Everybody in the country, and without a doubt around the planet, will have suffered the recent global economic downturn in one way or another, possibly as an individual or as a company owner. It might not have had an immediate effect upon your own job or your personal income, but the knock-on impact of businesses dropping income will have affected the financial situation of the wide majority of people. It has been a very complicated issue with wide reaching implications.
The actual downturn now appears to be over, or is at least coming to an end, according to most economic experts. Whilst it might not yet be the moment to celebrate having made it through the financial meltdown, it should be a time to begin looking ahead and planning for a future in a stable economic climate. It is time to find some recession opportunities.
Companies of all sizes, trading in all sorts of marketplaces are no doubt going to need to adjust their operations in light of the economic depression. This may be after legislation is brought in to more closely govern and keep an eye on the actions of worldwide monetary organisations. Many companies will also be considering techniques to make themselves more robust and have the ability to withstand economic instability in the long term. Either way, there will probably be adjustments for several companies, and wherever there is change there is opportunity.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and steadily propagated around the planet over the following few years. Numerous financial analysts attributed the cause of the recession to be the crash in the U.S. housing market, which in turn affected the value of financial products tied into real estate resources. The growth of the housing market up to that stage had motivated homeowners to refinance their primary properties in order to obtain second or third houses with a view to a long-term profit.
This fall in value then uncovered the vulnerabilities of such a widespread network of credit agreements between international businesses, particularly when much of the system was being backed by subprime lenders who were financial liabilities. A basic lack of third-party control of the financial services market had allowed the creation of a highly complex web of high-risk credit deals which depended upon a thriving economy.
The subsequent economic fallout saw many people lose their jobs and also lose their properties, while many big, international companies were forced out of business. Governments across the world had to introduce major financial packages to assist their own banking systems, and still now certain first world nations are fighting to make it through financially. Many believe it to have been the most severe economic period since the depression of the 1930s.
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The Impact on Business
It is probably reasonable to state that the recession has had an effect on just about every enterprise around the world. Particular business models will have been more able to adapt to the additional financial pressure than others however they will have still experienced an impact at some part of their operation. If a key supplier or a main client goes out of business then that can have a detrimental effect upon your own business.
Thousands of small and medium sized businesses have been pressured out of business due to the recent economic downturn. Several of these situations will have been comparatively basic; as the general public begin to decrease their spending these businesses lose revenue, and since profit margins are often very slim in a competitive market place there was very little space to allow for this drop.
Other cases were not so clear cut. There were scenarios where one business in a lengthy supply cycle had been unable to survive and the knock-on impact would push every business in that supply chain to the edge of bankruptcy.
Job losses have of course been a pretty sensitive subject to the broad majority of us. It’s believed that the current number of jobless individuals in the UK is over 2.3 million (nearly 8% of the total countries’ labourforce), and many of these will have been victims of the international economic crisis.
The End of Recession
It does seem that the recession is coming to an end however, and this can only be great news for business. Gross domestic product (GDP) saw a rise in the UK throughout the fourth quarter of 2009 and overall unemployment numbers fell, both of which are signs of an economy that is recovering. This is not a perspective shared by everybody however.
Experts at the International Monetary Fund (IMF) have predicted that the UK financial system will actually shrink 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. When added to the possibility of a new or even hung government coming into power in May 2010, as well as the real need to decrease a significant fiscal deficit, the future is definitely not set in stone.
This kind of uncertainty can be used as an advantage though, and companies that are prepared to take a few risks or that are willing to adjust their own operations to cater to a more cautious target audience could be set to make good profits.
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Price Sensitivity
On the surface it may appear that the clear technique to use while the economy is recovering is to increase your very own sales prices again to a level that offers your business some margin of comfort regarding running expenses. As the economy grows and consumers feel safer in their jobs they will really feel comfortable spending extra cash, so price increases ought to be an easy thing for consumers to take.
Actually, many companies may find that they have to keep 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 during the last few years, and simply because the hardest of the economic downturn seems to be over, we aren’t all ready to begin spending freely just yet. This is a pattern that is difficult to exactly quantify, however firms will need to be aware of how their specific consumer community feels toward spending.
The term price sensitivity represents how important the element of price is to shoppers any time they are buying a particular product. If a relatively large price shift, for example increasing the price of a car by £
1000, doesn’t see a large decrease in demand for that product then the product is said to be price insensitive. If a relatively small change in price, say increasing the price of a car by only £
100, does see a decline in demand then that product is price sensitive.
As a result, the marketplace at large will take great interest in the prices of the things that they are purchasing. Many people may be watching out for bargains for everyday items that they need, and particularly their grocery shopping. Several of these things are essentials however.
Firms will be able to take advantage of this by using special offers and price campaigns to attract new shoppers into buying their products. Buyers will be more likely than ever to move from their favored brand names if the price is perfect, and firms which offer the best priced products are likely to stand to gain from this. After these prospective customers have become customers there is a good chance that they will stay faithful to their new product choice as the economy rebounds further, which could lead to additional spending at the initial prices.
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Financial Security
People’s knowledge of the economic system at large and also how it influences us all has greatly grown in light of the economic downturn. Previous purchasing decisions may well have been made with respect to the properties of the item and its price, but there is a new factor that consumers will be considering now. Financial security.
Recession Proofing
Several businesses have endured bankruptcy in the aftermath of economic collapse. This has in turn has put thousands of customers in a very bad situation. As people seek to reinvest money into savings and shareholdings they will prefer to know that the corporation they are investing in has some sort of safeguard against future recessions. This might merely be a case of managing the business with as little debt as feasible, but anything that could be utilised to assure customers might be a great selling point for a business.
Price Guarantees
One particular very visible element of the recent recession in the Uk was the sharp decrease in the interest rate. After this change had worked itself through the high street retailers and monetary services institutes several people found that they were either suffering as a consequence or enjoying a financial advantage.
Shoppers that are seeking to open new savings accounts or private pensions may well be concerned that if the recession does in fact drag on for much longer they won’t be generating any considerable interest on their investments. In reality, the recession might still take a turn for the worst and interest rates could fall again. In this situation, a savings product that provides a guaranteed rate of return becomes a very attractive option. This technique could be used to appeal to many new savings clients.
The exact same can be said for consumers with credit agreements. If the recession is truly over and the worldwide market starts to recover more swiftly than many anticipate, then it may not be too long before we see a growth in interest rates. This would signify that customers would have to pay more each month for their mortgages and loans. A provider that can offer a secured rate of interest that is not connected to the base rate of interest can again attract several new clients.
A similar approach was used by a number of firms when the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. They would offer “price freezes” for their goods for a specific time period in an effort to retain current customers and bring new clients in. This kind of price freeze permitted a buffer period for individuals to adjust to the new VAT percentage.
Conclusion
Whether the recession is totally over yet or not, this has functioned as a firm reminder that no company can afford to be complacent with its own position of success. Business managers should always look to consolidate their own situation and boost their own operations where possible.
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