Everyone in the country, and in fact around the planet, will certainly have suffered the latest worldwide economic downturn in one manner or another, possibly as an individual or as a business operator. It might not have had an immediate impact upon your own job or your private income, but the knock-on effect of businesses losing income will have influenced the financial circumstance of the wide majority of people. It has been a really complex issue with far reaching implications.
The downturn now seems to be over, or is at the very least on its way to an end, according to most economic authorities. Although it may not yet be the time to celebrate having made it through the economic crisis, it should be a time to begin looking forward and planning for a future within a stable economic climate. It is time to seek out some recession opportunities.
Companies of almost all sizes, buying and selling in all types of marketplaces are no doubt going to have to adjust their operations in view of the economic downturn. This may well be after law is brought in to more closely govern and keep an eye on the actions of international economic organisations. Many businesses will also be looking at methods to make themselves more robust and able to endure financial instability in the long term. Either way, there will be adjustments for several companies, and where there is change there is potential.
The Recent Recession
The recession of the early 21st century began in 2007 and gradually propagated around the planet over the next couple of years. Numerous financial analysts credited the cause of the recession to be the drop in the U.S. housing market, which in turn impacted the worth of financial products linked into real estate assets.
This drop in value then uncovered the vulnerabilities of such a widespread system of credit agreements between international corporations, particularly when much of the system was being supported by subprime lenders who were financial risks. A general lack of third-party management of the monetary services sector had allowed the creation of a highly complex web of high-risk credit deals which relied upon a growing economy.
The following financial fallout saw several people lose their jobs and lose their homes, whilst many large, international companies were forced out of business. Government authorities throughout the world had to introduce major financial packages to support their own banking systems, and even now certain first world nations are fighting to make it through financially. Many consider it to have been the toughest economic episode since the depression of the 1930s.
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The Impact on Business
It is probably fair to say that the recession has had an impact on just about every enterprise around the world. Certain business models will have been more able to adjust to the extra financial strain than others however they will have nevertheless felt an impact at some portion of their operation.
Thousands of small and medium sized companies have been forced out of business due to the recent recession. Several of these situations will have been comparatively basic; as the general public begin to decrease their spending these types of businesses lose income, and since margins are often very slim in a competitive market place there was extremely little room to allow for this fall.
Some other cases were not so clear cut. There were circumstances where one company in a long supply cycle were unable to survive and the knock-on effect would force every business inside that supply chain to the brink of bankruptcy.
Job losses have obviously been a very sensitive subject to the wide majority of us. It’s believed that the current number of unemployed people in the UK is over 2.3 million (almost 8% of the total countries’ labourforce), and many of these will probably have been victims of the global economic crisis. These types of job losses lead to a larger decrease in general spending, which results in a further drop in earnings for business.
The End of Recession
It does appear that the recession is on its way to an end however, and this can only be great news for business. Gross domestic product (GDP) experienced a rise in the UK during the fourth quarter of 2009 and total unemployment figures fell, both of which are signs of an economy that is recovering. This isn’t a view shared by everyone though.
Industry experts at the International Monetary Fund (IMF) have predicted that the UK economy may actually reduce in size over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the threat of wide-spread unemployment persisting. When added to the prospect of a new or perhaps hung government on its way into power in May 2010, plus the real need to reduce a massive financial deficit, the future is definitely not set in stone.
This kind of uncertainty can be utilised as an advantage though, and businesses which are prepared to take a few risks or that are prepared to alter their own operations to cater for a more cautious target audience might be set to make great profits.
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Price Sensitivity
On the outside it might appear that the clear strategy to use while the economy is recuperating is to increase your own sales charges again to a point that offers your company some extra margin of comfort in relation to running expenses. As the market grows and people feel safer in their careers they will really feel comfortable spending extra cash, so price raises should be an easy thing for shoppers to take. This will not always be the case.
In fact, many firms might find that they have to keep their prices as small as feasible due to the recently triggered price sensitivity among the general public. Most of us have had to tighten our belts during the last couple of years, and just because the hardest of the recession seems to be over, we are not all ready to start spending freely again. This is a trend that is hard to exactly quantify, however firms will want to be mindful of how their particular customer community feels toward spending.
The phrase price sensitivity represents how important the factor of price is to shoppers any time they are purchasing a specific product. If a relatively large price shift, for example increasing the price of a car by £1000, doesn’t provoke a significant decrease in demand for that product then the product is said to be price insensitive. If a relatively small change in price, say raising the price of a car by just £100, does see a fall in demand then that product is price sensitive.
As a result, the market at large will take great interest in the costs of the things that they are purchasing. Several people will be looking out for bargains for everyday items that they need, and particularly their grocery shopping. Many of these things are essentials however.
Companies will be in a position to take advantage of this fact by using special discounts and price campaigns to attract new customers into buying their items. Buyers will be more likely than ever to move from their preferred brand names if the price tag is right, and companies which offer the best priced products are likely to stand to profit from this.
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Financial Security
People’s knowledge of the economy at large as well as how it affects us all has greatly grown in light of the economic depression. Prior buying decisions may well have been made according to the quality of the item and its price, but there is a fresh factor that shoppers will be thinking about now. Financial security.
Recession Proofing
Many companies have endured bankruptcy in the aftermath of recession. This has in turn has put thousands of customers in a really poor predicament. As people seek to reinvest money into personal savings and shareholdings they would prefer to see that the corporation they are investing in has some form of protection against future recessions.
Price Guarantees
One very visible feature of the recent economic downturn in the United Kingdom was the steep decrease in the interest rate. After this change had worked itself through the high street shops and financial services organisations several people found that they were either struggling as a consequence or reaping a monetary advantage.
Customers that are seeking to open up new savings accounts or private pensions may well be concerned that if the recession does in fact carry on for much longer they will not be generating any considerable interest on their investments. Actually, the recession may still take a turn for the worst and interest rates might fall again. In this scenario, a savings product that offers a confirmed rate of return turns into a very attractive choice.
The exact same could be said for consumers with credit agreements. If the recession really is genuinely over and the worldwide economy starts to recuperate more quickly than many anticipate, then it might not be long before we see a growth in interest rates. That would signify that consumers would have to pay much more every month for their mortgages and loans.
A similar approach was utilised by a number of companies when the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. These companies would offer “price freezes” for their goods for a specific time period in an attempt to keep existing clients and bring new clients in. This price freeze allowed a buffer period for individuals to adapt to the new VAT percentage.
Conclusion
Whether the recession is completely over yet or not, it has functioned as a firm reminder that no company can become complacent in its own situation of survival. Company owners must constantly seek to consolidate their position and boost their operations wherever possible.
