Opportunities for Companies who have Survived the Global Recession
Everybody in the country, and in fact all around the world, will have experienced the recent global economic downturn in one manner or another, possibly as a person or as a company operator. It may not have had a direct effect on your own career or your personal income, but the knock-on impact of businesses losing revenue will have affected the monetary situation of the wide majority of people. It has been a very complex problem with far reaching ramifications.
The actual recession now seems to be over, or is at least coming to an end, according to most financial authorities. Although it may not yet be the occasion to celebrate having survived the financial crisis, it should be a time to start looking ahead and preparing for a future within a stable economy. It is time to seek out some recession opportunities.
Firms of almost all sizes, trading in all types of markets are no doubt going to have to adjust their operations in light of the economic depression. This may be after legislation is brought in to more closely govern and monitor the action of global monetary companies. Many firms may also be considering methods to make themselves much more robust and have the ability to endure economic instability in the future. Either way, there will probably be changes for many businesses, and wherever there is change there is opportunity.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and slowly propagated around the planet over the subsequent few years. Many financial analysts attributed the cause of the economic downturn to be the drop in the U.S. real estate market, which in turn affected the value of financial products linked into real estate assets. The expansion of the housing market up to that stage had motivated homeowners to refinance their primary properties in order to buy second or third houses with a view to a long-term profit.
This fall in value then exposed the vulnerabilities of such a wide-spread system of credit contracts between international businesses, especially when much of the system was being supported by subprime lenders who were fiscal risks. A general lack of third-party control of the financial services sector had allowed the development of a highly complex web of high-risk credit deals which relied upon a rising economy.
The following economic fallout saw several people lose their jobs as well as lose their homes, whilst many large, global companies were forced out of business. Government authorities across the world had to introduce major financial packages to help their own banking systems, and even now certain first world countries are struggling to make it through financially.
Since speaking to company managers in the wedding hair fascinators sector it would seem they were snagged in the middle of the recession.
The Impact on Business
It is probably fair to state that the economic downturn had an impact on just about every single enterprise around the globe. Particular company models will have been more able to adapt to the added financial pressure than others however they will have nevertheless felt an impact at some part of their operation. If a key supplier or a major customer goes out of business then this can have a negative effect upon your own enterprise.
Thousands of small and medium sized businesses have been pressured out of business as a result of the recent recession. Several of these situations will have been comparatively basic; as the general public start to reduce their spending these companies lose income, and since margins are often very slender in a competitive market place there was very little space to allow for this decline. It is a straightforward case of supply and demand not meeting in the middle.
Other cases were not so clean cut. There were scenarios where one business in a long supply chain were unable to survive and the knock-on effect would force every company inside that supply chain to the brink of bankruptcy.
Job losses have obviously been a very delicate subject to the broad majority of us. It’s estimated that the present number of jobless individuals in the UK is over 2.3 million (almost 8% of the entire countries’ labourforce), and many of these will probably have been victims of the international financial crisis. These job losses lead to a larger decrease in typical spending, which triggers a further decrease in revenue for business.
The End of Recession
It does appear that the downturn is coming to an end though, and this can only be great news for business. Gross domestic product (GDP) experienced a rise in the UK throughout the final quarter of 2009 and total unemployment figures dropped, both of which are signals of an economic system that is healing.
Experts from the International Monetary Fund (IMF) have forecast that the UK economy may actually shrink over the duration of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the risk of wide-spread unemployment continuing.
This kind of uncertainty can be utilised as an advantage however, and businesses that are ready to take a few risks or who are prepared to modify their operations to cater to a more cautious audience could be set to make good profits.
I was speaking to the director of a well respected electricity price comparison business renowned for making high quality items and he was optimistic for the foreseeable future.
Price Sensitivity
On the outside it may seem that the clear technique to use while the economy is recovering is to raise your own retail prices again to a point that offers your company some margin of comfort in relation to operating costs. As the economy grows and people feel safer in their careers they will feel relaxed spending extra money, so price raises should be an easy thing for shoppers to take on.
Actually, many companies may find that they have to hold their prices as small as feasible 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 simply because the hardest of the economic downturn seems to be over, we are not all prepared to begin spending freely again.
The term price sensitivity describes how important the factor of price is to consumers any time they are buying a particular product. If a relatively large price change, for example raising the cost of a car by £1000, does not see a big decrease in demand for that item 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 drop in demand then that product is price sensitive.
As a result, the market at large will take great interest in the costs of the things that they are purchasing. Many people may be looking out for bargains for everyday products that they require, and in particular their grocery shopping. Many of these products are necessities however.
Companies will be able to take advantage of this fact by using special discounts and price promotions to lure new shoppers into buying their own items. Consumers will be more likely than ever to switch from their preferred brands if the price tag is perfect, and companies that offer the best priced products are most likely to stand to gain from this.
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Financial Security
People’s understanding of the economic system at large and also how it impacts us all has greatly increased in light of the recession. Previous purchasing decisions may well have been made according to the properties of the product and its value, but there is actually a new factor that shoppers will be considering now. Financial security.
Recession Proofing
Many firms have endured bankruptcy in the aftermath of economic collapse. This has in turn has left countless numbers of buyers in a really bad situation. As individuals look to reinvest money into financial savings and shareholdings they will like to know that the company they are investing in has some kind of protection against potential recessions.
Price Guarantees
One very noticeable feature of the recent economic downturn in the United Kingdom was the steep drop in the interest rate. Once this change had worked itself throughout the high street shops and financial services institutes many people discovered that they were either struggling as a result or reaping a financial advantage.
Customers who are seeking to open up new savings accounts or private pensions might be concerned that if the economic downturn does in fact carry on for much more time they will not be generating any substantial interest on their investments. In fact, 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 secured rate of return turns into a really appealing option. This technique can be used to bring in several new savings clients.
The same could be said for customers with credit agreements. If the recession really is truly over and the international market starts to recuperate more swiftly than many anticipate, then it might not be too long before we see a rise in interest rates. That would mean that consumers would have to pay much more each month for their mortgages and loans. A provider that could offer a secured rate of interest that is not connected to the base rate of interest might again attract many new customers.
A similar technique was used by a number of businesses 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 attempt to keep their current clients and bring new clients in.
Conclusion
Whether the recession is entirely over yet or not, it has functioned as a timely reminder that no company can be complacent with their own situation of survival. Business managers must always look to consolidate their own situation and boost their own operations where possible. The businesses which manage to survive the economic downturn will have learned important lessons.
This entry was posted on Friday, January 28th, 2011 at 4:51 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.