The Great Recession was a hot topic in the news in 2008. I had no idea what that meant. I did realise, though, that most of the people were having financial difficulties.
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Although it was the first economic slump that I can recall since I was old enough to remember, it is not the first one that has occurred either domestically or worldwide.Asia’s financial crisis occurred in 1997. The New York Stock Exchange stopped on 9/11 for four days, a first since World War I.
I have no doubt that the world will experience unpredictable times in the future. However, how do businesses survive financially difficult times we’ll examine seven businesses that prospered during the recession and examine their strategies for doing so.
Companies That Succeeded During the Recession
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Small companies can benefit from the IT solutions and consulting services offered by TeamLogic IT. Surprisingly, the IT business has expanded through uncertain periods, including the crisis of 2008.Since consumers are becoming more and more reliant on newer technologies, this sector typically does well when the economy is in a slump. From our security to our enjoyment, technology has an impact on practically every aspect of our lives.
In reality, during the economic downturn of 2008, technology sales rose.
This pattern helped TeamLogic IT weather the 2008 storm successfully.If you wish to launch a business, it’s crucial to take into account whether that sector has performed successfully throughout periods of economic turbulence. Businesses in the tech, bargain retail, accounting, food, healthcare, and DIY/repair sectors prosper.
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Because Netflix is such a large company, you might be saying, “Of course Netflix survived the 2008 recession.”
Netflix companies wasn’t the media behemoth it is today in 2008, though.
In reality, Netflix launched a new service (the streaming service) in reaction to failing video rental establishments around the time of the Great Recession.The companies then continued to work on collaborations with organisations like Xbox so that customers may stream through those gadgets in 2008 and 2009.These inventions were what made it possible for the business to expand despite the recession. In fact, when other businesses were struggling to maintain revenue during the 2008 crisis, they were actually gaining memberships and subscriptions.
Additionally, this business has experienced recessions before, not only in 2008. Since it was established before the dot-com bubble burst, Netflix had to survive it in the early 2000s.During these times, the companies pioneered strategies for maintaining consumer appeal, whether it meant launching new products or growing its current lineup through alliances and collaborations.
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The Federal Reserve runs stress tests on banks every year to determine how much capital they would have if they suffered significant losses.It’s interesting to note that Citigroup companies, one of the only banks to have grown since the 2008 recession, saw an increase in assets in 2014.
In the wake of the financial crisis, this bank expanded when others didn’t because they focused on building their brands and providing high-quality services. Citigroup companies began to assist specific community organisations, which benefited their brand narrative.In actuality, Citigroup’s companies capacity to expand following the 2008 recession was significantly aided by marketing.
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Lego is a fascinating case study since one could assume that play areas and amusement parks are unnecessary, which means that an economic downturn would have an effect on the sector.Lego made the decision to diversify into a global market, nevertheless, during the 2008 recession.
While the United States’ economy was in trouble, the corporation focused its efforts on growing its sales in Europe and Asia.This allowed the business to have its highest-ever profitability levels during a downturn. When the economy in its primary market was in decline, this corporation recognised just when to diversify into international markets.
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You could think, “Of course they survived an economic crisis,” about Groupon companies as well.But in 2008, Groupon was still a young company. In actuality, the business began operations in the midst of the Great Recession. How is this possible?
Unexpectedly, startups typically perform well during recessions since they typically serve a demand and may operate on a less budget due to discounted prices.Particularly with Groupon, the website prospered since it was providing discounts.
Discounts are in high demand during recessions because customers are looking for any opportunity to reduce spending. Discounts actually give customers a way to weather a downturn, which is why they do well in unstable economic times.
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Mailchimp has been in business for about 20 years and has weathered numerous economic downturns. Since it was established in 2001, the business survived both the recessions of 2008 and 2001.So, how did the brand continue to exist and even grow throughout a recession? Well, the business was established amid the 2001 financial crisis and prospered as a result.
Due to a complete companies model overhaul in 2008, the companies managed to survive. They switched to a freemium model, and as a result, their sales soared.Due to the fact that Mailchimp was free during the recession, many clients wanted to use it. The brand was able to expand by changing with the times and giving out a free product, and they have continued to operate under that strategy ever since.
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Another companies that was established during the Great Recession is Warby Parker. What allowed them to be successful at this time? They filled a significant market void.Even though you would believe that an economic downturn is not the best time to launch a business, it is actually a terrific time to identify market gaps and pain points and address them.
When Warby Parker found it was difficult to find an inexpensive pair of stylish glasses online, they took that action.
Customers came even though they weren’t spending much money since they met a need. Customers required an affordable glassware solution, therefore the company promoted itself as being affordable (which was necessary during a recession).Even if your companies isn’t as large as these, keep in mind that many enterprise businesses today were founded during a recession.Another illustration is Microsoft, which was founded in the 1970s during the recession. After the economic collapse of 9/11, Apple reinvented its brand by launching new products and making investments.
The world economy is robust, and adversity always passes. The economy will bounce back, but it’s crucial for your business to be ready in case a financial catastrophe occurs.These businesses were successful because they continuously sought for new opportunities, moved into new markets, modified existing offers, created new goods, and provided customers with affordable alternatives. You may thrive in the upcoming economic crisis by using creativity and innovation.
List of Recessions in United States:
There have been up to 48 recessions in the United States since the Articles of Confederation, and although economists and historians disagree about some of the 19th-century recessions, there is general agreement that “the cyclical volatility of GDP and unemployment was greater before the Great Depression than it has been since the end of World War II.” Cycles in the nation’s agricultural production, industrial production, consumption, and business investment have all occurred throughout the country’s history. In particular, as economies of nations become more intertwined, U.S. recessions have a greater impact on economies globally.
The National Bureau of Economic Research (NBER), a private nonprofit research organisation based in the United States, has determined the unofficial beginning and ending dates of recessions in the country. A recession, according to the NBER, is “a considerable fall in economic activity across the economy, lasting more than two quarters, or six months, and usually manifested in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales.”
Financial crises and recessions commonly occurred at the same time in the 19th century. Due to the lack of economic statistics, it is more challenging to determine the incidence of recessions prior to the 20th century. As a result, researchers rely on historical descriptions of economic activity, such as business ledgers or current newspapers. Economists typically derive dates of U.S. recessions back to 1790 from business annals based on various contemporary descriptions, despite the NBER not dating recessions before to 1857. Their job is supported by past trends, as recessions frequently occur after external shocks to the economy, such as wars, weather changes that damage agriculture, and banking crises.
After World War II, major contemporary economic indicators, such as GDP and unemployment, began to be regularly and systematically compiled. The average length of the 11 recessions between 1945 and 2001 is 10 months, as opposed to 18 months and 22 months for the recessions between 1919 and 1945 and 1854 to 1919, respectively. It is challenging to compare the severity of current recessions to earlier recessions due to the enormous changes in the economy over time. No post-World War II age has had a recession with the severity of the Great Depression, which lasted from 1929 until 1941 and was brought on by the 1929 stock market crash and other circumstances, until the COVID-19 recession started in March 2020.
The Great Depression to the Free Banking Era (1836-1929)
President Andrew Jackson of the United States campaigned to abolish the Second Bank of the United States in the 1830s. After the Bank War, the Second Bank’s charter was revoked in 1836. While there was no national presence in banking from 1837 to 1862, there was still a great deal of state and even local control, such as prohibitions on branch banks that restricted diversification. The National Banking Act was established by Congress in 1863 in response to the financial strains of the Civil War, establishing banks with national charters. Banking panics were frequent because there was no central bank or deposit insurance during this time. Financial crises and bank panics were frequently caused by recessions, which made the recession worse.
It is debatable when to date recessions during this time. The collection of current economic data, such as GDP and unemployment, did not occur during this time. In order to gauge the severity of these recessions, Victor Zarnowitz examined a range of measures. The Cleveland Trust Company index, which measured economic activity from 1834 to 1929, can be used to compare recessions. Starting in 1882, an index of commerce and industrial activity was also available.
From the Great Depression on (1929–present)
After the conclusion of World War II and the significant transition of the economy from a period of war to peace in 1945, the gathering of numerous economic data, including GDP and unemployment, became standardised. These statistics allow for far easier comparisons between post-World War II recessions than between earlier recessions. The National Bureau of Economic Research’s official chronology is where the mentioned dates and times are taken from. The Bureau of Economic Analysis provided the GDP statistics, and the Bureau of Labor Statistics provided the unemployment data (after 1948). After a recession has been declared to be over, the unemployment rate frequently reaches a peak.
No post-World War II era came close to reaching the depths of the Great Depression up until the onset of the COVID-19 recession in 2020. The Great Depression saw a 27% decline in GDP, a 10% unemployment rate (the highest afterwards was a 10.8% rate during the 1981–1982 recession), and a 5.1% decline in GDP as of the second quarter of 2009—the deepest recession since demobilisation.
According to the National Bureau of Economic Research’s chronology, there were 16 cycles between 1854 and 1919, when recessions began to occur on a monthly basis. Average expansions lasted 27 months, while average recessions 22 months. There were six cycles between 1919 and 1945, with recessions lasting 18 months on average and booms 35. Recessions lasted an average of 10 months from 1945 to 2001 and 10 cycles, while expansions lasted an average of 57 months. Some economists have stated that the business cycle has grown less severe as a result of this.
The creation of deposit insurance in the form of the Federal Deposit Insurance Corporation in 1933 and increasing regulation of the banking industry are two variables that may have contributed to this moderation. The employment of fiscal policy as automatic stabilisers to reduce cyclical volatility is one of the other improvements. The Federal Reserve System was established in 1913, but its effectiveness as a source of stability has been questioned. Since the early 1980s, a variety of factors, including governmental regulations, business practises, technological advancements, and even good fortune, have been blamed for the origins of the Great Moderation.