Read the case study below and answer the questions that follow.  Demographic changes and international trade Demography is the study of the structure of human populations – their size, age  composition, gender mix, growth and so on. Changes in the population, age and gender  mix of the world’s major economies suggests that major changes are predicted for the  world economy. Owing to better health care, education and hygiene, major world economies now face the  challenge of an ageing population (increase in the number of people aged 60 years and  above). The population of major economic powers like USA, Germany, South Korea and  Japan are predicted to get smaller and older over the next few years. According to the  organization for Economic Cooperation and Development (OECD), the old-age  dependency ration will rise dramatically over the next few years. The old-age dependency  ratio is the ratio of the number of people aged 65 and above to the number of people  between the ages of 20 and 64. The implications of these demographic changes for countries and companies are serious.  

For many companies, when retirees leave, a lifetime of experience and knowledge can be lost when they leave. Japan is one of the first major economy to face an ageing and  shrinking population and Japanese companies are at the forefront of responding to these  changes. For example, Toyota has adapted its workstations to make it more comfortable  for the older workforce. The reality is that countries operating in countries with shrinking population are likely to  face higher wage and salary costs as the supply of labour shrinks. In countries with ageing  population, companies are likely to face higher taxes as governments struggle to find  revenues to support and care for older citizens. Moreover, an increasing portion of the  population will be employed to care for the retirees, shrinking the availability of labour for other sectors of the economy. Consumption patterns will also change as older people need different things compared  to younger people. For example, older people will need more healthcare products,  medical services, different insurance packages, more leisure activities while younger people will be buying more consumer products like electrical equipment, educational  services, household goods. Japanese companies appear to be at the forefront of adapting new technologies to meet  these demographic challenges. A Nagoya based supplier of cable television and local  area network technology has developed a system to allow the elderly to self-administer  basic medical measurements which can be transmitted to their doctors via the internet. Other manufacturers are developing service robots to help the elderly in daily living.

  (Source: adapted from RW Griffin and MW Pustay, International Business (2015), 8thth edition,  Pearson, pg 44))

Analyse the effect of the demographic changes on the competitiveness of countries  engaged in international business.  

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