The society has a huge influence upon businesses and markets, especially on business strategy and change management. Demographic, cultural and social factors affect business activity with new changes and trends emerging among consumers. And, the degree to how much the society impacts the business will vary from country to country.
The structure of societies constantly evolves as the changes occur in many countries at the same time. Also, many countries are interlinked with one another to various degrees as a result of trading blocks.
The attitudes of the society towards a wide range of different issues can present both opportunities and threats for businesses.
Demographic, cultural and social influences on business activity
Let’s take a look at the impact of these changes on business decisions through The STEEPLE Analysis.
1. Demographic Factors
Aging population
These days the world is facing this phenomenon of ageing population which is going to change the balance between the number of people available for work and those supported by the health service, public pension system, pension funds and the senior care facilities. It will also change the structure of workforce in the companies. On one hand, the percentage of older employees will be higher which may result in more loyalty to a business and having years of experience (more knowledge and skills). But, on the other, the percentage of young employees will be lower which may result in less adaptability to change and application of new technologies. Businesses need to be prepared to adjust workforce planning, recruitment practices and marketing strategies to include provision for older workers who have higher requirements for better health and social care.
Lower birth rates
Women in many modern societies are opting to have children at a later age as they give their professional careers a priority. The issues of infertility caused by pollution, widespread of medications and other environmental factors, also have impact on women giving birth to less children.
Longer life expectancy
The average age of the human population is increasing meaning that the numbers of ‘grey’ consumers will increase too. It will require businesses to conduct market research in order to modify their product portfolios including more goods and services suitable for an ageing population. With longer life expectancy, there will be a larger proportion of the population over the statutory age of retirement and a smaller proportion of the population in lower age ranges such as teenagers or university students. It may create business demand for construction companies to build more residential units with facilities for the elderly. On the other hand, TAX burdens on the working population will increase due to a smaller number of workers in the economy.
Smaller families
Lower birth rates will cause smaller families. Another reason is easier and easier access to contraception. Because many women these days choose career over giving birth and raising many children starting in their twenties, there is a growing tendency to have children later in life.
Rising divorce rates
In many countries, for example China, divorce rates are on the rise increasing the number of households with only one person. The consequences of it might be a higher demand for furniture and home appliances as two single households will need two dining tables and two refrigerators instead of one as in the case of a married couple.
2. Cultural Factors
Language
The most commonly spoken languages around the world are Mandarin Chinese, English, Spanish, Hindi, Arabic and Russian. While multinational companies such as Coca Cola or McDonald’s translate names of their brands and products into local languages and pay attention to not committing any cultural faux pas, some other businesses operating around the world mindlessly commit cultural blunders making themselves look bad. Remember that sometimes it is not possible to translate marketing messages into other languages though.
Religion & Values and beliefs
Worldwide, religion is one of the key factors regarding cultural diversity among employees. Some workers want religious beliefs and practices to be accommodated, including having time off to celebrate their religious rituals, while others keep their religious beliefs to themselves. Managers need to think about the best ways to schedule effectively, create harmony and foster effective teams in global businesses. Failing to recognize different religions and respecting the needs of individual employees can lead to serious conflicts.
Globalization of cultures
Examples of the spread of the American culture around the world as a result of globalization could include hamburgers, Hollywood action movies and soft drinks, the spread of the Japanese culture could include Sushi and Ramen noodles, while the spread of the Swedish culture that promotes sustainability and minimalistic furniture could include products sold by IKEA.
3. Social Factors
Women in the workforce
There has been an increase in the number of women in employment worldwide. In the UK as a whole, 75% of women seek full-time employment. Women also work in a wider range of occupations which they are employed, but which were previously only reserved for men such as TAXI drivers or public bus drivers. The role of women in the society is also changing from just bearing and looking after children to seeking full-time employment and managing big companies. Businesses can benefit from having more diversified workforce with different skills, and more stable employees as women tend to stay longer as full-time employees.
Flexible working patterns
For many businesses, especially in the personal-service industries, mental and physical labor is still a crucial factor of production and probably the greatest business cost. While flexible working patters are linked with job insecurity and worker exploitation, these new forms of labor arrangements are preferred by some workers.
Changing patterns of employment will have impact on business activity:
- Part-time employment is more popular due to increase in single part-time jobs and some of it due to job sharing. Many part-time jobs are second jobs as better-skilled people utilize their abilities to supplement their income.
- Student employment on part-time basis is popular among both students in secondary education and higher education. Some industries such as fast-food chains, retail shops and supermarkets are substantially staffed by students and part-time workers.
- Temporary employment contracts are popular in industries with seasonal demand or uncertainties caused by increasing globalization such as fruit picking or farming. These types of labor contracts help businesses to reduce fixed costs of full-time posts and to allow for flexibility when faced with.
- Flexible working hours are more common, especially in large metropolises where the problems of being at work for 9am or of getting home at the normal end of the day at 5pm have produced a more flexible approach. This approach is very helpful for working parents.
Early retirement
An increasing number of people in many high-income countries such as the US or Canada are retiring early in their mid-thirties or mid-forties. It may lead to more leisure time for a growing number of relatively wealthy pensioners who tend to spend on their hobbies and increasing the quality of life. On the other hand, because early retirees leave the working population, the number of potential workers is becoming smaller.
People replaced by machines
In many places such accounting firms or supermarkets, human mental and physical labor is being replaced by machinery. In the secondary sector of the economy, robots are producing cars and other goods. It leads to higher output and efficiency due to increasing productivity. Machinery is also becoming popular in the services industries such as banks, restaurants or airports where robots are serving food to hungry customers or welcoming those who go to the bank to withdraw some money.
Multiculturalism – Influx of immigrants
Many countries are increasingly multicultural. Easier migration and the increased awareness and acceptance of multiculturalism have created more choice for consumers, easier knowledge transfer and increased open-mindedness.
Pressure to act ethically
The growing support for environmental protection and ethical behaviors toward all stakeholders has modified business behavior immensely. These days many large organizations are now reporting the non-financial aspects of their operations, such as waste management or clean energy consumption. However, complying with societal pressures for businesses to act more ethically and socially responsibly will result in higher expenses, therefore reducing profits for the owners.
Virtual Reality (VR) & Augmented Reality (AR)
The two technologies Virtual Reality (VR) and Augmented Reality (AR) are changing the way we use machines, creating new interactive experiences that are being added into our daily lives as we speak. The widespread of VR and AR will involve transfer of labor from old and established industries such as steelmaking to new hi-technology industries such as computer design.
Better education
These days, the modern worker is perhaps the most educated workforce ever in the human history. With access to higher-quality secondary and higher education, we can observe increasing literacy that leads to availability of more skilled and adaptable workforce.
How much social changes affect the business?
Changes in the society affect all businesses, but it is up to the particular business really whether these changes will work to its own benefit or increase the costs instead.
First, on one hand higher quality workforce will be more efficient, but on the other better workers will expect higher payment and improved working conditions.
Second, on one hand part-time workers can offer a business much greater flexibility by being available at peak times, so maintaining a suitable number of workers will be easier, but on the other, temporary staff can be difficult to integrate into one cohesive team.
Third, on one hand employing more female workers will provide the business with a wider choice of staff and improved motivation among women, but on the other there will be increased costs as women take maternity leave and temporary replacement needs to be hired for maternity cover.
The most successful firms will be those that quickly adapt to changes and manage to turn threats into a competitive advantage.
