Demography Matters in Business, Today More than Ever Before by Alexandra Tragaki

Demography is defined as the study of human populations. It examines the size, the composition and territorial distribution of population, its changes therein as well as the components of such changes. Demographic analysis comprises a set of methods and tools to measure population dynamics. It is applied in a wide variety of contexts: since only recently, business decision making has been one of them. As business decision becomes more information driven, its intersection with demography gets steadily wider. Variables like age, sex, ethnicity, income or occupation may provide valuable input about business-related behavior of individuals. Moreover, at macroeconomic level, demographic variables influence, if not condition, the business environment.  

Demographic input is of particular importance in different business fields: these include, but are not limited to, financial planning, marketing, sales forecasts, logistics, and human resources. Financial planning requires information about how demographics affect cash flows or return on investment. Marketing strategy and plan, product design and promotion are developed only after the demographic profiles of customer-base segments are drawn. In particular markets, sales forecasts may gain in accuracy if they rely on projected population shifts. Logistics (transportation and distribution) are usually determined by the spatial pattern and specific attributes of target groups. Techniques in recruiting and management of the personnel may need to adjust so as to respond to demographic changes of the workforce, if competitiveness is to be secured.

Demography provides a powerful tool to explain business phenomena. Furthermore, it provides the link between population process and future problems or eventual opportunities. Nowadays, its role becomes even more important. Major demographic shifts are currently taking place all over the world. The onset of the 21st century signalized a brand new era where humanity looks completely different to what it used to. Human population is larger than ever; older than ever; on constant move; and, for the first time in history, mostly urban. 

Just a century ago, global population did not exceed 1.7 billion people; in October 2011, the world welcomed the 7 billionth person on earth, a girl born in Manila, Philippines (neither the sex of the baby nor its place of birth lack of significance). 
People all over the world live longer and have smaller families. As a result, humanity is ageing. In Europe, half of the population is above 38 years of age, while the above 65 represent something less than 20% of total population. Population pyramids do not look like pyramids anymore; they are mostly like spinning-tops. Despite, common wisdom, this trend is not reserved to most developed areas. Well, in the contrary, the faster ageing country is China. 
The demographic imbalance between fast growing developing countries and aged developed areas has fueled massive migratory flows, and it will continue to do so. Changing ethnic composition is a new challenge all developed countries have to deal with.
Since late 2008, when world reached one more momentous milestone, more than half of human population lives in urban areas.
Population ageing, shifts between urban and rural population and changing ethnic composition are expected to change everything: from economic and financial prospects to social and cultural environment. Demographic trends will condition the economic and social milieu where businesses develop and shape future consumers’ behavior. Against this rapidly changing demographic landscape, firms would rather not fail to read the demographic tell. 

Alexandra Tragaki has worked as a specialist on Social Security issues at the Foundation for the Economic and Industrial Research (IOBE), and has been a member of the Research and Economic Analysis Unit at the Council of Economic Advisers. She has participated, as permanent member, in the Greek delegation to the Economic Policy Committee of the European Union. Currently, she is Assistant Professor in Demography Economics at Harokopion University in Athens.
 
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