drugs; safety and health regulations increasing
for food, automobile, clothing, electrical appliance, and
construction industries)

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