Everyone in the nation, and without a doubt around the world, will have experienced the latest global recession in one way or another, possibly as a person or as a company owner. It may not have had a direct effect upon your own job or your private earnings, but the knock-on effect of companies losing revenue will have influenced the monetary situation of the vast majority of folks. It was a really complicated issue with wide reaching implications.
The recession now appears to be over, or is at least coming to an end, according to most financial authorities. Whilst it might not yet be the time to celebrate having survived the financial crisis, it should be a period to begin looking forward and preparing for a future in a stable economy. It is time to find some recession opportunities.
Firms of all sizes, trading in all sorts of markets are no doubt going to need to adjust their operations in view of the economic downturn. This may well be after law is introduced to more closely control and keep an eye on the actions of global financial organisations. Many companies will also be considering techniques to make themselves much more robust and able to withstand economic instability in the long term. Either way, there will certainly be changes for several companies, and where there is change there is potential.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and gradually propagated around the world over the subsequent few years. Numerous financial analysts credited the cause of the economic downturn to be the crash in the U.S. property market, which in turn affected the value of monetary products linked into real estate assets. The expansion of the housing market up to that point had encouraged homeowners to refinance their primary homes in order to purchase second or third houses with a view to a long-term gain.
This fall in value then exposed the vulnerabilities of such a widespread system of credit agreements between global businesses, particularly when much of the system was being backed by subprime lenders who were fiscal risks. A general lack of third-party control of the monetary services sector had allowed the creation of a very complex web of high-risk credit deals which relied upon a growing economy. Once the first debtors began to default on payments, the entire house of cards ended up being quick to come down.
The subsequent financial fallout saw many people lose their jobs and also lose their properties, while many big, international companies were forced out of business. Governments all over the world had to bring in major financial packages to help their own banking systems, and even now certain first world countries are fighting to make it through financially.
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The Impact on Business
It’s probably reasonable to say that the recession had an impact on just about every enterprise around the world. Particular business models will have been more able to adapt to the extra financial strain than others but they will have still experienced an impact at some part of their operation.
Thousands of small and medium sized businesses have been pressured out of business because of the recent economic collapse. Many of these cases will have been relatively basic; as the general public begin to decrease their spending these types of businesses lose income, and since profit margins are often very slender in a competitive market place there was very little space to allow for this decrease. It is a simple 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 cycle had been unable to make it through and the knock-on effect would push every business in that supply chain to the edge of bankruptcy.
Job losses have obviously been a very sensitive subject to the broad majority of us. It’s believed that the current number of jobless individuals in the UK is over 2.3 million (almost 8% of the entire countries’ labourforce), and many of these will probably have been victims of the international economic crisis. These job losses lead to a larger decrease in typical spending, which triggers a further drop in revenue for business.
The End of Recession
It does seem that the recession is on its way to an end however, 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 overall unemployment figures dropped, both of which are signs of an economy that is recovering. This isn’t a view shared by everyone however.
Industry experts at the International Monetary Fund (IMF) have forecast that the UK economy may actually reduce in size over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the risk of wide-spread joblessness continuing. When added to the possibility of a new or even hung government coming into power in May 2010, as well as the need to lower a significant financial deficit, the foreseeable future is definitely not set in stone.
This kind of uncertainty can be used as an advantage though, and organisations that are ready to take a few risks or that are prepared to adjust their own operations to cater for a more wary target audience could be set to make excellent profits.
Any forthcoming adjustments to nationwide tax costs will probably impact teriyaki marinade companies from manufacturing all the way through to product sales.
Price Sensitivity
On the outside it might appear that the clear technique to use whilst the economy is recuperating is to increase your very own retail prices again to a level that affords your company some extra margin of comfort in relation to operating expenses. As the market grows and consumers feel more secure in their careers they will feel secure spending more money, so price increases ought to be an easy thing for shoppers to take.
In fact, many businesses might find that they need to keep their prices as small as feasible because the recently triggered price sensitivity amongst the general public. Many of us will have had to tighten our belts during the last few years, and simply because the worst of the recession appears to be over, we aren’t all prepared to start spending freely again. This is a trend that is tough to precisely quantify, but firms will want to be mindful of how their specific consumer sector feels toward spending.
The term price sensitivity represents how important the element of price is to customers any time they are buying a specific item. If a fairly large price change, for example raising the cost of a car by £1000, does not provoke a large drop in demand for that product then the item is said to be price insensitive. If a relatively small change in price, say increasing the price of a car by only £100, does see a fall 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 purchasing. Several people may be looking out for discounts for everyday items that they need, and in particular their grocery shopping. Many of these items are necessities however. When it comes to buying expensive goods, like televisions, cars and holidays, the cost of the purchase is likely to be an more important decision maker.
Firms will be in a position to take advantage of this by using special discounts and price promotions to attract new consumers into buying their products. Consumers will be more likely than ever to switch from their preferred manufacturers if the price is perfect, and businesses that offer the best priced items are most likely to stand to profit from this. Once these potential customers have turned into customers there is a good chance that they will remain faithful to their new product choice as the economy recovers further, which could lead to further spending at the original price rates.
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Financial Security
People’s knowledge of the economy at large and also how it influences us all has significantly grown in light of the economic downturn. Prior purchasing decisions may well have been made in accordance to the quality of the product and its value, but there is actually a new factor that consumers will be considering now.
Recession Proofing
Many businesses have endured bankruptcy in the aftermath of recession. This has in turn has left countless numbers of customers in a very poor predicament. As individuals look to reinvest income into personal savings and shareholdings they will prefer to see that the business they are investing in has some kind of defense against future recessions. This could merely be a case of managing the firm with as little debt as possible, but anything at all that could be used to reassure customers might be a great selling point for a business.
Price Guarantees
One particular very noticeable feature of the recent recession in the United Kingdom was the sharp decrease in the interest rate. After this change had precipitated itself through the high street retailers and monetary services organisations several people found that they were either suffering as a result or reaping a monetary advantage.
Consumers that are looking to open up new savings accounts or private pensions may be concerned that if the recession does indeed carry on for much longer they will not be earning any considerable interest on their investments. In reality, the tough economy may even now 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 becomes a very attractive option. This method might be used to attract many new savings clients.
The same can be said for customers with credit agreements. If the recession is truly over and the worldwide economy starts to recover much more swiftly than many anticipate, then it might not be long before we see a growth in interest rates. This would signify that customers would have to pay more each month for their mortgages and loans.
A similar approach was made use of by a number of firms 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 items for a certain time period in an effort to keep current customers and bring new clients in.
Conclusion
Whether the economic downturn is totally over yet or not, it has served as a firm indication that no business can become complacent in their own situation of survival. Company owners should always seek to consolidate their own position and boost their own operations wherever possible.
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