Impact of Changing Culture on Business & Economics

Instructor: Scott Tuning

Scott has been a faculty member in higher education for over 10 years. He holds an MBA in Management, an MA in counseling, and an M.Div. in Academic Biblical Studies.

Cultural shifts are inevitable, and they are important for retailers because they can dramatically shift consumer buying habits. This lesson explores three types of cultural change that impacts businesses.

When Culture Changes an Industry

In September 2014, pharmacy retailer CVS announced that it would no longer sell tobacco products. CVS executives indicated that selling tobacco was inconsistent with their company's mission of promoting health. This was a brave decision due in no small part to the fact that tobacco sales are often financially lucrative.

The decision by CVS to place customer health above profit was admirable in and of itself, but the retailer monitored the impact of their decision and something even more interesting began to happen. In any state where CVS controlled 15% or more of the pharmacy retail market, tobacco sales for all retailers dropped at least 1%. In the same markets, retailers sold 95 million fewer packs in aggregate. The sales of smoking cessation products like nicotine patches increased.

American culture has changed dramatically with regard to smoking, and this change has impacted many retailers.
Smoking

Obviously, this story is remarkable if for no other reason than a major retailer putting patients ahead of profits is not incredibly common. It is, however, more interesting that the decision to stop selling tobacco products actually drove down sales for all pharmacy retailers in a region. In essence, the position taken by CVS was powerful enough to influence the overall culture of cigarette purchases as evidenced by sales going down in aggregate.

Decades ago, it was not culturally frowned upon to smoke cigarettes. Consequently, smoking was the norm in places that would be unheard of today, such as airplanes, restaurants, and inside vehicles. The CVS story tells us that a culture of improving health has forever altered the tobacco industry.

Cultural Patterns That Make Economies Thrive

In the case of CVS, we saw that a cultural shift regarding a bad habit changed the economic picture for the tobacco industry and the pharmacy retail industry. The poppy fields of Afghanistan reflect the opposite change in cultural economics. Afghanistan, a top producer of the world's opium, saw dramatic increases in the amount of land devoted to growing the taboo substance despite the use of military resources to eradicate the plant.

Cultural views about drugs are so different that opium is grown and sold openly in one country while bringing death penalty offenses in others.
OpiumPlant

In the CVS story, a culture that opposed a bad habit brought positive change. For opium producers in Afghanistan, the opposite was true. The economic value of opium production was so high, and the cultural opposition to it was so low, that even military enforcement was not strong enough to slow or end production activities.

Cultural acceptance or rejection of a particular product or service can dramatically alter the business landscape for companies whose product places them at odds with their culture. Cultural changes, however, rarely overcome the law of supply and demand. For instance, even though the use of illicit drugs is culturally unacceptable in the United States, the fact that suppliers make these drugs and there are people who demand them means that the cultural pressure may slow but not eliminate the consumption of the taboo goods or services.

The Impact of Cultural Nationalism on Business and Economics

In the two decades leading up to the election of President Donald Trump, the culture in the U.S. embraced an international role. The U.S. provided economic aid to moderate governments in the Middle East, involved itself militarily in theaters where human rights were being violated, and promoted less restrictive trade practices.

That culture began to change leading up to the 2016 election. Then-candidate Trump ran on a platform that emphasized his belief that American resources should be focused domestically rather than internationally. Many in America agreed with him.

In early 2018, President Trump announced that the U.S. was the victim of unfair trade practices that he would counter by imposing tariffs on many goods inbound to the U.S. Tariffs are special taxes that are designed to control the flow of goods into a country.

Such cultural shifts toward nationalism impact retailers, who must adapt their pricing strategies to account for financial impacts of import taxes.

The Impact of a Changing Political Culture

In 2012, Colorado voters approved the decriminalization of personal quantities of recreational marijuana. Because the substance had not been legalized at the federal level, Colorado's recreational marijuana retailers faced a litany of problems created by this head-on collision between two opposing political cultures.

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