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Recession-Proofing for the Future

Everybody in the nation, and certainly around the planet, will have experienced the recent global recession in one manner or another, possibly as a person or as a business owner. It might not have had a direct impact on your own job or your private income, but the knock-on impact of companies losing income will have influenced the monetary circumstance of the great majority of people. It has been a really complicated problem with wide reaching implications.

The actual recession now seems to be over, or is at the least on its way to an end, according to many economic authorities. Whilst it might not yet be the moment to celebrate having made it through the economic crisis, it should be a time to begin looking ahead and preparing for a future in a stable economy. It is time to look for some recession opportunities.

Firms of all sizes, trading in all sorts of markets are no doubt going to have to change their operations in light of the economic depression. This may be after law is brought in to more closely control and keep an eye on the action of international monetary companies. Many companies will also be looking at methods to make themselves much more robust and able to withstand financial instability in the future.

The Recent Recession

The economic downturn of the early 21st century began in 2007 and gradually propagated around the world over the subsequent couple of years. Numerous financial analysts credited the cause of the recession to be the crash in the U.S. real estate market, which in turn affected the worth of monetary products linked into real estate resources. The expansion of the housing market until that stage had motivated homeowners to refinance their primary homes in order to obtain second or third houses with a view to a long-term gain.

This fall in value then uncovered the vulnerabilities of such a wide-spread network of credit agreements between global businesses, particularly when much of the system was being supported by subprime lenders who were financial liabilities. A general lack of third-party control of the financial services sector had allowed the development of a highly complex web of high-risk credit deals that depended upon a thriving economy.

The subsequent financial 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 throughout the world had to introduce radical financial packages to assist their own banking systems, and even now certain first world nations are struggling to make it through financially.

All firms, such as this particular firm supplying hair fascinators have taken a slightly different tactic to deal with the recession.

The Impact on Business

It is probably reasonable to say that the economic downturn has had an impact on just about every enterprise around the world. Particular company models will have been more able to adjust to the added economic pressure than others however they will have still experienced an impact at some part of their operations.

Thousands of small and medium sized businesses have been pressured out of business because of the recent economic collapse. Several of these cases will have been fairly 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 drop.

Some other cases were not so clean cut. There were situations where one business in a long supply chain had been unable to make it through and the knock-on impact would force every business within that supply chain to the edge of bankruptcy.

Job losses have of course been a pretty sensitive subject to the wide majority of us. It is believed that the present number of jobless individuals 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 international financial crisis. These job losses head to a larger drop in typical spending, which results in a further decrease in earnings for business.

The End of Recession

It does seem that the downturn is on its way to an end however, and that can only be good news for business. Gross domestic product (GDP) saw a climb in the UK throughout the fourth quarter of 2009 and total unemployment figures dropped, both of which are indicators of an economic system that is recovering.

Experts from the International Monetary Fund (IMF) have forecast that the UK economy will actually get smaller over the course of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the threat of wide-spread joblessness continuing.

This kind of uncertainty may be utilised as an advantage though, and companies that are ready to take a few risks or that are willing to adjust their own operations to cater for a more cautious audience could be set to make great profits.

I have been talking to the owner of a well respected company who sell plastic food containers famous for making high quality goods and he was positive for the future.

Price Sensitivity

On the surface it may appear that the obvious technique to use whilst the overall economy is recovering is to increase your own retail prices again to a level that offers your business some extra margin of comfort in relation to running costs. As the market grows and consumers feel more secure in their careers they will really feel comfortable spending more cash, so price increases should be an easy thing for shoppers to take.

In fact, several firms might find that they have to hold their selling prices as small as possible due to the recently provoked price sensitivity among the general public. Most of us have had to tighten our belts over the last few years, and simply because the worst of the recession seems to be over, we aren’t all prepared to start spending freely again.

The phrase price sensitivity represents how influential the element of price is to shoppers any time they are purchasing a specific item. If a relatively large price change, for example increasing the price of a car by £1000, does not provoke a big drop in demand for that item then the item 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 drop in demand then that product is price sensitive.

As a result, the market at large will have great interest in the prices of the things that they are buying. Several people may be looking out for bargains for everyday items that they need, and in particular their grocery shopping. Several of these products are essentials however.

Businesses will be able to take advantage of this by using special discounts and price campaigns to entice new consumers into buying their items. Consumers will be a lot more likely than ever to switch from their favored manufacturers if the price is right, and companies that offer the best priced items are likely to stand to profit from this. Once these prospects have become shoppers there is a great chance that they will remain loyal to their new product or service choice as the market recovers further, which could lead to further spending at the initial prices.

I was especially impressed at the way this particular company maintained overall performance as well as made sales throughout the toughest times of the economic downturn.

Financial Security

People’s understanding of the economy at large along with how it impacts us all has significantly grown in light of the economic depression. Prior buying decisions may well have been made with respect to the quality of the product and its value, but there is a fresh aspect that buyers will be thinking about now. Financial security.

Recession Proofing

Many companies have suffered bankruptcy in the aftermath of economic collapse. This has in turn has left thousands of buyers in a really bad situation. As individuals look to reinvest income into financial savings and shareholdings they will like to see that the business they are investing in has some form of protection against future recessions.

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 shops and financial services organisations several people found that they were either suffering as a consequence or reaping a financial benefit.

Consumers that are looking to open new savings accounts or private pensions may well be worried that if the recession does indeed drag on for much longer they will not be generating any substantial interest on their investments. In reality, the recession may even now take a turn for the worst and interest rates might fall again. In this scenario, a savings product that provides a confirmed rate of return will become a very attractive choice.

The same could be said for consumers with credit agreements. If the recession is genuinely over and the global economy starts to recover more quickly than many expect, then it might not be long before we see a growth in interest rates. This would mean that customers would need to pay much more every month for their mortgages and loans. A business that could offer a secured rate of interest that isn’t connected to the base rate of interest can again attract many new customers.

A similar technique was used by a number of companies 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 particular period in an attempt to retain existing clients and draw new customers in.

Conclusion

Whether the economic downturn is absolutely over yet or not, this has functioned as a timely indication that no company can become complacent with its own position of success. Company owners must always look to consolidate their own situation and boost their operations where possible.

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