The Demographic Environment Of Business Introduction - Business Environment

As previous sections have demonstrated, human beings are a critical element of business activity both in their role as producers (e.g. workers, managers, entrepreneurs) and as consumers of outputs provided by the private, public and voluntary sectors. Put simply, business activity ultimately takes place because of and for people, a point well illustrated by the concept of the circular flow of income (CFI) and by the systems model introduced. In order to more fully understand the environment in which business organisations exist and operate, it is important to consider how broader ‘social’ influences affect business organisations by examining how they can impact upon both the demand and supply side of the economy. In this section we look at three such influences: demography, social aspects and the idea of ‘culture’ and illustrate how these can affect both the amount and types of goods and services consumed within an economy and different aspects of the production process. In the next chapter, on the resource context, we examine ‘people’ as a key factor of production and look at a number of areas associated with the concept of the ‘workforce’.

As the CFI model clearly shows, both the demand and supply side of the economy are interrelated (e.g. consider the notion of ‘derived demand’) and the same is often true for demographic, social and cultural influences. For example, in some countries, changing attitudes to female participation in the workforce (a socio-cultural factor) have helped to influence family sizes (a demographic factor) and this in turn has had implications for both the markets for goods and services and for human resources. To simplify the analysis, however, we have chosen to examine the different social influences and their impact on the economy separately but would encourage you to think of the various ways in which the different factors can be interconnected, both in themselves and with other macro environmental variables (e.g. the political environment).

The examples provided below are by no means exhaustive and you might like to think of others based on your own interest and/or experience (e.g. public administration students should consider the impact of a changing demographic and socio-cultural environment on the supply of and demand for public sector services such as education, pensions and healthcare). Moreover, the analysis can also be applied across different countries and cultures and ideally should seek to demonstrate the impact of socio-cultural and demographic change on business activity.

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