Everyone in the nation, and in fact around the world, will have experienced the latest global recession in one manner or another, possibly as a person or as a company owner. It may not have had an immediate impact on your own position or your private income, but the knock-on result of companies dropping revenue will have affected the financial predicament of the wide majority of people. It has been a very complicated problem with far reaching ramifications.
The actual downturn now seems to be over, or is at the very least on its way to an end, according to many financial experts. Whilst it may not yet be the moment to celebrate having made it through the financial turmoil, it should be a period to begin looking forward and preparing for a future within a stable economic climate. It is time to seek out some recession opportunities.
Firms of almost all sizes, buying and selling in all types of markets are no doubt going to have to alter their operations in view of the economic downturn. This may be after law is introduced to more closely govern and monitor the actions of worldwide financial companies. Many businesses will also be considering methods to make themselves more robust and have the ability to endure economic instability in the future.
The Recent Recession
The recession of the early 21st century began in 2007 and steadily spread around the world over the next couple of years. Numerous financial analysts attributed the cause of the recession to be the crash in the U.S. property market, which in turn affected the value of monetary products tied into real estate resources. The growth of the housing market until that stage had motivated homeowners to refinance their primary homes in order to buy second or third homes with a view to a long-term profit.
This fall in value then uncovered the vulnerabilities of such a widespread system of credit agreements between international companies, particularly when much of the system was being backed by subprime lenders who were financial risks. A basic lack of third-party management of the monetary services sector had permitted the creation of a highly complex web of high-risk credit deals that depended upon a thriving economy.
The subsequent economic fallout saw many individuals lose their jobs and lose their properties, while many large, global companies were forced out of business. Governments all over the world had to introduce radical financial programs to support their own banking systems, and still now certain first world countries are struggling to make it through financially. Many believe it to have been the worst economic episode 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 world. Particular company models will have been more able to adjust to the additional economic stress than others however they will have still experienced an impact at some section of their operation. If any key service provider or a major customer goes out of business then that will have a bad effect upon your own company.
Thousands of small and medium sized businesses have been forced out of business due to the recent economic collapse. Many of these situations will have been relatively basic; as the general public start to reduce their spending these businesses lose revenue, and since profit margins are often incredibly slender in a competitive market place there was very little space to accommodate this decrease. It is a simple case of supply and demand not meeting in the middle.
Some other cases were not so clear cut. There were circumstances where one business in a lengthy supply cycle were unable to make it through and the knock-on effect would push every business in that supply chain to the brink of bankruptcy.
Job losses have of course been a very delicate subject to the wide majority of us. It's estimated that the current number of unemployed people 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 international economic crisis.
The End of Recession
It does appear that the recession is on its way to an end though, and this can only be good news for business. Gross domestic product (GDP) experienced a rise in the UK during the final quarter of 2009 and total unemployment figures dropped, both of which are indicators of an economy that is healing. This isn't a perspective embraced by everybody though.
Industry experts at the International Monetary Fund (IMF) have predicted that the UK financial system may 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 unemployment continuing. When added to the possibility of a new or perhaps hung government on its way into power in May 2010, in addition to the real need to reduce a significant fiscal deficit, the foreseeable future is definitely not set in stone.
This uncertainty can be used as an advantage however, and companies that are prepared to take a few risks or that are prepared to alter their own operations to cater for a more cautious audience might be set to make good profits.
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Price Sensitivity
On the outside it may seem that the clear strategy to use while the overall economy is recuperating is to increase your very own sales prices again to a point that offers your business some margin of comfort in relation to running costs. As the economy grows and consumers feel safer in their jobs they will feel comfortable spending extra cash, so price increases ought to be an easy thing for shoppers to take. This will not necessarily be the case.
Actually, several companies may find that they need to hold their prices as small as possible due to the recently triggered price sensitivity amongst the general public. Most of us have had to tighten our belts over the last couple of years, and simply because the hardest of the economic downturn seems to be over, we are not all ready to start spending freely again. This is a trend that is tough to exactly quantify, however firms will need to be mindful of how their specific consumer community feels toward spending.
The term price sensitivity represents how influential the element of price is to shoppers any time they are buying a specific product. If a fairly large price shift, for example increasing the price of a car by £1000, does not see a significant decrease in demand for that item then the item is said to be price insensitive. If a fairly small change in price, say raising the price of a car by only £100, does see a fall in demand then that item is price sensitive. This same principle can likewise be applied to consumers themselves, and following a phase of economic downturn people are more likely to be price sensitive.
As a result, the market at large will have great interest in the prices of the things that they are purchasing. Many people will be watching out for bargains for everyday products that they require, and particularly their grocery shopping. Many of these products are essentials however.
Firms will be in a position to take advantage of this by using special discounts and price campaigns to attract new consumers into buying their own goods. Shoppers will be more likely than ever to switch from their favored brands if the price is perfect, and firms which offer the best priced products are most likely to stand to gain from this. After these prospects have turned into clients there is a good chance that they will remain faithful to their new product or service choice as the market rebounds further, which could lead to additional spending at the original price rates.
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Financial Security
People's awareness of the economy at large and how it impacts us all has significantly grown in light of the economic downturn. Previous buying decisions may well have been made in accordance to the properties of the item and its value, but there is actually a fresh aspect that buyers will be considering now. Financial security.
Recession Proofing
Several firms have endured bankruptcy in the aftermath of recession. This has in turn has put countless numbers of buyers in a very bad situation. As individuals look to reinvest income into savings and shareholdings they would prefer to see that the business they are investing in has some form of defense against future recessions. This might merely be a case of operating the firm with as little debt as feasible, but anything at all that may be used to reassure clients could be a great selling point for a business.
Price Guarantees
One particular very visible element of the latest recession in the Uk was the steep decrease in the interest rate. Once this change had precipitated itself through the high street shops and monetary services institutes several people found that they were either struggling as a consequence or reaping a financial benefit.
Shoppers that are seeking to open up new savings accounts or private pensions may well be worried that if the recession does indeed carry on for much more time they will not be earning any substantial interest on their investments. In reality, the recession may still take a turn for the worst and interest rates might fall again. In this situation, a savings product that provides a guaranteed rate of return will become a very appealing option. This technique can be used to bring in several new savings shoppers.
The exact same could be said for consumers with credit agreements. If the recession really is truly over and the global market starts to recuperate more quickly than many expect, then it might not be long before we see an increase in interest rates. This would signify that consumers would need to pay much more each month for their mortgages and loans. A business that can offer a guaranteed rate of interest that isn't linked to the base rate of interest can again entice many new clients.
A similar approach was used by a number of businesses after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. They would offer "price freezes" on their goods for a particular time period in an attempt to keep their existing consumers and draw new customers in.
Conclusion
Whether the economic downturn is absolutely over yet or not, it has functioned as a firm indication that no company can afford to be complacent with their own position of success. Business managers should constantly look to consolidate their own position and boost their own operations wherever possible. The companies that are able to endure the downturn in the economy will have learned valuable lessons.