Global Economic Recession - Research Paper Example

APPLIED RESEARCH METHODS Abstract: The research under-study aspires to investigate the business strategy of the international corporations they have adopted in the wake of the contemporary economic recession. The contemporary recession has influenced on every institution, particularly related to the trade and commerce, and corporate class is under the state of shock regarding how to combat with the gauche control of the prevailing financial recession that is turning corporate activities dim, dismal, dram and dull. The business volume at global scale is in constant decrease, which may lead the corporations towards grave pecuniary thrashing. As a result, the business tycoons belonging to different nations and regions of the world have conducted arranged strategic analysis to formulate methodology in order to overcome the persistently escalating trade and commerce droop hitting the markets for the last one and half decade. The present study aims to present an extensive research proposal, to explore the course of action the corporate firms and organisations espouse under the state of unhinged, unpredictable and falling business environment. The researcher looks for taking real estate industry for his study, which has been one of the most affected industries of contemporary recession. TABLE OF CONTENTS Abstract…………………………………………………………………. i Table of Contents…………………………………………………………ii Introduction………………………………………………………………1 Review of Relevant Literature……………………………………………2 Statement of the Problem………………………………………………….4 Significance of the Study………………………………………………….5 Aims & Objectives…………………………………………………………6 Theoretical Framework…………………………………………………….6 Operationalisation…………………………………………………………..7 Research Procedure………………………………………………………..10 Statistical Methods…………………………………………………………12 Ethics Involved in the Present Research……………………………………13 Limitations of the Present Research…………………………………………15 Introduction: Economic recession refers to the decelerating of the activities and transactions, related to trade and commerce, where high inflation rates and lack of purchasing power make an imperative proportion of the population unable to buy commodities and services, and thus turn the markets in a sorry state of dormancy and stillness. It also hits employment and GDP, and the countries are forced to revise their fiscal and monetary policies in order to cope with the economic downturn. Consequently, the business volume shrinks significantly and markets observe desolation and depopulation. Like financial boom and prosperity, economic recession is also an essential part of business activities cycle and almost all the markets of the world experience climax and decline in business performance time and again. The world observed extraordinary commercial flourishing during 1980s and 1990s, after the economic recession of 1970s and every industry and production house earned astonishing profits in its wake. The companies made so tremendous progress during that period that they launched their business activities at international and global level, which gave birth to the concept of globalisation by the end of the last century. The corporations of international reputation were still rejoicing the marvellous commercial flourishing that the economies started undergoing economic recession, and considerably distorted the whole commercial atmosphere. Started from the USA, the recession took Europe, Far Asian countries and the Middle East under its sway. “The behavior of the economy”, Labonte & Makinen state, “over most of 2001 has generated a lot of negative news. Industrial production has fallen continuously since September, 2000. Gross domestic product, which grew at an average rate of more than 4% between mid-1995 and mid-2000, slumped badly and recorded very little growth between mid-2000 and mid-2001. The annualized rates of growth from the third quarter of 2000 through the second quarter of 2001 were, respectively, 1.3%, 1.9%, 1.3%, and 0.3%. During the third quarter of 2001, GDP contracted at an annual rate of 1.1%.” (2002: p 3) The clumsy clutches of continuous recession left its influence on almost all big and small companies, and the management of the well-reputed firms looked into the changing business environment and modified their business scheme and corporate designs at national and international levels to rescue their company from the affects of long term financial slump of contemporary era. Literature Review: Labonte & Makinen (2002) have conducted their research under the topic “The Current Economic Recession: How Long, How Deep, and How Different from the Past” by making a comparative analysis of the present economic recession with the depressions took place during the last century at different times. The analysts have elaborated the nature of the current recession and highlighted the similarities and dissimilarities between the characteristics of the present and old recessions. Labonte & Makinen are of the opinion that the present economic depression is more severe than those happened in 1973-1975 and 1981-1982. Being the vastness in range, the analysts associate this recession with the slump the world experienced during 1960s, which had taken the whole world in its fold. In addition, Labonte & Makinen consider 9/11 catastrophe as an essential element behind challenging and putting the world economy at stake in its aftermath. “The horrific nature of the attacks is widely believed to have undermined public confidence, leading the public and businesses to refrain from spending at a rate that would have occurred without the attacks.” (Labonte & Makinen, 2002: p 8) Boonyoung (2009) has conducted his research under the title “Recession 2009 And Thailandûs Housing Sector” by focusing his research on real estate and housing sector, where he has defined the strategy articulated by the business tycoons and property brokers in response to the present downturn in various parts of the globe. Boonyoung particularly concentrates upon the current situation of property business in Thailand, where prices of land have started falling speedily. Once one of the costliest lands of the world, Thai properties have touched the lowest ebb within less than a decade or so, which is the outcome of overall global financial slump hitting the economies of an imperative number of states and countries. “The number of new dwellings” Boonyoung observes, “registered in Bangkok district and suburban areas during the first three quarters of 2008 was 56,690 units, a 4.8 per cent increase compared to the first three quarters of 2007. The number of detached houses (Bangkok-suburban areas) fell in 2007 and we estimated that it will drop even further in 2008. Registered condominium units in 2008, however were the highest during this decade since 1999.”(2009: p 2) The writer points out the strategies adopted by the real estate brokers, which include downsizing, pre-financing, post-financing and introduction of new projects etc. The writer proves that these business schemes introduced by the businessmen have helped their corporations come out of total collapse in the real estate industry. Statement of the Problem: The boom and downturn serve as two aspects of the financial activities, where none of the two can sustain its position forever. Hence, the economists declare both prosperity and adversity of economic situation as the part of fluctuation that must exist in every economy for the maintenance of check and balance of the financial activities. The current slump started setting its foot by 1997 from the USA, and got an imperative boost after the terrorists’ attacks of 2001. The sudden rise in oil prices, as a result of the US-led invasion on Iraq and Afghanistan, augmented the situation and badly hit the airline industry, real estate business, stock exchange activities, insurance industry and banking sector subsequently. Consequently, a large number of people has been affected by the cruel clutches of economic depression. The prices of land witnessed an unabated rise making it out of reach for an overwhelming majority of the masses at large. The wish to build one’s own dwelling has become a dream in many parts of Asia, Africa and even the USA. “Investors are, now, not buying any property and have stopped going in for more investments. Practically, when no one buys, rates are stagnated at some particular point. That is what is happening today. The sale price has stopped further climbing up, since there are no takers. Malls are worst hit. The recession started with them, while the exhibiting rates were much less then the actual investments made.” (Retrieved from www. Merinews.com) The investors and stakeholders, affiliated with this business have adopted new strategies to combat with the affects of recession on their earnings and profits, which include the introduction and construction of small units, entering into joint ventures with other companies, similar to the real estate and launching of new housing schemes carrying small area of land. The present research aims to find out that how much beneficial and supportive the new inventive business strategies have been proved and how joint ventures have helped them tackle the increasing financial slump. The researcher looks for answering the following questions: To discover the intensity of economic slump in the country and its affects on various industries To find out the commercial areas and communities most stricken by the current ray of recession To analyse the business schemes and plans assumed by the companies to minimise the level of losses and maximise their profits To examine the policies devised by the real estate industry during the course of time to kick out the influences of recession To investigate the role of emergence to counteract the contemporary financial downturn To throw light upon the short-term and long-term plans selected by the stakeholders in the real estate industry Significance of the Study: Real estate is one of the most profitable businesses all over the world, which has been offering its services to almost every individual of society because of its imperative significance. Since every citizen requires a dwelling, an office, a school, a religious structure and a business place, he looks for the services of real estate agents and brokers for the sale, purchase and renting of a piece of land and building. Though the business of real estate has been in vogue since ever, it experienced extraordinary boost during the last two decades in the aftermath of speedy technological growth. Real estate sector plays an imperative part in the growth and development of an economy, which is as significant for the country’s swift progress as the agriculture or industrial sectors. “The real estate sector and contributes heavily towards the gross domestic product (GDP). Almost five per cent of the country's GDP is contributed to by the housing sector. According to industry players, housing accounts for 4.5 per cent of gross domestic product (GDP) with urban housing accounting for 3.13 per cent. According to Jones Lang LaSalle, faster economic growth in Brazil, Russia, India and China (BRIC) could result in the property markets of those nations recovering at a faster rate than the UK and US real estate markets.” (Quoted in www.ibef.org) The present study investigates the business scheme devised by the real estate industry under such a great economic disaster. The study suggests the methods of gathering the data from the home office as well as from real estate offices in order to present a complete and comprehensive picture of the strategic management composed by real estate agents and stakeholders. Aims & Objectives: The following aims and objectives have been established for the present study: To analyse the new business plans assumed by the real estate industry in order to embark upon the current economic slump in the country To investigate the success ratio of the innovative methods assumed by the property investors, brokers and middlemen during the economic downturn To discover the increase of profit in the wake of newly adopted business policies To estimate the upsizing and downsizing exercised by the investors and their affects on their businesses To present a wide-ranging investigation and suggestions on the basis of the data gathered for this purpose, which could be helpful for the conducting of further research under similar or relative topic Theoretical Framework: The theoretical framework presented by Herbert Hoover has been applied for the present research. Famous economist and analyst Herbert Hoover presented his research papers as soon as the world witnessed the after-effects of the Great Depression during 1930s. Hoover suggests the following steps taken by the government and private sector to undertake the depression and its influence on business class on the one hand, and on the masses on the other. Hoover proposes the following economic plan: “Maintaining current wage rates Distributing available work to as many employees as possible Increasing construction by businesses and governments Organizing voluntary committees to care for the unemployed and to find jobs for them” (http://www.geocities.com/mb_williams/hooverpapers/stability.html) Hoover considers unemployment as a great obstacle on the way to progress and economic stability and condemns the reduction of wages under the situation of economic downturn. On the contrary, he lays stress upon the maintenance of the wages for the employees, workers and labourers to combat the recession. Hoover does not declare the government as the only responsible for the financial miseries of the people. On the contrary, he views business class as the equal shareholder in respect of inviting the financial slow down within a society. Consequently, exploitation of the middle and lower classes at the hands of the upper stratum cause economic recession in a country. Hoover’s theoretical framework takes after Karl Marx’s social conflict theory, which also vehemently condemns social inequalities, injustices and exploitations of the workers and labourers, though an overwhelming majority of the workers also plays a role in respect of bringing disasters and misery in their life. Operationalisation of Concepts and Variables: Hypothesis: The research suggests the following hypothesis for the conducting of the present study on the topic of business strategy of real estate industry under current economic slump: Faster the articulation of corporate strategy according to the changing market scenario in the real estate industry, more the probability of business steadiness of an organisation as well as enhancement of the wages and salaries of the workers and employees even during the economic turndown Concepts: The concepts involved in the present research include: Concepts related to the Independent Variable: i. Corporate Strategy: Corporate strategy refers to the policies, plans and schemes assumed by the management for the growth and progress of their corporate firms and organisations. Corporate strategy usually focuses upon customers, competitors, resources and commodities. “Corporate strategy”, Johnson & Scholes observe, “is the direction and scope of an organisation over the long term: ideally, which matches its resources to its changing environment and in particular its markets, customers or clients, so as to meet stakeholders’ experiments.” (1993: p 10) ii. Market Scenario: Market scenario refers to the prevailing business environment within one or more commercial sectors, and which determines or influences the entire market in one way or the other. Though market scenario had always been in constant change since ever, it experiences swift alterations after the arrival of technological revolution and globalisation as well. The companies have to revise their business strategies on the basis of the market scenario. iii. Real Estate Industry: Real estate industry refers to the business activities related to the sale, purchase and development of land, houses, colonies and commercial area for residential and business purposes. “Organisations primarily engaged in renting or leasing real estate to others; managing real estate for others; selling, buying, or renting real estate for others; and providing other real estate related services, such as appraisal services.” (http://www.bitpipe.com/tlist/Real-Estate-Industry.html) Real estate experienced unusual increase during the last two decades, and now it is in decline in many parts of the world for the couple of years. Concepts related to the Dependent Variable: iv. Business Steadiness: Business stability and steadiness refers to the smooth running of the activities of an organisation, where sales volume, number of clients and number of employees are in constant increase, along with the increase in the profit volume and business performance. The companies undergo various business situations, where boom and slump come and go turn by turn. If the management maintains a deep insight into the changes taking place within a business environment and alters its strategy according to the changing market scenario, it sustains its commercial stability and corporate steadiness, and remains ‘in’ in the market; on not complying with the market circumstances, an organisation has to taste failures and face upsets and losses subsequently. v. Wages and salaries: Wages and salaries simply mean the remunerations or package the labourers and employees obtain as compensation against the labour or service they render while working in a firm, a corporation or an organisational set up. The companies hire the staff members and employees for the fulfilment of one task or the other and offer specific wages and pays to their workers. Usually the wages and pays are in the form or money, though facilities, allowances and rewards are also the part of compensation the employees receive from the owners, industrialists or employers according to the prescribed mode described in the employees’ contract with employers. vi. Workers and employees: Workers, staff members and employees are the most important stratum of an organisation, which work under the command of the owners according to the policies announced by the owners and receive wages, pays, salaries and other compensation against their services, works and performances rendered for the organisation. Employees serve as the identity of an organisation, and their behaviour and service determine the level of the organisation. The workforce plays most dominant part in the growth, stability and progress of an organisation. vii. Economic Downturn: Economic downturn simply means the slow down of financial activities and the shrinking of business performances as well as sales volume. “An economic downturn suggests the economy is entering into recession. A recession is a period of negative economic growth with falling output and rising unemployment.” (Quoted in economicforecasts.org) RESEARCH PROCEDURE Universe: The researcher proposes Department of Statistics, Home Office as well as Department of Housing and Physical Planning as the universe for the present research. In addition, the data could be gathered from the websites, record books and other material of the corporations selected for this research, along with gathering the data from the real estate industry available at the governmental institutions as well as advertised by the private sector of real estate. Sampling: The researcher suggests the application of quota (non-probability) sampling for the current study. The researcher aims to personally visit the offices of property owners, builders, constructors, architects and real estate brokers for the collection of data. Tools for Data Collection: The researcher seeks help from websites, record books and Statistical Bureau records as one of the tools for the collection of data for the present research. Moreover, interview-schedule will also be applied to collect answers from the personnel associated with the real estate industry. STATISTICAL METHODS: “Statistical methods simply mean the methods of collecting, summarising, analysing, and interpreting variable numerical data. Statistical methods can be contrasted with deterministic methods, which are appropriate where observations are exactly reproducible or are assumed to be so.” (Retrieved from www.encyclopedia.com) Different researches assume divergent methods for qualitative and quantitative researches. In qualitative research, the number of respondents is limited one, and the research is conducted under somewhat a controlled environment. On the contrary, quantitative research encompasses a large number of respondents, where comparatively lengthy questionnaire is applied in order to obtain replies from the respondents. In the present study, the researcher takes chi square and ANOVA tables as the appropriate statistical measures, which will analyse the data gathered for the present study. Ethics involved in the Present Research Theorists have determined some specific paradigms for the conducting of a social research, which are necessary for every researcher to follow. These ethical paradigms can be studied under the following headings: Lucidity: There must be a patent and an unambiguous state of affairs before the researcher while conducting his research. He must be clear regarding the topic and parameters within which he has to complete his task and perform his obligations. Objectivity: It is an ethical obligation of a researcher that he must pretend impartiality and objectivity during his research process. He must no enquire such questions, which may instigate religious or racial sentiments of the respondents. Similarly, political, ethnic and other controversial issues must also be avoided in order to complete his research without any hurdle or interruption. Privacy and Confidentiality: There must be observed strict policy of confidentiality while conducting a social research. “The participants are assured that identifying information will not be made available to anyone who is not directly involved in the study. The stricter standard is the principle of anonymity which essentially means that the participant will remain anonymous throughout the study--even to the researchers themselves.” (socialresearchmethods.net) The respondents would never like that there privacy and secrecy should be disclosed at any cost, so they must be assured that the researcher looks for gathering the valuable information from them, and he has no concern regarding the activities or identity of the respondents. Moreover, the research process should not be conducted without obtaining the prior permission of the participants and respondents. “According to Churchill and Peter (1995)”, Smadi (2008: p 7) states, “an organisation’s social responsibility is an acceptance of accountability to society for its actions, and that ethics are viewed as the principles, values, and standards of conduct.” Limitations of the Present Research: Every research, whether social or scientific and either basic or applied, faces some hurdles and obtains few limitations, which are adjusted by a skilled and experienced researcher. The same is the case with the present research, which faces the following limitations: 1. Being a very vast topic in its nature and scope, it is a bit hard to cover the situation of the entire real estate industry, as well as the fluctuations it has been experiencing for the last few years 2. The collection of data from the Home Office is also a great hurdle on the way to have access to the data relevant to the real estate industry, for which the researcher will have to make hard efforts 3. Real estate brokers, property developers and constructors do not reveal the actual data before anyone. Consequently, the researcher will have to penetrate into these divergent fields of real estate sector to obtain the exact facts and figures on the one hand, and discover the causes of decline in the industry on the other. In addition, it will also require devotion and efforts in respect of comparing the level of business activities between recession and boom periods 4. The affects of recession are different in various areas, and same is the case with the prices of properties. Consequently, calculations of the exact recession scale is really a hard nut to crack 5. Businessmen, traders, and directors are usually very busy persons, and do not give the researches due importance. In addition, they have the tradition of concealing the facts about their business, which serves as a great obstacle on getting the exact data The researcher aims to overcome these limitations on the basis of his experience and skill, and will be able to conduct the research in a refined way LIST OF REFERENCES: Boonyoung, Issara. (2009) Global Economic Recession 2009 and Thailand’s Housing Sector pp 4-9 (Quoted in http://www.ghb.co.th/en/Journal/no6/19.pdf) Labonte & Makinen (2002) http://www.iwar.org.uk/news-archive/crs/7962.pdf Recession or Recess of Real Estate Market (Retrieved from http://www.merinews.com/catFull.jsp?articleID=145463) Real Estate Industry (Quoted in http://www.ibef.org/industry/realestate.aspx) Statistical Methods (2004) (http://www.encyclopedia.com/doc/1O11-statisticalmethods.html) The Depression Papers of Herbert Hoover (Retrieved from http://www.geocities.com/mb_williams/hooverpapers/stability.html) Doby, John T. (1997) An Introduction to Social Research 7th Edition Meredith Publishing Company New York p 89 http://icbm.bangkok.googlepages.com/ICBM.2008.Sami.Al.Smadi.RP.pdf Read More