With reference to the item above and your own research, to what extent do you think that the amount of profits earned by a business in a recession depends entirely on the industry in which it operates? An economic downturn is when the GDP of the country falls. The GDP is the Gross Domestic Product of the country and accounts for all transactions made throughout each quarter of the period. If the GDP falls for two consecutive quarters then that is classed as a recession and the government should take action to help stimulate the economy. One of the main changes in a particular industry during the recession was the Fast Food industry.
During the recession these industries seemed invulnerable to the dramatic decrease in luxury spending due to the increased price of necessity goods. The first company which have been doing well whilst England have been in and out of recession is KFC, they seemed to have gained the benefits of people having less money to spend whilst being able to put back into the economy by creating jobs, this is shown in the Worcester the ‘Job Centre’ which was approached by KFC to fill 70 jobs that were to be created in 2008 just after the first recession had began.Also in February 2009 BBC news published another story quoting KFC on ‘creating 9000 jobs over the next 3-5 years’ this is a staggering figure and one that was created during a heavy recession. The reason they were so confident with their figures throughout the recession was because they believed people who now had less money to spend were drawn to cheaper foods, therefore boosting the fast food industry. In contrast, one industry, which isn’t secure, is the car industry, which took a bad turn during the recession.
In December 2008 many car manufacturers had to cut shifts meaning shorter hours for workers to save money on salaries. Aston Martin has to cut 600 jobs due to the extreme market conditions proving they have taken on the strategy to cut costs as opposed to optimise them. Another car manufacturer that has struggled through the recession is Land Rover, who in 2009 reported a decreased in the number of cars sold from 246000 to 167000.This could be because Land Rover targets an upper end market that is very much an elastic product, as once you buy one car that can last a very long time and another would be a luxury. On the other hand, Nissan have had a good year of trading and experienced a 14% rise in car sales. However, this increase was funded by government intervention, as they received ? 420m to help increase their sales.
Another company in the fast food industry, Dominoes pizza, recently announced a 25% increase in its annual pre-tax profits to ? 23. 4 million. They believe this is because consumers in the recession switched from eating in restaurants to buying takeaway food.It has also been found that an increasing sedentary lifestyle in people in the UK is also the reason why there are a larger number of people getting takeaways for dinner. Throughout the recession Dominoes pizza have ensured that they exceed expectations for product quality and speed of delivery, thereby building customer loyalty. They have achieved this successfully by spending smarter instead of spending less.
For example making sure waste is eliminated and making/buying the correct amount of products for the demand.For this business the recession has led to growth as they are currently meeting their objective to have 1000 stores in the next ten years, therefore more orders for suppliers, more jobs and more rewards for investors. Overall helping the economy and keep positive relations. Another sector that has been affected by the recession is the technology market. Many of these companies have had different struggles during the downturn and some have recovered better than others.The cure for Apple during the recession has not been through cost cutting, but through innovation, for example the iPad that was launched right in the depths of slump.
They have adopted a new range of products sold proving they have not cut spending in the research and development sector as many other companies did. Apple have been thinking in the long term and negotiated the relationship between short-term costs and long-term profits through optimising their costs.Despite the harsh recession share price for apple had rose from $1.19 to $1.
35 a share within the space a 1 year, this showed that Apple were still selling strong despite harsh competition from competitors such as Samsung. However, in the same year Nokia had a major decline in shipments proving that even if two businesses operate in the same market it depends on how the business acts to the change in the market and in this case Apple reacted a lot better than Nokia proving it is the business and not the industry in which it operates.Overall, the market in which businesses operate will be affected by a recession. An inelastic product such as petrol should be able to meet their targets easier than an elastic product such as yachts as there will be a greater fall in sales during the downturn.
However, more recognised firms will be able to cope better with the recession if they plan an appropriate strategic response to the companies aim.
