Recession-Proofing for the Future February 4, 2011 at 3:46 pm
Everybody in the nation, and without a doubt around the world, will certainly have suffered the latest global economic downturn in one way or another, possibly as an individual or as a business operator. It might not have had an immediate effect on your own job or your private income, but the knock-on effect of businesses dropping revenue will have affected the economic predicament of the great majority of folks. It has been a really complex issue with wide reaching ramifications.
The downturn now appears to be over, or is at least coming to an end, according to most financial experts. Whilst it might not yet be the moment to celebrate having survived the financial crisis, it should be a time to start looking forward and preparing for a future in a steady economy. It is time to seek out some recession opportunities.
Firms of all sizes, buying and selling in all sorts of marketplaces are no doubt going to need to adjust their operations in light of the economic depression. This might be after law is brought in to more closely control and keep an eye on the actions of worldwide monetary organisations. Many businesses will also be considering ways to make themselves far more robust and have the ability to endure economic instability in the long term. Either way, there will probably be adjustments for several companies, and wherever there is change there is potential.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and steadily spread around the world over the following couple of years. Numerous economic analysts credited the cause of the recession to be the drop in the U.S. real estate market, which in turn affected the value of financial products tied into real estate assets. The growth of the housing market until that stage had motivated homeowners to refinance their primary homes in order to obtain second or third properties with a view to a long-term profit.
The economic downturn of the early 21st century started in 2007 and progressively spread around the planet over the following few years. Many economic analysts attributed the cause of the economic downturn to be the drop in the U.S. housing market, which in turn impacted the worth of monetary products tied into real estate assets. The expansion of the property market up to that stage had encouraged homeowners to refinance their primary properties in order to purchase second or third houses with a view to a long-term gain.
The following financial fallout saw many individuals lose their jobs and also lose their properties, while many big, global organisations were forced out of business. Governments across the world had to introduce sweeping financial packages to assist their own banking systems, and even now certain first world nations are struggling to make it through financially.
For a small business which mainly deliver mobility scooters uk products, the total impact of the recession might not be apparent for an additional year or so.
The Affect on your Market
It is probably reasonable to say that the economic downturn has had an impact on just about every single enterprise around the globe. Particular business models will have been more able to adjust to the additional economic stress than others however they will have still experienced an impact at some section of their operation.
Many thousands of small and medium sized businesses have been forced out of business as a result of the recent economic downturn. Several of these cases will have been relatively simple; as the general public begin to decrease their spending these types of companies lose revenue, and since margins are often incredibly slender in a competitive market place there was very little room to allow for this decline. It’s a simple case of supply and demand not meeting in the middle.
Some other cases were not so clear cut. There were scenarios where one company in a long supply chain had been unable to make it through and the knock-on effect would force every company inside that supply chain to the brink of bankruptcy. The businesses that were able to survive have had to make very difficult judgements to make sure they can survive the economic collapse.
Job losses have of course been a very sensitive subject to the vast majority of us. It’s estimated that the current number of unemployed individuals in the UK is over 2.3 million (nearly 8% of the total countries’ labourforce), and many of these will have been victims of the international economic crisis.
The Ending of Economic Downturn
It does seem that the recession is coming to an end however, and that can only be good news for business. Gross domestic product (GDP) experienced a climb in the UK throughout the final quarter of 2009 and overall unemployment figures fell, both of which are signs of an economy that is healing.
Experts from 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 danger of wide-spread unemployment persisting.
This kind of uncertainty can be used as an advantage however, and organisations that are ready to take a few risks or that are prepared to alter their own operations to cater for a more wary audience might be set to make excellent profits.
There is a battle to acquire fresh customers among electricity price comparison suppliers that will present greater choice and more competitive prices to consumers.
Price tag Awareness
On the outside it might seem that the clear technique to use while the economy is recuperating is to increase your very own sales prices again to a point that affords your company some margin of comfort regarding operating expenses. As the economy grows and people feel more secure in their careers they will feel secure spending extra money, so price raises ought to be an easy thing for consumers to take on.
In fact, many companies might find that they have to keep their selling prices as small as feasible because the newly provoked price sensitivity amongst the general public. Many of us will have had to tighten our belts during the last couple of years, and simply because the hardest of the recession appears to be over, we are not all prepared to begin spending freely again.
The phrase price sensitivity describes how important the element of price is to customers when they are purchasing a specific product. If a relatively large price change, for example raising the cost of a car by £1000, does not see a large drop in demand for that item 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 fall in demand then that item is price sensitive. The same principle can also be applied to shoppers themselves, and following a phase of recession people are more inclined 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 buying. Several people may be watching out for discounts for everyday items that they need, and in particular their grocery shopping. Several of these items are essentials however.
Companies will be in a position to take advantage of this fact by utilising special offers and price promotions to attract new customers into purchasing their own products. Buyers will be more likely than ever to switch from their preferred manufacturers if the price is perfect, and firms which offer the best priced goods are likely to stand to gain from this.
Preserving a loyal consumer base was incredibly significant to this company and clever unit rates as well as marketing has helped to accomplish this.
Financial Stability
People’s understanding of the economic system at large as well as how it influences us all has significantly increased in light of the economic depression. Previous buying choices may well have been made according to the quality of the item and its price, but there is actually a new aspect that buyers will be considering now.
Depression Proofing
Many businesses have suffered bankruptcy in the aftermath of recession. This in turn has left countless numbers of consumers in a really poor situation. As people look to reinvest income into personal savings and shareholdings they would prefer to see that the business they are investing in has some sort of defense against potential recessions. This may simply be a case of operating the company with as little debt as feasible, but anything that may be utilised to assure customers might be a fantastic selling point for a company.
Pricing Promises
One particular very visible feature of the recent recession in the Uk was the steep decrease in the interest rate. After this change had worked itself throughout the high street retailers and monetary services institutes many people found that they were either suffering as a consequence or reaping a monetary advantage. Either way, it definitely raised the profile of the effect that a fluctuating interest rate can have on every day economic products.
Customers who are looking to open up new savings accounts or private pensions may be concerned that if the economic downturn does in fact carry on for much longer they will not be generating any substantial interest on their investments. Actually, the tough economy may still take a turn for the worst and interest rates could fall again. In this situation, a savings product that provides a confirmed rate of return turns into a really attractive option.
The exact same could be said for consumers with credit agreements. If the recession is genuinely over and the international market starts to recuperate more quickly than many expect, then it may not be too long before we see a growth in interest rates. That would signify that consumers would need to pay more every month for their mortgages and loans. A business that can offer a guaranteed rate of interest that isn’t linked to the base rate of interest might again attract many new customers.
A similar technique was utilised by a number of businesses after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. These companies would offer “price freezes” on their goods for a specific period in an effort to keep their existing customers and draw new customers in.
Conclusions
Whether the recession is absolutely over yet or not, it has functioned as a timely reminder that no business can afford to become complacent with its own situation of survival. Business managers should constantly look to consolidate their own position and boost their operations where possible.