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News : Global Economy Last Updated: Mar 30, 2011 - 6:43 AM

Longevity offers opportunities to business but not in the short term according to new research
By Finfacts Team
Mar 30, 2011 - 6:39 AM

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Longevity offers opportunities to business but not in the short term  according to new research from the  Economist Intelligence Unit.

A striking demographic change is taking place worldwide, as people live longer than ever before and fertility rates fall in many regions. Globally, the number of those aged 65 and over is growing at about twice the rate of the overall population. This age cohort is now the fastest growing primary segment of the world’s population, and its growth rate is outstripped only by that of an even older sub-group—those aged 80 and above.

Business is largely optimistic about the implications of this phenomenon. A large majority of executives (71%) in a recent survey view longevity as an opportunity, compared with 43% who consider it a risk. However, only a few firms see older consumers as a rapidly evolving market. Just 5% think sales to this group will increase by 25% or more in the coming five years.

The survey was conducted for a new report, A silver opportunity? Rising longevity and its implications for business, (pdf), published by the Economist Intelligence Unit and sponsored by AXA. The global survey of 583 executives was conducted in January and February 2011 and covered a wide range of sectors and company sizes.

Other key findings of the research include the following:

  • Healthcare and pharmaceuticals, leisure and tourism, and financial services are the key industries likely to benefit. They will not be alone: consumer goods, food and beverages, retail and technology companies are just some of the others also expected to find new opportunities, especially those able to help older consumers achieve more independent lifestyles.

  • For some specialised companies, longevity already offers significant growth opportunities. Companies that already sell primarily to older consumers, such as health and medical device manufacturers, see a bonanza coming. One example is Smith & Nephew, which sells replacement hip and knee joints, largely to an older population, and lists ageing populations as one of its key growth drivers.

  • Small and midsize businesses (with revenues of US$500m or less) seem more responsive than larger ones (with revenues of US$1bn or more) in terms of creating new products. Bigger firms with greater resources are better able to market to specific niches and train their sales teams appropriately. Many, however, still consider longevity an issue for the distant future, rather than something pressing for today.

  • Firms face several looming demographic risks to their workforces, prompting nearly half to consider the potential impact of longevity on their staffing. Companies will not only be hit by rising numbers of retiring older workers—with an associated loss of skills—but also a decline in the availability of younger workers, and a decline in average productivity as the median age of workers rises.

  • Increased longevity is often considered in terms of its impact on firms’ pension and healthcare obligations; this is the biggest worry on executives’ minds. North American firms are most concerned about rising financial liabilities, such as for healthcare, followed by the loss of skills as their baby boomer generation prepares to retire. European firms also worry most about liabilities, largely for pensions, but in contrast with their North America peers are then most concerned about insufficiently understanding the needs of older consumers.

  • Outdated human resources policies are the weakest link for many firms. Executives highlight some striking weaknesses within firms. Nearly one in three (29%) say their firms are not at all effective at targeted HR strategies to older workers. One in four (26%) say the same about their ability to transfer knowledge from retiring staff to younger staff. Only 18% say that their firms have a policy in place to deal with the rising number of older workers.

  • Executives are overwhelmingly interested in working as long as they can, providing their work is flexible. Some eight out of ten (79%) executives polled are willing to do so, suggesting a striking appetite for appropriate policies. However, they are cautious about enforcing this: only 43% advocate a higher official retirement age. And the need to earn money is not the main reason for this, despite the recent recession: only one-third of those polled (all of whom are managers) worry about supporting their retirement financially.

A silver opportunity? Rising longevity and its implications for business is an Economist Intelligence Unit report, sponsored by AXA and it looks at the risks and opportunities faced by businesses as they start to grapple with changing demographics, both in terms of their internal workforces as well as the changing nature of consumer demand. To support the study, the Economist Intelligence Unit conducted a global survey of 583 executives during January and February 2011. The survey was global: 36% of respondents were based in Europe, 33% in Asia-Pacific, and 18% in North America, with 13% from the rest of the world.

It covered a wide range of sectors, including financial services, IT and technology, healthcare, pharmaceuticals, and professional services, among others. All company sizes were represented: 56% had annual revenues of less than US$500m, while 35% had revenues of at least US$1bn. All respondents hailed from management functions, with just over half (55%) representing the C-suite or board. The majority (62%) were aged between 35 and 54, but 24% were aged 55 and over, with 14% under 34. To complement the survey findings, the Economist Intelligence Unit also conducted wide-ranging desk research and in-depth interviews with a range of experts and executives.

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