Businesses exist in society, and as such, many social factors can affect the business environment. These social factors can range from lifestyles to social class, demographics, and more. These external factors can result in various consumer behaviors.
Strategists occasionally make inquiries, such as what the people within the ecosystem think. What is influencing their behavior towards the business? What is the trend today, and what will probably be after? Sometimes, without an inquiry, businesses cannot receive insights.
The social factors are environmental factors and a key element of PESTLE analysis.
PESTLE stands for Political, Economic, Social, Technological, Lega, and Environment.
Social pressure can force the government to increase transparency, a greener economy, gender equity or inclusion, etc., and can also influence businesses, especially in recruitment, spending, developing new products, etc.
What Are Social Factors?
The word “social” stems from the root word “society.” A business’ social environment relates to human behavior, culture, religion, and interactions. It describes how members of the public (or ecosystem) perceive assets that they deem to be of value (e.g., work, entertainment, ethics, immigration, population growth rate, social class, saving and investing, etc.).
Social Factors Affecting the Business Environment
Some social factors that can affect the business environment are:
- Lifestyles
- Technology
- Market Trends
- Environmental Sustainability and the “Green” Economy
- Education
- Social Media
- Age Distribution and Life Expectancy
- Social Class
- Religious Beliefs
- Immigration
- Demographics
- Buying Habits
- Gender Distribution
- Safety
- Health Consciousness
- Population Growth
- Family Size and Structure
- Average Disposable-Income Level
- Savings and Investment Perspective
Lifestyles
Lifestyle includes common habits in society. Lifestyles always keep changing, and this makes the trend. Understanding the needs and desires associated with these changes lets businesses see opportunities or impending threats and prepare against them.
Lifestyle and fashion can affect the business. The business can see an opportunity in a trend and capture the market by tailoring products and services in line with the trend.
Lifestyle determines how to profile customer segments and tailor goods and services accordingly.
Technology
Technological factors have enhanced work patterns such that employees now have opportunities to work from home using virtual tools such as MS Teams, Google Docs, etc. These have changed the perception of work, making businesses redefine how to engage employees.
Market Trends
The need for smartphones with touch screens was growing, and companies like Apple and Samsung out-competed the market dominance of Nokia. The market need was just beyond a device to make or receive calls. Aesthetics, convenience, and the feel also mattered.
Had Nokia realized this earlier, they may have kept market leadership.
Environmental Sustainability and the “Green” Economy
Environmental sustainability and the “green” economy are necessary factors to consider when conducting business globally. Companies that want to thrive in the future must incorporate social responsibility and environmental and social governance (ESG) to ensure that they help keep the environment clean.
A good example is Saudi Aramco, which has environmental initiatives (e.g., a wildlife sanctuary to promote biodiversity) as part of its corporate social responsibility (CSR).
This helps keep stakeholders satisfied.
Government policies and regulations play a key role in pushing businesses to adopt a green way of doing business. Government policies are legal factors that affect social factors.
Education
The educational level also affects buying behavior. The higher the level of education, the more the income generation and economic resources (as the audience is more sophisticated in technology, skills, knowledge, etc.) and the buying potential of people. With a low level of education, investors may not see such an environment as the best destination or market for high-tech products.
For instance, marketers in the banking industry target products for consumer or corporate banking. The latter is perceived to have the majority as a highly educated market segment; hence products or services could be high-tech or sophisticated. However, consumer banking for customers like peasant customers, retirees, and early students entails less sophisticated products and services.
Social Media
The increasing use of social media provides business opportunities for targeted marketing. Community interactions are promoted via platforms such as WhatsApp, Facebook, etc., where businesses share information, advertise, comment, sell, market, and receive payment for transactions.
Age Distribution and Life Expectancy
Age distribution is an important social factor, as a growing population means that a disproportionate amount of the population is currently comprised of middle-aged and young people. Certain businesses (e.g., sports, education, and entertainment) can leverage a growing population to create and capture value. Banks and other institutions can also determine how to use such demographics to their advantage.
Social Class
A social class is a group of people within a society with similar socioeconomic status. Economic factors influence social class, and they can divide the wealthy from the middle class and the working class. Members of a higher social class make more income, thus leading to more buying power. Producers consider members of higher social classes to be a target demographic for their goods and services, thus leading to more economic growth.
Religious Beliefs
Religious beliefs can also influence the market and buyers. Businesses of alcohol, pork, cigarettes, etc., have many religious restrictions in certain territories.
For example, McDonald’s in the US does not offer halal food, while they offer halal food in the Middle East. They cannot offer haram food in such territories.
Immigration
When the labor force emigrates to better economies, there will be a brain drain and a lack of competence within some fields, affecting productivity.
Where there are no jobs to cater to the immigrants of a society, locals will strive with such, and tensions may rise in such cases as seen in South Africa against Nigerian migrants.
Demographics
Demographics provide the skill level of the population, class structure, hierarchy, and power structure, culture (gender roles, social conventions, etc.), general attitudes (health, environmental consciousness, etc.), and leisure interests, which contribute enormously making a meaningful business and purchasing judgment.
Examples of Social Factors That Affect the Business Environment
Social Factors That Affected Adidas
The Black Lives Matter (BLM) movement gained significant momentum in recent years, prompting Adidas to take a stance and address racial inequality.
In 2020, following the killing of George Floyd and the protests against racial injustice, Adidas pledged to support the BLM movement and announced several initiatives to combat racism. They committed to filling 30% of new positions in the United States with Black and Latinx individuals, investing 20 million USD in Black communities over the next four years, and establishing a fund to support organizations fighting for racial equality.
Adidas also changed its internal policies and practices to promote diversity and inclusivity. They created employee-resource groups to support underrepresented communities, implemented unconscious-bias training, and increased their investments in diverse talent-development programs.
Social Factors That Affected Amazon
In recent years, there has been growing concern about environmental sustainability, labor conditions, and fair treatment of workers in the retail industry.
Amazon has faced scrutiny and criticism regarding its environmental impact and labor practices. Activist groups and consumers have raised concerns about the carbon footprint of Amazon’s operations, including packaging waste and carbon emissions from delivery vehicles. Allegations of poor working conditions and inadequate wages in Amazon’s fulfillment centers have led to public backlash and calls for improved labor standards.
Amazon has responded to criticisms about labor practices by increasing its minimum wage for all U.S. employees to 15 USD per hour, a significant raise for many workers. The company has also implemented additional safety measures and programs to support employee well-being.
Amazon has taken steps to enhance its sustainability efforts to address these social concerns and maintain its reputation.
The company has committed to reducing its carbon footprint and becoming net zero by 2040. They have invested in renewable energy projects, implemented packaging initiatives to minimize waste, and introduced electric delivery vehicles to reduce emissions.
Conclusion
Knowledge of social factors can help businesses market their products and services effectively. Such knowledge can help them craft robust and well-informed product design, packing, and pricing strategies, thus improving advertising and marketing decisions overall.