Bad Business
The fall of the economy in 2008 was spurred by several bad business practices that lead to liquidity shortfall occurring in the U.S. banking system, the collapse of the largest financial institutions and the bailout of many banks by the national government, as well as downturns in the stock markets globally. Along with financial institutions and banks, the housing market fell as well resulting in many homes being foreclosed and many residents being evicted as well as prolonged vacancies. There were many questions concerning bank solvency, as well as declines in credit availability and a largely damaged investor confidence that led to a great fall in the economy during 2008, with the largest businesses falling with the economy and many consumers feeling the heat.
Cutting Customer Service Levels
As the economy was faltering and businesses were seeking new ways to save money, customer service began a back slide. Consumers were no longer greeted by customer service agents promptly, seeking to reduce the queue time, but with recorded messages stating there would be a few minute wait time to the call. Not only did this send consumers searching for a new business to deal with, but sent the businesses looking for funding where they had lost it due to cut backs. Cutting back the customer service levels meant saving money where it was needed most and ignoring the consumers that kept the business alive, resulting in the downfall of many businesses due to a massive drop in customers.
Replacing Representatives with Computers
Still affecting customer service, many businesses felt that cutting salary costs by replacing customer service representatives with computer answerers would be a great choice to lessen costs and maintain customer service, but it did just the opposite. Many consumers were still requiring or preferring the assistance of a live representative, but found it extremely difficult to reach one. Again, many consumers headed for the other businesses that still valued human contact as a way of resolving issues.
Cutting Employee Wages
The bankruptcy of several companies is a prime example of what happens when expense management turns to employee wage cuts which spells nothing but disaster. Many businesses responded to high expenses by cutting the wages of employees, which in turn turned to high turnover rates and higher costs in recruiting and training new personnel due to the difficulty of retaining personnel with such wage cuts. As wages declined, the work force declined and workers were led to companies that were willing to put more into their employees.
Fast Growth Efforts Due to Success
A common issue leading to the decline of the economy in 2008 was the businesses that decided to grow quicker due to a high success rate. This caused the downturn of many great companies as they decided to put more forward to grow faster, allowing them to become prime targets for massive competition. The result of the faster growth was the effect of several identical stores or shops, staffed by untrained and uncaring personnel, with high costs on products that were easily matched and beaten by the competition, ultimately leading to the downfall and extreme strain on the business in the long run.
Extreme Fees
Many, many businesses responded to a slacking economy by increasing rates, fees, interest, and other costs for services, causing a great decline in consumers. Consumers were being taken advantage of left and right from extreme fees associated to regular services to increases in rates without notice and several fees applied to a simple service. These businesses began to prey on those with poor credit or no credit, while using the opportunity to repossess and seek high repayments based on low defaulting guidelines. These predatory behaviors lead to repossessions of vehicles, appliances, and other items, as well as foreclosures and evictions for many consumers, but a decline in trust for these companies eventually leading to a complete decline in business.
Sale of Worthless Products
Between 2005 and 2007, one extremely large company began to peddle off worthless products to many business owners, risking these businesses and their owners’ livelihoods. This practice was also seen within several other large companies that began to sell off worthless product with full knowledge, leaving consumers to rely on these products with no warning. The result was a high cost for repair or warranty services, bringing in more profit for the businesses but less efficiency and higher costs for the consumers. What was the end result? The decline of several large companies during 2007 and 2008, continuing in the most recent years in which these companies have gone bankrupt or had to downsize to improve results and come back.
Extremely Strict Hiring Qualifications
One other bad business practice that assisted in the fall of the economy in 2008 was the implementation of extreme hiring qualifications that canceled out some of the United States’ most qualified and trained professionals. Not only did many companies begin the Right to Work legislation, but they had the right to hire or fire for any reason, disqualifying candidates and laying off employees for any reason. This destroyed the job market, caused a great decline in consumers, and cost businesses a great deal as well. Many states were allowing employers to hire and fire with no question, many times leading to an increase in costs for products and services to consumers reducing the input into the company over a long term.
The decline in the economy in 2008 was extreme and caused by many bad business practices that cost everyone both on a national and global level. The U.S. remained in debt, yet offered great incentives to repair big businesses and financial institutions. Whether or not this assisted in any type of repair to the economy is still a question as the economy is on a slow and unstable ground. However, the effort to prevent bad business practices is heightened and consumers as well as employers have gained a greater wisdom through these practices that highly affected the state of the economy, leaving the nation in a state of upheaval.