Everyone in the country, and in fact all around the world, will certainly have suffered the latest worldwide recession in one manner or another, either as a person or as a company owner. It might not have had an immediate impact upon your own position or your individual income, but the knock-on result of businesses losing income will have affected the financial situation of the vast majority of folks. It was a really complex problem with wide reaching implications.
The downturn now seems to be over, or is at the very 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 economic crisis, it should be a time to start looking ahead and preparing for a future within a steady economic climate. It is time to seek some recession opportunities.
Businesses of almost all sizes, trading in all types of marketplaces are no doubt going to need to change their operations in view of the recession. This may well be after legislation is introduced to more closely control and monitor the actions of worldwide financial organisations. Many firms may also be considering methods to make themselves more robust and able to withstand economic instability in the future. Either way, there will be adjustments for many companies, and wherever there is change there is potential.
The Recent Recession
The recession of the early 21st century started in 2007 and slowly spread around the world over the following couple of years. Many financial analysts attributed the cause of the economic downturn to be the crash in the U.S. property market, which in turn affected the value of monetary products tied into real estate assets. The growth of the housing market up to that stage had motivated homeowners to refinance their first homes in order to purchase second or third houses with a view to a long-term gain.
This fall in value then uncovered the vulnerabilities of such a wide-spread network of credit agreements between global companies, especially when much of the system was being supported by subprime lenders who were financial risks. A basic lack of third-party control of the financial services sector had allowed the development of a highly complicated web of high-risk credit agreements which depended upon a growing economy. Once the first debtors started to default on repayments, the entire house of cards ended up being quick to fall.
The subsequent financial fallout saw several people lose their jobs as well as lose their homes, while many big, international companies were forced out of business. Government authorities across the world had to bring in radical financial programs to help their own banking systems, and still now certain first world nations are struggling to make it through financially. Many consider it to have been the most severe financial episode since the depression of the 1930s.
One company that works within the pastry cutter marketplace had to make difficult judgements in the face of financial doubt.
The Impact on Business
It’s probably reasonable to say that the recession had an effect on just about every single enterprise around the world. Certain company models will have been more able to adjust to the additional economic strain than others but they will have nevertheless experienced an impact at some part of their operations. If any key supplier or a major client goes out of business then this can have a detrimental impact upon your own enterprise.
Many thousands of small and medium sized companies have been forced out of business as a result of the recent recession. Several of these situations will have been relatively simple; as the general public begin to reduce their spending these companies lose revenue, and since margins are often very slender in a competitive market place there was very little room to allow for this drop.
Other cases were not so clean cut. There were circumstances where one company in a lengthy supply chain had been unable to make it through and the knock-on impact would push every company within that supply chain to the brink of bankruptcy.
Job losses have obviously been a very sensitive subject to the vast majority of us. It’s estimated that the present number of unemployed individuals in the UK is over 2.3 million (almost 8% of the entire countries’ labourforce), and many of these will have been victims of the international economic crisis. These types of job losses head to a larger decrease in general spending, which leads to a further fall in income for business.
The End of Recession
It does seem that the downturn is coming to an end though, and that can only be good news for business. Gross domestic product (GDP) saw a rise in the UK throughout the final quarter of 2009 and total unemployment figures dropped, both of which are indicators of an economic system that is healing. This isn’t a perspective shared by everyone though.
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 warned of the risk of wide-spread joblessness persisting. When added to the possibility of a new or perhaps hung government coming into power in May 2010, as well as the need to reduce an enormous financial deficit, the foreseeable future is definitely not set in stone.
This uncertainty can be utilised as an advantage however, and businesses that are prepared to take a few risks or that are willing to alter their operations to cater for a more wary target audience could be set to make great profits.
I was talking to the manager of a well respected light cooking business famous for making good quality items and he was optimistic for the future.
Price Sensitivity
On the outside it may seem that the clear technique to use whilst the overall economy is recovering is to increase your own sales charges again to a point that offers your company some extra margin of comfort in relation to operating costs. As the economy grows and people feel safer in their careers they will really feel comfortable spending more cash, so price raises should be an easy thing for shoppers to take on. This will not always be the case.
In fact, many firms may find that they need to keep their 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 over the last few years, and simply because the hardest of the recession seems to be over, we are not all ready to start spending freely again. This is a pattern that is difficult to exactly quantify, but companies will want to be mindful of how their particular customer sector feels toward spending.
The phrase price sensitivity represents how important the factor of price is to shoppers when they are buying a specific product. If a fairly large price change, for example increasing the cost of a car by £1000, does not see a large drop in demand for that product then the product is said to be price insensitive. If a comparatively small change in price, say increasing the price of a car by just £100, does see a decline in demand then that product is price sensitive. The exact same theory can also be applied to consumers themselves, and after a phase of economic downturn people are more likely to be price sensitive.
As a result, the market at large will take great interest in the costs of the items that they are buying. Many people may be watching out for deals for everyday products that they require, and particularly their grocery shopping. Many of these things are essentials however. When it comes to buying luxury products, like televisions, cars and holidays, the price of the purchase is likely to be an more important decision maker.
Businesses will be in a position to take advantage of this fact by using special discounts and price promotions to attract new customers into buying their own items. Buyers will be more likely than ever to change from their favored brand names if the price is perfect, and firms which offer the best priced goods are likely to stand to profit from this. After these potential customers have turned into clients there is a great chance that they will stay faithful to their new product choice as the economy recovers further, which could lead to additional spending at the initial price rates.
One particular company has found that their own website has been a great method to interact with consumers during the tough economy.
Financial Security
People’s understanding of the economy at large and how it impacts us all has significantly increased in light of the recession. Prior purchasing decisions may well have been made according to the quality of the product and its value, but there is a new aspect that buyers will be thinking about now. Financial security.
Recession Proofing
Many companies have suffered bankruptcy in the aftermath of recession. This in turn has put countless numbers of customers in a very poor situation. As people look to reinvest income into personal savings and shareholdings they would prefer to know that the corporation they are investing in has some form of protection against future recessions.
Price Guarantees
One particular very noticeable feature of the recent recession in the Uk was the steep drop in the interest rate. After this change had precipitated itself through the high street stores and monetary services organisations many people discovered that they were either suffering as a result or reaping a financial advantage.
Consumers that are looking to open new savings accounts or private pensions may well be worried that if the economic downturn does indeed drag on for much longer they won’t be earning any significant interest on their investments. In reality, the tough economy may even now take a turn for the worst and interest rates might fall again. In this situation, a savings product that offers a guaranteed rate of return becomes a very appealing option. This technique might be used to attract many new savings customers.
The exact same could be said for consumers with credit agreements. If the recession really is genuinely over and the worldwide economy starts to recover more swiftly than many anticipate, then it may not be long before we see a growth in interest rates. This would mean that consumers would have to pay more every month for their mortgages and loans. A company which can offer a secured rate of interest that is not linked to the base rate of interest could again entice several new clients.
A similar approach was made use of by a number of firms after 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 certain period in an effort to retain existing consumers and bring new customers in. This price freeze permitted a buffer period for consumers to adjust to the new VAT rate.
Conclusion
Whether the economic downturn is totally over yet or not, this has served as a firm reminder that no business can become complacent with their own situation of survival. Business owners must constantly look to consolidate their position and boost their own operations wherever possible.