Everyone in the nation, and in fact around the planet, will have suffered the recent global economic downturn in one way or another, either as a person or as a business operator. It may not have had an immediate impact upon your own position or your personal income, but the knock-on impact of companies losing income will have affected the economic circumstance of the great majority of folks. It was a very complicated problem with wide reaching implications.
The recession now seems to be over, or is at least coming to an end, according to most economic authorities. Although it may not yet be the moment to celebrate having survived the economic meltdown, it should be a period to begin looking forward and planning for a future within a steady economy. It is time to seek some recession opportunities.
Businesses of all sizes, buying and selling in all sorts of marketplaces are no doubt going to have to adjust their operations in light of the recession. This may be after legislation is brought in to more closely control and monitor the action of global financial organisations. Many companies will also be looking at ways to make themselves far more robust and have the ability to endure economic instability in the future.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and slowly propagated around the planet over the following few years. Many financial analysts credited the cause of the recession to be the drop in the U.S. real estate market, which in turn impacted the worth of monetary products linked into real estate assets.
This fall in value then exposed the vulnerabilities of such a wide-spread network of credit agreements between international corporations, especially when much of the system was being backed by subprime lenders who were financial risks. A general lack of third-party control of the monetary services sector had permitted the creation of a very complicated web of high-risk credit agreements that depended upon a thriving economy.
The subsequent economic fallout saw several people lose their jobs as well as lose their properties, while many large, global companies were forced out of business. Governments across the world had to bring in major financial programs to support their own banking systems, and still now certain first world countries are struggling to make it through financially. Many believe 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 reasonable to state that the recession had an impact on just about every single enterprise around the world. Certain company models will have been more able to adapt to the additional economic strain than others however they will have nevertheless felt an impact at some part of their operations. If a key service provider or a key client goes out of business then that will have a detrimental effect upon your own business.
Thousands of small and medium sized businesses have been pressured out of business due to the recent recession. Many of these cases will have been fairly simple; as the general public start to reduce their spending these types of businesses lose revenue, and since profit margins are often incredibly slim in a competitive market place there was very little space to allow for this decrease. It’s a simple case of supply and demand not meeting in the middle.
Other cases were not so clean cut. There were situations where one business in a long supply cycle were unable to make it through and the knock-on effect would push every business inside that supply chain to the brink of bankruptcy. The businesses that were able to survive have had to make very tough choices to make sure they can outlast the recession.
Job losses have naturally been a very sensitive subject to the broad majority of us. It is estimated that the present 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 financial crisis.
The End of Recession
It does appear that the recession is coming to an end however, and this can only be great news for business. Gross domestic product (GDP) saw a climb in the UK during the fourth quarter of 2009 and overall unemployment numbers dropped, both of which are signs of an economic system that is healing.
Industry experts from the International Monetary Fund (IMF) have forecast 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 unemployment persisting.
This kind of uncertainty can be used as an advantage however, and businesses that are ready to take a few risks or who are willing to adjust their operations to cater for a more cautious target audience could be set to make good profits.
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Price Sensitivity
On the surface it may appear that the clear strategy to use whilst the overall economy is recovering is to raise your very own sales charges again to a level that affords your business some margin of comfort with regards to running costs. As the economy grows and consumers feel safer in their jobs they will really feel comfortable spending more money, so price increases should be an easy thing for consumers to take on. This will not necessarily be the case.
In fact, several companies might find that they have to hold their prices as low as feasible due to the recently provoked price sensitivity among the general public. Many of us have had to tighten our belts over the last few years, and simply because the worst of the economic downturn appears to be over, we aren’t all prepared to begin spending freely just yet.
The term price sensitivity describes how influential the factor of price is to consumers any time they are purchasing a specific product. If a fairly large price shift, for example increasing the cost of a car by £1000, does not provoke a large decrease in demand for that item then the item is said to be price insensitive.
If a comparatively small change in price, say increasing the price of a car by only £100, does see a decline in demand then that item is price sensitive.
As a result, the market place at large will take great interest in the prices of the items that they are buying. Several people will be looking out for discounts for everyday products that they need, and in particular their grocery shopping. Many of these products are necessities however. When it comes to purchasing expensive goods, for example televisions, cars and holidays, the price of the purchase is likely to be an much more crucial decision maker.
Firms will be in a position to take advantage of this by utilising special offers and price campaigns to lure new consumers into buying their own goods. Buyers will be a lot more likely than ever to move from their preferred brands if the price tag is right, and firms that offer the best priced items are likely to stand to gain from this. Once these prospective customers have become clients there is a great chance that they will remain faithful to their new product choice as the market rebounds further, which could lead to additional spending at the initial price rates.
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Financial Security
People’s understanding of the economy at large and how it impacts us all has greatly increased in light of the economic downturn. Previous purchasing choices may well have been made with respect to the quality of the item and its value, but there is a new aspect that consumers will be thinking about now. Financial security.
Recession Proofing
Many companies have suffered bankruptcy in the aftermath of recession. This in turn has left countless numbers of customers in a very bad situation. As people seek to reinvest income into financial savings and shareholdings they will like to see that the business they are investing in has some sort of safeguard against potential recessions.
Price Guarantees
One very noticeable element of the latest economic downturn in the United Kingdom was the sharp decrease in the interest rate. After this change had worked itself throughout the high street shops and fiscal services organisations several people found that they were either suffering as a consequence or enjoying a financial benefit. Either way, it certainly raised the profile of the impact that a changing interest rate can have on every day economic products.
Customers that are looking to open new savings accounts or private pensions may be concerned that if the recession does indeed drag on for much more time they won’t be generating any significant interest on their investments. In fact, the tough economy might even now take a turn for the worst and interest rates might drop again. In this scenario, a savings product that offers a confirmed rate of return will become a very appealing choice. This technique can be used to bring in several new savings customers.
The exact same can be said for customers with credit agreements. If the recession really is truly over and the worldwide economy begins to recuperate much more quickly than many expect, then it may not be long before we see a rise in interest rates. That would signify that consumers would have to pay more each month for their mortgages and loans.
A similar approach was used 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 particular period in an attempt to keep their existing customers and bring new clients in. This price freeze allowed a buffer period for people to adjust to the new VAT rate.
Conclusion
Whether the recession is absolutely over yet or not, this has served as a timely indication that no company can become complacent with its own position of survival. Company managers should always look to consolidate their own position and boost their operations wherever possible.
