1. INTRODUCTION
1.1 What is the recession?
The recession is the activity marked by the economic slowdown. During this phase, production, employment, investment, income, and spending all fall during this phase. Economists suggest that if the slowdown continues for more than two quarters, then there is a serious indication of a recession. Among the longest recessions are the panic of 1873 and the long depression that lasted five years and five months, the great depression that continued for four years and seven months, that is, from August 1929 to March 1933, and the period between the end of 1939 and the end of 1943. which lasted four years.
1.2 The recession scenario
As all the elements like investments, Gross Domestic Product, expenses fall and inflation increases, there is a definite impact on business. The decline in revenue and profit leads the company to reduce its production, lay off employees and freeze the entire hiring process. In an effort to reduce costs, the company may reduce or stop its marketing efforts, purchasing material from other suppliers that obviously have an effect on other businesses that are present in the chain of this company.
Globalization has turned the world into a global village where each company has multiple operations in several countries, each company is dependent on the other company for one or more requirements and it is very likely in most cases that the other participant in the chain can be in another country. So the whole scenario is based on the fact that if one of the major economies suffers a recession, it is very likely that other countries that do business with it will be greatly affected.
2. IMPACT OF THE RECESSION ON THE ECONOMIC GROWTH OF THE COUNTRY
2.1 Reduced cash inflow and decline in share prices
Falling stock prices generate discontent among shareholders. This drop in share prices affects the pockets of shareholders and employees. Due to the slowdown, the inflow of cash into the country drops sharply during the recession period. Countries have fewer cash reserves and are therefore less likely to invest in their home country’s businesses or finance companies and industries that exist in other countries.
2.2 Business credit cycle
The creditors pay the debt untimely and the company receives the money from them slowly. Sometimes they pay the amount partially or don’t pay at all which hinders the health of the company. As a solution to this, companies restructure their credit policy or resort to refinancing.
2.3 Layoffs of employees
Since companies tend to save money and reserve it, they lay off their employees. The remaining employees are ordered to take cover and work for the overall productivity so that the productivity of the company remains intact. The number of full-time workers decreases considerably, while the number of part-time employees increases. This has an impact on both full-time and part-time employees. Both segments remain unsure of their jobs and employee engagement levels are falling, leading to lower productivity.
2.4 Decrease in GDP
The decrease in income and profit leads to a decrease in the production of the goods that are produced. This is an important indicator of the recession.
2.5 Quality is hampered
Since companies do not inject more money to produce quality goods or provide quality services, quality suffers greatly. Companies also do not try to spend on product research and development to make new and innovative products. Quality standards therefore decrease.
3. Conclusion
However, the recession does not last forever, but companies must plan to overcome the recession in the best possible way. Some of the suggested ways are:
3.1 Diversify
The company should consider diversifying. They may do this by launching a whole new set of products and services, or by considering breaking into a whole new vertical. Risk is spread and therefore there is a greater chance of stabilizing in a fluctuating economic situation.
3.2 Investment
Having a standardized set of products and services does not attract investors, customers and is less profitable for shareholders. Continuous investment in research and development leads to improvement of existing products and development of a need-based but impressive and innovative product and the chances of survival of said company increase. Investing in the brand is a good option. Brand equity attracts new customers and retains the existing customer base.
3.3 Customer connection
A loyal customer base and cult following reduces the risk of being hit hard by the slowdown. Investing in branding, promotion, and most importantly, investing in customer loyalty programs help companies maintain strong relationships with their stakeholders.
3.4 Mix of employees
Instead of keeping a large number of permanent employees and then laying them off, a company can try to maintain a healthy mix and ratio of freelancers, part-timers, full-time employees, and outsourced vendors.