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Demography and Investment Planning

In: Social Issues

Submitted By mathias12
Words 2200
Pages 9
NAME : MWEEMBA MATHIAS

Course : demography

COURSE CODE : DEM 1110

QUESTION:
Using relevant examples drawn from Zambia, discuss the relevance of demography in investment planning both domestically and internationally.

The world we live in today has become a business oriented with people investing almost any given sector that is open for investment. However, every of these investors don’t just enter into a sector without planning because all the investing that they carry out is a rational decision, with an aim of reaping serious profits, as argued by Von Neumann, and Morgenstern (1944), who argue that People rationally choose between alternatives, they act rationally while making their investment decisions (Von Neumann, and Morgenstern, 1944). Profit maximization in any investment is highly dependent on the market structure, especially on the consumers and to a greater extent the labor force, which in this case are the people. As stated above, all investors plan their investments as they seek to maximize profits, this planning is in the business sector referred to as investment planning, which by definition according to the Economy Watch, (2015) is focus on identifying effective investment strategies according to an investor’s risk appetite and financial goals. Through investment planning, one can identify the most appropriate portfolio mix. (Economy Watch, 2015)
As Investors plan, they plan for a lot of issues that will affect their investments such as labour, education levels and other factors related to the people. These factors are what are known as demographic factors. One might at this stage ask what demographic factors are. To answer this question, is imperative that we firstly define what demography is and then demographic factors.
This essay will therefore define demography as the statistical and mathematical study of the size, compositions and spatial composition of human populations and the changes over time in these aspects through the operation of the five processes of fertility, mortality, migration, marriage and social mobility (Bogue, D. 1969:1). Demographic factors will be defined as the Socioeconomic characteristics of a population expressed statistically, such as age, sex, education level, income level, marital status, occupation, religion, birth rate, death rate, average size of a family, average age at marriage. (Business dictionary, 2015).
Having defined demography and investment planning, it is now safe to state the main aim of the essay. The essay will therefore seek to provide possible solutions to the question “using relevant examples from Zambia, discuss the relevance of demography in investment planning both domestically and internationally?” The approach taken will be linking certain demographic variables to certain investment issues that investors look at when they are planning to investment in various economic fields.
Key to every investor investing or planning to invest in any given field is profit Maximization. This desire to maximize profits makes investors look at the size of the market in terms people through the various demographic factors. Our focus in the essay will look at the demographic factors of Population density, Age composition, Sex composition, Education level, Income level, Marital status, Occupation, Religion, Birth rate and Death rate. For investment planning, we shall mainly focus on planning for Labour, planning for what product to produce, planning for product Marketing and the economic potential of market area. This process is called Market segmentation, which is to divide the market according to various demographic factors.
Population density is the population per unit of land area; for example, persons per square mile or persons per square kilometer of arable land. This is important to investment planning in so many ways. The first sector under investment planning that we will link population density is when an investor is planning for labour. Usually areas that are highly populated such as urban areas have readily available labour, and in most cases cheap labour, for example, Kanyama compound in Lusaka provides readily available labour for the various manufacturing industries in the Chinika Industrial area that require lots of manpower.
Population density is also important when planning for marketing of the investors intended product in the sense that highly populated areas require less advertising as people are compacted hence they easily share information than compared to less dense areas such as the rural areas. Further, when planning to invest, population density is cardinal to knowing what products are very much on demand in a given area by assessing the most selling products in that particular market. This prevents future losses as the investor will know what products to invest in as regards to a particular market. This can be seen from the fresh produce sector especially those in the agricultural sector who plant vegetables, these tend to mostly sell their produce in areas that are highly populated, where people cannot even grow vegetables for themselves such as in Lusaka city, where vegetable producers are from the outskirts of Lusaka.
Age composition of a population is simply put the composition of the population as determined by the various age groups. This is important to important to investment planning firstly when planning for the product to produce, the majority age group in that population will obviously comprise the larger part of the market for examples, a population that is mainly comprised of toddlers will make the best market for toys, while a population mainly composed of teenagers who are still in their schooling years will make the best market for encyclopedias, scientific calculators, learning to read tools and financial institution providing loans to students like Bayport financial services behind UNZA main Library.
Age composition is also important when planning for labour investment as observed by Trewartha G, (1969), he argues that “age composition is one important determinant of the proportion of the population which is economically active.” (Trewartha, G. 1969:168). It is worth stating that many countries today have various labour laws where there is a minimum age in which someone can be employed. Depending on the age composition of a population, an investor can plan for labour in the sense that he can decide whether to import much of his labour or not due to age composition, although there are less changes of one being in this situation as the world today is facing serious levels of unemployment, with Zambia’s levels standing at %.
As regards product marketing plans, the age composition has a serious importance in that the adverts for example should be tailored to catch the attention of the majority age group. Further, developments of social media such as Facebook and twitter and recent marketing trends such as social media advertising have made the age factor become so critical to planning for investment because social media is in most cases dominated by the young. So an investor wanting to draw the attention of the majority young people would do so very easily using social media, the age factor also helps to plan for product marketing in that the content and format of the advert will depend largely on the majority age group as observed by Michael A. Stelzner (2014) who argues that there's a direct relationship between a markets leading age and the kind of advertising done (Social Media Marketing Industry Report 2014: 16).
Moving to sex composition, which is in simple terms is the composition of the population in terms of sex. The demographic variable of sex composition is relevant to investment planning when planning for the market product in that the dominant sex will command a larger share of the market products yet at the same time helping the investor plan for the right product that will be gender specific, for example, scarves for women, neck ties for men.
The world has today seen a great campaign for gender equality like never before. The cries so far have been that men and women be given equal opportunity when employers are employing. Regardless of this campaign, the issue of gender preference by employers still lives on as argued by Mor Barak et al. (1998), and Konrad & Hartmann (2002) who argue that a large number of studies comparing the behavior and attitudes of males and females report that gender differences do exist when employing and planning for investment (Mor Barak et al. 1998, Konrad & Hartmann 2002). This is so because certain jobs favor mostly a single sex; let us consider the case of a drilling company, where the work is mostly physical, men are highly favored than women.
Certain investment sectors such as the ICT sector thrives on a market that is educated for both customers and labour force. Educational attainment levels of the population an investor intends to settle in become another critical issue although some sector like the agriculture do not thrive much on education levels. However, education is relevant to investment planning when it comes to planning for market product, for examples, products such as laptop computers are mostly bought by educated people. Education can also be said to be of relevance to investment planning when it comes to marketing of the product. In Zambia for example, it would be easy to advertise a product in English because all people that have attained an education understand Basic English unlike it would be to advertise a product in local languages. One advert can reach out to the masses due to education
It can be seen from above after linking some demographic variables to certain aspects of investment planning that the knowledge of demography is important to investment planning. For an investor planning to invest, demographics are really important if they wish to maximize on profit. Further, the method of obtaining market statistics is mostly thought to be for economics but in actual sense the demographer is the best source of information as they actually go in the fields to collect Personal statistics that include such information as income level, gender, educational level, location, ethnicity, race, and family size, all which are cardinal for investment planning.
For example, the field of insurance is all about managing risks. This is one area that can be used as perfect example to illustrate the relevance of demography to investment planning, let us consider the case of life insurance, the insurance company attempts to manage mortality (death) rates among its clients. The insurance company has different premium plans for various age groups and even based on sex. A person called an actuary constantly crunches demographic data to estimate the life of a person. This is why characteristics such as age, sex, smoker and etc. all affect the premium that a policy holder must pay. The greater the chance that a person will have a shorter life span than the average, the higher the premium that person will have to pay, and depending on one’s income levels, the company formulates the different payment plans to allow for people who are not high earners to also enjoy the services of insurance. The marketing department of a business might use demographic variables as an important input when formulating target customer profiles.
In conclusion, demography is very relevant to investment planning for the fact that any given investment requires the presence of people to participate in that particular investment activity. Like it has been stated in the introduction, all investment decisions are rational, even so, it should be stated that even all consumption decisions are rational, making it important for the investor to understand the Socioeconomic characteristics of a population, that will constitute a market for his investment. The source of the information needed to study a population is from demography from demographic factors as compiled by demographers and expressed statistically according to categories, such as age, sex, education level, income level, marital status, occupation, religion, birth rate, death rate, average size of a family, average age at marriage. This information is usually contained from a country’s census report as census is a collection of the demographic factors associated with every member of a population. As shown throughout the discussion, such information is needed for the process of market fragmentation, which divides consumers into groups based on their knowledge, attitudes, uses, or responses to a product. Therefore, investment planning relies heavily on demography through the various demographic factors, hence the relevance of demography to investment planning.

Bibliography.
Bogue, D. (1969). Principles of Demography. Wiley: New York.
Business Dictionary (2015). Demographic factors. [Online]. Available from http://www.businessdictionary.com/definition/demographic-factors.html#ixzz3StlSL5SD. [Accessed: 23 February 27, 2015, at 19:24 Hrs.].
Churchill, Gilbert A., Jr., and Peter, Paul J. (1998). Marketing: Creating value for customers (2nd ed.). New York: Irwin McGraw-Hill.
Economy watch (2015). Investment planning. [Online]. Available from http://www.economywatch.com/investment/investment-planning.html. [Accessed on 23 February 2015, at 10:45 Hrs.]
Konrad, A. M., & Hartmann, L. (2002). Gender differences in attitudes toward affirmative action programs in Australia: Effects of beliefs, interests, and attitudes towards women. Gender Roles, 45(5-6), 415-432.
Mor Barak, M. E., Cherin, D. A., & Berkman, S. (1998). Organizational and personal dimensions in diversity climate. Journal of Applied Behavioral Science, 34(1), 82-104
Stelzner A M. (2014). How Marketers Are Using Social Media to Grow Their Businesses. Washington D.C: Social Media Examiner
Trewartha G. T. (1969). A Geography of Population: World Patterns. New York: John Wiley and Sons Inc.

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