Global Marketing Strategies
TASK 1 2
1.0. INTRODUCTION 3
2.0. HOW CREDIT CRUNCH WILL AFFECT INTERNATIONAL BUSINESS? 4
3.0. RECOMMENDATIONS TO OVERCOME THIS CREDIT CRUNCH 6
4.0. CONCLUSION 7
5.0. BIBLIOGRAPHY 8
Discuss the likely effects to international/global business by the recent credit crunch. Suggest ways to overcome these problems.
Credit crunch is an economic downturn, when the world experiences a credit crisis. It is caused by declining value in real estate and by defaulting loans, arising from contraction in the supply of credit.
A credit crunch is a [sudden] reduction in the availability of liquidity in the ...view middle of the document...
Since lenders have implemented stricter guidelines, it is more difficult for businesses to obtain the loans businesses need to get through slow cash flow times;
3.0. Layoffs and Unemployment - Some businesses had to cut back on their employees because of budget cuts, so one of the major fallouts from the credit crisis is employee layoffs. The volume of layoffs at one time has caused some of the highest unemployment rates the world has seen since the United States went through the recessionary period during the 1980s;
4.0. Flexibility - The direct effect is that businesses have become more flexible in order to keep business operations afloat until the crisis ends. Flexible measures include closing one or two additional days per week, forced leave and working out payment arrangements with customers;
5.0. Business Property Defaults - Many businesses that own the properties where they operate had adjustable rate mortgages that adjusted up during the credit crisis. Unfortunately, the stricter lending guidelines prohibited many of these businesses from refinancing, mortgage payments rose to an unaffordable level and many commercial property owners went into default on their mortgages. Even some businesses leasing commercial property found themselves without a place to function when landlords defaulted on the mortgages and banks foreclosed on the properties—forcing the leasing businesses out;
1.0. Tourism decreased arrivals – tourist dependent nations such as Cook Islands, Fiji, Samoa experienced economic slowdown in their source nations, in USA and UK, and Europe as a whole.
(Source: Hines, P. 2008, Global Impact of the Credit Crisis on Commercial and
Small Business Lending, Tower group, USA.)
3.0. RECOMMENDATIONS TO OVERCOME THIS CREDIT CRUNCH
1. A closer watch on the health of the domestic financial sector and financial regulation will help maintain confidence and thus mitigate some of the adverse effects from abroad;
2. Reducing public expenditures will help to manage finances and reduce levels of debt;
3. Closely monitor cash flow- businesses should closely monitor cash moving in and out of the business to keep receivables at a minimum and low or no debt;
4. Reduce borrowing – borrow only when it will produce immediate returns and profits. Capital spending should be reviews which can take out case of the business;
5. Postpone large projects – to avoid cash deficit, avoid big projects that require capital investment and postpone them to the future;
6. Keep costs down – businesses in this period of credit crunch need to keep costs down to remain sustainable and maintain profitability. Reducing inventory is one way of keeping costs down. Full time staff can be temporarily be put on part time to keep them in employment but reduce costs for the company;
7. Know customer financial reputation – businesses in this credit crunch must make sure that the customers are in good financial standing and will cause no risk to...