Examples of socio-cultural factors are values, beliefs, and attitudes. Social class, consumer lifestyles, buying habits, sexuality, tastes, and preferences are other examples.
Another closely related factor is the demographic factor, which refers to the population and its composition based on variables such as gender, age, education, religion, ethnicity, and race. Socio-cultural factors are often used interchangeably with socio-demographic factors.
The socio-cultural environment does not only vary between groups. But it also constantly evolves and changes, presenting business opportunities and threats. Therefore, companies need to monitor these trends and consider their strategic implications.
What are socio-cultural factors?
Socio-cultural factors refer to the elements around attitudes, behaviors, and values in society. Their trends and developments are closely related to population, lifestyle, culture, tastes, customs, and traditions. These factors are created by society and often passed down from one generation to another.
If we factor in the population and its composition, we get the socio-demographic factor. The word “demography” relates to the population and its structure.
When we discuss population structure/demography, we are referring to population composition concerning aspects such as:
- Family size
The population continues to grow. Likewise, the composition also changed. The following factors influence the change:
- Birth rate
- Death rate
- Immigration rate
Why are socio-cultural factors important?
Let’s take a few reasons to explain why socio-cultural (socio-demographic) factors are important. First, companies use it as a basis for their marketing targeting.
Marketing targeting requires companies to examine who the product should be sold to. They use demographic variables to segment the market and select the target segment.
At first, the company grouped consumers based on variables such as age, gender, marital status, family size, income, or education. Then, they select a specific segment as a target.
Second, social demographic factors influence future growth potential. Population structure is a consideration for businesses when expanding overseas. For example, companies target countries with a predominant working age as their market.
These countries offer high demand potential. Besides, they also provide a productive workforce.
Third, changes in socio-cultural factors expose both opportunities and threats. These changes affect the strategy and the way businesses market their products.
Take changing preferences as an example. McDonald’s initially did not offer salads or frappes. The company focuses on the classic hamburger and fries combo.
However, customer preferences are changing, and they want healthier food. McDonald’s then responded to these changes and adapted. It offers healthy alternatives, such as salads, fruit, and oatmeal.
What are some examples of socio-cultural factors?
Socio-cultural factors influence people’s feelings, behaviors, attitudes, values, beliefs, and interactions. These factors shape social development and cultural change.
What are the variables in the socio-cultural environment? Why are they important? Let’s take a few examples.
Population numbers and growth. Population growth not only provides more labor and demand for goods and services. But, it can also lead to social problems such as crime and poverty, especially when there are insufficient job opportunities.
Age composition. In several countries, the productive age population dominates and becomes an opportunity for business because it provides a significant potential demand for goods and services. However, in other countries, such as Japan, the elderly population predominates, which presents opportunities and challenges for the economy and companies.
Household and family structure. The population can be broken down based on several criteria, such as one-person households, single-family households, single-family households with one child, single-family households with more than one child, and so on. The structure influences what they spend each month.
Work. For example, white-collar workers have specific and different expenses from blue-collar workers. They need more training in soft skills than hard skills.
Wealth and social class. People from different social classes have different consumption patterns. For example, the upper class has different values and self-images to reflect their societal position. In addition, the upper class generally spends more money on services than the lower class.
Geography. Populations may be concentrated in some geographic regions, such as villages where fertile agricultural land is available or in industrial areas. Those who live in rural areas may have less need for modern goods than those who live in urban areas.
Ethnicity. Some countries, such as Indonesia, have different tribes and races. This has implications for various aspects such as language, culture, habits, and tastes.
Culture. Individual values and habits can change individually through contact with specific cultures. You can take a look at how K-pop culture affects young people around the world. It influences consumers by encouraging them to buy K-pop or artist-inspired items.
Habit. The tendency or the way someone behaves or usually shows in dealing with a given situation. Habits influence what is bought and what is avoided.
Beliefs and values. Beliefs refer to how we feel about something or someone. Meanwhile, values are rooted in beliefs but are relatively enduring and serve as a guide for culturally appropriate behavior.
Social values influence purchases. For example, individuals may buy a product for its social image rather than its functional performance.
How the socio-cultural environment affects business
Changes in some socio-cultural factors may take years. However, others may change more rapidly and dynamically, for example, thanks to technological changes, which allow us to adopt foreign cultures more quickly.
As previously explained, these changes have implications for opportunities and threats to the company. And finally, these changes affect future success.
These opportunities and threats work through their impact on the following three aspects:
- Market demand
- Future strategy
- Human resources within the organization
Impact on competitive strategy
Social and cultural changes are challenging companies to find more effective ways to adapt. They must be flexible in developing competitive strategies.
Companies do not only think about the impact on consumer needs and wants. However, they should also examine how competitors are responding to these changes.
Thus, considering changes in consumer demand patterns and competitive landscapes allows companies to find more effective strategies. Therefore, companies do not only adapt to changes in consumer demand patterns. However, they can also respond effectively through better strategies than their competitors.
For example, consumers have increasingly gone online. Their preferences in shopping change. They are leaving traditional shopping for online shopping.
Conventional retailers may fail to adapt to these changes. They stick to the “brick and mortar” business model because they believe consumers will remain loyal to visiting their store.
Others may adapt by developing online channels. But they do it the old ways. Ultimately, they failed to compete.
Others may do it more aggressively. They transformed businesses rapidly by inviting investors to participate, adopting new technologies, and reorganizing operations and human resources. So, they are not only technologically ready. However, their organization, including corporate culture, is also flexible towards changes in operations and business models.
Impact on demand patterns
Take the change in consumer values as an example. Increasing environmental awareness drives changes in consumers’ everyday values. For instance, they are only willing to deal with companies with similar values.
This change in value ultimately changes buying behavior. Consumers are increasingly leaving conventional products.
Today, these changes have forced giant companies to transform their business. Unilever is an example. Companies ensure their products are safe for consumers and positively impact the environment.
These changes require Unilever to change its policies and business practices. For example, Unilever is only willing to purchase inputs from suppliers with shared values. In addition, the company is targeting zero emissions at their operations in 2030.
Take age as another example to explore how changes in socio-cultural factors affect spending patterns. Age differences clearly affect changes in spending patterns. What children need will be different from teenagers or parents.
If these age changes occur on a large scale, the impact will be significant for the business. For example, an aging population requires more products, such as health care. In addition, they tend to spend money more wisely than young people.
Impact on human resources within the organization
Changes in socio-cultural factors also affect human resources within the organization. For example, low education levels make it difficult for companies to find qualified workers. Thus, it requires an increase in education to improve their quality and increase their supply.
In addition, these changes can also affect changes in culture within the organization. However, attitudes, behavior, and values in the company will be very much rooted in where employees come from and their backgrounds.
For example, bowing to those who are more senior is a greeting and respect. And this culture is deeply rooted in Japanese life and is prevalent in Japanese corporate culture.