Essay on Evaluate, Using Your Own Examples, How Firms Can Still Make a Profit and Be Competitive During a Recession. (40marks)

Submitted By Scoobyroo
Words: 939
Pages: 4

Being competitive means offering something that other, similar companies do not offer. To stay competitive during a recession it is important to focus on the marketing mix. For example pricing is a crucial element that directly affects the number of sales especially at a time when people are being more careful with their money. An example of a company who uses pricing to their advantage would be Poundland as they use a consistent penetrative pricing strategy to entice sales. This is more effective during a recession as people will choose lower prices to save their limited budgets. The chain ‘99p Store’ uses a similar strategy but also uses Physiological pricing as a way to compete with Poundland. This is because 99p sounds allot less than £1 although there’s only 1p between them, however many stores believe due to this strategies commonality amongst pricing choices that it no longer has any significant effect on customer choices.
A company who failed to adapt their price strategy and chose to stick to high prices even during the recession was HMV. This is one of the main reasons they became less competitive and lost their customer to other cheaper stores, such as Sainsburys. However HMV were also struggling due to the boom in e-commerce. This would be classed as location in the marketing mix. For example; when Apple made it so all music could easily be bought and downloaded online, the sales of CD’s came to a standstill. Similarly to this companies like Netflix and Sky have made it possible to download films from the internet or straight onto your TV, eliminating the need for the purchase of actual DVDs. If HMV had moved with the times and offered a similar service they may have been able to avoid administration earlier this year.
Location impacts competitiveness for example choosing to enter the e-commerce market is now almost essential. Some companies that locate entirely online have become huge successes, like Amazon and E-bay. These offer 24/7 sales and home deliveries, so working people who may have a reasonable income but not much time can still shop at hours that suit them. This is especially necessary in a recession as companies need all the sales they can get. Blockbuster is a good example of a company who failed to move online and due to this lost the sales they needed to survive.

Using the marketing mix to stay competitive for example by setting low prices and increasing customer services, is effective in a recession yet will obviously be costly for the company. So the company will also need to adapt its budgets to cope with the spending and low prices needed to entice customers and remain in profit. Objectives must be made to suit the economical state and the financial position of the company in question. For example; in a recession it would be a bad idea to have expansion as an objective,
Profit is the money left when you take all the costs away from the sales revenue. So to maximise profit without increasing selling price you must reduce spending. One method of cost cutting is making redundancies. JJB made mass redundancies when it was being bought out by JD sports. It also closed down all its stores bar its 20 top ones. Redundancies are good for in the long-term however in the short-term it may be necessary to give redundancy pay, remaining staff will lose morale and may seek a more stable job placement elsewhere thus raising labour turn-over. This leads to higher costs in recruitment and training…