Technological, lifestyle and social change can have a huge impact on businesses. It can lead to consumers demanding different products and services. It can also influence the way businesses operate and produce goods. Let's explore this topic in more detail.
Environment and Lifestyle
First, it is important to consider how lifestyle and environment may impact business decision-making.
Demographic change
Demographic change is an important consideration for business.
Demographic change implies a change in the population, such as the size and structure of the population.
Not only do demographics play a huge role in marketing (segmentation, targeting) they are also significant for the strategic positioning of a business. The population is essentially one of the most important considerations for businesses as they make up the organization's customer base and workforce. Demographic changes can impact demand for a business's products.
An ageing population will most likely demand products and services that are associated with a later life stage, whereas a young population will demand products and services associated with an earlier life stage.
An ageing population may also mean that there will be increased demand for products and services associated with old age, in addition to a smaller workforce (if a large part of the population is retired).
On the other hand, a growing population could mean that there will be an increase in demand for all types of goods and services - as there is most likely going to be a big difference in the types of goods younger and older people demand.
Urbanisation and Migration
Migration is the movement of people from one place to another.
Usually, this means the movement of people from one country to another with the intention of settling, or temporarily settling, in the new country. An increase in migration to a country can help that country's economy grow, as the workforce increases - businesses have an increased supply of labour (more workers).
On the other hand, this could also put pressure on government spending, as the demand for public services in the country also increases.
Urbanisation is the movement of people from the countryside to cities (within the country).
The degree of urbanisation is a measure of the percentage of the population living in urban areas (cities or towns).
An increase in urbanization could mean that there will be an increase in middle-class consumers who are willing and able to spend more. On the other hand, urbanization can also lead to densely populated cities and higher housing or office prices.
Lifestyle and Buying Behavior
Consumer lifestyles and buying behaviours also play a huge role in the external environment of the business.
Consumer lifestyles
There have been several changes in consumer lifestyles including:
Health and well-being: consumers find it increasingly important to adopt and maintain a healthy lifestyle. This will most likely lead to increasing demands for healthy food, fitness, and exercise-related activities.
Social concerns: consumers are becoming more socially and environmentally conscious. They are more likely to take into consideration the social impact of the products and services they purchase. This means that they are more likely to purchase products that are less harmful to the environment and society, such as makeup that has not been tested on animals or electric cars.
Access to information: in the digital age consumers have almost unlimited access to information. This also results in consumers being bombarded with information on products and services, advertisements, product placement, etc. It is becoming increasingly difficult to assess what information is trustworthy.
Digitalization: a lot of consumers use digital media daily which means they are likely to make more online purchases.
Convenience products: consumers are also more likely to have busy and fast-paced lives, which results in an increased demand for 'on-demand products' that are available to a consumer almost instantly after purchasing goods and services online.
Buying Behavior
Consumers' buying behaviour has also been changing in a couple of ways:
Access to information: as a result of digital technology, consumers are better informed and it has also become much easier for them to access information. They can easily read customer reviews, recommendations and compare prices.
Distribution: consumers have control over where, when and how they buy their products. Consumers can purchase products in person or online.
Effects of Technology on the Business Environment
Technology has also had a huge impact on the business environment.
Technology and promoting products
Technological advancements have made it easier for businesses to sell and advertise their products.
Digitalisation refers to the way in which social life (including business) has become restructured based on digital communication.
Digitalisation has also made it significantly easier to reach and communicate with customers. Some businesses rely only on technology to distribute and promote their products. As a result of digitalization, firms can save money on advertising and distribution, as they no longer need to use intermediaries - who take a percentage of revenues - to promote and distribute their products.
Technology and business operations
Technology has also transformed the way businesses are operating. Technology has brought about numerous opportunities for growth and development. It has allowed businesses to automate certain processes and reach a much larger customer base.
However, the acceptance of technological innovation varies between industries. Some businesses are happy to embrace new technology, whereas others are more hesitant and determined to stick to their old ways. The rate of accepting technology also differs within companies. Some employees are eager to learn and new technology represents an opportunity for them, whereas others are reluctant to learn new skills. However, innovative technologies present a huge opportunity for most people and companies, resulting in benefits like increased motivation and higher salaries.
Advantages and disadvantages of technological change
Some of the advantages of technological change are the following:
Lower costs: due to more efficient or automated processes.
Higher profit margins: due to lower costs of production.
New skills: as a result of new and changing technology.
Easier expansion: easier to diversify and expand into new markets, as more information is available.
Higher reach: businesses can reach customers they previously couldn't through digitalisation.
Some of the disadvantages of technological change include:
Higher R&D costs: it is expensive to constantly innovate and embrace new technologies.
Additional costs: it can sometimes be costly to implement new operational processes.
Mergers and takeovers: smaller firms are less likely to have sufficient funds for R&D and keeping up with larger competitors.
Unemployment: if workers are unable to learn new skills or if their jobs become obsolete.
Lifestyle and Technological Environment - Key takeaways
Social change can have a huge impact on businesses. It can lead to consumers demanding different products and services.
Social change can also influence the way businesses operate and produce goods.
Demographic changes, migration, and urbanisation are common examples of current social change.
Consumers' lifestyles and buying behaviours are changing.
Consumers are more socially conscious and have access to almost unlimited information, as a result of digitalisation.
It is also easier for consumers to make decisions about purchases as they can purchase products whenever and however they wish (online, in-person).
Technology has made it easier for companies to promote their products and make their operations more efficient.
Technological changes can increase profit margins and lower costs of production, however, they can also increase R&D costs and the risk of takeovers.
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