Everybody in the country, and indeed around the planet, will have experienced the recent global recession in one way or another, possibly as an individual or as a business operator. It might not have had an immediate effect on your own position or your individual income, but the knock-on impact of businesses dropping income will have affected the economic predicament of the vast majority of people. It has been a really complex problem with wide reaching ramifications.
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 occasion to celebrate having made it through the economic meltdown, it should be a period to begin looking ahead and preparing for a future within a stable economic climate. It is time to seek some recession opportunities.
Firms of all sizes, buying and selling in all kinds of markets are no doubt going to have to change their operations in light of the recession. This might be after legislation is introduced to more closely govern and monitor the actions of worldwide economic companies. Many companies may also be looking at ways to make themselves much more robust and have the ability to withstand economic instability in the future. Either way, there will probably be changes for many businesses, and wherever there is change there is potential.
The Recent Recession
The recession of the early 21st century started in 2007 and slowly spread around the world over the following couple of years. Several financial analysts attributed the cause of the recession to be the crash in the U.S. real estate market, which in turn impacted the worth of financial products linked into real estate resources. The growth of the property market up to that point had encouraged homeowners to refinance their first properties in order to buy second or third properties with a view to a long-term profit.
This drop in value then uncovered the vulnerabilities of such a widespread system of credit agreements between global corporations, particularly when much of the system was being backed by subprime lenders who were financial liabilities. A general lack of third-party management of the monetary services market had allowed the creation of a highly complex web of high-risk credit agreements that depended upon a thriving economy. Once the first debtors began to fall behind on repayments, the entire house of cards was quick to come down.
The subsequent economic fallout saw several individuals lose their jobs and also lose their homes, while many big, international organisations were forced out of business. Government authorities across the world had to bring in major financial packages to assist 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 financial episode since the depression of the 1930s.
While general confidence of the banking construct dropped away the planning consultants community noticed a quite sharp drop in gross sales income.
The Impact on Business
It’s probably reasonable to state that the economic downturn has had an effect on just about every enterprise around the world. Particular business models will have been more able to adjust to the additional economic pressure than others but they will have still experienced an impact at some part of their operations.
Many thousands of small and medium sized businesses have been pressured out of business because of the recent recession. Many of these situations will have been relatively basic; as the general public begin to reduce their spending these companies lose revenue, and since margins are often extremely slim in a competitive market place there was extremely little room to allow for this decline. It’s a straightforward case of supply and demand not meeting in the middle.
Some other cases were not so clean cut. There were situations where one business in a long supply chain had been unable to make it through and the knock-on impact would push every company within that supply chain to the edge of bankruptcy.
Job losses have of course been a very sensitive subject to the wide majority of us. It is believed that the current number of unemployed individuals in the UK is over 2.3 million (nearly 8% of the total countries’ workforce), and many of these will have been victims of the international economic crisis. These job losses head to a larger drop in typical 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 though, and that can only be great news for business. Gross domestic product (GDP) experienced a climb in the UK during the final quarter of 2009 and total unemployment figures fell, both of which are signs of an economy that is recovering.
Experts at the International Monetary Fund (IMF) have predicted that the UK economy may actually reduce in size over the duration of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the danger of wide-spread joblessness continuing.
This uncertainty can be utilised as an advantage though, and companies which are prepared to take a few risks or that are willing to alter their operations to cater for a more cautious target audience might be set to make great profits.
Any kind of future changes to nationwide tax costs will affect mobile phone socks firms from production right through to sales.
Price Sensitivity
On the outside it may appear that the obvious technique to use whilst the overall economy is recuperating is to raise your very own sales prices again to a level that affords your business some margin of comfort with regards to operating expenses. As the market grows and people feel more secure in their jobs they will feel secure spending more money, so price raises should be an easy thing for consumers to take. This may not always be the situation.
In fact, many businesses might find that they have to keep their selling prices as small as possible because the newly provoked price sensitivity amongst the general public. Many of us will have had to tighten our belts over the last few years, and simply because the hardest of the recession seems to be over, we aren’t all prepared to begin spending freely again.
The term price sensitivity describes how influential the element of price is to customers when they are purchasing a specific item. If a fairly large price shift, for example increasing the cost of a car by £1000, doesn’t see a significant drop in demand for that item then the item is said to be price insensitive. If a comparatively small change in price, say raising the price of a car by only £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 items that they are buying. Several people may be looking out for deals for everyday items that they require, and particularly their grocery shopping. Several of these items are necessities however.
Firms will be in a position to take advantage of this fact by using special offers and price promotions to attract new shoppers into buying their goods. Consumers will be more likely than ever to move from their favored brands if the price is perfect, and companies which offer the best priced goods are likely to stand to gain from this. Once these prospective customers have become clients there is a good chance that they will stay loyal to their new product choice as the market recovers further, which could lead to further spending at the initial price rates.
One particular company which has managed to get by during the economic downturn
Financial Security
People’s awareness of the economic system at large as well as how it affects us all has greatly grown in light of the recession. Prior buying choices may well have been made with respect to the properties of the item and its price, but there is a new factor that consumers will be considering now. Financial security.
Recession Proofing
Several businesses have endured bankruptcy in the aftermath of recession. This has in turn has left countless numbers of buyers in a really bad predicament. As individuals look to reinvest money into savings and shareholdings they would prefer to know that the company they are investing in has some kind of protection against future recessions. This could simply be a case of operating the business with as little debt as feasible, but anything that could be utilised to assure clients might be a fantastic selling point for a business.
Price Guarantees
One particular very noticeable element of the recent economic downturn in the Uk was the steep decrease in the interest rate. Once this change had worked itself throughout the high street retailers and monetary services institutes many people discovered that they were either struggling as a consequence or reaping a financial advantage. Either way, it undoubtedly raised the profile of the impact that a changing interest rate can have on every day financial products.
Consumers who are seeking to open new savings accounts or private pensions may well be concerned that if the economic downturn does indeed carry on for much more time they won’t be generating any significant interest on their investments. In reality, the recession may even now take a turn for the worst and interest rates could fall again. In this scenario, a savings product that provides a secured rate of return turns into a very appealing option.
The exact same could be said for customers with credit agreements. If the recession really is truly over and the worldwide economy starts to recover much more swiftly than many expect, then it may not be long before we see an increase in interest rates. This would mean that consumers would have to pay much more each month for their mortgages and loans. A business which can offer a secured rate of interest that isn’t connected to the base rate of interest could again attract many new clients.
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. They would offer “price freezes” for their goods for a specific time period in an attempt to retain their existing consumers and bring new customers in.
Conclusion
Whether the recession is completely over yet or not, this has functioned as a firm indication that no business can be complacent in its own position of success. Business managers must constantly look to consolidate their situation and improve their operations wherever possible. The companies that manage to make it through the downturn in the economy will have learnt valuable lessons.