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Demographic environment


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International business

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Demographic environment

  1. 1. DEMOGRAPHIC ENVIRONMENT Demography: Is the study of human populations in terms of size, density, location, age, gender, race occupation, and other statistics. Demography is very important because it involves people, and people make up markets. The world population is growing at an explosive rate. This population explosion has been of major concern to governments and various groups.
  2. 2. The less-developed regions of the world currently account for 76% of the world population. The explosive world population growth has major implications for business due to:  Growing human needs  Growing market opportunities. It is good to keep close track of demographic trends and developments in their markets, both at home and abroad.
  4. 4. Demography Size Composition Distribution Age Family life cycle Race Language Occupation Sex Status Religion Education Wealth Rural Urban
  5. 5. Size:  The size of the country is estimated by counting the number of the people in that country.  The size of the population and its growth rate has both demand and supply side effects.  An expansion in the size increases the consumption needs and the amount of labour. Composition:  The composition of population can be assessed by classifying it by using different criteria described as follows: Age compositions/generations: The population is divided into three categories: Population Age Child O-14 Working 15-64 Aged 65 and above
  6. 6. Race/Ethnicity:  Classification of population on the basis of race or ethnicity is subjective as individuals usually identify their own race or ethnicity in the population census conducted by their countries. for eg:USA census there are six race/ethnic categories:  Business organization also use such a data for a variety of business strategies. They often use such a data to design advertisement that can attract the dominant category. Similarly investment decisions are often based on such information. AMERICAN INDIAN,ASIAN,BLACK,WHITE,HISPANIC AND OTHERS
  7. 7. Religion :  Religion categories in demographic classification also vary across countries. In India major religions are Hindu,Christian,Muslim.Business organization take care of the religious sentiments while designing their products.  For e.g.: McDonalds India
  8. 8. Language :  Depending on the major language spoken in a particular country, the classification of population according to language also varies across countries.  For e.g.: Regional radio stations
  9. 9. Education:  Education profile is assessed by enumerating the number of people of 18 years and above attaining a specified level of education.  Education level also often influences income, product choices and standard of living.  Businesses, hence, often use such information for market research and product targeting  For e.g.: IT companies
  10. 10. Occupation:  Different countries have been using different occupation classification.  Occupational data is used by businesses for targeting and pricing for their products.  For e.g.: Insurance Companies
  11. 11. Income:  Income, being a primary measure of well-being of a person, influences his/her purchasing power and choices.  Income can be aggregate income of a person or per capita income.  Brands are specifically developed and positioned within particular income segments to maximize turnover and profit.  For e.g.: Rolls Royce cars and Tata Nano
  12. 12. Gender composition:  One of the basic characteristics of demography, the gender composition largely reflects the underlying social, economic, and cultural patterns of a society.  Gender classification of population is often analyzed by businesses as men and women have different psychological and physiological needs and they shop differently. Such a segmentation is widely used within cosmetics, clothing and magazine industry  For e.g.: Fair and handsome, Fair and lovely, Femina
  13. 13. Family life cycle  The stages of life through which families go through is known as family life cycle. It is expressed as, Families with no children Families with children For example,
  14. 14. Distribution:  Distribution of population depicts the density in a particular area. Population density is estimated per square mile of land area and measured by the following formula: Population density = Total Population of the Area/ Size of the Area Population density is an important indicator of quality of life.
  15. 15. DETERMINANTS OF DEMOGRAPHY Fertility  Crude birth rate = Number of live births in the year/ Total population *1000 Mortality and life expectancy  Crude death rate = Number of deaths in the year/ Total population *1000  Infant mortality rate=No. of deaths of infants of less than 1 yr old/ Total population *1000 Migration  Immigration rate =Number of people entering a region / Total population *1000  Emigration rate = Number of people leaving a region / Total population *1000
  16. 16. USES OF DEMOGRAPHIC PROFILE BY BUSINESS ORGANIZATION 1. Production analysis 2. Establishing selling outlets 3. Determining advertising and communication strategies 4. Strategic planning
  17. 17. DISADVANTAGES -Business is at risk of alienating people who fall between categories --If market research is flawed, the campaign could be targeting the wrong people
  18. 18. Conclusion  Business management involves management of people and efficiency of business depends largely on the competency and motivation of its people. The demographic environment differs from country to country and from one place to another within the country.Thus the demographic factors should be clearly analyzed as it has very significant implications for business organization.
  19. 19. TIME TO REFRESH  World Population Day – July 11  The world population is estimated to be 7.325 billion in 2015.  Top 5 Most populated countries: China: 1,361,512,535 India: 1,251,695,584 USA: 321,362,789 Indonesia: 255,993,674 Brazil: 204,259,812  Top 5 Least populated countries: Tuvalu: 11,636 Nauru: 12,809 Palau: 20,016 San Marino: 28,503 Monaco: 32,270
  20. 20.  As per 2011 census, which religion constitute 2nd highest Population in India Islam 14.23%(17.22 crore)  Which is the most populous state with roughly 200 million people Uttar Pradesh  Which is the least populous state (610,577) Sikkim  The number of people in different age groups is referred as: Age composition  Which of the following migration of population does not change the size of the population? Internal migration