Everyone in the nation, and certainly around the world, will certainly have experienced the recent global economic downturn in one way or another, either as an individual or as a business operator. It may not have had a direct effect upon your own career or your personal income, but the knock-on effect of companies losing revenue will have influenced the monetary circumstance of the vast majority of people. It has been a very complicated issue with far reaching ramifications.
The recession now appears to be over, or is at the very least coming to an end, according to many economic experts. Although it might not yet be the occasion to celebrate having survived the economic meltdown, it should be a period to start looking ahead and preparing for a future in a stable economy. It is time to find some recession opportunities.
Firms of all sizes, buying and selling in all kinds of markets are no doubt going to have to alter their operations in view of the economic depression. This may be after legislation is brought in to more closely control and monitor the actions of worldwide monetary organisations. Many companies will also be considering ways to make themselves far more robust and able to endure financial instability in the long term. Either way, there will probably be changes for several companies, and where there is change there is opportunity.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and gradually propagated around the world over the following few years. Many financial analysts attributed the cause of the recession to be the crash in the U.S. property market, which in turn affected the value of monetary products tied into real estate assets.
This fall in value then uncovered the vulnerabilities of such a widespread system of credit contracts between international corporations, especially when much of the system was being backed by subprime lenders who were fiscal liabilities. A basic lack of third-party control of the monetary services sector had permitted the creation of a highly complex web of high-risk credit deals that relied upon a rising economy. Once the first debtors started to fall behind on payments, the entire house of cards was quick to come down.
The subsequent financial fallout saw many people lose their jobs as well as lose their homes, while many big, global companies were forced out of business. Government authorities all over the world had to introduce sweeping financial programs to assist their own banking systems, and even now certain first world countries are fighting to survive financially. Many believe it to have been the toughest economic period since the depression of the 1930s.
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The Impact on Business
It is probably reasonable to say that the recession had an effect on just about every enterprise around the world. Certain business models will have been more able to adapt to the extra economic stress than others but they will have nevertheless experienced an impact at some section of their operation.
Thousands of small and medium sized companies have been forced out of business due to the recent economic downturn. Many of these situations will have been comparatively simple; as the general public start to decrease their spending these businesses lose income, and since margins are often extremely slim in a competitive market place there was extremely little space to allow for this decline. It is a simple case of supply and demand not meeting in the middle.
Some other cases were not so clean cut. There were situations where one business in a lengthy supply cycle were unable to make it through and the knock-on impact would push every company inside of that supply chain to the brink of bankruptcy.
Job losses have of course been a very delicate subject to the wide majority of us. It is estimated 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 financial crisis.
The End of Recession
It does seem that the recession is coming to an end however, and that can only be good news for business. Gross domestic product (GDP) experienced a climb in the UK throughout the fourth quarter of 2009 and total unemployment figures fell, both of which are indicators of an economic system that is healing.
Industry experts from the International Monetary Fund (IMF) have predicted that the UK financial system will actually get smaller over the duration of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the danger of wide-spread joblessness persisting. When added to the possibility of a new or even hung government on its way into power in May 2010, as well as the real need to reduce an enormous financial deficit, the future is definitely not set in stone.
This uncertainty can be utilised as an advantage though, and businesses that are prepared to take a few risks or that are willing to alter their operations to cater for a more wary audience could be set to make great profits.
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On the surface it may appear that the obvious technique to use whilst the overall economy is recuperating is to raise your own retail prices again to a point that affords your company some extra margin of comfort in relation to operating expenses. As the market grows and consumers feel safer in their jobs they will really feel relaxed spending more cash, so price increases ought to be an easy thing for shoppers to take on.
In fact, several firms may find that they need to keep their prices as small as possible due to the newly triggered price sensitivity amongst the general public. Many of us have had to tighten our belts during the last few years, and just because the worst of the economic downturn seems to be over, we aren’t all prepared to start spending freely just yet. This is a pattern that is tough to precisely quantify, however firms will have to be aware of how their specific customer sector feels toward spending.
The phrase price sensitivity represents how influential the element of price is to customers when they are buying a particular product. If a fairly large price change, for example raising the cost of a car by £1000, does not provoke a significant drop in demand for that item then the item is said to be price insensitive. If a fairly small 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. The same principle can also be applied to consumers themselves, and following a period of recession people are much more likely to be price sensitive.
As a result, the market at large will have great interest in the costs of the things that they are buying. Several people may be looking out for deals for everyday products that they need, and particularly their grocery shopping. Many of these products are essentials however.
Companies will be in a position to take advantage of this by using special discounts and price promotions to entice new consumers into buying their products. Buyers will be more likely than ever to move from their preferred brand names if the price is perfect, and companies which offer the best priced goods are likely to stand to gain from this.
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People’s awareness of the economy at large and how it impacts us all has greatly increased in light of the economic depression. Previous purchasing decisions may well have been made in accordance to the quality of the item and its value, but there is actually a fresh aspect that shoppers will be thinking about now.
Many firms have suffered bankruptcy in the aftermath of recession. This in turn has put countless numbers of customers in a really poor predicament. As people look to reinvest money into savings and shareholdings they will like to see that the corporation they are investing in has some sort of safeguard against potential recessions. This may merely be a case of operating the firm with as little debt as possible, but anything at all that can be used to assure customers might be a fantastic selling point for a business.
One very visible feature of the recent recession in the United Kingdom was the sharp decrease in the interest rate. Once this change had worked itself throughout the high street retailers and fiscal services institutes many people found that they were either suffering as a consequence or enjoying a monetary benefit.
Shoppers who are looking to open up new savings accounts or private pensions might be worried that if the recession does indeed drag on for much more time they won’t be generating any considerable interest on their investments. In reality, the tough economy might even now take a turn for the worst and interest rates could fall again. In this situation, a savings product that offers a guaranteed rate of return becomes a very appealing choice.
The exact same can be said for consumers with credit agreements. If the recession really is genuinely over and the worldwide economy begins to recuperate more swiftly than many expect, then it may not be too long before we see a rise in interest rates. This would signify that customers would have to pay much more each month for their mortgages and loans.
A similar technique was utilised by a number of firms after 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 period in an attempt to retain their current customers and draw new clients in.
Whether the economic downturn is completely over yet or not, this has served as a firm indication that no company can afford to be complacent in their own situation of survival. Company managers must constantly look to consolidate their situation and improve their own operations where possible.