Everyone in the country, and indeed all around the planet, will have experienced the recent global economic downturn in one manner or another, possibly as a person or as a business operator. It might not have had an immediate impact on your own job or your private income, but the knock-on result of companies dropping revenue will have influenced the monetary predicament of the wide majority of folks. It has been a very complicated problem with wide reaching implications.
The actual downturn now appears 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 economic meltdown, it should be a time to begin looking ahead and preparing for a future in a stable economic climate. It is time to find some recession opportunities.
Businesses of almost all sizes, trading in all kinds of markets are no doubt going to need to change their operations in light of the recession. This might be after law is introduced to more closely control and monitor the action of global monetary organisations. Many companies will also be looking at ways to make themselves more robust and have the ability to endure economic instability in the long term.
The Recent Recession
The recession of the early 21st century began in 2007 and steadily propagated around the world over the subsequent few years. Several financial analysts credited the cause of the economic downturn to be the crash in the U.S. property market, which in turn affected the worth of monetary products tied into real estate resources.
This fall in value then exposed the vulnerabilities of such a widespread system of credit agreements between international companies, particularly when much of the system was being supported by subprime lenders who were fiscal liabilities. A general lack of third-party management of the monetary services market had permitted the development of a very complex web of high-risk credit agreements which depended upon a thriving economy. Once the first debtors started to default on repayments, the entire house of cards ended up being quick to fall.
The subsequent economic fallout saw several people lose their jobs as well as lose their properties, whilst many big, global companies were forced out of business. Government authorities across the world had to bring in radical 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 toughest financial period since the depression of the 1930s.
Since speaking to company managers within the Nottingham planning consultant market it certainly seems they were caught in the middle of the economic slowdown.
The Impact on Business
It is probably reasonable to state that the economic downturn had an impact on just about every single enterprise around the world. Particular business models will have been more able to adjust to the additional economic pressure than others however they will have nevertheless experienced an impact at some part of their operations.
Thousands of small and medium sized businesses have been pressured out of business due to the recent economic collapse. Many of these situations will have been comparatively basic; as the general public begin to decrease their spending these companies lose revenue, and since profit margins are often very slim in a competitive market place there was extremely little room to accommodate this fall. It is a simple case of supply and demand not meeting in the middle.
Other cases were not so clean cut. There were circumstances where one business in a long supply chain had been unable to survive and the knock-on effect would force every business in that supply chain to the edge of bankruptcy. The organisations that were able to pull through have had to make extremely tough decisions to be sure they can outlast the economic downturn.
Job losses have of course been a pretty delicate subject to the wide majority of us. It’s estimated that the present number of jobless people in the UK is over 2.3 million (nearly 8% of the entire countries’ labourforce), and many of these will probably have been victims of the international economic crisis.
The End of Recession
It does appear that the downturn is on its way 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 fourth quarter of 2009 and overall unemployment numbers dropped, both of which are signs of an economic system that is recovering. This isn’t a perspective embraced by everybody however.
Experts at the International Monetary Fund (IMF) have forecast that the UK economy will actually shrink over the duration of 2010 and Mervyn King, the Governor of the Bank of England has warned of the threat of wide-spread unemployment continuing. When added to the possibility of a new or perhaps hung government coming into power in May 2010, in addition to the need to decrease an enormous fiscal deficit, the foreseeable future is certainly 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 modify their own operations to cater to a more wary target audience might be set to make excellent profits.
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Price Sensitivity
On the surface it might seem that the obvious technique to use while the economy is recuperating is to increase your own sales prices again to a point that affords your business some extra margin of comfort with regards to running costs. As the economy grows and people feel more secure in their careers they will feel relaxed spending extra cash, so price raises should be an easy thing for shoppers to take.
In fact, many companies may find that they have to keep their selling prices as low as possible due to the newly triggered price sensitivity among the general public. Many of us have had to tighten our belts during the last few years, and simply because the worst of the recession appears to be over, we aren’t all prepared to start spending freely again.
This is a pattern that is hard to exactly quantify, however firms will have to be mindful of how their particular consumer community feels toward spending.
The term price sensitivity describes how important the element of price is to customers when they are purchasing a specific item. If a fairly large price change, for example increasing the price of a car by £1000, does not provoke a big decrease in demand for that product then the item is said to be price insensitive. If a fairly small change in price, say increasing the price of a car by only £100, does see a fall in demand then that item is price sensitive.
As a result, the market at large will have great interest in the prices of the items that they are purchasing. Several people will be watching out for bargains for everyday products that they need, and in particular their grocery shopping. Many of these products are essentials however. When it comes to buying luxury products, for example televisions, cars and holidays, the price of the purchase is likely to be an more crucial decision maker.
Companies will be in a position to take advantage of this fact by using special offers and price promotions to entice new shoppers into purchasing their own goods. Shoppers will be more likely than ever to switch from their preferred manufacturers if the price tag is right, and firms which offer the best priced items are most likely to stand to gain from this. Once these prospective customers have turned into customers there is a good chance that they will remain loyal to their new product or service choice as the market rebounds further, which could lead to additional spending at the original prices.
A specific firm which has got through the recession
Financial Security
People’s awareness of the economic system at large and how it affects us all has significantly increased in light of the economic depression. Previous purchasing decisions may well have been made in accordance to the properties of the item and its price, but there is a fresh aspect that shoppers will be thinking about now. Financial security.
Recession Proofing
Several firms have suffered bankruptcy in the aftermath of economic collapse. This has in turn has put thousands of buyers in a very bad predicament. As individuals seek to reinvest income into financial savings and shareholdings they would like to see that the corporation they are investing in has some type of safeguard against potential recessions. This may simply be a case of operating the firm with as little debt as feasible, but anything that may be used to reassure clients might be a great selling point for a company.
Price Guarantees
One very noticeable element of the recent economic downturn 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 suffering as a result or reaping a monetary benefit.
Customers that are seeking to open new savings accounts or private pensions may well be concerned that if the recession does indeed drag on for much more time they won’t be earning any significant interest on their investments. In fact, the recession may even now take a turn for the worst and interest rates might drop again. In this situation, a savings product that provides a guaranteed rate of return turns into a very attractive choice. This method could be used to bring in many new savings clients.
The same could be said for consumers with credit agreements. If the recession is truly over and the worldwide economy begins to recuperate much more swiftly than many anticipate, then it may not be too long before we see an increase in interest rates. That would signify that customers would need to pay much more every month for their mortgages and loans. A provider which can offer a secured rate of interest that isn’t linked to the base rate of interest could again entice many new customers.
A similar technique was made use of 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 particular time period in an effort to keep existing clients and bring new customers in. This price freeze granted a buffer period for consumers to adjust to the new VAT rate.
Conclusion
Whether the recession is totally over yet or not, this has functioned as a timely reminder that no company can afford to be complacent with its own situation of survival. Company managers must constantly look to consolidate their own position and boost their operations where possible.