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YOUR BUSINESS VS THE POPULATION
By Yank Elliot , IAHBE Staff Editor and MBA
If your customer market were to shrink 40% within a few years, would it affect your ability to remain in business? The study of population and demographic trends is essential to a serious entrepreneur and the development of an effective business plan.
"What we are witnessing now is a clash of civilizations, not just between states but within them," said Pim Fortuyn in a 2002 interview with BBC’s Kirsty Lang. Fortuyn was the Dutch Right-Wing politician assassinated just two weeks before a major election.
In his book, "Clash Of Civilizations," Samuel Huntington voiced a similar idea on a global scale. He said problems would arise on what he called “fault lines” between major cultures. Huntington had in mind zones between competing countries; Fortuyn was describing his perception that the competing cultures were being brought to him right in his country, The Netherlands, via immigration.
We shall see that these clashes unleash forces that will determine our success or failure in business. The strategies we develop to take advantage of the opportunities (a pessimist will call them disasters) presented by these monumental population swings are the most important decisions we will make in the next few years.
Entrepreneurs will be affected in a very great way by population swings taking place throughout the world at this very minute. What follows is a simple chart displaying astonishing information you need to recognize about population trends.
Globalization may not be the panacea forecast by proponents of international trade, but the technology is in place to remove any kind of border or constraint on information or trade. Whether we like it or not, we must consider the mutual effects among each of us and everyone else on this planet we call Earth.
In his article for Business Week, “Living Longer With the Global Economy,” Chris Farrell reports that there are those who point to trampling of traditional customs and ways of doing business and eroding native culture in general as undesirable effects of worldwide trading ventures. Wireless technology and the ubiquitous Internet magnify effects—positive and negative—of global trade exponentially.
Most developing countries, in spite of no apparent economic growth, have experienced a significant improvement in life expectancy. This is a positive effect of global interaction and should be factored into your market population research if some of your customers reside in underdeveloped nations.
Population pressures can cause numerous unwanted problems. According to Joseph Chamie, Director of the United Nations Population Division, there is an ever-growing flood of illegal migrants to all countries, especially the more developed ones. The reason for this is the tremendous number of people wanting to leave areas with no opportunity and poor living conditions for better places.
The demand side (countries needing or wanting new people) of the equation for migrants is only a few million; the supply of potential migrants wanting to leave where they are is perhaps as much as two billion!
Even if better and more equitable immigration laws are passed, which is doubtful anywhere after 9/11, the illegals would still be knocking down the back doors.
This inflow of people is often unwanted by most of the host country’s population. They view the migrants as taking their jobs, destroying their culture, and increasing local crime. Businesses, however, often see immigrants as a source of much needed labor. The most affected areas where migrants want to live are Europe, Japan, and North America.
Much of the developed world faces population decline. Many European countries as well as Japan are seeing deaths exceed births. Should this continue, a decline in numbers of citizens will surely follow. At the very least, the population will become older each year.
The Europe Population chart above shows the extent of expected demographic declines in various countries in Europe. It appears that Europe will have excess room, so that is where a lot of migration pressure is likely to occur. That these countries are fairly close to areas with exploding populations increases the flow of new citizen hopefuls, legal and illegal.
Sources of most of the prospective migrants are countries in Africa and Southeast Asia. Half the world’s population explosion is occurring in India, China, Nigeria, Pakistan, Bangladesh, and Indonesia.
Even the United States appears to be entering an era of reduced birth rates, though for now no one is suggesting any population decline. The Health and Human Services Department recently reported the lowest birth rate since 1900. Part of the decline was based on women having children later, coupled with aging of the population. The population chart shows the U.S. as experiencing an increase in people of about 21% by 2050. What this really means is a greater percentage of older people, just another thing entrepreneurs must factor into their business strategy.
Even Mother Russia, having weathered many calamities and in the midst of economic recovery from the 1998 crash, faces a population loss of 30% by 2050. That’s 44 million people lost or about 1 million per year. Vodka is a big cause of this, especially among men both in good times and bad. The Russian death rate exceeds births by 17 to 10 and life expectancy for men has declined by 2.8 years since 1998 to 58.5 years. Worse, a predicted AIDS explosion within seven years could cause a much more severe population loss. This is not encouraging for the Russian economy, which has struggled for years since the October Revolution.
Drastic population changes require constant review of business strategies. Business owners must determine how to satisfy a wide range of changing needs. If the immigrant population is growing, their needs must be determined and met. Since all of the inflowing population does not come from the same place, many different cultures need to be satisfied.
The decreasing number of young people will impact every business catering to babies on through teenagers. The relatively young adult population up to about 40 will also be shrinking.
The number of older people will also decline but they will become a larger percentage of the total population. What do they need and how will you satisfy these emerging niche markets?
Perhaps a few examples will start you thinking about future market strategies:
Michel Shuyman and Bharat Sikka, writing for Time magazine, give examples of big-spending companies such as McDonalds and Pepsi that have made paradigm shifts in their marketing approaches in other countries. Imagine being in charge of marketing McDonalds in India, the second largest country in the world. It has so many potential customers no business can ignore it, but McDonalds sells beef and Hindus don’t eat cow!
What to do?
Throw away the entire traditional McDonalds menu. Offer instead the McAloo Tikki burger, a fried potato patty covered with cheese. Or offer the new McCurry Pan pastry stuffed with broccoli or chicken curry.
Pepsi also considered its Indian consumers when developing marketing plans. The popular national cricket team wears striking blue uniforms. So Pepsico India developed a matching fluorescent blue cola and achieved marvelous sales.
These ideas illustrate use of the strategy of finding what consumers want and giving it to them. You may have to change your product a little as Pepsi did, or you may have to adopt an entirely new product line as McDonalds did.
The point is you must know exactly what your customers WANT!
India is a huge developing market, and many entrepreneurs are seeing ways to do things that may be overlooked by those of us accustomed to having everything conveniently available at our fingertips.
Here’s one last example from India of someone who developed an idea into a success. An Indian entrepreneur was unable to find any quiet place to relax in bustling New Delhi. On a visit to London, he discovered the coffee shop. There were none in India; now his Barista Coffee Co. has 132 locations.
The owner spent a month in Italy learning the coffee house business from the bottom up. Then he hired some design people to create exactly the atmosphere he wanted. He is now fetching a premium price for his coffee. He has been able to capitalize on the effects of CNN and other foreign brands. The entrepreneur discovered that Indian consumers want to do what the rest of the world does, so they are willing to pay extra for his coffee.
STRATEGIES FOR SERVING MATURE POPULATIONS
Most news in the U.S. comes from urban areas, since that is where population, government, and corporate giants are headquartered.
But the U.S. is mostly rural!
Many small manufacturing plants that once thrived in small towns have gone away. There seems to be nothing for young folks to do, so they leave, too. A lot of older folks are left behind.
Now many politicians and others view this as undesirable because they say they will have to provide services for elders, but why is this different from providing services for new industries? Why not cultivate nice quiet communities for older people far from the hustle of crime-filled cities. Shopping areas, regional medical facilities, and centralized recreation would do the job.
These ideas require the entrepreneur to spend time with local small business centers like those at most Community Colleges and Merchants’ Associations. Legislators at several levels will also have to be contacted to obtain possible government funding. Somebody will need to know how to write grants as well.
Many older people won’t have the money to pay for a lot of fancy stuff, but if you think though this idea of a rural center catering to older people, you will see there are many services the government or some private foundation will fund. The smart entrepreneur will find his share of this money and help others at the same time.
This idea about catering to an aging population will play well in many other areas around the world as well. The population chart in this article shows many places where there are going to be a lot more older people pretty soon.
For more information on rural areas and an aging population see: www.prb.org.
Associated Press. “U.S. Birth Rate Falls to Record Low,” June 25, 2003.
Chamie, Joseph. “Knock, Knock... Who's there? Many Migrants!” YaleGlobal, August 5, 2003.
Farrell, Christopher. “Living Longer With the Global Economy”. Business Week Online, June 27, 2003.
Huntington, Samuel. The Clash of Civilizations. Simon & Schuster, 1998.
Lang, Kirsty. Interview “At Home With ‘Professor Pim’ ”. BBC News, May 4, 2002. http://news.bbc.co.uk/1/hi/world/ from_our_own_correspondent/1966979.stm
Schuman, Michael, and Sikka, Bharat. “Hey, Big Spenders”. Time, August 25, 2003.
Starobin, Paul. “Russia”. Business Week Online, August 4, 2003.
Tarman, Allison. “Older Americans a Growth Industry for Rural Areas?” Population Reference Bureau: www.prb.org.
Population Reference Bureau, www.prb.org
United Nations Population Division. “World Population Prospects: The 2002 Revision”. http://esa.un.org/unpp/index.asp?panel=1
Yank Elliott is a home-based entrepreneur and freelance business writer in Belhaven, North Carolina, USA. His Website is www.furriwhalesworld.com. He is currently a staff writer for IAHBE. Contact Yank at email@example.com