Everyone in the country, and in fact all around the planet, will certainly have experienced the recent global economic downturn in one manner or another, possibly as a person or as a business operator. It may not have had a direct impact upon your own career or your private income, but the knock-on impact of businesses dropping income will have influenced the economic situation of the great majority of folks. It has been a very complex problem with far reaching ramifications.
The recession now appears to be over, or is at the very least on its way to an end, according to most economic experts. Although it may not yet be the time to celebrate having survived the financial meltdown, it should be a period to begin looking forward and preparing for a future within a stable economy. It is time to find some recession opportunities.
Businesses of almost all sizes, trading in all types of marketplaces are no doubt going to need to alter their operations in view of the economic downturn. This might be after law is introduced to more closely govern and keep an eye on the actions of global financial companies. Many firms will also be looking at ways to make themselves much more robust and able to endure economic instability in the future. Either way, there will certainly be adjustments for many businesses, and wherever there is change there is potential.
The Recent Recession
The recession of the early 21st century began in 2007 and slowly spread around the world over the next couple of years. Several economic analysts credited the cause of the economic downturn to be the drop in the U.S. housing market, which in turn impacted the value of monetary products linked into real estate resources. The expansion of the housing market up to that point had motivated homeowners to refinance their primary homes in order to buy second or third houses with a view to a long-term gain.
This drop in value then exposed the vulnerabilities of such a widespread system of credit agreements between global companies, particularly when much of the system was being backed by subprime lenders who were fiscal risks. A basic lack of third-party control of the financial services market had allowed the creation of a highly complicated web of high-risk credit deals that relied upon a growing economy.
The following economic fallout saw many individuals lose their jobs as well as lose their homes, while many large, global organisations were forced out of business. Governments across the world had to bring in major financial programs to support their own banking systems, and still now certain first world nations are fighting to make it through financially. Many consider it to have been the worst financial period since the depression of the 1930s.
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The Impact on Business
It is probably reasonable to state that the recession had an effect on just about every single business around the world. Certain business models will have been more able to adjust to the added financial stress than others but they will have still felt an impact at some portion 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. Many of these situations will have been relatively simple; as the general public begin to decrease their spending these types of businesses lose income, and since profit margins are often incredibly slender in a competitive market place there was very little room to allow for this drop. It is a straightforward case of supply and demand not meeting in the middle.
Other cases were not so clear cut. There were scenarios where one company in a long supply cycle had been unable to make it through and the knock-on effect would force every business in that supply chain to the brink of bankruptcy. The organisations that were able to survive have had to make very tough decisions to be sure they can outlast the economic collapse.
Job losses have obviously been a very sensitive subject to the wide majority of us. It’s estimated that the present number of unemployed people in the UK is over 2.3 million (nearly 8% of the entire countries’ workforce), and many of these will have been victims of the global financial crisis.
The End of Recession
It does appear that the downturn is on its way to an end however, and that can only be good news for business. Gross domestic product (GDP) experienced a climb in the UK during the final quarter of 2009 and overall unemployment figures dropped, both of which are indicators of an economic system that is healing.
Industry experts from the International Monetary Fund (IMF) have forecast 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 joblessness persisting. When added to the prospect of a new or perhaps hung government coming into power in May 2010, as well as the need to lower a significant financial deficit, the future is certainly not set in stone.
This uncertainty may be used as an advantage though, and organisations which are prepared to take a few risks or who are willing to adjust their own operations to cater to a more cautious target audience might be set to make excellent profits.
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Price Sensitivity
On the outside it might seem that the obvious strategy to use whilst the economy is recuperating is to increase your very own sales charges again to a level that offers your business some margin of comfort with regards to operating costs. As the market grows and consumers feel more secure in their careers they will feel comfortable spending more money, so price increases ought to be an easy thing for consumers to take.
Actually, several businesses might find that they need to hold their selling prices as low as feasible due to the recently triggered price sensitivity amongst the general public. Most of us will have had to tighten our belts during the last few years, and just because the hardest of the economic downturn seems to be over, we are not all prepared to start spending freely again.
The term price sensitivity describes how influential the factor of price is to customers when they are purchasing a specific product. If a fairly large price change, for example raising the cost of a car by £1000, does not see a large decrease in demand for that product then the product is said to be price insensitive. If a fairly 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.
As a result, the market place at large will take great interest in the costs of the items that they are buying. Several people may be watching out for discounts 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 by utilising special offers and price promotions to lure new customers into purchasing their own goods. Buyers will be a lot more likely than ever to move from their favored brand names if the price is right, and firms that offer the best priced goods are likely to stand to profit from this.
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Financial Security
People’s knowledge of the economy at large as well as how it influences us all has greatly increased in light of the economic downturn. Previous purchasing decisions may well have been made in accordance to the quality of the product and its price, but there is a fresh aspect that buyers will be thinking about now. Financial security.
Recession Proofing
Many firms have endured bankruptcy in the aftermath of recession. This in turn has left countless numbers of buyers in a very poor predicament. As individuals seek to reinvest income into financial savings and shareholdings they will prefer to see that the company they are investing in has some type of protection against potential recessions. This could merely be a case of running the firm with as little debt as possible, but anything at all that may be used to assure clients may be a great selling point for a company.
Price Guarantees
One very noticeable element of the latest economic downturn in the United Kingdom was the sharp drop in the interest rate. After this change had worked itself throughout the high street stores and financial services organisations several people discovered that they were either suffering as a consequence or reaping a financial advantage.
Shoppers who are looking to open up new savings accounts or private pensions might be worried that if the recession does indeed carry on for much longer they won’t be generating any substantial interest on their investments. In fact, the recession may still take a turn for the worst and interest rates could drop again. In this situation, a savings product that provides a secured rate of return turns into a really attractive option. This method can be used to attract many new savings clients.
The exact same could be said for customers with credit agreements. If the recession really is genuinely over and the worldwide economy begins to recuperate much more swiftly than many anticipate, then it might not be too long before we see a growth in interest rates. That would mean that consumers would have to pay much more every month for their mortgages and loans. A business that could offer a guaranteed rate of interest that isn’t connected to the base rate of interest can again attract several new clients.
A similar technique was used 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 items for a certain period in an attempt to keep their existing customers and bring new clients in.
Conclusion
Whether the economic downturn is totally over yet or not, it has functioned as a timely reminder that no company can become complacent with its own position of success. Company managers should always seek to consolidate their own position and improve their own operations wherever possible. The businesses that manage to endure the downturn in the economy will have learned valuable lessons.
