Most people think that the world faces an overpopulation problem. But Phillip Lo

Question

Most people think that the world faces an overpopulation problem. But Phillip Longman argues otherwise in his book The Empty Cradle. He warns instead of a global baby bust. World population growth has fallen 40 percent since the late 1960s. The human population is expected to peak at nine billion by 2070, and many countries will see their population shrink long before that. Japan will have 49 retirees per 100 workers as early as 2005.

Falling birthrates mainly account for these declines. Several factors contribute to the falling birthrates. Around the world, more women are entering the workforce, and young people delay raising a family in order to attain the higher levels of education needed to compete in a global marketplace. However, a major reason for falling birthrates is the high cost of raising a middle-class child in an industrialized country---a cost estimated at more than $200,000 (exclusive of college tuition) in the United States.

As developing countries become more industrialized and urban, they too face a high cost of raising children. In Mexico, where fertility rates have declined precipitously, the population is aging five times faster than it is in the United States. By 2050, Algeria could well see its average age increase from 21.7 years to 40 years. One of the greatest declines in population growth is occurring in China, where government policy has long supported one child per family. It predicted that 60 percent of China's population could be over 60 years old by midcentury.

A nation may experience a "demographic dividend" when birthrates first fall. More working-age citizens support fewer children, freeing up money for consumption and investment. Many attribute the recent boom markets in Asia, such as China and South Korea, to this demographic dividend. However, as population growth continues to slow, the nation faces the problem of supporting older populations. For example, by 2040, Germany's public spending on pensions will exceed 15 percent of the GNP, and Italy's working population is expected to plunge to 41 percent by 2050. On a more positive note, a decline in terrorism is associated with an aging populations. Longman points to the fact that Europe's Red Guard, a terrorist organization active in the 1970s, is now defunct.

Is immigration the answer for industrialized countries? To sustain its current ratio of workers to retirees over time, the United States would need to absorb almost 11 million immigrants a year. Such an influx would require building the equivalent of another New York City every ten months. By 2050, 73 percent of the U.S. population would be immigrants or descendants of immigrants who arrived since 1995. However, before this occurs, a potential political backlash against immigrants could materialize. Supply is a problem also.

Puerto Rico---once a major source of immigration to the United States---no longer provides a net flow of immigrants to the United States despite its lower standard of living and free access to the United States. In addition, the United States would have to compete with Europe for immigrants from the developing world. In fact, to sustain its current age structure, even South Korea would have to bring over six million immigrants by 2050.

Prepare a written response to the questions following the You Decide assignment. The length of this case study should be 2–3 pages, double spaced. Spell-check your work before turning it in and remember to submit your assignment. The written assignment should address the following.

What are the implications of the global baby bust for marketers of consumer goods?

What are the implications of the global baby bust for marketers who sell to governments?

Why do you think entrepreneurship in a nation declines as its population ages? How could this impact global marketing?

How does the global baby bust affect the relative attractiveness of different national markets?

Explanation / Answer

1. Global Baby Bust is leading to declining populations and a rise in the percentage of ageing population globally. This will have both positive and negative impacts on the consumer goods marketers.

On one side, shrinking population directly leads to lower demands. This problem further is heightened by the fact that this ageing population will have less disposable income as they will be relying on their retirement funds, which will further lead to lower revenues for consumer goods marketers. Moreover as the population ages, the number of customer segments demographically will also shrink, leading to higher and tighter competition I the market for limited demand, further worsening the scenario for consumer goods marketers.

On the other hand, due to the global baby bust, the size of families is shrinking. This leads to more fragmentation of resources needed to sustain these families. Hence, the overall requirement of resources per individual will increase leading to a small rise in predicted demands for consumer goods. Also, a new segment of ageing population poses itself as a huge opportunity for consumer goods marketers to capture. Innovation and focus on the ageing population niche, to fulfill their demands and align product offerings to their ease of use and requirements will allow consumer goods marketers to better target their markets and hence generate higher revenues with less focus on multiple market segments.

2. For the marketers who sell to the governments, scenario is going to change significantly, and they will have to understand and adjust to the changing requirements of government agencies. With ageing population due to the Global Baby Bust, the healthcare costs for elderly will surpass the education costs of younger generations. So the ageing of population is going to specifically strain government budgets allocated to healthcare and pension plans to support the older citizens of the country. Moreover, with fewer percentage of population paying the taxes, the government’s collection is going to shrink significantly, which is add to the stress in government’s healthcare and pension management. In multiple European nations, pension and healthcare costs are predicted to consume around 30% of their national outputs.

Also, lifestyle changes due to urbanization and sedentary lifestyles will further add to the healthcare costs of people, especially the elderly. Hence, when the economy is shrinking due to less spending, and lower tax paying population, growing healthcare and pension costs is going to push governments to reduce their spending on every possible aspect.

Overall, capital investments will also decline as the ageing population will prefer cashing on their investments to support their daily costs of living which will further affect the government’s ability to generate collections out of public domain.

This means, the marketers selling to the governments will face tighter margins, higher competition (as the agencies will be more vigilant and demanding to ensure they get the best in least possible expenditure) and lower profits from their sales.

3. Entrepreneurship is directly linked to a person’s ability to take risks. A younger person is more likely to take risks, as the risk propensity at lower ages is higher as they don’t have much to lose. If we look at elderly population, they have a lot to lose of their risk fails to payoff. Moreover unlike the younger generation, they do not have much time to recuperate from the losses they make if their venture fails. Also, as a person ages, the responsibility on him/her increases, they have families to support, are habitual to a lifestyle and life standard and have limited exposure to things outside their daily lives. Hence, as a person ages their entrepreneurial abilities shrink, and they tend to prefer safer investment options.

The Global Baby Bust leading to ageing population is going to impact global marketing as the global level of innovation and entrepreneurship is going to decline. This means, the marketers will have to rely on standard product offerings to cater to a niche of ageing target market, and hence will face much tighter competitions and much lower margins to play with.

4. The Global Baby Bust will affect the level of entrepreneurship and innovation that companies can offer. Hence the attractiveness of national markets will depend on the average age of the customers the market offers. For countries that have a younger population, the markets will be more attractive for global players are there will be higher disposable income, higher demand, higher consumption, and higher acceptability for new innovations. Whereas, for the countries with significantly aged populations like China, the market attractiveness is going to decline significantly, as the market segments that can be catered to will decline and only the ageing population niche will remain for marketers to fight for their share into. This will increase the competition within the market while simultaneously shrinking the profit margins that the companies derive in these markets, thus overall decreasing the attractiveness of the market.   

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