Everybody in the nation, and indeed around the world, will have suffered the recent global economic downturn in one manner or another, possibly as a person or as a business owner. It might not have had a direct effect upon your own position or your personal earnings, but the knock-on impact of companies dropping income will have influenced the financial circumstance of the wide majority of people. It was a really complex issue with far reaching implications.
The actual recession now seems to be over, or is at least coming to an end, according to most financial experts. Whilst it might not yet be the time to celebrate having made it through the economic turmoil, it should be a time to start looking ahead and planning for a future in a stable economic climate. It is time to find some recession opportunities.
Firms of all sizes, buying and selling in all types of markets are no doubt going to have to alter their operations in light of the recession. This might be after law is introduced to more closely control and keep an eye on the actions of global monetary organisations. Many firms may also be considering ways to make themselves far more robust and have the ability to endure economic instability in the long term.
The Recent Recession
The recession of the early 21st century started in 2007 and slowly propagated around the planet over the following couple of years. Many economic analysts attributed the cause of the economic downturn to be the drop in the U.S. housing market, which in turn affected the worth of financial products tied into real estate assets.
This fall in value then exposed 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 fiscal risks. A basic lack of third-party control of the financial services sector had allowed the creation of a very complicated web of high-risk credit deals which relied upon a rising economy.
The following financial fallout saw several individuals lose their jobs as well as lose their properties, while many large, international organisations were forced out of business. Governments all over the world had to introduce radical financial packages to help their own banking systems, and even now certain first world countries are struggling to make it through financially. Many consider it to have been the worst economic period since the depression of the 1930s.
The global recession has impacted every market field such as floor renovations since production chains are affected across all levels.
The Impact on Business
It is probably fair to state that the recession has had an effect on just about every single enterprise around the world. Certain company models will have been more able to adapt to the extra financial stress than others however they will have nevertheless experienced an impact at some portion of their operations.
Thousands of small and medium sized companies have been pressured out of business as a result of the recent recession. Many of these situations 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 very slim in a competitive market place there was very little space to accommodate this decrease. It’s a straightforward case of supply and demand not meeting in the middle.
Other cases were not so clean cut. There were scenarios where one company in a lengthy supply chain had been unable to survive and the knock-on effect would push every business inside that supply chain to the edge of bankruptcy.
Job losses have of course been a very delicate subject to the vast 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’ workforce), and many of these will have been victims of the global economic crisis. These types of job losses head to a greater decrease in general spending, which leads to a further fall in income for business.
The End of Recession
It does seem that the downturn is on its way to an end though, and this can only be great news for business. Gross domestic product (GDP) saw a rise in the UK throughout the final quarter of 2009 and total unemployment numbers dropped, both of which are signs of an economic system that is recovering. This isn’t a perspective shared by everyone however.
Experts from the International Monetary Fund (IMF) have forecast that the UK financial system may 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 possibility of a new or even hung government coming into power in May 2010, plus the need to reduce an enormous financial deficit, the foreseeable future is certainly not set in stone.
This uncertainty may be utilised as an advantage however, and businesses that are prepared to take a few risks or who are prepared to alter their own operations to cater to a more wary audience might be set to make great profits.
There’s a fight to acquire brand new customers amongst sunny plants for rockeries businesses that could present greater selection and more competitive prices to consumers.
Price Sensitivity
On the outside it may seem that the clear strategy to use while the overall economy is recovering is to increase your very own sales prices again to a level that offers your company some margin of comfort in relation to operating expenses. As the market grows and people feel more secure in their jobs they will feel relaxed spending more cash, so price increases should be an easy thing for consumers to take on.
Actually, several firms may find that they need to keep their selling prices as small as feasible because the recently triggered price sensitivity amongst the general public. Most of us have had to tighten our belts over the last couple of years, and simply because the worst of the recession seems to be over, we are not all prepared to start spending freely again. This is a trend that is hard to precisely quantify, however companies will want to be aware of how their specific consumer sector feels toward spending.
The phrase price sensitivity represents how important the element of price is to shoppers when they are purchasing a particular item. If a fairly large price shift, for example raising the cost of a car by £1000, doesn’t provoke a big decrease in demand for that product then the product is said to be price insensitive. If a relatively 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. This same theory can also be applied to shoppers themselves, and after a period of recession people are much more likely to be price sensitive.
As a result, the marketplace at large will take great interest in the prices of the things that they are purchasing. Several people may be looking out for discounts for everyday products that they need, and particularly their grocery shopping. Many of these things are essentials however. When it comes to purchasing luxury items, for example televisions, cars and holidays, the cost of the purchase is likely to be an more crucial decision maker.
Companies will be in a position to take advantage of this fact by utilising special offers and price campaigns to attract new shoppers into buying their goods. Consumers will be a lot more likely than ever to switch from their favored brand names if the price tag is right, and firms which offer the best priced items are most likely to stand to profit from this.
A particular firm that has made it through the recession
Financial Security
People’s understanding of the economic system at large along with how it influences us all has significantly increased in light of the economic downturn. Previous purchasing decisions may well have been made according to the quality of the product and its value, but there is a new factor that buyers will be thinking about now. Financial security.
Recession Proofing
Many firms have endured bankruptcy in the aftermath of recession. This in turn has put thousands of consumers in a very bad situation. As people seek to reinvest income into financial savings and shareholdings they would like to know that the business they are investing in has some sort of defense against future recessions.
Price Guarantees
One very visible feature of the latest economic downturn in the Uk was the sharp decrease in the interest rate. After this change had worked itself through the high street stores and monetary services institutes several people found that they were either suffering as a result or enjoying a monetary benefit. Either way, it definitely elevated the profile of the effect that a fluctuating interest rate can have on every day financial products.
Shoppers that are seeking to open up new savings accounts or private pensions might be concerned that if the recession does in fact carry on for much more time they will not be generating any significant interest on their investments. In reality, the tough economy may still take a turn for the worst and interest rates could drop again. In this scenario, a savings product that offers a confirmed rate of return turns into a very attractive option. This technique could be used to bring in many new savings customers.
The same can be said for customers with credit agreements. If the recession really is genuinely over and the worldwide market starts to recover much more quickly than many expect, then it may not be too long before we see an increase in interest rates. This would mean that consumers would need to pay much more each month for their mortgages and loans. A company which can offer a secured rate of interest that is not linked to the base rate of interest might again attract many new customers.
A similar technique was used by a number of firms when the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. They would offer “price freezes” for their products for a specific time period in an attempt to retain current clients and bring new clients in.
Conclusion
Whether the recession is absolutely over yet or not, this has functioned as a firm indication that no business can afford to become complacent in their own position of survival. Company managers should constantly look to consolidate their situation and boost their own operations where possible. The businesses which are able to survive the economic downturn will have learnt important lessons.
