The demographic shifts anticipated to take place over the next several decades will have a great impact on the global market and business. The shift in demographics is associated with variation of population growth rates between different countries. Population growth rate in high-income countries is expected to slow, and populations are expected to decline in nations like Japan and Italy. On the other hand, the population growth rate in low-income countries will be high. Consequently, the GDP per capita will be higher in the emerging markets compared to the developed high-income nations. These changes will significantly influence the choice of locating labor and goods market. However, it is vital to note that the selection of countries in international business is also dependent on locations where innovative people are likely to converge to create innovations. This consideration is essential because it is crucial for employees to have face to face contact with each other. Virtual teams are not an alternative for face to face contact. Therefore, there is a need to investigate the impact of these demographic changes on the strategy of the international business.
Businesses need to select emerging countries as locations for expansion because they have great potential of the untapped market and adequate labor force. The emerging markets will have a higher GDP per capita as the population of workforce is expected to grow at fast rates leading to high production. Emerging economies have more significant growth potential driven by the growing number of young people joining the workforce annually. Low-income countries are expected to have a high number of young populations that have the synergy to produce thus reducing the cost of production. It results in increased revenue and profits for global businesses which is a critical element for business expansion. High-income countries like Japan and Italy are not an ideal selection for international business expansion because of the expected high aging population. A high aging population implies that production will be slower thus reducing per capita GDP (Chand, & Tung, 2014). Also, an increasing number of aging populations is related to pressure on welfare services and health, and businesses will have to import labor which is costly. The burden of social programs resulting from a high number of aging populations in high-income countries can lead to a high debt-to-GDP ratio thus stalling economic growth that limits opportunities for business expansion and market.
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Emerging economies present more opportunities for business growth. However, several factors have to be put into consideration when selecting the location for labor, such as the level of innovation, creativity, and technological advancements of target expansion countries. Technology assists in amplifying efficiency and reduces the number of workers required. Also, technology provides an opportunity for excellent value creation in the launching of new products and services (Gnepa & Cordeiro, 2011). The degree of convergence for innovation and creativity purposes has to be considered when selecting the market location. This is because innovation and creativity are critical in enhancing the effectiveness of production due to simplified process and reduced cost of production. An innovative population allows businesses to explore several opportunities that generate quality products and delivery of satisfactory services.
The selection of markets requires the consideration of the level of disposable income which determines the spending habits and level of spending. Currently, high-income countries have high disposable income which is expected to decrease due to high aging population hence cannot be the best selection for expansion. The disposable income is expected to grow in low-income countries because of the expected robustness in a population that has great potential for production. This will lead to high disposable income in the future that can result in high revenue and profits for a business. The rules and regulations that guide global business expansion have to be considered to reduce the cost of production and labor requirements.
The expected shifts in demographics present businesses with an opportunity for global expansion. It is essential for a business to have an understanding of the aging stages in the target country to ensure that sound decisions are made regarding market and labor location. Emerging economies are the best selections for labor because the population is expected to grow thus provide labor at a reduced cost. Also, emerging countries are a suitable market location because of the probable increase in disposable income thus high consumption power.
References
Chand, M., & Tung, R. L. (2014). The aging of the world's population and its effects on global business. Academy of Management Perspectives, 28(4), 409-429.
Gnepa, & Cordeiro. (2011). INTERNATIONAL JOURNAL OF BUSINESS STRATEGY. Retrieved from http://ashesi.org/wp-content/uploads/2016/03/Country-Branding.pdf
