Everyone in the country, and without a doubt around the planet, will certainly have experienced the latest worldwide economic downturn in one manner or another, possibly as an individual or as a company owner. It may not have had an immediate effect upon your own job or your personal income, but the knock-on impact of businesses dropping income will have affected the monetary predicament of the vast majority of folks. It has been a really complex problem with far reaching ramifications.
The actual recession now appears to be over, or is at least coming to an end, according to many economic experts. Although it may not yet be the time to celebrate having survived the economic crisis, it should be a period to begin looking ahead and preparing for a future within a stable economic climate. It is time to look for some recession opportunities.
Businesses of almost all sizes, trading in all sorts of markets are no doubt going to have to alter their operations in light of the recession. This may well be after legislation is brought in to more closely govern and keep an eye on the action of international economic companies. Many firms will also be looking at techniques to make themselves far more robust and able to withstand financial instability in the future. Either way, there will be adjustments for several companies, and wherever there is change there is potential.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and progressively propagated around the world over the subsequent couple of years. Many economic analysts attributed the cause of the recession to be the crash in the U.S. real estate market, which in turn impacted the value of monetary products tied into real estate resources. The expansion of the housing market until that point had encouraged homeowners to refinance their primary homes in order to obtain second or third properties with a view to a long-term profit.
This fall in value then exposed the vulnerabilities of such a widespread network of credit contracts between global corporations, particularly when much of the system was being backed by subprime lenders who were financial risks. A general lack of third-party management of the financial services market had allowed the development of a highly complicated web of high-risk credit agreements that relied upon a growing economy.
The following financial fallout saw many people lose their jobs and also lose their properties, whilst many big, international organisations were forced out of business. Governments across the world had to bring in radical financial packages to help their own banking systems, and even now certain first world countries are struggling to survive financially.
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The Impact on Business
It is probably reasonable to state that the recession has had an impact on just about every single enterprise around the globe. Particular business models will have been more able to adjust to the added economic stress than others however they will have nevertheless experienced an impact at some portion of their operation. If a key supplier or a key client goes out of business then that will have a detrimental impact upon your own enterprise.
Thousands of small and medium sized businesses have been pressured out of business as a result of the recent recession. Several of these situations will have been fairly simple; as the general public start 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 extremely little room to allow for this fall.
Some other cases were not so clean cut. There were circumstances where one business in a lengthy supply chain were unable to survive and the knock-on effect would force every company within that supply chain to the brink of bankruptcy. The businesses that were able to pull through have had to make very difficult choices to ensure they can outlast the economic downturn.
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 (nearly 8% of the entire countries’ labourforce), and many of these will probably have been victims of the international financial crisis. These kinds of job losses lead to a greater decrease in typical spending, which triggers a further drop in earnings for business.
The End of Recession
It does appear that the downturn is coming to an end though, and that can only be great news for business. Gross domestic product (GDP) saw a climb in the UK during the fourth quarter of 2009 and total unemployment numbers dropped, both of which are indicators of an economy that is healing. This isn’t a view embraced by everybody however.
Industry experts at the International Monetary Fund (IMF) have forecast that the UK economy will actually reduce in size over the course of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the threat of wide-spread unemployment persisting.
This kind of uncertainty may be used as an advantage though, and businesses that are ready to take a few risks or that are willing to alter their operations to cater to a more wary target audience could be set to make excellent profits.
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Price Sensitivity
On the surface it may appear that the obvious technique to use while the overall economy is recovering is to increase your very own retail charges again to a point that affords your company some margin of comfort in relation to operating costs. As the economy grows and consumers feel more secure in their jobs they will feel comfortable spending more money, so price raises ought to be an easy thing for consumers to take. This will not always be the situation.
Actually, several firms may find that they need to keep their selling prices as low as possible due to the recently triggered price sensitivity amongst the general public. Most of us have had to tighten our belts during the last few years, and simply because the hardest of the economic downturn appears to be over, we aren’t all prepared to begin spending freely again. This is a trend that is tough to precisely quantify, but companies will want to be mindful of how their specific customer sector feels toward spending.
The term price sensitivity describes how influential the factor of price is to shoppers any time they are purchasing a specific item. If a fairly large price change, for example raising 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 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. Many people may be looking out for discounts for everyday products that they need, and particularly their grocery shopping. Many of these items are essentials however.
Firms will be able to take advantage of this by utilising special discounts and price promotions to attract new shoppers into buying their own goods. Consumers will be more likely than ever to switch from their preferred brand names if the price tag is right, and companies that offer the best priced goods are likely to stand to profit from this. Once these prospects have become clients there is a great chance that they will remain loyal to their new product or service choice as the market recovers 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 along with how it influences us all has greatly grown in light of the economic depression. Previous buying decisions may well have been made in accordance to the quality of the item and its price, but there is a fresh factor that buyers will be thinking about now.
Recession Proofing
Several firms have endured bankruptcy in the aftermath of recession. This has in turn has put thousands of shoppers in a really poor predicament. As individuals seek to reinvest money into financial savings and shareholdings they would prefer to know that the company they are investing in has some kind of protection against future recessions. This might simply be a case of running the business with as little debt as feasible, but anything that could be used to reassure clients might be a fantastic selling point for a business.
Price Guarantees
One very visible element of the recent economic downturn in the Uk was the sharp decrease in the interest rate. Once this change had worked itself through the high street retailers and fiscal services institutes several people found that they were either struggling as a result or enjoying a monetary benefit. Either way, it undoubtedly elevated the profile of the effect that a fluctuating interest rate can have on everyday economic products.
Customers that are seeking to open new savings accounts or private pensions may well be worried that if the recession does in fact drag on for much more time they won’t be generating any considerable interest on their investments. In fact, the tough economy may even now take a turn for the worst and interest rates might drop again. In this situation, a savings product that provides a guaranteed rate of return will become a really attractive option.
The same can be said for consumers with credit agreements. If the recession really is genuinely over and the international market begins to recover more quickly than many anticipate, then it might not be too long before we see a growth in interest rates. This would mean that consumers would need to pay more every month for their mortgages and loans. A business which could offer a secured rate of interest that is not connected to the base rate of interest might again entice several new clients.
A similar approach was made use of 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 certain time period in an effort to keep their current customers and bring new clients in.
Conclusion
Whether the economic downturn is completely over yet or not, this has functioned as a timely indication that no company can become complacent in their own situation of success. Business managers must always seek to consolidate their situation and improve their own operations wherever possible. The companies that manage to survive the economic downturn will have learnt valuable lessons.
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