Everyone in the nation, and without a doubt all around the world, will have experienced the latest global recession in one manner or another, either as an individual or as a company operator. It may not have had a direct effect upon your own career or your personal earnings, but the knock-on effect of businesses losing income will have affected the economic situation of the great majority of folks. It has been a very complicated problem with far reaching implications.
The actual recession now seems to be over, or is at the very least coming to an end, according to many financial experts. Although it may not yet be the occasion to celebrate having survived the financial crisis, it should be a period to begin looking forward and planning for a future in a stable economic climate. It is time to seek out some recession opportunities.
Businesses of all sizes, buying and selling in all kinds of markets are no doubt going to have to alter their operations in light of the recession. This may well be after law is brought in to more closely govern and keep an eye on the actions of worldwide monetary organisations. Many businesses will also be looking at ways to make themselves far more robust and able to endure financial 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 recession of the early 21st century began in 2007 and progressively spread around the planet over the following few years. Many financial analysts credited the cause of the economic downturn to be the drop in the U.S. property market, which in turn affected the worth of financial products linked into real estate assets.
This fall in value then uncovered 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 liabilities. A general lack of third-party control of the monetary services sector had permitted the creation of a highly complicated web of high-risk credit agreements that relied upon a growing economy. Once the first debtors started to fall behind on payments, the entire house of cards ended up being quick to fall.
The following financial fallout saw several people lose their jobs as well as lose their homes, while many large, global companies were forced out of business. Government authorities all over the world had to introduce sweeping financial packages to help their own banking systems, and even now certain first world countries are fighting to make it through financially. Many consider it to have been the toughest economic period since the depression of the 1930s.
Even businesses which specialize in supplying floor painting contractors needed to change their operations so as to make it through the credit crunch.
The Impact on Business
It is probably fair to state that the recession has had an effect on just about every single enterprise around the globe. Certain business models will have been more able to adjust to the added economic stress than others however they will have still felt an impact at some section of their operation. If a key supplier or a key client goes out of business then this will have a bad effect upon your own company.
Thousands of small and medium sized companies have been forced out of business because of the recent recession. Many of these situations will have been relatively simple; as the general public begin to reduce their spending these types of businesses lose revenue, and since margins are often very slim in a competitive market place there was very little space to accommodate this decrease.
Other cases were not so clean cut. There were circumstances where one company in a long supply chain had been unable to make it through and the knock-on effect would force every business inside of that supply chain to the brink of bankruptcy. The companies that were able to pull through have had to make incredibly tough decisions to make sure they can outlast the recession.
Job losses have obviously been a pretty sensitive subject to the vast majority of us. It is estimated that the current number of jobless individuals in the UK is over 2.3 million (nearly 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 on its way to an end though, and that can only be good news for business. Gross domestic product (GDP) experienced a climb in the UK during the final quarter of 2009 and overall unemployment numbers fell, both of which are signals of an economy that is recovering. This is not a view shared by everyone though.
Industry experts at the International Monetary Fund (IMF) have forecast that the UK economy may actually shrink over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the risk of wide-spread unemployment persisting. When added to the prospect of a new or perhaps hung government coming into power in May 2010, in addition to the need to lower a significant fiscal deficit, the foreseeable future is certainly not set in stone.
This uncertainty may be used as an advantage however, and companies that are ready to take a few risks or who are willing to modify their operations to cater to a more wary target audience might be set to make great profits.
The actual impact of the tough economy upon this specific business selling oven gloves with fingers has been somewhat less serious compared to several other businesses around the region.
Price Sensitivity
On the outside it may seem that the clear strategy to use whilst the economy is recuperating is to raise your own retail prices again to a level that affords your company some margin of comfort in relation to operating costs. As the economy grows and people feel more secure in their careers they will feel relaxed spending more cash, so price increases should be an easy thing for consumers to take on.
Actually, several firms might find that they have to hold their prices as small as possible because the recently provoked price sensitivity among the general public. Most of us will have had to tighten our belts over the last few years, and just because the worst of the economic downturn appears to be over, we are not all ready to begin spending freely just yet.
The term price sensitivity describes how influential the element of price is to shoppers when they are buying a particular product. If a relatively large price change, for example increasing the cost of a car by £1000, does not see a significant drop in demand for that item 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 decline in demand then that item is price sensitive. The exact same theory can also be applied to shoppers themselves, and after a period of economic downturn people are more inclined to be price sensitive.
As a result, the marketplace at large will have great interest in the prices of the items that they are buying. Many people may be watching out for bargains for everyday products that they need, and in particular their grocery shopping. Many of these items are necessities however. When it comes to buying luxury items, like televisions, cars and holidays, the cost of the purchase is likely to be an more important decision maker.
Businesses will be in a position to take advantage of this fact by using special offers and price campaigns to attract new customers into buying their own goods. Consumers will be more likely than ever to switch from their preferred brands if the price is right, and businesses which offer the best priced items are most likely to stand to gain from this.
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Financial Security
People’s understanding of the economy at large and also how it impacts us all has significantly grown in light of the recession. Prior buying decisions may well have been made according to the properties of the product and its price, but there is a fresh aspect that shoppers will be considering now. Financial security.
Recession Proofing
Many companies have endured bankruptcy in the aftermath of economic collapse. This has in turn has put thousands of consumers in a very bad predicament. As people seek to reinvest money into financial savings and shareholdings they would prefer to know that the business they are investing in has some kind of safeguard against potential recessions. This could simply be a case of managing the company with as little debt as feasible, but anything at all that may be utilised to reassure customers could be a great selling point for a company.
Price Guarantees
One very noticeable element of the recent recession in the Uk was the steep decrease in the interest rate. After this change had precipitated itself throughout the high street retailers and monetary services organisations many people found that they were either struggling as a consequence or enjoying a financial advantage. Either way, it definitely elevated the profile of the effect that a changing interest rate can have on everyday financial products.
Customers that are seeking to open up 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 substantial interest on their investments. In fact, the tough economy might still take a turn for the worst and interest rates might fall again. In this scenario, a savings product that provides a confirmed rate of return turns into a very appealing choice. This technique can be used to attract several new savings customers.
The exact same could be said for customers with credit agreements. If the recession is genuinely over and the worldwide market starts to recover more swiftly than many anticipate, 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 technique was made use of by a number of businesses when the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. They would offer “price freezes” on their products for a certain period in an attempt to retain their current customers and draw new customers in. This kind of price freeze allowed a buffer period for people to adapt to the new VAT rate.
Conclusion
Whether the economic downturn is completely over yet or not, this has served as a timely indication that no company can become complacent in its own position of success. Business owners should always seek to consolidate their own situation and improve their operations where possible. The companies that manage to survive the economic downturn will have learned valuable lessons.