Question

Question:

What is a recession? What are some ways companies can prepare for a recession and be better prepared for growth after the end of a recession?

Your answers will be short essays and should be three full paragraphs or longer.

Answer 1

Solution:

Recession is an economic situation when the economic activities that lead to the growth of the economy are either slowed down or completely stopped. This happens because of an economic bubble that is providing a wrong image of the economy altogether until it bursts to enter the economic recession or recession can also happen because of complete stopage of economic activities because of a natural calamity or hazard that results in significant losses of economic assets hence leading to a weaker economic condition of the country. Hence, during the recession the economic activities are standstill and there is very little to no flow of monetary value or trade among different economic stakeholders and hence causing a very slow growth of economy leading to a lower economic production and value creation.

Because of recession the disposable income with the consumers lowers because the income levels of people drastically reduce or may even completely stop. People may run out of jobs, income sources or companies may shut because of lower financial power to sustain the business operations during the economic recession and hence the income that is generated within the economy drops significantly. Hennce, the GDP, Gross Domestic Product lowers because of slower economic activities and resulting in lower income levels of people and hence lower levels of disposable income which in turn results into further lower business or trade happening because of low levels of consumer activity. Hence, during the recession the income levels of people go down causing very lower economic activities in the market.

The companies may suffer the most because of recession if they do not have enough capital to survive the economic downturn. Companies generally downsize during recession, fire employees, shut their projects, close their business units and activities and operate with are minimum resources to ensure business is kept operational and is not closed. Companies focus more on cost savings and capital savings during the recession to prevent themselves from the risk of going bankrupt and hence they take appropriate measures and strategies and plan for the survival and revival strategies for the business.

During recession companies often have 2 different strategies known to be survival strategy and revival strategy. The survival strategy focuses on the survival of the business for forecasted period of economic recession so that they keep themselves in the business and prevent themselves from hoping out of business. Revival strategies focus on the strategies the business can take once the economy starts recovering. The revival strategies focus on development of new products or services post recession that will have significant consumer demand and hence the business can tap these opportunities and start their business recovery.

Hence, these are the strategies that businesses can have to revive themselves after the recession is over and economy starts to recover.