As people took precautions against influenza during its pandemic, employment plunged and business activity shrunk significantly. Now that some restrictions have eased off, what will the recovery be like?
Some analysts forecast a “U-shaped” recovery, in which GDP remains low until slowly returning to pre-pandemic trend; others see an “V-shaped” one instead.
1. Increased Globalization
Business leaders benefit greatly from globalization’s increased globalization; it allows them to reach more customers, tap into different markets, leverage global technology and knowledge and create greater productivity and gain a competitive advantage in the marketplace.
Globalization offers businesses multiple advantages when it comes to streamlining operations and tapping a larger talent pool, thus improving efficiency while decreasing operational costs, leading to higher sales growth and revenue gains.
However, entrepreneurs must recognize that increased globalization may not always be positive; sometimes it can even hinder economic recovery. Propping up businesses or investments that do not reflect economic reality may prolong liquidation and reallocation processes associated with recessions – which in turn prevent resources being allocated towards more productive uses and do lasting damage to economies as a whole. Thus, businesses and investments must adapt quickly as economic realities shift over time.
2. Economic Growth
Entrepreneurs play a vital role in driving economic growth by developing products and services that enhance firm and economy competitiveness, creating new jobs in the short-term while driving productivity through stimulating competition among existing firms as they look to enhance processes and products.
Economic recovery is an integral component of business cycles and typically ushers in an expansionary phase where resources that had been tied down in failed businesses or investments become freed up for use elsewhere. Leading indicators like stock markets, retail sales and startup businesses typically rise ahead of an economic recovery.
Entrepreneurs, investors and service providers all play critical roles in supporting entrepreneurial businesses in their local communities. Working together enables them to leverage each other’s expertise and resources for mutual advantage – creating an enhanced economy as a result of entrepreneurs’ successes, which in turn motivate other individuals to form businesses themselves, contributing further to overall city prosperity.
3. Increased Access to Capital
Market economies often experience ups and downs, from boom periods leading to economic crisis or recession; during this time businesses may liquidate assets to reduce costs and save cash in response to decreased demand. Over time though, economies typically recover and resume growing once again.
Entrepreneurs know the value of accessing capital as essential. Without sufficient financing, most startups or existing companies cannot launch or expand their businesses successfully. Federal programs have increasingly been created with the intention of improving access to funding for entrepreneurs.
ESO Ventures in Oakland, California combines competency-based curriculum with mentoring and financial support. Other examples of similar programs are provided by the Kauffman Foundation’s Invest in Diversity initiative that invests capital in fund managers of color. COTEE competition also serves to accelerate community incubator growth. All these efforts join philanthropic programs, government grants and loans as well as innovative structures such as revenue-based financing in supporting entrepreneurs.
4. Changing Consumer Behavior
Economic recovery typically entails reallocating labor, capital, and other resources tied to businesses that failed during a recession to new uses. This process exposes inefficiency or waste in business arrangements, investments, or institutions that were ineffective during a downturn and creates the opportunity for an economically sustainable rebound.
As in other pandemics, COVID-19 brought with it government restrictions and fears of public health disaster, leading to an immediate sharp drop in economic activity that devastated small businesses and jobs reliant on face-to-face interactions such as those offering low pay or limited professional qualifications.
Despite these difficulties, US household consumption and business investment rebounded quickly during the recovery phase. Businesses’ return to normal operations has led to faster GDI growth than GDP; consumers are showing greater support for locally-owned small businesses as they purchase products made near them.