Everybody in the nation, and indeed all around the planet, will certainly have experienced the recent global economic downturn in one manner or another, either as a person or as a company owner. It may not have had an immediate impact upon your own position or your private income, but the knock-on result of businesses dropping revenue will have influenced the monetary predicament of the wide majority of folks. It has been a very complex problem with far reaching implications.
The actual recession now seems to be over, or is at least on its way to an end, according to most financial experts. Although it might not yet be the occasion to celebrate having survived the financial meltdown, it should be a time to start looking ahead and preparing for a future in a steady economy. It is time to look for some recession opportunities.
Businesses of almost all sizes, buying and selling in all types of markets are no doubt going to need to change their operations in light of the recession. This may be after legislation is introduced to more closely govern and keep an eye on the action of worldwide monetary companies. Many companies will also be considering methods to make themselves far more robust and able to endure economic instability in the future. Either way, there will certainly be adjustments for many companies, and where there is change there is opportunity.
The Recent Recession
The recession of the early 21st century began in 2007 and progressively propagated around the planet over the subsequent couple of years. Numerous financial analysts attributed the cause of the recession to be the drop in the U.S. real estate market, which in turn affected the value of monetary products linked into real estate assets. The growth of the housing market up to that point had motivated homeowners to refinance their primary properties in order to purchase second or third homes with a view to a long-term profit.
This drop in value then exposed the vulnerabilities of such a widespread network of credit contracts between international businesses, particularly when much of the system was being backed by subprime lenders who were fiscal risks. A general lack of third-party management of the financial services market had allowed the creation of a highly complex web of high-risk credit agreements which depended upon a rising economy. Once the first debtors began to default on payments, the entire house of cards was quick to come down.
The subsequent financial fallout saw many individuals lose their jobs and lose their properties, while many large, global companies were forced out of business. Governments across the world had to introduce major financial packages to assist their own banking systems, and even now certain first world countries are fighting to survive financially. Many consider it to have been the worst economic period since the depression of the 1930s.
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The Impact on Business
It’s probably fair to say that the economic downturn had an effect on just about every enterprise around the globe. Particular business models will have been more able to adapt to the additional economic stress than others but they will have still experienced an impact at some part of their operations. If any key supplier or a main client goes out of business then this can have a detrimental effect upon your own enterprise.
Many thousands of small and medium sized companies have been pressured out of business as a result of the recent recession. Many of these situations will have been comparatively simple; as the general public start to decrease their spending these companies lose revenue, and since margins are often very slender in a competitive market place there was extremely little room to accommodate this decrease. It is a straightforward case of supply and demand not meeting in the middle.
Some other cases were not so clear cut. There were scenarios where one company in a lengthy supply chain had been unable to make it through and the knock-on impact 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 extremely tough judgements to ensure they can outlast the economic collapse.
Job losses have obviously been a very sensitive subject to the wide majority of us. It’s estimated that the present number of unemployed individuals in the UK is over 2.3 million (almost 8% of the total countries’ workforce), and many of these will probably 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 that can only be good news for business. Gross domestic product (GDP) experienced a rise in the UK throughout the fourth quarter of 2009 and overall unemployment numbers fell, both of which are indicators of an economic system that is healing. This is not a perspective shared by everybody though.
Industry experts from the International Monetary Fund (IMF) have forecast that the UK financial system will actually reduce in size over the duration of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the danger of wide-spread unemployment persisting. When added to the possibility of a new or even hung government on its way into power in May 2010, in addition to the real need to lower a significant fiscal deficit, the future is definitely not set in stone.
This uncertainty may be used as an advantage however, and organisations that are ready to take a few risks or who are prepared to alter their operations to cater for a more wary target audience could be set to make good profits.
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Price Sensitivity
On the surface it might appear that the obvious strategy to use whilst the overall economy is recuperating is to increase your very own retail charges again to a point that offers your company some margin of comfort regarding operating costs. As the market grows and consumers feel safer in their careers they will really feel comfortable spending more money, so price raises ought to be an easy thing for shoppers to take on. This will not necessarily be the case.
Actually, several businesses might find that they have to keep their selling prices as low as possible because the newly provoked price sensitivity amongst 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 recession seems to be over, we aren’t all prepared to start spending freely just yet.
The term price sensitivity describes how influential the element of price is to shoppers when they are purchasing a particular item. If a fairly large price shift, for example raising the cost of a car by £1000, doesn’t see a large decrease in demand for that item then the product is said to be price insensitive. If a comparatively small change in price, say raising the price of a car by only £100, does see a decline in demand then that item is price sensitive.
As a result, the market place at large will have great interest in the costs of the items that they are buying. Several people will be looking out for bargains for everyday items that they require, and in particular their grocery shopping. Many of these things are essentials however.
Businesses will be in a position to take advantage of this fact by using special discounts and price campaigns to lure new shoppers into purchasing their own products. Shoppers will be a lot more likely than ever to move from their favored brand names if the price is right, and companies which offer the best priced items are most likely to stand to gain from this.
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Financial Security
People’s knowledge of the economy at large and also how it affects us all has greatly grown in light of the economic downturn. Prior buying decisions may well have been made with respect to the quality of the item and its value, but there is actually a new aspect that buyers will be thinking about now. Financial security.
Recession Proofing
Several businesses have suffered bankruptcy in the aftermath of economic collapse. This in turn has left countless numbers of shoppers in a really poor situation. As individuals look to reinvest money into financial savings and shareholdings they would like to know that the business they are investing in has some type of safeguard against future recessions.
Price Guarantees
One particular very noticeable feature of the recent economic downturn in the Uk was the sharp decrease in the interest rate. Once this change had precipitated itself through the high street stores and monetary services organisations many people discovered that they were either suffering as a consequence or enjoying a financial benefit.
Customers that are seeking to open new savings accounts or private pensions may well be worried that if the economic downturn does indeed drag on for much more time they will not be earning any substantial interest on their investments. In reality, the recession might still take a turn for the worst and interest rates might drop again. In this situation, a savings product that offers a confirmed rate of return becomes a really attractive option.
The same can be said for consumers with credit agreements. If the recession really is truly over and the worldwide economy starts to recover more swiftly than many expect, then it might not be too long before we see a rise in interest rates. This would signify that consumers would need to pay more each month for their mortgages and loans. A provider which can offer a secured rate of interest that isn’t connected to the base rate of interest could again entice many new customers.
A similar technique was used 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” on their products for a specific period in an attempt to keep their existing clients and draw new clients in. This price freeze allowed a buffer time for people to adapt to the new VAT rate.
Conclusion
Whether the economic downturn is absolutely over yet or not, it has served as a timely reminder that no company can afford to become complacent in its own position of survival. Company managers must constantly look to consolidate their position and improve their operations where possible. The businesses that are able to endure the downturn in the economy will have learned valuable lessons.
