In Economics, a recession is a period of economic slowdown. One of the causes for recession is widespread drop in spending followed by a supply shock. Recession has many ill effects on the macroeconomic level which in turn affect the microeconomic economy. In Macroeconomics, cumulative effect of recession can be seen through fall in, production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization, household incomes, business profits, and inflation. Various methods are adopted by adopted and employed by government to respond to recessions such as increasing government spending and decreasing taxation etc.
But as a proverb states, every cloud has a silver lining, in the same way even the so negatively perceived period of recession has some positive effects in the economy which will be further explored in this paper.
Regardless of what people or media say, recession is a good time to get into the business. Just take a look at last economic slowdowns throughout history you’ll find recession last for an average of 10 months than followed by growth period of approx 4 years, which could be very beneficial for a start-ups .
Some reasons to justify why recession is considered as a good time period would be
1). CHEAP RESOURCES
The time of recession is right time for fantastic deals in every category be it be land, equipment, offices, raw materials, labour, etc. At this time every asset price goes down and there is no better time to get into real estates or heavy equipments as it involves huge cash inflows
2). HIRE BETTER QUALIFIED PEOPLE CHEAPLY
Imagine a period of recession where even Microsoft is laying off, there would be no better time where you can hire highly qualified people and at a rate which you can’t get during normal period. Highly qualified People from engineers to accountants are all waiting to get a job
3). COMPETITORS ARE WEAKEND
Because of the recession, your competitors are not only weakened but perhaps even closing up and selling out. Maybe some owners are retiring. All are tightening their belts. There may be a niche for you to slip into if a hole is developing in the marketplace.
4). BETTER INTREST RATES DUE TO BETTER CREDIT RATING
During a recession banks are typically less thrilled about lending money out. However, if your company already exists and has a better credit rating you’ll have your pick of interest rates and other loan features to finance moving your new business forward if it makes sense to do so during the recession.
5). SUPPLIERS ARE GIVING BETTER CREDIT.
Because the credit markets have virtually shut down, the B2B credit flows are keeping money circulating out of sheer necessity. That means a bullish outlook for companies looking for good terms on stock and/or inventories. The main advantage is that all parties have more incentive than ever for finding true win-win situations that allow for cash and stock flow. When everyone is looking to survive, great deals can be had.
6). FINANCE YOUR BUSINESS
If you are starting a business during a recession, you are starting with a very limited budget. Chances are, you don't have access to angel investors or venture capitalists. You may have access to funds from your family or friends since, in a recession, they may not be investing in the stock market or other financial instruments.
7). BETTER PUBLIC IMAGE
The media loves aberrations, and if you are optimistic by expanding or getting into business now, you would be in that category. That means you can generate some great PR by demonstrating your "alternative" view of the market.
8).RECESSION TOUGHEN UP COMPANIES
A recession is a great time to start a company, but it isn't the easiest time to incubate a business. That doesn't mean entrepreneurs should back away from the challenge, however. Adversity brings out qualities that every entrepreneur needs to succeed - guts, problem-solving, strength and perseverance. Starting a company in the lean times helps develop those qualities more quickly, which will help the startups in the long-run.
SOME FAMOUS COMPANY WHICH STARTED DURING RECESSION
It might seem counterintuitive to start a new business when the economy is in the dumps. But a recession can actually be the ideal time for launching a company. In fact, many well-known and successful organizations were born during an economic slump.
Why do these companies succeed? Usually it's because the founders recognized a market need and filled it. Identifying that need — whether it’s related to entertainment, travel or even streamlining how businesses operate — is the key to any thriving enterprise, regardless of the economic climate in which it begins. The following major corporations made it big during recessions by doing just that.
Hyatt Corp. opened its first hotel’s doors at the Los Angeles International Airport during the Eisenhower recession (1957 to 1958). The chain rose to worldwide fame in the following decades and now operates more than 365 hotels in 25 countries with premium services such as wifi hotspots.
Burger King Corp., with its flame-broiled burgers, is another recession start-up. The company began in 1954 when James McLamore and David Edgerton opened a Burger King restaurant in Miami, Fla. During another recession in 1957, the company introduced its successful signature burger — the Whopper. Today, the company operates more than 11,100 locations in 65 countries.
FedEx Corp. began operations on April 17, 1973 as Federal Express, a nod to the Federal Reserve, with whom founder Frederick W. Smith had hoped to get a contract. He didn't, but the company that delivered 186 packages to 25 cities on its first night of operations now manages more than 7.5 million shipments everyday worldwide.
Microsoft Corp. wasn't always the jaw-dropping enterprise it is today. In 1975, when it was created by Harvard University dropout Bill Gates, Microsoft was just a little company in Albuquerque, N.M. It dealt in rudimentary computing languages and began its climb to business stardom with the success of MS-DOS, which was sold and marketed to IBM Corp. and then-IBM clones. Today, the company is estimated to earn more than $60 billion in revenue per year and is branching into new areas including VoIP and CRM.
CNN might be a news giant now, but in recession-plagued 1980, it was a little-known station called The Cable Network News. It revolutionized how people received information when it premiered as the first 24-hour all-news channel. Today, 1.5 billion people across the globe watch CNN.
MTV Networks brought something new and different to the music scene when it debuted in the economic slump of 1981. Intended to be an all-music-video channel, MTV used VJs (video jockeys) to host programs and facilitate transitions between videos. Today, MTV is a global brand with dozens of shows, music-related and not.
Wikipedia Foundation Inc. was born during the recent post-9/11 recession. Established in January 2001, the online encyclopedia had more than 100,000 entries by 2003. Today it is home to more than 2.5 million articles and continues to grow.
Sports Illustrated magazine was launched on August 16, 1954, at the tail-end of a recession. The magazine benefitted from fortunate timing as a boom in professional sports exploded soon after its founding. Sports Illustrated now sells about 3 million copies in the U.S. each week.
GE (General Electric Co.) was established in 1876 by famed American inventor Thomas Edison. In the middle of the Panic of 1873, a six-year recession, Edison created one of the best-known inventions of all time — the incandescent light bulb. In terms of market capitalization, GE is now the third largest company in the world. The enterprise has evolved from a manufacturing-strong business to an enterprise earning more than 50 percent of its revenue from its financial services division.
HP (Hewlett-Packard Development Company LP) was inauspiciously born in a Palo Alto garage at the end of the Great Depression. The electronic company, initially supported by a mere $538 investment, has grown into the first technology business to exceed $100 billion in revenue, earning $104 billion in 2007. It now operates in nearly every country in the world.
Recessions, however, aren’t advantageous only to start-ups. Pre-existing companies can also make incredible gains in years where the economy is down. Some of the most recent success stories are those of Google, PayPal and Salesforce.com Inc. From 2000 to 2001 each of these companies thrived, leading PayPal to go public in 2002, followed by Google and Salesforce.com in 2004.
“Once in a while recession can also turn into an opportunity which can be proved to be a boon for the upcoming businesses”.
But as a proverb states, every cloud has a silver lining, in the same way even the so negatively perceived period of recession has some positive effects in the economy which will be further explored in this paper.
Regardless of what people or media say, recession is a good time to get into the business. Just take a look at last economic slowdowns throughout history you’ll find recession last for an average of 10 months than followed by growth period of approx 4 years, which could be very beneficial for a start-ups .
Some reasons to justify why recession is considered as a good time period would be
1). CHEAP RESOURCES
The time of recession is right time for fantastic deals in every category be it be land, equipment, offices, raw materials, labour, etc. At this time every asset price goes down and there is no better time to get into real estates or heavy equipments as it involves huge cash inflows
2). HIRE BETTER QUALIFIED PEOPLE CHEAPLY
Imagine a period of recession where even Microsoft is laying off, there would be no better time where you can hire highly qualified people and at a rate which you can’t get during normal period. Highly qualified People from engineers to accountants are all waiting to get a job
3). COMPETITORS ARE WEAKEND
Because of the recession, your competitors are not only weakened but perhaps even closing up and selling out. Maybe some owners are retiring. All are tightening their belts. There may be a niche for you to slip into if a hole is developing in the marketplace.
4). BETTER INTREST RATES DUE TO BETTER CREDIT RATING
During a recession banks are typically less thrilled about lending money out. However, if your company already exists and has a better credit rating you’ll have your pick of interest rates and other loan features to finance moving your new business forward if it makes sense to do so during the recession.
5). SUPPLIERS ARE GIVING BETTER CREDIT.
Because the credit markets have virtually shut down, the B2B credit flows are keeping money circulating out of sheer necessity. That means a bullish outlook for companies looking for good terms on stock and/or inventories. The main advantage is that all parties have more incentive than ever for finding true win-win situations that allow for cash and stock flow. When everyone is looking to survive, great deals can be had.
6). FINANCE YOUR BUSINESS
If you are starting a business during a recession, you are starting with a very limited budget. Chances are, you don't have access to angel investors or venture capitalists. You may have access to funds from your family or friends since, in a recession, they may not be investing in the stock market or other financial instruments.
7). BETTER PUBLIC IMAGE
The media loves aberrations, and if you are optimistic by expanding or getting into business now, you would be in that category. That means you can generate some great PR by demonstrating your "alternative" view of the market.
8).RECESSION TOUGHEN UP COMPANIES
A recession is a great time to start a company, but it isn't the easiest time to incubate a business. That doesn't mean entrepreneurs should back away from the challenge, however. Adversity brings out qualities that every entrepreneur needs to succeed - guts, problem-solving, strength and perseverance. Starting a company in the lean times helps develop those qualities more quickly, which will help the startups in the long-run.
SOME FAMOUS COMPANY WHICH STARTED DURING RECESSION
It might seem counterintuitive to start a new business when the economy is in the dumps. But a recession can actually be the ideal time for launching a company. In fact, many well-known and successful organizations were born during an economic slump.
Why do these companies succeed? Usually it's because the founders recognized a market need and filled it. Identifying that need — whether it’s related to entertainment, travel or even streamlining how businesses operate — is the key to any thriving enterprise, regardless of the economic climate in which it begins. The following major corporations made it big during recessions by doing just that.
Hyatt Corp. opened its first hotel’s doors at the Los Angeles International Airport during the Eisenhower recession (1957 to 1958). The chain rose to worldwide fame in the following decades and now operates more than 365 hotels in 25 countries with premium services such as wifi hotspots.
Burger King Corp., with its flame-broiled burgers, is another recession start-up. The company began in 1954 when James McLamore and David Edgerton opened a Burger King restaurant in Miami, Fla. During another recession in 1957, the company introduced its successful signature burger — the Whopper. Today, the company operates more than 11,100 locations in 65 countries.
FedEx Corp. began operations on April 17, 1973 as Federal Express, a nod to the Federal Reserve, with whom founder Frederick W. Smith had hoped to get a contract. He didn't, but the company that delivered 186 packages to 25 cities on its first night of operations now manages more than 7.5 million shipments everyday worldwide.
Microsoft Corp. wasn't always the jaw-dropping enterprise it is today. In 1975, when it was created by Harvard University dropout Bill Gates, Microsoft was just a little company in Albuquerque, N.M. It dealt in rudimentary computing languages and began its climb to business stardom with the success of MS-DOS, which was sold and marketed to IBM Corp. and then-IBM clones. Today, the company is estimated to earn more than $60 billion in revenue per year and is branching into new areas including VoIP and CRM.
CNN might be a news giant now, but in recession-plagued 1980, it was a little-known station called The Cable Network News. It revolutionized how people received information when it premiered as the first 24-hour all-news channel. Today, 1.5 billion people across the globe watch CNN.
MTV Networks brought something new and different to the music scene when it debuted in the economic slump of 1981. Intended to be an all-music-video channel, MTV used VJs (video jockeys) to host programs and facilitate transitions between videos. Today, MTV is a global brand with dozens of shows, music-related and not.
Wikipedia Foundation Inc. was born during the recent post-9/11 recession. Established in January 2001, the online encyclopedia had more than 100,000 entries by 2003. Today it is home to more than 2.5 million articles and continues to grow.
Sports Illustrated magazine was launched on August 16, 1954, at the tail-end of a recession. The magazine benefitted from fortunate timing as a boom in professional sports exploded soon after its founding. Sports Illustrated now sells about 3 million copies in the U.S. each week.
GE (General Electric Co.) was established in 1876 by famed American inventor Thomas Edison. In the middle of the Panic of 1873, a six-year recession, Edison created one of the best-known inventions of all time — the incandescent light bulb. In terms of market capitalization, GE is now the third largest company in the world. The enterprise has evolved from a manufacturing-strong business to an enterprise earning more than 50 percent of its revenue from its financial services division.
HP (Hewlett-Packard Development Company LP) was inauspiciously born in a Palo Alto garage at the end of the Great Depression. The electronic company, initially supported by a mere $538 investment, has grown into the first technology business to exceed $100 billion in revenue, earning $104 billion in 2007. It now operates in nearly every country in the world.
Recessions, however, aren’t advantageous only to start-ups. Pre-existing companies can also make incredible gains in years where the economy is down. Some of the most recent success stories are those of Google, PayPal and Salesforce.com Inc. From 2000 to 2001 each of these companies thrived, leading PayPal to go public in 2002, followed by Google and Salesforce.com in 2004.
“Once in a while recession can also turn into an opportunity which can be proved to be a boon for the upcoming businesses”.
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