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03/13/2012

Research Proposal - Economic Implications of Consumption Behavior of China’s Older Population


Economic Implications of Consumption Behavior of China’s Older Population

 

Introduction

In a press release by the US Bureau of Census, it recounted that the United States ranks second in terms of the number of people 80 years and older. Not surprisingly, China ranks the first in the size of its older adult population. The challenge of global aging transcends its impact on government budgets ion China. It promises to restructure the economy, reshape the family, redefine politics and even rearrange the geopolitical order of the twenty-first century. As labor forces shrink, economic growth may stagnate or even turn negative in many countries--not just during cyclical downturns, but decade in and decade out.

Global aging poses fundamental economic challenges that reach far beyond public spending. When people retire, they begin to consume more of their income and save less for the future. As a larger share of the population enters its harvest years over the next three decades, the OECD projects that the private saving rate in the developed world could fall by more than half (OECD, 1996). Some economists say that this isn't a problem since societies with stationary or shrinking workforces won't need to invest as much to maintain the same rate of growth in output per worker. Others disagree. They argue that the pace of technological progress may be linked to the volume of investment a society undertakes. An optimistic outlook for productivity, moreover, assumes that growing fiscal deficits won't crowd out national savings and productive investment entirely.

Most studies of older consumers have focused on their economic status as a determinant of market place behavior with little emphasis on their intrinsic or interpersonal reasons for shopping or the effect of social activity on shopping behavior. In both the 50-to-64-year-old and the 65+ groups, consumers are often long-time members of the community with many social and business relationships that influence their patronage behavior (Miller and Kean 1995). Granovetter (1990) considered that economic-based activity was "embedded in" the networks of personal relationships and argued that each directly affected the other.

A study by Paulin (2000) showed that older consumers, who are expected to account for an increasing share of expenditures, do not differ significantly from younger consumers in their spending patterns; the underlying tastes and preferences of subgroups of older consumers did not change significantly.

Although previous studies offer some insight by recognizing and examining the importance of expenditures by older consumers, many of those studies concentrate on spending patterns at just one or two points in time. Furthermore, the consumption behavior of the older population in China shall be illustrated in this proposed study. This proposed study shall also include elements from earlier studies, but takes the analysis further: first, expenditure trends are analyzed for different age groups within the older population; second, experiments are designed to test whether tastes and preferences differ over time for older consumers in China.

Conceptual Framework

This proposed study shall utilize the consumer alienation theory on the older consumers in examining the economic effects of consumer behavior in China. The concept of consumer or marketplace alienation recognizes the emergence of a psychological attitude as the result of four underlying constructs (rather than discrete measurable subscales) - marketplace powerlessness, normlessness, isolation, and self-estrangement (Allison, 1978).

Allison (1978) offers the following descriptions of the underlying constructs of consumer alienation. Consumer powerlessness may be defined as feelings held by consumers that they are unable to help determine market practices, and are unable to control the market environment or events within the marketplace. Consumers may have a sense of powerlessness if they feel they cannot influence business behavior to be more consistent with a buyer's needs. Lambert (1981) suggests that an alienated consumer believes he has no control over any of the aspects he faces in dealing with the marketplace.

Research Aims

            This study seeks to achieve the following objectives:

1.    to illustrate the consumption behavior of China’s older population (65 years old and above)

2.    to assess the relationship between consumption behavior and age

3.    to determine the relationship between China’s older population and consumption behavior

4.    to evaluate the effects of China’s older population consumption behavior

5.    to evaluate the economic implications of the consumption behavior of China’s older population

Statement of the Problem

             This proposed study intends to investigate the consumption behavior of China’s older population (65 years old and above) and its economic effects on the businesses that specifically caters to their needs. Moreover, since the older population in China is huge, this proposed study posits that they affects the economic activities in China.

Hypothesis

            This proposed study shall test the following null hypothesis:

  1. There is a significant relationship between consumption behavior and China’s older population
  2. There are economic implications of the consumption behavior of China’s older population

Significance of the Study

 This study seeks to contribute in the literature in terms of the relationship between age and consumption behavior. In particular, it seeks to illustrate the economic implications of Chinese older populace. Since, there is a scarcity of research on this area. This study seeks to fill the gap in literature. This is also targeted to government planners and business strategists in developing their policies and plans that targets the older population since they constitute a bulk of consumers in the market today.

Review of Related Literature

Global aging is the result of two fundamental demographic forces (Peterson, 2002): rising longevity and falling fertility. The first is increasing the relative number of the elderly in the population, while the second is reducing the relative number of the young.

Beth Harrison (1986) compared consumer units in which the reference person was between the ages of 65 and 74 with those in which the reference person was 75 or older. Despite the brevity of her analysis, Harrison described an important finding: persons 65 years and older are not homogeneous. She also found that those 75 or older spent less for most goods and services than those 65 to 74.

Another study by Thomas Moehrle (1990) examined expenditure patterns by families with reference persons aged 62 to 74. Those whose reference person was involuntarily unemployed or working without pay were excluded from the sample. Moehrle (1990) found that, regardless of income class, workers had higher expenditures for most goods and services than nonworkers.

More recently, Mohamed Abdel-Ghany and Deanna L. Sharpe (1997) analysis to examine levels of expenditures for those same two age groups (62-74). Their analysis allowed them to make estimates about how tastes and preferences differed between the groups when characteristics such as income, family size, and region of residence were held constant. Abdel-Ghany and Sharpe found differences between the two groups in every expenditure category they examined.

Similarly, Rose M. Rubin and Michael L. Nieswiadomy (1997) combined results of several studies, into a book describing characteristics and expenditure patterns of older consumers. One of their more interesting extensions to the earlier analyses was that they attempted to measure the effects of change on the lives of older consumers, first by comparing regression results for pre- and postretirement families(8) and then by examining changes in tastes and preferences over time.

The senior citizen or elderly market is traditionally defined as consumers age 65 years and older (Kim, Miller, and Schofield-Tomschin, 1998). Analysis of age trends provides highly accurate projections for the future that will allow alert marketers to recognize potential opportunities years in advance. Moreover, it can also predict the products, services and goods that shall be in demand. In China, where the population of the older segment of the society is expected to increase more rapidly, it provides an impetus for businesses and the government to affect specially services and products that targets the market.

Little comparative research presently exists that has investigated whether or not behavioral differences between older consumers and consumers in other age categories are identifiable and measurable. Tongren (1988) suggested that comparative studies were needed to determine if the behavior of older consumers was affected by their activity level and whether or not these characteristics made them unique in the marketplace when compared with younger consumers.

Etzioni (1988) emphasized that the choices people made, including economic choices, were most often based on both the needs of the individual and the needs of his or her collective group or community. His theory proposed that moral commitment interacted with economic factors to influence the overall behavior of individuals within their social environment. Reasons for shopping locally have previously been found to result from attending loyalties (Miller and Kean 1997); thus, moral, social, and economic variables are all important considerations in studying the patronage behavior of late middle-age and elderly consumers.

Research on the current and future older market will have implications for small-sized locally-owned retail establishments who are struggling to maintain a customer base in communities (Stone 1995). Lumpkin and Greenberg (1982) and Lumpkin (1985) found consumers age 65 and older shopped more frequently in stores where they were known, and that older consumers depended more on assistance from store personnel than did younger consumers. Lumpkin's (1985) additional research on the elderly found that those who were more actively involved in the community, anti in general more socially active, enjoyed shopping locally, and that they shopped locally because of the merchants' reputation rather than their pricing structure or brand offerings.

It was important to first differentiate those individuals who were in the later part of middle age (50-to-64 years old) from those who would be classified as older age (age 65 and older) to see if differences existed in terms of social and market place exchange. In reviewing past research methodology, Tongren (1988) found research that compared older consumers with younger consumers problematic because multiple threshold ages had been used to describe entry into the older age category. The majority of the 67 articles he reviewed designated age 65 as the threshold for the older market. Tongren proposed age 65 as the entry into older age in light of past research applications.

Several business decisions are based on misconceptions about the older consumer. With the number of mature consumers increasing, such findings should be of particular concern to marketers (Johnson, 1996). Two criteria commonly considered by marketers when evaluating a possible market are size and income. While much is known about the increasing size and market potential of older consumers and the markets to which they devote their consumption resources, very little is known about their overall attitudes toward the marketplace.

Methodology

This proposed study shall utilize the descriptive of research which allows for a critical examination of a certain phenomena. It seeks to describe what is taking place and provide an evaluation of the events based on examination and observation (Creswell, 1994). The descriptive type of research allows for the use of interviews, questionnaire and observations.

The research described in this document is based fundamentally on quantitative research methods. This permits a flexible and iterative approach. During data gathering the choice and design of methods are constantly modified, based on ongoing analysis. This allows investigation of important new issues and questions as they arise, and allows the investigators to drop unproductive areas of research from the original research plan. Moreover, the result of the study shall be compared and verified based on the existing literature on the subject.

This study basically intends to investigate economic impact of consumption behaviour of the older population in China. By older, this study shall utilize the standard bracketing that old population refers to those 65 years old and above. China which maintains of the highest population of old population had been adapting its marketing, production of services and products specifically to target the older population. This study shall outline the consumption behaviour of the older population using a survey and shall use official statistics from business that specifically caters to the older population in assessing the impact of their consumption on the companies.

The primary source of data will come from survey and interviews conducted by the researcher on the older Chinese population. Moreover, economic analysts shall also be interviewed to provide predictions on the impact of the adult population on economics. The secondary sources of data will come from published articles from business and economic journals, books and related studies on consumption behaviour, economics of consumption and economic impact of older population consumption.

            For this research design, the researcher will gather data, collate published studies from different local and foreign universities and articles from health and college journals; and make a content analysis of the collected documentary and verbal material.  Afterwards, the researcher will summarize all the information, make a conclusion based on the null hypotheses posited and provide insightful recommendations on the dealing with issues on consumption of the older population in China.

References

 

Abdel-Ghany, M. and Sharpe, D. (1997) Consumption Patterns Among the Young-Old and Old-Old. Journal of Consumer Affairs, summer 1997 pp. 90-112.

 

Ageing in OECD Countries: A Critical Policy Challenge, Social Policy Studies no. 20 (Paris: OECD, 1996).

 

Allison, Neil K. (1978). "A Psychometric Development of a Test for Consumer Alienation From the Marketplace," Journal of Marketing Research, 15, 565-75.

 

Etzioni, Amitai (1988), The Moral Dimension: Toward a New Economics, New York: Free Press.

 

Granovetter, Mark (1990), "The Old and the New Economic Sociology: A History and an Agenda," in Beyond the Marketplace, Roger Friedland and A. F. Robertson (eds.), New York: Aldine de Gruyter: 89-112.

 

Harrison, B. (1986) "Spending patterns of older persons revealed in expenditure survey," Monthly Labor Review, October 1986, pp. 15-17.

 

Johnson, E. (1996) Cognitive age: understanding consumer alienation in the mature market. Review of Business, Vol. 17.

 

Lumpkin, James R. (1985), "Shopping Orientation Segmentation of the Elderly Consumer," Journal of the Academy of Marketing Science, 13(2, Spring): 271-289.

 

Lumpkin, James R. and Barnett A. Greenberg (1982), "Apparel-Shopping Patterns of the Elderly Consumer," Journal of Retailing, 58(4, Winter): 68-89.

 

Kim, S., Miller, N. and Schofield-Tomschin, S. (1998) The effects of activity and          aging on rural community living and consuming. Journal of Consumer         Affairs, Vol. 32.

 

Miller, Nancy J. and Rita C. Kean (1995), "Reciprocal Consumer Behavior Intentions in Rural Communities: Inducements to Shop with Local Retailers," paper presented at the Rural Retailing: Emerging Community Issues Conference, Salt Lake City, UT.

 

Miller, Nancy J. and Rita C. Kean (1997), "Factors Contributing to Inshopping Behavior in Rural Trade Area: Implications for Local Retailers," Journal of Small Business Management, 35(2): 80-94.

 

Moehrle, T. (May 1990) Expenditure patterns of the elderly: workers and nonworkers. Monthly Labor Review, pp. 34-41.

 

Paulin, G. (2000) Expenditure patterns of older Americans, 1984-97. Monthly Labor Review, Vol. 123.

 

Peterson, P. (2002) The shape of things to come: global aging in the twenty-first century. Journal of International Affairs, Vol. 56.

 

Rubin, R. and Nieswiadomy, M. (1997) Expenditures of Older Americans (Westport, CT, Praeger Press.

 

Stone, Kenneth E. (1995), Competing with the Retail Giants: How to Survive in the New Retail Landscape, New York: John Wiley and Sons.

 

Tongren, Hale N. (1988), "Determinant Behavior Characteristics of Older   Consumers," Journal of Consumer Affairs, 22(1): 136-157.

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