How the economic recession effect on business - (the pare down production cut cost and the business fail or bankruptcy and profits fall are effect of economic recession on business. -

1. merge the quotes below into the article.

Quotes :

In the moments when firms face economic instability, it is more than clear that they will step against the investments they will make. A reduction in investment costs will also result in technological innovations. Nothing is certain, so investors do not prefer to take risks and a good part of them withdraw. As production and employment decline, there are fewer investment opportunities. Tejvan Pettinger, (2009)

The article

In the period of economic recession, the businesses will take corresponding actions. Some will pursue on cutting production costs and the worst case, others might declare a bankruptcy. To avoid dissolution in the industry, businesses will prefer cutting its cost. This may not be easy but better than being bankrupt and loss huge amount of money. Tejvan Pettinger, (2020). Cutting the production cost all of a sudden will cause declining in profitability. This means that a reduction in production cost will also cause cutting its expenditures, equipments and among others. Businesses will be forced to produced lower production output, which may then affect the sales and profit of businesses. Michael Boyle, (2020). Having a cost-cutting strategy will keep any business survive during hard times. The most common cost-cutting strategies include the freezing of all discretionary non-essential spending and saving. Renegotiating terms with partners and lenders and finding the best alternative business models will also be helpful. Brittany Gooding, (2020). Also, consumers will probably set stricter priorities and reduce their spending which will result to surplus of goods and services. With this, businesses will typically reduce prices to sell their products. Along with that, sales will start to drop. A drop of sales will also push businesses postpone new investments and marketing expenditures in areas from communications to research are often reduced. John Quelch and Katherine Jocz, (2009). Recessions cannot just affect the financial capability of a business but it can also hinder the ability of a business to experiment and create new products and techniques. The crisis can lead to a decreases in investment spending and the adoption of new technologies. This will lead to a lower demand of existing products since customers income decline. A lower return of investments is expected and businesses have a limited access to credit. This situation will limit business firms ability to invest because they cannot generate more funds. The increased in uncertainty will lead firms to retrench towards the "core" products and production techniques. Therefore, they maybe less likely to experiment with new products and techniques. Charles Grassley, (2009). The overall cost reductions during economic recession will help businesses to maintain profit margins. There are many ways in which businesses will lower the total costs (TC) and this will include; lowering the variable costs (VC) or cost of goods sold (COGS), and lowering fixed costs (FC) or expenses. In lowering the variable costs (VC), these will include finding the alternative suppliers of raw materials which can offer better prices, using cheaper raw materi))als or using less raw materials, cutting back on utility bills by more reasonable water and energy usage, reducing excessive packaging or if possible, selling goods without any packaging, and reducing transportation costs by using space efficiently inside the delivery trucks or working with cheaper couriers. On the other hand, lowering fixed costs (FC) will also include; finding a cheaper location to relocate the business, renting smaller premises or negotiating cheaper rent with the landlord, reducing or temporarily hold the spending on promotion and advertising, alternatively changing from very expensive above-the-line promotion methods to free or cheap below-the-line promotion methods, the businesses may also use the guerilla marketing more often, and educing administration fees such as spending on security, cleaning services, office supplies, and among others. Jerry Grzegorzek, (2021). The businesses may also adjust yearly budget, tighten budget, update perks and benefits framework, create a cash flow projection to ensure business continuity, transparency, and may also condense cash conversion cycle. Jordan Wan, (2020). In the other words, businesses can look for savings from staffing, reduced materials costs, capital projects and outside services, selling off assets and equipments. The added cash will surely help them weather the recession. Bill Cornely, (2020)

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