Friday, February 20, 2009

Testing Mettle: One Benefit of an Economic Downturn

When the economy is growing and consumers are feeling flush, it’s relatively easy for businesses to thrive because there is more than enough money to go around. However, there is a dark cloud surrounding this silver lining. Economic booms create a false sense of accomplishment.

The more confident consumers feel about their economic situations, the less discerning they are about how they spend money. As a result, relatively durable goods become more disposable. Switching phones, cars or even homes with lightning speed becomes commonplace. And disappointments are diminished due to the turnover. All of which enable companies to flourish with only a mediocre effort.

It isn’t until external pressures force people to reconsider spending habits that companies and their offerings come under the microscope. Tough times allow companies to find out what they are truly made of. Some fail, thinning the herd. Others survive. Those who survive are stronger and flourish—at least until the next test.

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