RECESSION

ARTICLE BY,

SATHISH KUMAR.M

RECESSION

                        In economics, a recession is a business cycle contraction, a general slowdown in economic activity over a period of time.During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions, bankruptcies and the unemployment rate rises.

THE MAIN REASON FOR RECESSION

1.      The US Real estate market crash

2.      High default rates on Subprime loans &

3.      Subprime Mortgage backed securities

     RECESSION BENFITS TO AN ORGSNISATION

Does anyone benefit from a recession?

Some people who may do well in a period of a slowdown in economic growth

• Companies dealing with bankruptcies and IVF
• Companies dealing with debt problems
• It is said bookmakers and publicans do well in a recession because people like to ‘drown their sorrows’ with small gambles and getting drunk
• Pawnbrokers and people who pay cash for goods
• Firms selling inferior goods. (Goods where demand rises when income falls) e.g. value goods, second hand stores etc.
• Greater efficiency – enabling economy to more productive in long term
• Economists and analysts – get to talk about recession and how to get out of it

What do we think the benefits are?

·         Growing in a declining market costs much less. Growing is horrifically expensive. More stock, more cash, more space, more staff. It eats money. Do it when the market is down and you can grow share with out the spend.

·         The competition became distracted. Some competitors cut back, reducing range and staff. That gave us opportunities.

·         We learnt to focus on the best customers. One of the first things to happen was poorly managed customers going bust. It has really tightened credit control and our views on who are the best people we want to work with.

·         We treat things with more respect. From forklifts in the warehouse, to the chairs and computers, people have started to feel respect for things. Everything is less disposable.

·          We learnt to look for value again. We have re-pitched all main items of expenditure, not necessarily giving the business to the cheapest, but the best.

·         We have slowed down and thought more.

RECESSION NON BENFITS TO AN ORGSNISATION

·         Less income

·         nonprofits companies receive fewer donations and

·         struggle to keep their charity functioning during recession

·         Unfortunately, during a recession many nonprofit's programmatic needs increase.

·         Since people and institutions have less disposable income, nonprofits receive fewer donations and struggle to keep their charity functioning.

·         Each year most charities set new goals to raise more money than the previous year.

·         However, during a recessionary period, the goal should be to maintain at least the previous years' funding and at the same time cut expenses