Everybody in the country, and certainly all around the planet, will have suffered the latest global economic downturn in one way or another, possibly as a person or as a business owner. It might not have had a direct impact upon your own position or your private earnings, but the knock-on effect of businesses dropping revenue will have affected the economic situation of the wide majority of people. It was a really complex problem with far reaching ramifications.
The actual downturn now seems to be over, or is at least coming to an end, according to most economic experts. Although it may not yet be the occasion to celebrate having survived the financial meltdown, it should be a time to start looking forward and planning for a future within a stable economic climate. It is time to seek out some recession opportunities.
Businesses of almost all sizes, trading in all kinds of markets are no doubt going to need to adjust their operations in view of the recession. This might be after legislation is introduced to more closely control and keep an eye on the actions of worldwide financial organisations. Many companies will also be considering methods to make themselves much more robust and have the ability to endure financial instability in the long term. Either way, there will be changes for several businesses, and where there is change there is opportunity.
The Recent Recession
The recession of the early 21st century began in 2007 and gradually spread around the planet over the next few years. Many economic analysts attributed the cause of the economic downturn to be the crash in the U.S. real estate market, which in turn affected the worth of monetary products linked into real estate assets.
This drop in value then exposed the vulnerabilities of such a widespread network of credit agreements between international 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 monetary services market had permitted the development of a highly complicated web of high-risk credit deals that relied upon a rising economy. Once the first debtors started to fall behind on repayments, the entire house of cards was quick to come down.
The following financial fallout saw many people lose their jobs and also lose their properties, while many big, international companies were forced out of business. Governments all over the world had to bring in sweeping financial packages to support 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 worst financial period since the depression of the 1930s.
After speaking to business owners in the Nottingham planning consultant sector it would seem that they were caught in the midst of the recession.
The Impact on Business
It’s probably fair to state that the economic downturn has had an impact on just about every single business around the world. Certain business models will have been more able to adapt to the additional financial strain than others however they will have nevertheless experienced an impact at some portion of their operation.
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 types of businesses lose income, and since profit margins are often extremely slim in a competitive market place there was very little room to accommodate this fall.
Some other cases were not so clear cut. There were situations where one company in a lengthy supply chain had been unable to make it through and the knock-on impact would force every company inside of that supply chain to the brink of bankruptcy.
Job losses have of course been a very delicate subject to the vast majority of us. It’s believed that the present number of unemployed people in the UK is over 2.3 million (nearly 8% of the total countries’ labourforce), and many of these will probably have been victims of the global economic crisis. These types of job losses head to a larger decrease in typical spending, which triggers a further fall in revenue for business.
The End of Recession
It does seem that the downturn is on its way to an end though, and that can only be good news for business. Gross domestic product (GDP) experienced a rise in the UK throughout the fourth quarter of 2009 and total unemployment figures fell, both of which are signals of an economy that is healing. This isn’t a view shared by everyone however.
Experts from the International Monetary Fund (IMF) have forecast that the UK economy may actually get smaller over the course of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the risk of wide-spread unemployment continuing. When added to the possibility of a new or even hung government on its way into power in May 2010, as well as the need to lower a significant financial deficit, the future is definitely not set in stone.
This kind of uncertainty can be used as an advantage however, and organisations which are ready to take a few risks or who are prepared to adjust their operations to cater for a more cautious target audience could be set to make excellent profits.
Right now is a great time to be searching to acquire a phone sock since companies will be using promotions to lure brand new consumers.
Price Sensitivity
On the surface it may appear that the obvious strategy to use whilst the overall economy is recovering is to raise your very own retail prices again to a level that affords your company some margin of comfort with regards to running costs. As the market grows and consumers feel more secure in their careers they will feel comfortable spending extra money, so price raises should be an easy thing for shoppers to take on. This will not always be the case.
In fact, many businesses might find that they have to keep their selling prices as small as possible due to the recently triggered price sensitivity among the general public. Many of us have had to tighten our belts during the last few years, and just because the worst of the economic downturn seems to be over, we are not all prepared to start spending freely just yet.
The term price sensitivity describes how influential the factor of price is to shoppers any time they are purchasing a specific product. If a fairly large price shift, for example raising the price of a car by £1000, does not see a significant drop in demand for that product 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 drop in demand then that product is price sensitive. This same theory can also be applied to consumers themselves, and after a phase of economic downturn people are much more likely to be price sensitive.
As a result, the market place at large will take great interest in the prices of the items that they are purchasing. Several people will be watching out for discounts for everyday items that they require, and particularly their grocery shopping. Several of these things are essentials however. When it comes to purchasing luxury products, like televisions, cars and holidays, the price of the purchase is likely to be an much more important decision maker.
Businesses will be in a position to take advantage of this fact by using special offers and price campaigns to entice new customers into buying their goods. Buyers will be more likely than ever to move from their preferred brands if the price tag is perfect, and companies which offer the best priced goods are most likely to stand to profit from this. After these prospects have become clients there is a good chance that they will remain faithful to their new product choice as the market rebounds further, which could lead to further spending at the initial price rates.
A particular business has found that a website has been an excellent means to engage with their customers during the economic downturn.
Financial Security
People’s awareness of the economic system at large and how it impacts us all has significantly grown in light of the economic downturn. Prior purchasing decisions may well have been made with respect to the quality of the item and its price, but there is actually a fresh aspect that buyers will be considering now.
Recession Proofing
Several businesses have suffered bankruptcy in the aftermath of economic collapse. This has in turn has left countless numbers of shoppers in a really bad situation. As people seek to reinvest income into financial savings and shareholdings they will prefer to see that the corporation they are investing in has some type of safeguard against potential recessions. This may merely be a case of managing the business with as little debt as possible, but anything that may be used to assure customers might be a fantastic selling point for a firm.
Price Guarantees
One particular very visible element of the latest economic downturn in the United Kingdom was the steep drop in the interest rate. Once this change had worked itself throughout the high street retailers and fiscal services institutes several people discovered that they were either suffering as a consequence or enjoying a monetary benefit. Either way, it definitely elevated the profile of the effect that a changing interest rate could have on every day financial products.
Shoppers who are seeking to open up new savings accounts or private pensions may well be concerned that if the recession does in fact drag on for much longer they will not be earning any considerable interest on their investments. Actually, the recession may still take a turn for the worst and interest rates might drop again. In this scenario, a savings product that offers a guaranteed rate of return becomes a really appealing option. This method might be used to bring in several new savings customers.
The 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 too long before we see a rise in interest rates. That would signify that customers would have to pay more each month for their mortgages and loans.
A similar technique was utilised by a number of firms after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. These companies would offer “price freezes” for their goods for a specific period in an attempt to keep their current customers and draw new clients in.
Conclusion
Whether the economic downturn is entirely over yet or not, it has served as a firm reminder that no business can afford to be complacent in their own position of success. Company owners should always seek to consolidate their position and boost their operations wherever possible. The businesses that manage to survive the economic downturn will have learned important lessons.