7.6 - Social and technological environment

• Demographic changes


  Changes in the structure of the UK population over time in terms of things like age, sex and race changes
• Demographic changes


  Create both opportunities and threats
• Ageing UK population


  • Threat - the proportion of people available to work (those aged 16-65) is falling. If businesses can't find enough workers to fill all their vacancies, it'll make growth difficult.
  • Opportunity - the market size for firms such as private healthcare providers will increase. Retired people often travel a lot—so it's good news for holiday companies too.
• Demographic changes


  Influence a business's decision-making
• Demographic changes influencing business decisions

  • More working parents will boost the workforce, but businesses might need to provide flexible contracts
  • An increase in single-occupancy households increases the demand for smaller houses and for food packaged in smaller amounts
  • An increase in senior citizens might prompt a business (e.g. a cinema or a hairdressers) to offer special rates during weekdays, when other people are working
• Changes in consumer lifestyle and buying behaviour

  Lead to firms needing to alter their strategic plans
• Changes in consumer lifestyle and buying behaviour


  • Consumers now use the internet to research products before buying them. Companies often send products to relevant bloggers to review online. This gives them cheap, long-lasting promotion
  • An increase in online social networking means this is an important means of promotion
  • Customers increasingly buy things online but are too busy to wait in for deliveries. So some companies use delivery services which drop off parcels at convenient locations (e.g. petrol stations) from which the customer collects them
  • Increased use of tablets and smartphones means not everyone wants physical products. E.g. the Camping and Caravanning Club offers a cheaper 'online membership'. Members get access to the magazines online, rather than receiving printed copies. This saves the business and the customer money and reduces environmental impact
• Urbanisation


  An increase in the proportion of the population living in cities
• Urbanisation


  Provides opportunities for companies
• Opportunities from urbanisation


  • New markets with concentrated demand-businesses might focus on their distribution networks in these areas at the expense of their wider distribution network
  • Infrastructure, housing and communication technology will be needed, so there will be lots of opportunities for new and existing businesses to expand into these industries
  • People have access to a higher level of education, so the workforce becomes more skilled-businesses might move certain departments (e.g. finance) to these areas to take advantage of the labour supply
• Migration


  The movement of the population from one area or country to another
• Migration


  Affects businesses
• Effects of migration on businesses

  • When there is a shortage of labour, businesses struggle to grow. Migrants can help some businesses overcome labour shortages and allow them to expand into new and current markets
  • Migrants can create demand for certain products which creates new markets for businesses to move into, e.g. a mobile phone operator might offer cheaper international calls to expand its market share
  • If too many skilled people emigrate from a country, it can cause a 'brain drain'. Businesses in that country will struggle to get skilled workers which, in the worst case, will force them to shut down
• Environmental issues


  • Affect business strategy
• Customers, investors and the government

  Can put pressure on businesses to be more environmentally friendly
• Businesses need to respond to environmental pressure


  Or they risk damaging their brand loyalty
• Environmental audits


  1. Compare the firm's activities with those required by legislation and with the company's objectives

  2. The outcomes can be used in strategic planning
• Environmental consultants


  Check that businesses have complied with legislation
• Hiring environmental consultants


  • Pleases customers as the business is seen to be conscious of its environmental impact
  • Pleases investors as the business is protected from hefty fines
• Government schemes like ESOS

  1. Force businesses to analyse their energy usage and emissions

  2. This forces businesses to consider the environmental impact when they are making strategic decisions
• Corporate Social Responsibility (CSR)


  The idea that a company should go above and beyond what is required by law to help society, its workforce's quality of life and the environment
• The public are more aware of what companies do now

  Companies face pressure to act responsibly
• Consumers are likely to boycott goods

  If companies don't act responsibly, or buy from a competitor who they think is more ethical
• CSR has become part of business culture - how people expect things to be done in business
• CSR initiatives


  • Barclays' partnership with Teach First
  • Marks and Spencer ensuring suppliers' employees have good working conditions
  • McDonald's Planet Champion Programme and litter picking
• CSR should be integrated into a company's operations and strategy - ignoring it can lead to long-term damage to profits and reputation
• Businesses implementing CSR


  • Can gain a competitive advantage through improved brand loyalty, attracting talented applicants, and improved employee morale
• CSR has costs


  Which shareholders may see as a misuse of funds, leading to them withdrawing investment or pressuring firms to stop CSR activities
• Costs of CSR


  May be passed on to customers, leading to sales falling if the market is price-sensitive
• The expectation of CSR puts small businesses at a disadvantage as they are less likely to have funds for CSR projects or to employ someone to organise CSR activities
• Stakeholders and Shareholders


  Don't always agree on CSR
• Traditionally, the decision-making process


  Put the needs of shareholders first, which meant that the business was concerned with its profits above all else
• Now it's considered normal for businesses


  To balance the other stakeholders' needs with those of the shareholders during the decision-making process
• Corporate social responsibility


  Makes the general public a stakeholder and expects the business to actively improve things for everyone
• Making a profit is still key- the survival of the business is in the interests of stakeholders such as employees, suppliers and customers
• In reality though, it can be hard to take into account the needs of all stakeholders
• If a company has promised to invest in a local school for the next 5 years but its profits fall sharply, it has to decide which is more important

  • Keeping shareholders happy
  • Behaving ethically
• Some large companies, such as Starbucks, have been criticised in the media for avoiding paying corporate tax in the UK


  • They haven't done anything illegal - they've just exploited loopholes to increase profits
  • Public protests have led to them volunteering to pay a meaningful amount of tax
• Carroll's Pyramid of CSR


  Shows what Society Expects from a business
• Carroll's four types of CSR responsibilities

  • Philanthropic responsibilities - to be a good corporate citizen and to contribute resources to improve lives
  • Ethical responsibilities - to do the right thing and avoid harm
  • Legal responsibilities - to obey laws and regulations
  • Economic responsibilities - to be profitable, so the business survives (the foundation on which the other responsibilities rest)