Everyone in the nation, and indeed all around the planet, will have experienced the recent worldwide economic downturn in one manner or another, either as a person or as a company owner. It might not have had an immediate effect on your own career or your private income, but the knock-on effect of companies losing revenue will have influenced the economic situation of the vast majority of folks. It was a very complex problem with far reaching ramifications.
The actual downturn now appears to be over, or is at least coming to an end, according to many economic authorities. Whilst it may not yet be the moment to celebrate having made it through the financial crisis, it should be a period to begin looking forward and planning for a future in a steady economic climate. It is time to seek some recession opportunities.
Businesses of all sizes, trading in all kinds of markets are no doubt going to have to change their operations in view of the recession. This may be after legislation is brought in to more closely control and keep an eye on the action of worldwide monetary organisations. Many businesses will also be looking at ways to make themselves much more robust and able to withstand economic instability in the future.
The Recent Recession
The economic downturn of the early 21st century began in 2007 and progressively propagated around the world over the subsequent couple of years. Many financial analysts credited the cause of the economic downturn to be the drop in the U.S. housing market, which in turn affected the worth of monetary products linked into real estate assets. The growth of the housing market up to that point had motivated homeowners to refinance their primary properties in order to obtain second or third houses with a view to a long-term gain.
This drop in value then uncovered the vulnerabilities of such a widespread system of credit contracts between international corporations, particularly when much of the system was being supported by subprime lenders who were fiscal risks. A general lack of third-party management of the monetary services market had allowed the creation of a very complex web of high-risk credit deals which depended upon a rising economy. Once the first debtors started to fall behind on repayments, the entire house of cards was quick to fall.
The subsequent economic fallout saw several people lose their jobs and also lose their homes, whilst many large, international companies were forced out of business. Governments throughout the world had to bring in major financial packages to help their own banking systems, and even now certain first world countries are fighting to make it through financially. Many consider it to have been the worst economic episode since the depression of the 1930s.
Even businesses which specialise in providing planning consultancy needed to change their operations so as to survive the market meltdown.
The Impact on Business
It’s probably fair to say that the recession had an effect on just about every business around the world. Certain business models will have been more able to adapt to the added economic stress than others but they will have still felt an impact at some portion of their operation.
Many thousands of small and medium sized businesses have been forced out of business as a result of the recent recession. Many of these situations will have been fairly simple; as the general public start to decrease their spending these businesses lose income, and since profit margins are often extremely slender in a competitive market place there was very little room to accommodate this decline.
Other cases were not so clear cut. There were circumstances where one company in a lengthy supply cycle had been unable to survive and the knock-on effect would push every company in that supply chain to the brink of bankruptcy.
Job losses have naturally been a pretty sensitive subject to the vast majority of us. It’s estimated that the current number of unemployed people in the UK is over 2.3 million (almost 8% of the entire countries’ labourforce), and many of these will have been victims of the international economic crisis.
The End of Recession
It does seem that the recession is on its way to an end though, and that 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 numbers fell, both of which are signals of an economic system that is healing.
Experts from the International Monetary Fund (IMF) have predicted that the UK economy may actually get smaller over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the risk of wide-spread unemployment persisting.
This uncertainty can be used as an advantage however, and businesses which are ready to take a few risks or who are willing to adjust their operations to cater to a more wary target audience could be set to make good profits.
Overall, the negative influence that was experienced throughout the phone sock sector has been much easier to deal with than selected alternative market sectors around the world.
Price Sensitivity
On the outside it may seem that the obvious strategy to use whilst the economy is recuperating is to raise your own sales charges again to a point that offers your business some extra margin of comfort with regards to operating costs. As the market grows and consumers feel safer in their careers they will really feel secure spending extra cash, so price raises should be an easy thing for shoppers to take on.
In fact, many companies may find that they have to keep their prices as small as feasible due to the newly provoked price sensitivity amongst the general public. Many of us have had to tighten our belts during the last couple of years, and simply because the worst of the economic downturn seems to be over, we are not all ready to begin spending freely again.
The term price sensitivity describes how influential the element of price is to shoppers any time they are buying a specific product. If a relatively large price change, for example increasing the cost of a car by £1000, doesn’t provoke a significant decrease in demand for that item then the item is said to be price insensitive. If a fairly modest change in price, say increasing the price of a car by just £100, does see a decline in demand then that item is price sensitive. The same theory can likewise be applied to consumers themselves, and after a phase of economic downturn people are much more likely to be price sensitive.
As a result, the market at large will have great interest in the prices of the items that they are buying. Several people will be looking out for bargains for everyday items that they need, and in particular their grocery shopping. Many of these things are essentials however. When it comes to purchasing expensive goods, like televisions, cars and holidays, the cost of the purchase is likely to be an much more crucial decision maker.
Businesses will be able to take advantage of this by utilising special discounts and price campaigns to lure new shoppers into buying their own goods. Buyers will be more likely than ever to change from their preferred brand names if the price is right, and companies that offer the best priced items are most likely to stand to gain from this.
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Financial Security
People’s understanding of the economic system at large and how it influences us all has significantly grown in light of the economic depression. Prior purchasing choices may well have been made according to the properties of the product and its value, but there is a new aspect that shoppers will be considering now.
Recession Proofing
Several firms have endured bankruptcy in the aftermath of recession. This in turn has put thousands of consumers in a very poor situation. As individuals seek to reinvest income into financial savings and shareholdings they will like to know that the corporation they are investing in has some form of defense against future recessions. This may simply be a case of managing the company with as little debt as possible, but anything that can be utilised to reassure clients could be a fantastic selling point for a company.
Price Guarantees
One very noticeable feature of the latest economic downturn in the Uk was the sharp decrease in the interest rate. After this change had worked itself throughout the high street stores and monetary services organisations many people found that they were either struggling as a result or reaping a financial advantage. Either way, it undoubtedly raised the profile of the impact that a fluctuating interest rate can have on every day economic products.
Consumers that are seeking to open up new savings accounts or private pensions may be worried that if the economic downturn does indeed carry on for much longer they will not be generating any substantial interest on their investments. Actually, the recession may even now take a turn for the worst and interest rates could fall again. In this situation, a savings product that provides a confirmed rate of return becomes a really appealing option.
The same could be said for customers with credit agreements. If the recession really is truly over and the international economy starts to recover much more swiftly than many expect, then it may not be too long before we see a growth in interest rates. This would signify that customers would have to pay more every month for their mortgages and loans. A provider that can offer a secured rate of interest that isn’t linked to the base rate of interest could again entice many new customers.
A similar approach was made use of by a number of companies after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. They would offer “price freezes” on their items for a particular time period in an effort to retain their existing consumers and draw new clients in. This kind of price freeze permitted a buffer time for consumers to adjust to the new VAT percentage.
Conclusion
Whether the economic downturn is totally over yet or not, it has served as a firm indication that no business can afford to become complacent in their own position of survival. Business owners should always look to consolidate their own situation and improve their operations wherever possible.
rashidak General
