Discussion in recession - Coursework Example

The economic conditions are directly linked with the overall discretionary purchases undertaken by the households, while there is also a high degree of implication on the overall volume of necessity purchases. Due to the fact that all businesses are commercial organisations that have the underlying aim to increase shareholder’s wealth. It is therefore argued that recession is one of the critical downside risk facing contemporary businesses. The critics of this argument have however noted that recession can be seen as an opportunity for businesses to sharpen their business models.

Drawing upon Rampini et al (2014), the businesses that have lean and agile structures develop sustainable competitive advantage that does not only help them survive through a recession but also flourish and expand their presence. The aim of this debate is therefore to critically analyse and appraise the thinking that recession is the most critical downside risk facing all businesses.
It can therefore be argued that economic recession is likely to have negative impact on firms that are diversified across the industries and geographically, leading to lower than expected results on the top and bottom line of the business  My claim substantiates the overall conclusion with the help of the following set of arguments.

The key risk management strategy for contemporary businesses is to use diversification strategy, where all valuable resources of the firm are not focused on achieving a single competitive advantage. According to Ai et al (2012), the multiplicity of competitive advantage and its development within multiple industries and geographic markets essentially means that if there is any systemic risk in one industry or national market, than it can be mitigated by the firm from the other industry or national market.

It should be noted that in case of an economic recession, the overall demand for the products or services across the industries fall dramatically