Everyone in the nation, and indeed around the world, will have experienced the recent global economic downturn in one way or another, either as an individual or as a company owner. It might not have had an immediate impact on your own job or your private income, but the knock-on result of companies losing revenue will have influenced the financial circumstance of the great majority of people. It was a really complex problem with far reaching ramifications.
The actual recession now seems to be over, or is at the least on its way to an end, according to many economic experts. Although it may not yet be the occasion to celebrate having survived the financial turmoil, it should be a time to begin looking forward and preparing for a future within a stable economic climate. It is time to look for some recession opportunities.
Businesses of almost all sizes, trading in all sorts of markets are no doubt going to have to change their operations in view of the economic depression. This might be after law is brought in to more closely govern and keep an eye on the action of global economic organisations. Many companies will also be considering ways to make themselves much more robust and able to endure financial instability in the long term.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and steadily spread around the world over the next few years. Many financial analysts credited the cause of the economic downturn to be the crash in the U.S. housing market, which in turn affected the value of financial products linked into real estate resources.
This fall in value then exposed the vulnerabilities of such a widespread network of credit contracts between international businesses, especially when much of the system was being backed by subprime lenders who were financial liabilities. A general lack of third-party management of the monetary services market had permitted the creation of a very complicated web of high-risk credit deals that relied upon a thriving economy. Once the first debtors started to default on payments, the entire house of cards ended up being quick to come down.
The subsequent economic fallout saw many individuals lose their jobs and lose their properties, while many big, global companies were forced out of business. Government authorities all over the world had to bring in radical financial programs to assist their own banking systems, and still now certain first world countries are fighting to survive financially.
As public belief of the bank construct dropped down the disability car adaptations sector observed a fairly sharp decrease in gross sales revenues.
The Impact on Business
It’s probably reasonable to say that the economic downturn had an impact on just about every single business around the world. Certain business models will have been more able to adapt to the additional financial stress than others but they will have nevertheless felt an impact at some part of their operations.
Many thousands of small and medium sized businesses have been pressured out of business as a result of the recent economic collapse. Several of these situations will have been relatively basic; as the general public start to decrease their spending these companies lose income, and since profit margins are often very slender in a competitive market place there was extremely little space to accommodate this decline. It is a straightforward case of supply and demand not meeting in the middle.
Other cases were not so clear cut. There were situations where one business in a lengthy supply chain were unable to make it through and the knock-on impact would force every company inside that supply chain to the edge of bankruptcy. The companies which were able to pull through have had to make very hard judgements to make sure they can outlast the recession.
Job losses have obviously been a pretty sensitive subject to the broad majority of us. It’s believed that the current number of unemployed individuals 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 economic crisis.
The End of Recession
It does appear 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 rise in the UK throughout the final 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 everybody however.
Experts from the International Monetary Fund (IMF) have forecast that the UK economy will actually shrink over the course of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the danger of wide-spread joblessness continuing. When added to the prospect of a new or perhaps hung government on its way into power in May 2010, as well as the need to reduce an enormous fiscal deficit, the foreseeable future is certainly not set in stone.
This uncertainty may be used as an advantage however, and companies which are prepared to take a few risks or that are willing to alter their own operations to cater for a more wary target audience could be set to make great profits.
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Price Sensitivity
On the surface it might seem that the clear strategy to use while the economy is recovering is to increase your own retail prices again to a level that affords your business some extra margin of comfort regarding running costs. As the market grows and consumers feel more secure in their jobs they will feel relaxed spending extra money, so price increases ought to be an easy thing for shoppers to take.
In fact, several firms might find that they have to keep their prices as low as possible due to the recently provoked price sensitivity amongst the general public. Most of us have had to tighten our belts during the last couple of years, and just because the worst of the recession appears to be over, we are not all prepared to begin spending freely again.
The phrase price sensitivity describes how influential the factor of price is to customers any time they are buying a particular item. If a fairly large price shift, for example raising the price of a car by £1000, doesn’t provoke a significant decrease in demand for that product then the item 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 drop in demand then that item is price sensitive. The exact same theory can also be applied to consumers themselves, and following a phase of recession people are 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 will be looking out for deals for everyday items that they require, and particularly their grocery shopping. Many of these things are necessities however.
Companies will be able to take advantage of this fact by using special discounts and price promotions to entice new shoppers into purchasing their own items. Consumers will be more likely than ever to change from their favored manufacturers if the price tag is right, and companies which offer the best priced products are likely to stand to profit from this. Once these potential customers have become customers there is a good chance that they will stay faithful to their new product choice as the market recovers further, which could lead to further spending at the original prices.
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Financial Security
People’s awareness of the economy at large as well as how it affects us all has greatly increased in light of the economic depression. Previous buying decisions may well have been made according to the properties of the product and its price, but there is a new aspect that consumers will be considering now. Financial security.
Recession Proofing
Several firms have suffered bankruptcy in the aftermath of economic collapse. This in turn has left thousands of customers in a really bad situation. As individuals look to reinvest income into personal savings and shareholdings they would prefer to know that the business they are investing in has some kind of protection against future recessions.
Price Guarantees
One very visible element of the latest economic downturn in the Uk was the steep drop in the interest rate. After this change had worked itself throughout the high street shops and financial services organisations many people found that they were either struggling as a result or enjoying a monetary benefit. Either way, it undoubtedly raised the profile of the impact that a changing interest rate could have on everyday financial products.
Consumers that are looking to open new savings accounts or private pensions may be worried that if the recession does indeed carry on for much more time they will not be generating any significant interest on their investments. Actually, the recession might even now take a turn for the worst and interest rates could fall again. In this situation, a savings product that provides a secured rate of return will become a very attractive option.
The same can be said for customers with credit agreements. If the recession is genuinely over and the global market starts to recuperate much more quickly than many anticipate, then it might not be too long before we see a growth in interest rates. This would mean that customers would need to pay much more every month for their mortgages and loans.
A similar technique was utilised by a number of companies after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. These companies would offer “price freezes” on their goods for a particular time period in an effort to retain current customers and draw new customers in.
Conclusion
Whether the economic downturn is totally over yet or not, this has functioned as a timely reminder that no business can become complacent in its own position of survival. Business owners must always seek to consolidate their situation and boost their operations where possible.