Economic Forces

The economic forces relate to the overall economy and include things such as interest rates, employment rates, and inflation. After the Great Recession in 2008, the stock market recovered, home prices climbed to an all-time high, and unemployment reached a record low. But all of that changed with the shock of the COVID-19 pandemic. There are always challenges to be faced by economic forces. Wages have not grown in step with overall economic growth, the U.S. workforce has shrunk, and wealth inequality has continued to increase. These economic conditions have all had a direct impact on businesses, regardless of size.

Social Forces

Social forces—our attitudes, values, ethics, and lifestyles—influence what, how, where, and when people purchase products or services. They are difficult to predict, define, and measure because they can be very subjective. They also change as people move through different life stages. Changing roles have brought more women into the workforce. The development of the two-income household increased family incomes, heightened demand for time-saving goods and services, changed family shopping patterns, and impacted individuals’ ability to achieve a work-life balance. In addition, a renewed emphasis on ethical behavior within organizations at all levels of the company has managers and employees alike searching for the right approach when it comes to gender inequality, sexual harassment, and other social behaviors that impact the potential for a business’ continued success. The social environment also fuels forces such as Corporate Social Responsibility (CSR), which means that more and more consumers are demanding that businesses be good corporate citizens by supporting charitable causes and contributing to local communities, adhering to ethical standards in their treatment of workers and others, and adopting environmentally responsible practices.

The Social Impact of Demographics

Social forces also include demographics. Demography is the study of people’s vital statistics, such as their age, gender, race and ethnicity, and location. Demographics help companies define the markets for their products and also determine the size and composition of the workforce. Businesses today must deal with the unique shopping preferences of different generations, which each require marketing approaches and goods and services targeted to their needs and preferences. For example, 75 million members of the millennial generation were born between 1981 and 1997. In 2017, they surpassed baby boomers as America’s largest generation.^[1] The marketing impact of millennials continues to be immense. These are technologically savvy and prosperous people with hundreds of billions of dollars to spend. Other age groups, such as Generation X (people born between 1965 and 1980) and the Baby Boomers (born between 1946 and 1964) have their own spending patterns. Many people nearing retirement have saved money and spend it on their health, their comforts, and recreation. As the population ages, businesses offer more products that appeal to middle-aged and senior markets.^[2]

In addition, minorities represent more than 38 percent of the total population, with immigration bringing millions of new residents to the country over the past several decades. By 2044, the U.S. Census Bureau projects that the United States will be a plurality nation, meaning that no one racial or ethnic group will make up a majority of the population.^[3] Companies recognize the value of hiring a diverse workforce that reflects our society. Companies also develop products and marketing campaigns that target different racial and ethnic groups.

Combine these social forces with the whirlwind of changing fads, trends, and current events and you have some idea of why the social environment can present the greatest challenge to business.

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