The Recession, Customer’s Attitudes and Management Responses in the Retail Industry: A Case Study of as Watsons

...

5.1 Summary of Main Findings. 68

5.2 Review of Research aims and objectives. 69

5.3 Recommendations and Implications for Management 70

5.4 Future Research and final remarks. 70

5.5 Conclusions 71

REFERENCES 72

BIBLIOGRAPHY 76

APPENDIX 78

CHAPTER: 1. INTODUCTION AND CONTEXT

-

Background of research

At the dawn of the twentieth century, a topic that has become an increasingly important phenomenon is the recession and the global credit crunch (Singh 2009). These two remarkable occurrences have been considered to be intertwined, and in most cases these definitions are used in place of one another. This paper focuses on the recession and its impact as well as other factors that contribute to a recession. According to Carrigan (2009), the current global recession presents serious challenges for both management of businesses and customers alike. He claims that there’s a downturn in customer behaviour and businesses need to formulate strategies that will help them understand their customers and how the actions of customers can affect these businesses. Secondly the writer proposes that decisions should be made from these understanding in order to survive the recession.

Studies on ethical consumption have also shown that even ethical customers have been affected by the recession. As a matter of fact, some writers such as Young (2009) and Singh (2009) both support the notion that a recession leads to a depression or credit crunch and that we are potentially entering the crunch period. As the old joke says "a recession is when your neighbour loses his job, a depression is when you lose yours"(Hatch, 2004: Singh 2009: Eslake 2009, p.75). This statement prints the picture and the widespread view that exist in the head of the masses that a depression is a severe recession. Singh (2009) and Eslake (2009) have both shown that the difference between a recession and a depression lies between the percentage decline in GDP and not the duration or magnitude. Eslake (2009) added that the distinction between these two phenomenons’s hangs between their causes.

It was reported by the BBC in July 2008 that the British Chambers of Commerce had presented its quarterly report that showed that within a couple of months, the UK will face serious risk of recession. This event came into light as the FTSE 100 stock index dropped into a bear market. Research carried by David Kern, one of the UK's economic advisors in this period showed that Manufacturing and service firms were facing severe cash flow problems as domestic sales and orders had reduced drastically in the last quarter of the year. The survey showed that service providers in particular had been hard hit by the recession to their lowest levels. David Kern claimed the correction period for this recession is likely to be nastier and longer than expected. As they say, conclusions about the future can only be speculative but fears exist that there could still be a double-dip recession.

In the last two quarters of the year 2008, Chief Economist, Peter Spencer reported that the UK economy has deteriorated drastically and that the economy was already in a recession (BBC, 2008). Economic indicators and forecasters claimed the UK economy would shrink by one percent before growing by another one percent in the year 2010. Giancola (2010) and Singh (2009) have both shown in their works that newspapers, television news channels and business reports were filled with predictions made by economist at the birth of the current recession in 2008. This has been shown by remarks and comments made by the BBC and other news agencies around the globe. In their view, this was not the first time and that predicting what would happen during a recession was a complete waste of time and resources as very little of these predictions actually got the depth of the recessionary curve right. Giancola (2010) also stressed that these lessons should have been learnt from previous experiences posed by the past recessions.

The UK economy is the last amongst the biggest economies in the world to come out of the recession (BBC, 2010). Japan, the United States of America, Germany and France emerged from the recession in 2009, leaving the United Kingdom in the recession. According to the BBC (2010), Whiles the UK Government was putting measures in place to mitigate the effects of the recession, it also warned businesses and the masses that the economy will be hit hard by the credit crunch (BBC,2008).

According to the BBC (2010), the recent recession lasted for a six consecutive quarters, making it the longest recession in history since the recording of quarterly figures in 1955. This statement was a prove that the UK had come out of the recession but this was not so as businesses were still folding up and others being acquired and merged in order to survive. It is however not clear as to if the UK is out of the recession, in a recession or in a depression period because, the recession is country specific but the credit crunch or a depression is when the impact reaches every country and becomes a global phenomenon. However, what is clear to all is that both economic conditions are never nice things to go through and they do not last forever (Young, 2009).

Retail giants such as ASDA have even been affected by the recession, irrespective of their market share of the UK retail industry. It was not until early this year that ASDA reported its first increase in sales. Sainsbury’s also reported an increase of 4.9 percent for the first quarter of the year 2011. Based on these figures, it can be argued that there is an increase in profitability in the retail industry. The research of Theodoridis (2009) has also shown that businesses now operate in a business environment where the understanding and prediction of customer needs and factors that contribute to customer satisfaction is increasingly becoming an important subject. He further expresses concerns about the changes in customer attitudes, claiming customers seek an experience that exceeds product variety and quality.

Most business and management research has shown that customer satisfaction and loyalty are the most influential factors of success in business (Adsit et al, 1996). However, there is more to this, as other factors such as the recession and the credit crunch can also influence these factors.

...