The Condition of the Global Economy in the Years 2006-2008 - Essay Example

?Economic Conditions  The condition of the global economy during the years 2006 until 2008 was poor due to the global financial crisis. The economic conditions during those years were as follows:   1. Global industrial production quickly declined starting from 2007 until 2008 due to high oil prices  2. Throughout 2008, the unemployment rate was higher than usual  3. There was huge inflation in energy prices, agricultural products, industrial products, and precious metals  4. Falling stock market index  5. Huge decline in U.S. net lending and borrowing rates during 2008 6. U.S. gross debt increased in terms of percent of GDP 7. Nominal value of the U.S. dollar against all major currencies  In looking at actual data, there was a huge economic downturn during 2008. Despite this, retailers’ sales revenue increased when compared to 2006 and 2007. There was little effect on revenue growth in 2008 compared to 2007, but there was still considerably high revenue growth. The actual revenue growth of 2008 was also higher than the forecasted revenue for 2008.   According to the analysis, the economic downturn did not affect any area of the organization. All regions showed revenue growth during 2007 and 2008 (see Table1.4). This growth indicates that the economy had the same impact on all areas and had no effect on the revenue growth of its products.  By analyzing each area’s revenue, we can look and see if each area has special customer behavior that may affect its revenue. For example, the Web region shows the least amount of revenue (see Graph1). This means that customers prefer an in-store experience over an online one. Customers purchasing behavior depends on geography, gender, age, and the factors of the market. There are other factors that affect customers’ buying behavior. For example, older people are more likely to make a purchase than younger people, and females more likely to buy something than males are.  Retail companies have to take previous factors into account when they develop their budgets or forecasts. They may consider over-budgeting, which means to plan for more than they expected. If a dramatic change occurred, the company would be well-prepared. Some of these changes could be related to the economy, customer behavior, and other factors, which the company should take into account either as a risk or an opportunity.  Competitive Marketplace  There is huge competition in the retail industry in the United States. The following are characteristics the marketplace for retailers:  1. Use of Information Technology:  The retail industry is now offering its products through the Web. This benefits customers who like to buy products while sitting at home. Customers can place an order on a company’s website by paying through a secure payment system and then receiving the product at their home. The Internet, particularly e-commerce, has changed how retailers run their businesses.  2. Increase in Discount Stores:  Discount stores are one of the factors behind the retail industry’s success. Nowadays, retail stores offer a money back guarantee, reduced prices, and buy-one get-one free offers.  3. Increase in Store Sizes:  Retail stores are now required to be as big as possible sp that they can have all the products that customers demand at one place.  4. Direct Marketing:  Retail stores now use direct marketing strategies to increase their sales by sending emails, messages, catalogs to their customers, and also by selling products on their websites.  5. Mergers and Acquisitions  Retailers are merging and acquiring other stores to achieve a dominant position in market; this may not be possible without a merger or acquisition. By increasing their size, a retailer creates a high barrier of new entrants, and reduces the bargaining power of customers and suppliers. The major reason for a merger or acquisition is to reduce competition in the market.  There are many competitors in the retail industry in the United States. These retailers mostly sell electronics, support products, books, garments, music, computer software, food, and furniture. Some of the biggest retailers in the industry are as follows:  1. Wal-Mart  2. Home Depot  3. Amazon.com  4. eBay  5. Black and Decker  Competition within the retail industry and has significantly affected the revenue of many retailers. But, good marketing and business strategies can help a retailer to find a good market position and also increases revenue.  Target Revenue Growth  The success of retail businesses is dependent on the following factors:  1. Product Pricing:  For pricing strategies, we are planning to introduce a discount pricing strategy and also seasonal prices. With a discount pricing strategy, I expect to increase revenue and reduce the cost per unit due to economies of scale.  2. Use of Technology:  In my view, technology is one of the biggest factors that spur retail business growth and success. For technology enhancement in our business, customer relationship management should be introduced. This is linked with our online sales and company’s main sales database. With integrated customer relationship management, we will be able to get closer to our customers. This will help us to improve our business strategies and will result in increased revenue and future growth.  3. Supply Chain Management  If a retail business is able to manage the purchase stage and then the final delivery to customers without any time delays and stock shortages, then its growth cannot be stopped. For supply chain management, we should introduce a Radio Frequency Identification (RFID) system that is directly linked with the main database. This means that every transaction will have an automatic affect on its stock. Then, it will be linked with the supplier database, where the auto order placement system will be introduced. As soon as the stock reaches the reorder level, the RFID system will automatically deliver the order to the supplier.  4. Market Positioning  For market positioning, we should acquire some small retail stores in order to increase our product range and also to increase our size; this will help to increase our competitive position in the market.  The products that are available are books, movies and music. These three products are constantly evolving due to technological changes. For example, the iPhone has changed the way that most people read books, watch movies, and listen to music. Moreover, technology will not stop because of competition. There always will be new ways to do things, especially reading books, watching movies, and listening to music.  Nowadays, retail companies have to work harder than ever before to compete with other retailers. A retail company now has to consider many risks before developing a budget. Moreover, the company should focus on potential scenarios that may occur.  New Products  Currently, large retailers are selling electronics, books, music, and movies. In my view, retailers must introduce a clothing range and also furniture products. For clothing, there is high demand for ladies clothing and gents clothing. Secondly, furniture is always in demand from customers, so it is recommended that retailers introduce a range of furniture. By introducing these new products, it will attract new customers; these new customers will also shop for other products. For introducing these products to the market, it is recommended that a company must apply a penetration pricing strategy by lowering its profit margin. Once it captures the market, it may increase the price by changing the variety of products. There are many challenges to achieving success, such as competitors and brand image. When a company adopts a new product, it will face new competitors who would do anything to discourage the new company from introducing the product into the market. For example, they may lower the cost of production or add more quality to the product. The company may also find another challenge with its brand image. Changing a brand image is expensive. Moreover, to change the customers’ minds takes a long time. Competitors present a risk to keeping to a budget. However, they can outdo competitors by lowering their prices. This could adversely affect the budget. Another Read More