Recession Opportunities

Everybody in the nation, and indeed around the planet, will certainly have suffered the latest global recession in one manner or another, either as an individual or as a company owner. It may not have had an immediate effect on your own position or your individual income, but the knock-on effect of companies dropping revenue will have influenced the monetary circumstance of the wide majority of people. It was a really complicated problem with wide reaching ramifications.

The actual downturn now seems to be over, or is at the very least on its way to an end, according to many financial authorities. Although it might not yet be the moment to celebrate having survived the economic turmoil, it should be a period to start looking ahead and planning for a future within a stable economic climate. It is time to look for some recession opportunities.

Firms of almost all sizes, buying and selling in all sorts of markets are no doubt going to have to adjust their operations in light 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 firms may also be considering methods to make themselves far more robust and have the ability to withstand financial instability in the future.

The Recent Recession

The economic downturn of the early 21st century started in 2007 and gradually spread around the world over the next couple of years. Several economic analysts credited the cause of the recession to be the crash in the U.S. property market, which in turn impacted the value of monetary products linked into real estate assets.

This drop in value then exposed the vulnerabilities of such a widespread network of credit contracts between global businesses, especially when much of the system was being backed by subprime lenders who were fiscal risks. A basic lack of third-party management of the financial services market had allowed the development of a very complex web of high-risk credit deals that relied upon a rising economy. Once the first debtors began to fall behind on payments, the entire house of cards ended up being quick to fall.

The following economic fallout saw several individuals lose their jobs as well as lose their homes, while many large, international companies were forced out of business. Government authorities across the world had to introduce radical financial programs to help their own banking systems, and even now certain first world countries are struggling to make it through financially. Many believe it to have been the most severe financial period since the depression of the 1930s.

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The Impact on Business

It is probably fair to state that the economic downturn had an effect on just about every business around the globe. Particular business models will have been more able to adapt to the additional financial stress than others but they will have still experienced an impact at some section of their operation. If any key service provider or a key client goes out of business then this will have a negative effect upon your own company.

Many thousands of small and medium sized businesses have been forced out of business due to the recent recession. Many of these situations will have been comparatively basic; as the general public begin to reduce their spending these types of businesses lose income, and since profit margins are often extremely slender in a competitive market place there was very little space to allow for this decrease.

Other cases were not so clear cut. There were scenarios where one company in a long supply cycle had been unable to survive and the knock-on impact would push every business inside of that supply chain to the edge of bankruptcy. The businesses that were able to pull through have had to make extremely hard decisions to ensure they can outlast the recession.

Job losses have of course been a very sensitive subject to the vast majority of us. It is estimated that the current number of jobless individuals in the UK is over 2.3 million (almost 8% of the total countries’ workforce), and many of these will have been victims of the global financial crisis.

The End of Recession
It does appear that the recession is coming to an end however, and that can only be great news for business. Gross domestic product (GDP) saw a climb in the UK throughout the final quarter of 2009 and total unemployment numbers fell, both of which are signals of an economy that is healing. This isn’t a perspective embraced by everybody however.

Industry experts at the International Monetary Fund (IMF) have predicted that the UK financial system may actually get smaller over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the threat 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 who are prepared to modify their own operations to cater to a more wary audience might be set to make good profits.

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Price Sensitivity

On the outside it may seem that the obvious strategy to use whilst the economy is recovering is to raise your own sales prices again to a level that offers your company some margin of comfort with regards to running costs. As the economy grows and people feel more secure in their jobs they will really feel comfortable spending extra cash, so price raises should be an easy thing for shoppers to take on. This will not necessarily be the situation.

Actually, many companies may find that they need to keep their selling prices as small as possible because the newly triggered price sensitivity amongst the general public. Most of us will have had to tighten our belts over the last few years, and simply because the hardest of the economic downturn seems to be over, we aren’t all ready to begin spending freely just yet.

The phrase price sensitivity represents how influential the factor of price is to customers any time they are purchasing a specific product. If a relatively large price change, for example increasing the cost of a car by £1000, does not see a large decrease in demand for that product then the item is said to be price insensitive. If a fairly modest 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. This exact same principle can likewise be applied to shoppers themselves, and following a period of economic downturn people are more likely to be price sensitive.

As a result, the market at large will take great interest in the prices of the things that they are buying. Many people may be looking out for deals for everyday products that they need, and in particular their grocery shopping. Many of these items are necessities however. When it comes to purchasing expensive products, like televisions, cars and holidays, the cost of the purchase is likely to be an much more important decision maker.

Businesses will be able to take advantage of this by utilising special discounts and price promotions to attract new customers into purchasing their own items. Consumers will be a lot more likely than ever to change from their preferred manufacturers if the price is perfect, and firms which offer the best priced products 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 loyal to their new product or service choice as the market rebounds further, which could lead to further spending at the original price rates.

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Financial Security

People’s awareness of the economy at large along with how it affects us all has significantly increased in light of the economic depression. Previous purchasing choices may well have been made with respect to the quality of the product and its value, but there is a new factor that consumers will be thinking about now. Financial security.

Recession Proofing

Many businesses have suffered bankruptcy in the aftermath of recession. This has in turn has left countless numbers of customers in a really bad predicament. As people look to reinvest income into personal savings and shareholdings they will prefer to see that the company they are investing in has some kind of protection against potential recessions. This might simply be a case of running the business with as little debt as possible, but anything that can be used to assure customers could be a great selling point for a firm.

Price Guarantees

One very visible element of the recent recession in the Uk was the steep decrease in the interest rate. Once this change had precipitated itself throughout the high street stores and fiscal services institutes many people found that they were either suffering as a consequence or enjoying a financial benefit. Either way, it definitely elevated the profile of the effect that a fluctuating interest rate could have on everyday financial products.

Consumers who are looking to open new savings accounts or private pensions may well be worried that if the recession does indeed carry on for much more time they will not be earning any substantial interest on their investments. Actually, the tough economy might still take a turn for the worst and interest rates might fall again. In this situation, a savings product that provides a confirmed rate of return will become a really attractive option. This technique can be used to appeal to several new savings clients.

The same could be said for consumers with credit agreements. If the recession is genuinely over and the global market begins to recover more swiftly than many anticipate, then it may not be too long before we see a growth in interest rates. That would signify that consumers would need to pay much more every month for their mortgages and loans. A company that can offer a secured rate of interest that isn’t linked to the base rate of interest could again entice many new clients.

A similar approach 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 products for a particular time period in an effort to keep their current customers and draw new clients in. This price freeze permitted a buffer period for individuals to adjust to the new VAT rate.

Conclusion

Whether the economic downturn is totally over yet or not, this has served as a firm indication that no business can afford to be complacent in its own position of survival. Company managers must constantly look to consolidate their situation and improve their operations where possible.

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