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Opportunities For Companies Who Have Survived The Global Recession

Filed under: Uncategorized — emitaliablog
Posted on August 22, 2010 @ 1:35 pm
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Everyone in the nation, and in fact all around the world, will have experienced the latest global recession in one manner or another, either as a person or as a business operator. It may not have had a direct impact on your own job or your private earnings, but the knock-on impact of businesses dropping revenue will have influenced the economic situation of the great majority of folks. It has been a really complicated problem with wide reaching implications.

The downturn now appears to be over, or is at the least coming to an end, according to many financial experts. Whilst it might not yet be the occasion to celebrate having survived the economic crisis, it should be a period to begin looking forward and planning for a future in a steady economic climate. It is time to seek some recession opportunities.

Companies 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 legislation is introduced to more closely control and monitor the actions of international financial companies. Many businesses will also be considering methods to make themselves far more robust and able to withstand financial instability in the future.

The Recent Recession

The economic downturn of the early 21st century started in 2007 and slowly spread around the world over the subsequent few years. Many financial 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 resources. The expansion of the housing market until that stage had motivated homeowners to refinance their primary homes in order to purchase second or third homes with a view to a long-term profit.

This drop in value then uncovered the vulnerabilities of such a wide-spread network of credit agreements between global businesses, especially when much of the system was being backed by subprime lenders who were financial liabilities. A general lack of third-party control of the financial services market had allowed the creation of a highly complicated web of high-risk credit agreements which depended upon a thriving economy.

The subsequent economic fallout saw several individuals lose their jobs as well as lose their properties, whilst many big, international companies were forced out of business. Government authorities throughout the world had to introduce major financial programs to help their own banking systems, and even now certain first world nations are fighting to make it through financially. Many consider it to have been the most severe financial episode since the depression of the 1930s.

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The Impact on Business

It is probably reasonable to state that the recession had an effect on just about every single business around the world. Particular business models will have been more able to adapt to the additional economic strain than others but they will have still felt an impact at some section of their operations. If a key service provider or a major client goes out of business then that can have a negative effect upon your own business.

Thousands of small and medium sized companies have been pressured out of business as a result of the recent recession. Many of these situations will have been relatively simple; as the general public begin to reduce their spending these businesses lose revenue, and since margins are often very slim in a competitive market place there was very little room to accommodate this decrease. It’s a simple case of supply and demand not meeting in the middle.

Some other cases were not so clear cut. There were situations where one company in a long supply cycle were unable to survive and the knock-on effect would push every company in that supply chain to the edge of bankruptcy.

Job losses have of course been a very sensitive subject to the broad majority of us. It’s estimated that the current number of jobless people 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 global economic crisis. These types of job losses head to a larger decrease in typical spending, which leads to a further decrease in revenue for business.

The End of Recession

It does appear that the recession is on its way to an end though, and that can only be good news for business. Gross domestic product (GDP) experienced a climb in the UK during the fourth quarter of 2009 and overall unemployment numbers dropped, both of which are indicators of an economy that is healing.

Industry experts from the International Monetary Fund (IMF) have predicted that the UK economy will actually shrink over the duration of 2010 and Mervyn King, the Governor of the Bank of England has spoken of the risk of wide-spread joblessness persisting. When added to the prospect of a new or perhaps hung government coming into power in May 2010, as well as the real need to reduce a significant financial deficit, the future is definitely not set in stone.

This kind of uncertainty may be used as an advantage though, and companies which are ready to take a few risks or who are willing to alter their operations to cater to a more wary target audience could be set to make excellent profits.

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Price Sensitivity

On the outside it might seem that the clear technique to use while the overall economy is recovering is to raise your very own retail prices again to a point that offers your business some extra margin of comfort in relation to operating costs. As the economy grows and people feel safer in their jobs they will feel relaxed spending extra cash, so price raises should be an easy thing for consumers to take. This may not always be the case.

Actually, many firms may find that they need to hold their selling prices as low as feasible due to the recently triggered price sensitivity amongst the general public. Most of us will have had to tighten our belts over the last couple of years, and just because the worst of the recession appears to be over, we are not all prepared to start spending freely just yet. This is a trend that is difficult to exactly quantify, however businesses will have to be mindful of how their specific customer community feels toward spending.

The term price sensitivity represents how important the element of price is to consumers any time they are purchasing a particular product. If a relatively large price shift, for example increasing the cost of a car by £

1000, does not provoke a significant decrease in demand for that product then the product is said to be price insensitive. If a fairly modest 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. This exact same principle can also be applied to shoppers themselves, and after a phase of economic downturn people are more likely to be price sensitive.

As a result, the market place at large will take great interest in the costs of the things that they are purchasing. Several people will be watching out for deals for everyday products that they require, and particularly their grocery shopping. Many of these things are necessities however. When it comes to buying luxury goods, like televisions, cars and holidays, the cost of the purchase is likely to be an even more important decision maker.

Companies will be able to take advantage of this by using special offers and price promotions to attract new consumers into buying their own items. Consumers will be more likely than ever to move from their preferred brands if the price is perfect, and businesses that offer the best priced products are likely to stand to profit from this. Once these potential customers have turned into customers there is a good chance that they will remain faithful to their new product or service choice as the market rebounds further, which could lead to further spending at the initial prices.

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Financial Security

People’s knowledge of the economic system at large along with how it affects us all has significantly grown in light of the economic downturn. Prior purchasing choices may well have been made with respect to the quality of the item and its price, but there is actually a fresh factor that consumers will be considering now. Financial security.

Recession Proofing

Many firms have endured bankruptcy in the aftermath of recession. This has in turn has left thousands of consumers in a very poor predicament. As individuals seek to reinvest money into financial savings and shareholdings they will like to see that the business they are investing in has some sort of defense against future recessions.

Price Guarantees

One particular very noticeable feature of the recent economic downturn in the Uk was the sharp drop in the interest rate. After this change had worked itself throughout the high street shops and monetary services organisations several people discovered that they were either suffering as a result or enjoying a monetary benefit.

Customers who are seeking to open new savings accounts or private pensions may be worried that if the economic downturn does in fact carry on for much longer they will not be earning any considerable interest on their investments. Actually, the tough economy may still take a turn for the worst and interest rates might fall again. In this situation, a savings product that offers a guaranteed rate of return becomes a very attractive choice.

The same can be said for consumers with credit agreements. If the recession really is genuinely over and the worldwide economy begins to recuperate much more swiftly than many expect, then it might not be long before we see an increase in interest rates. That would signify that customers would have to pay much more each month for their mortgages and loans.

A similar technique was utilised by a number of firms when 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 certain time period in an effort to keep existing clients and bring new customers in. This kind of price freeze granted a buffer time for people to adapt to the new VAT percentage.

Conclusion

Whether the recession is totally over yet or not, it has functioned as a firm indication that no business can become complacent in its own position of survival. Business managers must always seek to consolidate their situation and boost their operations where possible. The companies that manage to endure the economic downturn will have learnt important lessons.




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