Planning and Development
Define and explain the significance of the term ‘derived demand’ as it applies to Strategic Human Resources Planning. (5 marks)

Derived demand is defined as a requirement for one product that is created due to the purchase of another product. It occurs for consumers who purchase goods for further production, because their purchases are based on the demand for their final product.[1] For example, when the demand for automobiles is high, the derived demand for steel, and all other products used to make automobiles, is also high. Should the demand for automobiles drop, so will the demand for the products used to make the automobiles.
Derived demand applies particularly to strategic human resources planning in relation to labour. Demand and supply of labour interact to determine the wages and affects the allocation of labour resources in ta corporation. It involves anticipating both the need for labor and the labor supply while planning programs necessary to ensure the organization will have the right mix of employees. The demand for labour is derived form the demand for the goods and services that labour is used to produce. Additionally the demand for labour is influenced by the level of economic activity, the productivity of labour and relative cost of labour compared to capital.[2]
The demand and supply of labour are influenced by both macroeconomic and microeconomic factors. Macroeconomics refer to conditions in the whole economy affecting the general labour market. Microeconomic factors include specific industry and company conditions that influence the demand and supply of labour for particular occupations and labour skills. These are factors that are industry or firm specific and include the nature and size of the industry, the pattern of consumer demand and output, the wage rate and conditions of employment offered, the productivity