Understanding Demography

The world is changing fast, and one of the greatest changes in human history has taken place without many of us even noticing—the changes that result from demographic developments.
Understanding these changes can provide a secure foundation as
well as signifi cant business opportunities.

The idea
The idea is simple: by understanding demography, future opportunities and threats will be revealed. One global business that understands the signifi cance of demography is HSBC, “the world’s local bank.” Understanding the composition of populations, how they will change, and what each group in society will want is vital for long-term success if you are running a wide range of businesses— and especially fi nancial services. Consider this HSBC email sent from its website (www.yourpointofview.com) in 2007:
Tell us what you think. Do you agree with 57% of Indonesians who see retirement as a time for rest? Or, like 58% of Canadians, do you see it as the start of a new career? With more of us living longer these days, it’s an issue that needs serious consideration. Especially given that, by 2050, 22% of the world’s population may be living in retirement. HSBC is developing a dynamic business in life, pensions, and investments, but that is just the start. Demography is behind many changes within HSBC. For example, HSBC has responded
to migration from Eastern Europe to Britain by recognizing that there is a demand among migrant workers for bank accounts and loans, even among people without a credit history in Britain, and immigrants also want to send remittances back to their families. This was not an isolated incident but a major new market segment, and HSBC developed and marketed (in several languages) a product that did just that. The twentieth century saw unparalleled demographic change.
Global population nearly quadrupled (from 1.6 billion in 1900 to 6.1 billion in 2000); there was the highest population growth rate (2 percent in 1969) and the shortest time for the global population to double, which it did between the administrations of American Presidents Kennedy and Clinton. This was combined
with unprecedented declines in mortality and fertility, signifi cant international migration, and increased urbanization—resulting in the emergence of mega-cities.
Clearly, demographic developments are changing the world around us. The fastest-growing populations are in India, China, Pakistan, Nigeria, Indonesia, and Bangladesh. For example:
• Japan expects its population to decline by 50 percent by 2100, the result of a low birth rate and a very low level of immigration.
• Within ten years, Italy will have more than 1 million people aged over 90. Within Europe, Italy’s population strength is in fast decline, as are those of Russia and Germany.
• America is the only major developed country with a population that is increasing, largely due to migration. By 2050, America will have a population of 400 million. Despite this, population growth is concentrated almost entirely in “developing” regions.
• Demographic developments are changing family composition in the developing world, with the result that the infl uence of women is increasing.
• Populations will be older than ever before, with profound implications for welfare policies, pensions, taxation, employment, and spending throughout the affected economies of the developed world.
• Urbanization is widespread and rising. In 2006, for the fi rst time in human history, global urban population exceeded global rural population. This movement to cities, like much demographic change, will profoundly alter behavior and expectations.

In practice
Understand how demography might be affecting your key markets. What are the trends? Where are the opportunities and threats?  Who are your customers now and who will they be in the future?