Everyone in the nation, and certainly all around the planet, will certainly have experienced the recent worldwide recession in one manner or another, either as a person or as a company owner. It might not have had an immediate effect upon your own position or your private income, but the knock-on effect of companies dropping income will have affected the economic situation of the vast majority of folks. It has been a very complex problem with far reaching implications.
The downturn now seems to be over, or is at the very least coming to an end, according to most financial experts. Whilst it might not yet be the time to celebrate having survived the financial crisis, it should be a period to begin looking ahead and preparing for a future in a stable economy. It is time to seek some recession opportunities.
Firms of almost all sizes, trading in all sorts of marketplaces are no doubt going to need to adjust their operations in view of the economic downturn. This may well be after legislation is brought in to more closely control and monitor the action of international financial organisations. Many companies will also be considering ways to make themselves more robust and able to withstand economic instability in the future. Either way, there will be adjustments for many companies, and wherever there is change there is potential.
The Recent Recession
The recession of the early 21st century started in 2007 and progressively spread around the planet over the following couple of years. Several economic analysts attributed the cause of the economic downturn to be the drop in the U.S. property market, which in turn affected the worth of financial products linked into real estate resources. The growth of the property market up to that stage had motivated homeowners to refinance their primary homes 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 global businesses, particularly when much of the system was being backed by subprime lenders who were financial liabilities. A basic lack of third-party control of the financial services sector had allowed the development of a very complicated web of high-risk credit deals that relied upon a rising economy. Once the first debtors began to default on repayments, the entire house of cards was quick to fall.
The following economic fallout saw many individuals lose their jobs and lose their homes, while many big, international companies were forced out of business. Government authorities throughout the world had to introduce sweeping financial packages to help their own banking systems, and even now certain first world nations are struggling to survive financially.
One firm which works in the actual pastry cutter market had to make difficult decisions in the face of financial uncertainty.
The Impact on Business
It’s probably fair to say that the economic downturn had an impact on just about every business around the globe. Particular company models will have been more able to adapt to the added economic stress than others but they will have still experienced an impact at some section of their operations.
Many thousands of small and medium sized businesses have been forced out of business because of the recent recession. Many of these cases will have been relatively simple; as the general public begin to reduce their spending these types of companies lose revenue, and since profit margins are often incredibly slim in a competitive market place there was extremely little room to allow for this decrease.
Some other cases were not so clean cut. There were circumstances where one business in a long supply cycle were unable to make it through and the knock-on impact would force every business inside that supply chain to the brink of bankruptcy. The organisations that were able to pull through have had to make extremely tough choices to be sure they can survive the recession.
Job losses have obviously been a very sensitive subject to the broad majority of us. It’s estimated that the present number of jobless individuals in the UK is over 2.3 million (almost 8% of the total countries’ workforce), and many of these will probably 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 however, and this can only be good news for business. Gross domestic product (GDP) experienced a climb in the UK during the fourth quarter of 2009 and overall unemployment figures fell, both of which are indicators of an economic system that is healing. This is not a view embraced by everyone however.
Experts from the International Monetary Fund (IMF) have predicted that the UK financial system will actually get smaller over the duration of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the threat of wide-spread unemployment persisting. When added to the prospect of a new or even hung government coming into power in May 2010, in addition to the need to decrease a massive financial deficit, the foreseeable future is certainly not set in stone.
This uncertainty may be used as an advantage however, and organisations that are prepared to take a few risks or who are prepared to adjust their operations to cater for a more cautious target audience could be set to make great profits.
Generally, the negative effect that has been experienced across the wrap around sunglasses market was a lot easier to bear than in selected other sectors around the world.
Price Sensitivity
On the outside it may seem that the obvious technique to use while the overall economy is recuperating is to increase your own sales charges again to a level that offers your company some margin of comfort regarding running expenses. As the market grows and people feel safer in their careers they will feel comfortable spending extra money, so price raises should be an easy thing for consumers to take.
Actually, several companies may find that they have to keep their prices as low as feasible because the newly provoked price sensitivity among the general public. Most of us have had to tighten our belts during the last few years, and just because the hardest of the economic downturn appears to be over, we are not all prepared to start spending freely again. This is a pattern that is hard to precisely quantify, but companies will need to be mindful of how their specific customer community feels toward spending.
The phrase price sensitivity represents how important the element of price is to consumers when they are buying a specific product. If a fairly large price change, for example increasing the price of a car by £1000, doesn’t provoke a large drop in demand for that product then the item is said to be price insensitive. If a relatively modest change in price, say increasing the price of a car by only £100, does see a drop in demand then that product is price sensitive. The exact same theory can likewise be applied to consumers themselves, and following a phase of economic downturn people are more likely to be price sensitive.
As a result, the market at large will take great interest in the prices of the items that they are buying. Several people may be watching out for deals for everyday products that they require, and particularly their grocery shopping. Many of these items are essentials however.
Businesses will be in a position to take advantage of this by using special discounts and price promotions to lure new customers into buying their own items. Shoppers will be a lot more likely than ever to change from their preferred brand names if the price tag is right, and firms that offer the best priced items are likely to stand to profit from this.
I was especially impressed by the way this company kept overall performance and made profits during the toughest times of the recession.
Financial Security
People’s knowledge of the economic system at large and how it influences us all has greatly increased in light of the economic depression. Previous purchasing choices may well have been made in accordance to the quality of the item and its price, but there is a new factor that consumers will be considering now. Financial security.
Recession Proofing
Several companies have suffered bankruptcy in the aftermath of recession. This has in turn has left thousands of shoppers in a really poor situation. As individuals look to reinvest income into financial savings and shareholdings they would prefer to see that the corporation they are investing in has some type of safeguard against potential recessions. This might simply be a case of operating the business with as little debt as feasible, but anything at all that could be utilised to reassure clients may be a great selling point for a business.
Price Guarantees
One particular very visible element of the recent recession in the Uk was the sharp decrease in the interest rate. Once this change had precipitated itself through the high street retailers and financial services organisations several people found that they were either suffering as a result or enjoying a monetary benefit.
Shoppers that are looking to open new savings accounts or private pensions might be concerned that if the recession does indeed drag on for much longer they won’t be generating any considerable interest on their investments. In reality, the recession may still take a turn for the worst and interest rates could fall again. In this scenario, a savings product that provides a confirmed rate of return will become a very appealing option.
The exact same could be said for consumers with credit agreements. If the recession really is genuinely over and the worldwide economy starts to recover more swiftly than many anticipate, then it may not be too long before we see an increase in interest rates. This would mean that customers would have to pay more each month for their mortgages and loans. A business that could offer a guaranteed rate of interest that is not linked to the base rate of interest can again entice many new customers.
A similar technique was made use of by a number of firms after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. These companies would offer “price freezes” on their products for a certain time period in an attempt to keep existing customers and draw new clients in. This kind of price freeze allowed a buffer time for individuals to adapt to the new VAT rate.
Conclusion
Whether the recession is completely over yet or not, this has functioned as a timely reminder that no company can become complacent with their own position of survival. Business managers should always seek to consolidate their own situation and boost their own operations wherever possible. The companies which are able to make it through the downturn in the economy will have learned important lessons.