Uncertain and unstable economic times can be the worst and most challenging environment for succeeding in businesses. Many companies start experiencing downturns, which soon result in the loss of jobs, reduced performance and income, and even going out of business. Nevertheless, just like damaging some organizations, a recession may also help companies survive competition, discover new growth opportunities, and thrive as a result of economic struggles.
Since the U.S. economy is rather unpredictable, it is essential for business owners to focus on generating ideas while staying powerful in their recession-proof industry and managing it smartly and strategically. The purpose of this paper is to discuss what products and businesses are likely to survive in a recession and base this consideration on individual behavior theory.
There are several industries that may be considered recession-proof due to the features of the products and services they offer. The main factor influencing whether a business survives severe downturns or disappears from the market is its necessity or luxury (Baye & Prince, 2014). In other words, a company is likely to thrive after experiencing economic struggles if it offers products that are always needed by the customers and typically preferred over other goods and services. Considering the varying needs and interests of Americans, what are these products?
For example, businesses in such niches as health care, food and beverage, repair services, baby products, and staple items are unlikely to disappear or have significant problems in and after a recession. Goods and services offered by these industries are not a luxury or one’s exceptional interest (Baye & Prince, 2014). That is why most people prefer them over other niches like entertainment, traveling, and others that they may relatively easily live without.
To support these assumptions, it is possible to refer to individual behavior theory. According to Baye and Prince (2014), “the budget constraint restricts consumer behavior by forcing the consumer to select a bundle of goods that is affordable” (p. 129). Consequently, if a person’s budget is restricted, they are likely to prefer necessary products and services over luxury ones, meaning that businesses that offer the primary goods have more chances to survive in a recession.
Changes in a consumer’s income may have two possible consequences. First, if the income becomes higher after being low, the customer may start buying more of the necessary goods or the luxury ones because they could not afford them before (Baye & Prince, 2014).
In both cases, the industries’ chances of surviving a recession increase. Second, if the client’s income reduces, then again, they are restricted by only the necessary services and goods, making it more likely for businesses in niches like health care and foods and beverages to thrive. What is more, if a company successfully incorporates various marketing schemes and sales techniques that make customers think they can save or benefit when getting a service or product, it is incredibly good for the business. Such approaches attract more clients and allow the companies not only to survive downturns but also become more productive and thriving.
To draw a conclusion, one may say it is essential to consider the mentioned factors when starting a business or going through a recession. The influence of consumers’ preferences, needs, and income levels is hard to overestimate when assessing businesses’ likelihood of surviving a recession. However, apart from depending on customers, it is also necessary for managers and leaders to be strategic, farsighted, and creative. Those businesses that offer primary goods and services and are led by professionals are more likely to thrive after downturns.
Reference
Baye, M. R., & Prince, J. T. (2014). Managerial economics and business strategy (8th ed.). McGraw-Hill/Irwin.