But with every boom comes a bust and recession-watchers have been primed for a reversal of fortunes. The economic devastation reaped by Covid may be the spark that ignites a prolonged slump.
If that's the case, then it's time again for workers, entrepreneurs and investors to seek refuge in so-called recession-proof businesses. Recession-proof businesses are traditionally defined as industries that either thrive during rotten economic times or at least survive unscathed.
The global financial crisis of , however, rewrote the rules about recessions. Many economists are now saying that there's no longer such a thing as a recession-proof business. The best that employees can hope for is a recession-resistant business, meaning one with a better chance than most of riding out a recession [source: Chase ]. The key to job security during a recession, experts say, is to find a company or industry that shows long-term growth potential, is immune from outsourcing and isn't tied to the fickle tastes of consumers [sources: Burt ].
So what might those be? Here are some examples, in no particular order, starting with some inexpensive purchases that are guaranteed to make you feel better. If anyone likes a quick pick-me-up, it's the stressed out American worker. If you're lucky enough to keep your job during a recession, then you're probably bracing for the next round of layoffs. While heavy drinking at the office is frowned upon, nearly everyone can get behind a big bowl of jellybeans.
Candy consumption in the United States went through the roof during the Great Recession. Hershey's saw its overall sales increase 4. Inexpensive, sweet treats provide a necessary break from all of the bad news.
Indeed, during the Great Depression, treats like Snickers, Tootsie Pops and Mars Bars were all invented, and are still enjoyed today [source: Haughney ]. Sweet and salty comfort foods were also a go-to during the early weeks of the Covid crisis. In mid-March , retailers reported chocolate candy sales were up Recessions don't affect everybody equally. According to Newsweek, the total number of worldwide billionaires jumped 20 percent in [source: Theil ].
Forbes counted a record number of billionaires in — 1, — while several parts of the economy were still recovering from the recession [source: Reuters].
The number of millionaires in India grew 22 percent over and China witnessed a 15 percent bump in millionaires in [sources: Smith and New ]. In the U. As early as , luxury retailers were some of the first to bounce back in the U. One luxury car dealership in Manhattan specializing in Lamborghini, Bentley and Rolls-Royce models — each retailing in the low six figures — said was one of its best sales year ever [source: Gross ].
During the Great Recession, 8 million Americans lost their jobs and household income dropped by 5 percent on average [source: Cho, Todd and Saksena ]. When money is tight, budgets need to be even tighter and tough choices have to be made. Keeping food on the table is priority No. On one hand, Americans drastically cut back on spending on food away from home both fast-food and full-service restaurants.
Grocery store spending, on the other hand, was strong and steady throughout the Great Recession, actually growing by 8 percent from pre-recession to [source: Cho, Todd and Saksena ].
While the total dollars spent at grocery stores remains steady during recessions, the items people buy do change. As unemployment rose during the Great Recession, Americans bought significantly more sale items, bulk products and generic goods, and they used more coupons than in pre-recession years [source: Gorman ]. A report by USA Today found that workers in many federal agencies are more likely to die than lose their job.
The federal government job security rate was In the private sector, an average of 3 percent of workers are fired for poor performance each year, and that doesn't include layoffs [source: Cauchon ].
Another study found that federal workers were 4. State and local government job security is an entirely different story.
During the Great Recession consumers cut spending which affected state and local tax revenue. Faced with budget crises, many states enacted steep budget cuts. District Court for the District of Columbia to block the proposed transaction. Bloomberg -- Semiconductor Manufacturing International Corp.
Chiang, who is in his mids, has left the Shanghai-ba. Even so, Barra said, she considers GM the U. Speaking with Reuters after holding a presentation for investors, NXP Chief Executive Kurt Sievers said the company intended to focus on key areas where more chips are going into cars and where NXP believes it can hold a market position at least twice that of any competitor.
One of those areas is radar sensors, which are increasingly being put into cars for safety systems that can automatically brake before a collision. Dow Futures 35, Nasdaq Futures 16, Russell Futures 2, Crude Oil Gold 1, Silver The cost of servicing a new customer for each is negligible, so each dollar of revenue flows straight to pre-tax profits. Digital assets can be used an infinite number of times in infinite places, without any erosion. In fact, each usage grows the value of the digital asset because of network effects, leading to increasing returns.
Knowledge products can be distributed all over the world instantaneously using the internet, so most digital companies compete globally. This strategy, combined with extremely low variable costs, implies that very few players can successfully address the entire global market.
Some of them earn winner-takes-all profits. The dominant strategy then becomes to establish first-mover advantage, grow your market, and become the global market leader as quickly as possible. In accounting terms, this means: Grow revenues instead of managing costs. Corporate finance defines the boundary of a company based on physical assets: land, buildings, warehouses, factories, machines, inventory, and patents. Based on expected risks and returns, it then determines the optimal way of financing from those assets, using a mix of debt and equity.
Planning is based on measures such as return on assets, payback period, and internal rate of return. A new framework is required to define the real asset base of a company by including the soft assets , which are now the predominant asset class for the company but are excluded from financial calculations: brands, first-mover advantage, information technology, talent, and competitive strategy.
Improving the definition of the asset base is essential for proper calculation of return on assets, which would then improve the selection of profitable projects — a hallmark of corporate finance. Asset pricing, another branch of finance, explores the factors that determine the prices of assets and company shares.
An emerging challenge is to create a model that can explain the trillion-dollar valuations of tech giants and billion-dollar valuations of loss-making unicorns. Currently, no such model exists. In addition, asset pricing considers risks to be a negative feature for investments.
Digital natives , however, readily give up projects with certain but small profits to chase highly risky projects with huge profit potential. New valuation models incorporating recent advancements in firm characteristics would improve portfolio returns and pricing of mergers and acquisitions — the hallmarks of asset pricing. More and more research is being done in emerging areas and finding its way into classroom teaching.
However, a wholesale shift to new models remains elusive. This is largely because the accounting numbers used in case-based teaching remain rooted in the past and remain deficient in addressing the new needs. Unilever, a company active in many countries, including India, is a good example. Unilever is expanding this approach across all its operations with an ambitious new Compass strategy announced this summer PDF. Another company with a significant footprint in India that is embedding strong sustainability principles in its operations is IKEA.
Not only will this help ensure there is tangible progress in addressing the crises but also in the case of company reporting, demonstrate to those viewing climate and social investment as a distraction that there is a valid business case for them. Otherwise we really will have run out of time. This blog was originally published by the Centre for Responsible Business.
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