Demographic Forces

Demographic forces are outcomes of changes in the characteristics of a population, such as

age, gender, ethnic origin, race, sexual orientation, and social class. Like the other forces

in the general environment, demographic forces present managers with opportunities and

threats and can have major implications for organizations. Changes in the age distribution

of a population are an example of a demographic force that affects managers and organiza-

tions. Currently, most industrialized nations are experiencing the aging of their populations

as a consequence of falling birth and death rates and the aging of the baby-boom gen-

eration. As the population ages, opportunities for organizations that cater to older people

are increasing; the home-health-care and recreation industries, for example, are seeing an

upswing in demand for their services. As the baby-boom generation from the late 1950s

to the early 1960s has aged, it has created a host of opportunities and threats. During the

1980s, many baby boomers were getting married and creating an upsurge in demand for the

customer appliances normally purchased by couples marrying for the first time. Companies

such as Whirlpool Corporation and GE capitalized on the resulting upsurge in demand for

washing machines, dishwashers, dryers, and the like. In the 1990s, many of these same

baby boomers were beginning to save for retirement, creating an inflow of money into mu-

tual funds, and creating a boom in the mutual fund industry. In the next 20 years, many of

these same baby boomers will retire, creating a boom in retirement communities.

Social Forces

Social forces refer to the way in which changing social mores and values affect an industry.

Like the other macroenvironmental forces discussed here, social change creates opportuni-

ties and threats. One of the major social movements of recent decades has been the trend

toward greater health consciousness. Its impact has been immense, and companies that

recognized the opportunities early have often reaped significant gains. Philip Morris, for

example, capitalized on the growing health consciousness trend when it acquired Miller

Brewing Company, and then redefined competition in the beer industry with its introduc-
tion of low-calorie beer (Miller Lite). Similarly, PepsiCo was able to gain market share

from its rival, Coca-Cola, by being the first to introduce diet colas and fruit-based soft

drinks. At the same time, the health trend has created a threat for many industries. The

tobacco industry, for example, is in decline as a direct result of greater customer awareness

of the health implications of smoking.

Political and Legal Forces

Political and legal forces are outcomes of changes in laws and regulations, and significantly

affect managers and companies. Political processes shape a society’s laws, which constrain

the operations of organizations and managers and thus create both opportunities and
threats.30

For example, throughout much of the industrialized world, there has been a strong trend

toward deregulation of industries previously controlled by the state, and privatization of

organizations once owned by the state. In the United States, deregulation of the airline
industry

in 1979 allowed 29 new airline companies to enter the industry between 1979 and 1993.