Everyone in the nation, and certainly around the world, will have experienced the latest global economic downturn in one way or another, either as a person or as a business owner. It might not have had a direct effect upon your own position or your personal income, but the knock-on effect of businesses losing revenue will have influenced the economic situation of the wide majority of folks. It has been a very complicated issue with wide reaching ramifications.
The recession now appears 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 time to celebrate having made it through the financial meltdown, it should be a time to start looking forward and preparing for a future in a stable economy. It is time to seek out some recession opportunities.
Firms of all sizes, buying and selling in all types of markets are no doubt going to have to adjust their operations in light 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 economic organisations. Many businesses may also be looking at methods to make themselves far more robust and able to endure financial instability in the future.
The Recent Recession
The recession of the early 21st century started in 2007 and steadily spread around the world over the subsequent couple of years. Many economic analysts attributed the cause of the recession to be the drop in the U.S. housing market, which in turn affected the worth of financial products tied into real estate resources. The growth of the property market until that point had motivated homeowners to refinance their first properties in order to buy second or third properties with a view to a long-term profit.
This fall in value then exposed the vulnerabilities of such a widespread system of credit contracts between international companies, particularly when much of the system was being supported by subprime lenders who were financial risks. A basic lack of third-party control of the monetary services sector had permitted the creation of a very complex web of high-risk credit deals which relied upon a growing economy.
The subsequent financial fallout saw many individuals lose their jobs as well as lose their homes, whilst many big, international companies were forced out of business. Government authorities across the world had to introduce radical financial packages to help their own banking systems, and still now certain first world nations are struggling to survive financially.
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The Impact on Business
It is probably fair to state that the economic downturn had an effect on just about every enterprise around the world. Certain business models will have been more able to adjust to the additional financial stress than others but they will have still experienced an impact at some section of their operations.
Thousands of small and medium sized businesses have been forced out of business because of the recent economic collapse. Several of these cases will have been relatively basic; as the general public start to decrease their spending these types of businesses lose income, and since margins are often incredibly slender in a competitive market place there was very little space to allow for this drop.
Other cases were not so clear cut. There were circumstances where one company in a lengthy supply cycle were unable to make it through and the knock-on effect would force every business within that supply chain to the brink of bankruptcy.
Job losses have naturally been a pretty delicate subject to the vast majority of us. It is believed that the present number of jobless individuals in the UK is over 2.3 million (nearly 8% of the entire countries’ workforce), and many of these will probably have been victims of the international financial crisis. These job losses lead to a larger decrease in general spending, which results in a further drop in revenue for business.
The End of Recession
It does appear that the downturn is coming to an end however, and this can only be good news for business. Gross domestic product (GDP) saw a rise in the UK throughout the fourth quarter of 2009 and total unemployment figures fell, both of which are indicators of an economy that is healing. This isn’t a perspective shared by everyone though.
Industry experts from the International Monetary Fund (IMF) have predicted that the UK financial system may actually reduce in size over the course of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the risk of wide-spread unemployment persisting.
This kind of uncertainty can be used as an advantage though, and businesses which are ready to take a few risks or that are willing to adjust their operations to cater for a more wary target audience might be set to make great profits.
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Price Sensitivity
On the outside it may appear that the clear strategy to use while the economy is recuperating is to raise your own retail charges again to a point that offers your company some margin of comfort with regards to running expenses. As the market grows and consumers feel more secure in their careers they will really feel comfortable spending more money, so price raises should be an easy thing for consumers to take.
In fact, several businesses may find that they need to keep their selling prices as low as possible due to the recently provoked price sensitivity amongst the general public. Many of us have had to tighten our belts during the last few years, and simply because the hardest of the recession appears to be over, we are not all ready to begin spending freely again.
The phrase price sensitivity represents how important the element of price is to customers any time they are buying a specific product. If a fairly large price shift, for example raising the price of a car by £1000, doesn’t see a big drop in demand for that item then the item is said to be price insensitive. If a fairly modest change in price, say raising the price of a car by only £100, does see a fall in demand then that product is price sensitive.
As a result, the market place at large will have great interest in the prices of the things that they are buying. Many people will be looking out for discounts for everyday items that they require, and in particular their grocery shopping. Many of these things are necessities however. When it comes to buying expensive products, such as televisions, cars and holidays, the cost of the purchase is likely to be an much more important decision maker.
Firms will be in a position to take advantage of this by using special discounts and price campaigns to attract new shoppers into purchasing their items. Shoppers will be a lot more likely than ever to change from their favored brand names if the price tag is right, and companies that offer the best priced items are likely to stand to profit from this.
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Financial Security
People’s understanding of the economic system at large along with how it impacts us all has significantly increased in light of the recession. Prior buying choices may well have been made in accordance to the properties of the product and its value, but there is actually a fresh aspect that shoppers will be thinking about now. Financial security.
Recession Proofing
Several companies have suffered bankruptcy in the aftermath of economic collapse. This in turn has put thousands of consumers in a really poor predicament. As individuals seek to reinvest income into personal savings and shareholdings they will like to see that the corporation they are investing in has some kind of protection against future recessions.
Price Guarantees
One particular very noticeable feature of the latest recession in the United Kingdom was the steep drop in the interest rate. After this change had worked itself throughout the high street shops and financial services institutes several people found that they were either struggling as a result or reaping a monetary benefit. Either way, it definitely raised the profile of the impact that a fluctuating interest rate could have on every day economic products.
Customers that are looking to open up new savings accounts or private pensions may be concerned that if the recession does in fact carry on for much more time they will not be generating any substantial interest on their investments. In fact, the tough economy might even now take a turn for the worst and interest rates might drop again. In this situation, a savings product that provides a confirmed rate of return becomes a really attractive option. This method could be used to attract many new savings clients.
The exact same can be said for customers with credit agreements. If the recession is genuinely over and the global market starts to recover much more quickly than many anticipate, then it might not be long before we see a rise in interest rates. That would signify that customers would need to pay more each month for their mortgages and loans. A company that could offer a guaranteed rate of interest that isn’t linked to the base rate of interest could again entice many new clients.
A similar approach 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. These companies would offer “price freezes” for their items for a specific period in an effort to keep current clients and bring new clients in.
Conclusion
Whether the economic downturn is totally over yet or not, this has served as a firm reminder that no company can become complacent in their own position of success. Company owners must always look to consolidate their position and boost their operations where possible. The companies which manage to endure the economic downturn will have learnt important lessons.