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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?
Small Business Owner:
When I was in college, the world feared overpopulation. What a change in one generation: Now we are going to run out of people! And as we do, populations are aging across the world. This is not just a problem for developed countries. It is a major threat to the future well-being of developing countries as well. What can be done to manage this crisis?
Expert Answer
What are the implications of the global baby bust for marketers of consumer goods?
As the population growth shrinks, the population will start aging. There would be concurrent positive and negative effects of the aging population on the consumer goods. On one side, the aging population’s demand pattern will be limited to a range of products and services with will be essential from the point of view of sustaining the lives of the elderly people. Higher innovations and creativity will be required to develop products and services which can match the consumption needs. The cost of the products needs also to be coming down due to the incapability of a larger mass of the population to buy costly products in that they will be living the after retirement lives and will only spend on products that aid their life activities in a useful manner. On the other side, the population will be highly fragmented in that the family size is getting smaller and smaller. So, people will need more resources (as the shared resources) will be less and thus the consumption will increase for the consumer goods. The marketers of the consumer goods need to focus on how comfortable the people can sustain their lives in an affordable manner. Companies finding innovative products having unique value proposition and value for money of the products will be the winners. But at the same time, they will need to protect their innovation and intellectual rights from the competition because they can only make a profit out of the value of the product (and related price). Cost minimization by utilizing economies of scale may not be possible due to the decline in population growth and highly narrow target segments.
What are the implications of the global baby bust for marketers who sell to governments?
For the government expenditure, again there will be concurrent opposite effect of the global baby bust. On one side, due to the decline in population growth rate, the tax revenue for the governments will reduce and so as the expenditure. However, on the other hand, as the family size will shrink and people will need more support for their lives, some facilities’ requirement will be high. For example, transportation and infrastructure development will grow to support the commuting and residence of the fragmented families. The baby boomers who will lead their retirement lives will have more reliance on government than any other private player while buying life services and as a result, in these areas, the government expenditures may increase. The marketers need to identify these areas and try to leverage on.
Why do you think entrepreneurship in a nation declines as its population ages? How could this impact global marketing?
As far as the attributes of an entrepreneur are concerned, it can be flourished in the range of 35 to 40 years of age. Such attributes include remaining presumably unfettered, willing to take risks, having low discount rates, and being undeterred from challenging established ways of doing things. Though there are exceptions, most of the entrepreneurs start their careers in this particular age range. The Kauffman Firm Survey (KFS) of 5000 companies revealed that the mean and median age for entrepreneurship is 45 years. As a nations average age increases, the propensity to involve in an entrepreneurship venture reduces.
As entrepreneurship reduces, people are now less willing to take the risk, less innovative, and completely risk averse. This means that the number of innovative products and service will reduce. The efficiency will also reduce as the process, technology, disruptive creativities will cease to exist. This will lead to an adverse implication as far as the global marketing is concerned as the markets will not get support from the product and process innovation and will also lack leadership. The companies will find a vicious circle of never-ending competitive force with cannot be broken by means of new creativity and innovation or newer value proposition.
How does the global baby bust affect the relative attractiveness of different national markets?
Though in aggregate, the world population growth will shrink, the effect will not be simultaneously visible in all the countries. For example, while the USA, China, and Japan will have the highest rate of slow down and a more aging population, the population of India will remain younger. Though a higher degree of talent laundering is possible, it is expected the innovation and entrepreneurship at some of these developing nations will be in existence and will, in fact, be more prominent than the developed countries. As a result, there can be differences in attractiveness of products and services across the boundaries of different nations and as a result, the marketers will try to leverage on this differences and focus on getting access to a global market.
