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Published: October 31, 2011

 
 

Demographics Are Not Destiny

2. Momentum countries, in which the population is dominated by people in the working-age group. These nations have higher levels of prosperity and equality than nascent countries, but the rate of marginal increase has dropped from the nascent stage. Countries at this stage need to save and invest efficiently to gain a high level of economic growth before they age.

3. Partially developed countries, in which the dependent population is dominated by people above age 65. These countries have moderately high levels of economic development, but minimal increases in prosperity and equality.

4. Advanced developed countries, in which the dependent population is dominated by people over 65. These countries are characterized by very high levels of economic development and minimal increases in prosperity and equality.

These trajectories are not set in stone, which makes the active use of demographic analysis a powerful policy tool. Governments dissatisfied with their current arc of growth can make policy decisions — such as the decision to improve the quality of the education system, increase workforce productivity, raise the retirement age, or better integrate immigrants into society — that propel their countries to higher arcs of growth.

At each stage, a country’s development agenda should build on the progress made in previous stages. For example, in the nascent stage, most countries should focus their employment and labor market strategies on creating job opportunities. As a country progresses into the momentum stage, it will need to develop a talent base to ensure that these jobs are filled. Once it reaches the partially developed stage, its focus should be on maximizing the productivity of these workers. Finally, in the advanced developed stage, the country needs to ensure that it is capitalizing on productivity gains from game-changing innovation and R&D.

Companies, too, must take demographics into account as they plot their corporate strategies. They will have to adjust their products and services for countries at varying points on the arc of growth. Changing demographic profiles make for new consumer priorities. As countries move along the arc from nascent to momentum, for instance, households begin to spend money on such previously unaffordable goods and services as furnishings, transportation, and communication. Such spending rises for a time as a percentage of consumer spending, and then levels off. After that, a greater percentage of spending shifts to housing and electric power, as well as luxuries (such as recreation and culture, restaurant meals, and hotel rooms). This spending increases continuously as countries move along the arc from nascent to advanced developed.

As employers, companies must also make policy adjustments to accommodate changing market dynamics and needs by developing a more diverse workforce. In a company’s initial stages, this may be as simple as outsourcing some basic activities to nascent and momentum countries to capitalize on their large labor pools. Over time, companies can make nascent and momentum countries true anchors in their corporate strategies — for example, creating R&D hubs that tap the insights of regional workers to develop customized products and services for those markets. Companies can take a similar approach in the developed economies by revisiting the structure of career paths to keep older workers on the payroll; doing so will have the dual benefit of keeping the knowledge and experience of these employees in the service of the company and increasing the company’s odds of success in tailoring products and services for older consumers in the “gray economy.”

Nascent Countries

Most nascent countries are in Africa and Southeast Asia, and are characterized by the United Nations as less developed. Of our 131 sample countries, 55 fall into this group. The full group of all nascent countries totals 2.5 billion people, or 39 percent of the global population. Most have experienced exponential population growth over the past century but low levels of development.

 
 
 
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Resources

  1. DeAnne Aguirre, Laird Post, and Sylvia Ann Hewlett, “The Talent Innovation Imperative,” s+b, Autumn 2009: In light of today’s changing workforce, rethink the way you manage people.
  2. David E. Bloom and David Canning, “Booms, Busts, and Echoes,” Finance and Development, vol. 43, no. 3 (September 2006): Analysis of current population trends, featuring the demographic dividend concept.
  3. Alonso Martinez and Ronald Haddock, “The Flatbread Factor, ” s+b, Spring 2007: To understand the life cycle of an emerging market, learn to decode its consumer products.
  4. C.K. Prahalad and Hrishi Bhattacharyya, “How to Be a Truly Global Company,” s+b, Autumn 2011: Three strategies — customization, competencies, and arbitrage — for a business model relevant to emerging economies.
  5. Edward Tse, The China Strategy: Harnessing the Power of the World’s Fastest-Growing Economy (Basic Books, 2010): A guide to the country’s changing markets, increased competition, shifting government priorities, and relationship with the outside world.
  6. Edward Tse, Bill Russo, and Ronald Haddock, “Competing for the Global Middle Class,” s+b, Autumn 2011: How three types of companies are jockeying to capture the loyalty of billions of new consumers.
  7. For more on this topic, see the s+b website at: www.strategy-business.com/global_perspective.