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A Sharp recession sends firms into receivership while some emerge stronger than ever. Discuss the factors which may determine the effects of a sharp recession upon a firm

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A Sharp recession sends firms into receivership while some emerge stronger than ever. Discuss the factors which may determine the effects of a sharp recession upon a firm All businesses go through a recession; these are often due to cyclical changes, which a business goes through. The business cycle consists of a sequence in which a recession is followed by a recovery, which leads into a boom. However if a business goes into a receivership this means the banks take control and often sell bits of the business. When a businesses is booming there will be a downturn leading to a recession which sometimes lead to business losing out al together and this is when they go into receivership. When a business goes through a recession the period of the business cycle is usually slow in growth or stagnation. It Isn't easy to predict what will happen in the economy and at what stage the business is going to experience the different aspects of a business cycle (Boom, Recession, Recovery). So sometimes business are caught out and hit hard by a recession, and can lead to them going out of business. ...read more.


This may be sending a business into a sharp recession and their reputation can be affected. Cuts are made during recessions such as cuts in employment (already mentioned) little use of capital equipment and cuts in output and sales all contribute in sending a business into a sharp recession. Also businesses lose their market share if they are in a highly competitive market e.g. mobile phone market a company producing only simple mobile phones lose their market share because customer interest goes elsewhere and other rival businesses have moved the market of mobile phones onto another level. The rising costs that a boom consists of in time discourages growth, They reduce profitability. The government in time then feels the need to damp down the economy and increase interest rates, which put people off spending on consumer goods and luxuries. People who have to spend more on their mortgages can't afford to spend on things, which are a luxury to them (Clive and his curry). Businesses that take out loans and other financial investments, their calculations are less favourable because of the rising interest rates; banks charge higher fees when the business pays back the money. ...read more.


The business however would have had to experience a recession and survived it in order to predict when it may occur so it has experience under its belt. Businesses who have a wide product range may also not be so affected by a recession because they won't be so affected by demand because they have a wide product range. This means they aren't heavily relying of products, which experience variation in demand in a cycle to make profits. Summary: The past doesn't always predict the future and businesses find it very difficult to forecast when a recession may come about. I have already discussed that some businesses can survive a recession quite easily and the different factors which can benefit them and soften the blow of a recession. Others find it an impossible task as I have explained because of economic factors such as taxes and interest rates for example. The unpredictability on the business cycle means that it justifies and emphasises the importance of contingency plans in worst-case scenarios and can prove valuable in recovering from a recession. A firm can think about the changing customer tastes and producing the next boom instead of relying on the government and economic problems to smooth things out. ?? ?? ?? ?? ...read more.

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