Everybody in the nation, and without a doubt around the world, will have suffered the recent global economic downturn in one manner or another, possibly as a person or as a company owner. It may not have had a direct impact on your own career or your personal income, but the knock-on result of businesses losing income will have influenced the monetary predicament of the wide majority of people. It was a very complex issue with wide reaching implications.
The actual downturn now seems to be over, or is at least coming to an end, according to most financial authorities. Whilst it may not yet be the time to celebrate having survived the economic turmoil, it should be a time to start looking ahead and planning for a future within a stable economic climate. It is time to find some recession opportunities.
Businesses of almost all sizes, buying and selling in all types of markets are no doubt going to have to adjust their operations in view of the economic downturn. This may well be after legislation is brought in to more closely govern and keep an eye on the actions of worldwide financial companies. Many businesses may also be looking at methods to make themselves more robust and have the ability to endure financial instability in the long term.
The Recent Recession
The recession of the early 21st century started in 2007 and slowly propagated around the world over the subsequent few years. Numerous economic analysts attributed the cause of the economic downturn to be the drop in the U.S. housing market, which in turn impacted the value of monetary products tied into real estate resources. The growth of the property market until that point had encouraged homeowners to refinance their first properties in order to obtain second or third homes with a view to a long-term gain.
This drop in value then uncovered the vulnerabilities of such a wide-spread network of credit agreements between international companies, particularly when much of the system was being supported by subprime lenders who were financial liabilities. A basic lack of third-party control of the monetary services market had permitted the creation of a very complicated web of high-risk credit deals which depended upon a growing economy.
The following economic fallout saw many individuals lose their jobs and also lose their homes, whilst many large, international organisations were forced out of business. Government authorities all over the world had to bring in major financial packages to support their own banking systems, and even now certain first world countries are fighting to survive financially.
All businesses, like this one providing planning consultancy have taken a slightly new tactic to deal with the economic downturn.
The Impact on Business
It is probably reasonable to state that the recession has had an effect on just about every single enterprise around the world. Particular business models will have been more able to adjust to the extra financial strain than others however they will have still felt an impact at some part of their operation.
Many thousands of small and medium sized businesses have been forced out of business as a result of the recent economic collapse. Several of these cases will have been fairly basic; as the general public start to decrease their spending these types of companies lose income, and since profit margins are often extremely slim in a competitive market place there was extremely little room to accommodate this decrease.
Some other cases were not so clear cut. There were scenarios where one business in a long supply chain were unable to survive and the knock-on effect would force every business in that supply chain to the brink of bankruptcy. The organisations that were able to survive have had to make extremely hard judgements to make sure they can survive the economic downturn.
Job losses have of course been a pretty delicate subject to the vast majority of us. It’s believed that the present number of jobless 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 international financial crisis.
The End of Recession
It does seem that the recession is coming to an end however, and this can only be great news for business. Gross domestic product (GDP) saw a rise in the UK during the fourth quarter of 2009 and overall unemployment figures fell, both of which are signs of an economy that is healing.
Experts at the International Monetary Fund (IMF) have forecast that the UK financial system may actually reduce in size over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the threat of wide-spread joblessness persisting. When added to the prospect of a new or perhaps hung government coming into power in May 2010, as well as the real need to reduce an enormous financial deficit, the foreseeable future is certainly not set in stone.
This kind of uncertainty may be used as an advantage though, and companies that are prepared to take a few risks or that are willing to adjust their own operations to cater for a more wary target audience might be set to make good profits.
One particular organisation that specialise in offering schizandra berries have lasted the recent recession and as such are now looking to develop again.
Price Sensitivity
On the surface it might appear that the obvious technique to use whilst the overall economy is recovering is to increase your very own retail prices again to a point that offers your company some margin of comfort with regards to operating costs. As the economy grows and people feel safer in their careers they will feel relaxed spending more money, so price increases ought to be an easy thing for consumers to take. This will not necessarily be the situation.
In fact, several firms might find that they have to hold their prices as small as feasible because the recently 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 hardest of the economic downturn appears to be over, we aren’t all prepared to start spending freely again.
The phrase price sensitivity describes how influential the factor of price is to customers when they are purchasing a particular item. If a relatively large price shift, for example raising the price of a car by £1000, does not see a significant drop in demand for that item then the product is said to be price insensitive. If a relatively modest change in price, say raising the price of a car by only £100, does see a fall in demand then that item is price sensitive. The same theory can also be applied to consumers themselves, and after a period of recession people are more inclined to be price sensitive.
As a result, the market at large will have great interest in the costs of the things that they are purchasing. Several people may be looking out for deals for everyday items that they require, and in particular their grocery shopping. Several of these things are necessities 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 in a position to take advantage of this by utilising special offers and price promotions to lure new consumers into purchasing their items. Consumers will be a lot more likely than ever to move from their favored manufacturers if the price is perfect, and businesses which offer the best priced products are most likely to stand to gain from this.
I was particularly satisfied at the way this specific company preserved overall performance as well as made profits throughout the hardest periods of the economic downturn.
Financial Security
People’s awareness of the economy at large along with how it impacts us all has significantly grown in light of the recession. Prior purchasing choices may well have been made with respect to the properties of the item and its price, but there is actually a new factor that buyers will be considering now.
Recession Proofing
Several companies have endured bankruptcy in the aftermath of recession. This has in turn has left countless numbers of consumers in a very bad situation. As people seek to reinvest money into savings and shareholdings they would like to know that the company they are investing in has some sort of safeguard against future recessions. This might simply be a case of operating the firm with as little debt as possible, but anything at all that could be used to reassure clients could be a great selling point for a firm.
Price Guarantees
One particular very visible feature of the recent recession in the Uk was the sharp decrease in the interest rate. After this change had worked itself through the high street retailers and financial services institutes several people found that they were either suffering as a result or enjoying a financial benefit. Either way, it undoubtedly elevated the profile of the effect that a changing interest rate can have on every day financial products.
Consumers who are looking to open up new savings accounts or private pensions may well be concerned that if the recession does in fact drag on for much longer they will not be generating any considerable interest on their investments. Actually, the tough economy may even now take a turn for the worst and interest rates might fall again. In this scenario, a savings product that provides a secured rate of return turns into a really appealing option.
The same can be said for customers with credit agreements. If the recession really is truly over and the worldwide economy starts to recuperate more swiftly than many expect, then it might not be too long before we see an increase in interest rates. That would mean that customers would have to pay more every month for their mortgages and loans.
A similar technique was used by a number of businesses 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 goods for a certain period in an attempt to retain existing customers and bring new customers in. This price freeze permitted a buffer period for individuals to adapt to the new VAT rate.
Conclusion
Whether the recession is completely over yet or not, it has served as a firm reminder that no business can afford to be complacent with their own position of survival. Business managers must always seek to consolidate their position and improve their own operations wherever possible. The businesses which are able to make it through the economic downturn will have learnt important lessons.