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WILL CONSUMERS CONSUME?
Experts argue about when it started, what the first signs were, who saw it
coming, and who was surprised when it got here. But the signs were
undeniable by the early months of 2008: The American economy was
headed for big trouble. Bear Stearns, one of the largest and oldest
investment firms, put itself up for sale. This Wall Street legend had survived
the Great Depression, but it just couldn't cope with the economic downturn
the subprime mortgage crisis ignited. Six months later, Lehman Brothers, a
company so old it was established before the Civil War, prepared to leave
the marketplace. Grave economic news continued through the end of 2008
as the government bailed out banks and automakers. The year closed with
the Dow Jones Industrial Average below 10 000 for the first time in four
years.
As the United States rolled into 2009, few things changed. The Dow
continued to descend, reaching below 7000 for the first time in a decade.
Unemployment rose to 8.5 percent, nearly double the rate from two years
before, and everyone realized that the United States, and in fact the world,
was in one of the deepest and most serious recessions most people had
experienced in their lifetimes-now referred to in the media as the Great
Recession.
Consumers were confused and caught off guard, but they reacted
quickly. They made swift changes in their consumer behaviour and spending.
People started staying home more-eating out less and cutting back on
family vacations. Data from Nielsen research identified many product
categories that were seeing a drop in sales, and at the same time categories
with increases in their sales patterns.
Wait, increases? What do people buy more of in a recession? For one
thing, baking staples as well as canning and freezing supplies began to pick
up in sales-in addition to flour and sugar there were increases in sales of
jars and freezer bags. At the other extreme, Nielsen reports that cameras
experienced the biggest sales drop among product categories. As people
stayed in more and travelled less, it's likely that photo opportunities would
plummet as well. Pricey bottled water was another loser as consumers
reverted to good old (and inexpensive) tap water.
In addition to cutting back in certain categories, American consumers
started to save, many for the first time in their adult lives. The U.S.
Department of Commerce tracks the personal savings rate of Americans as a
measure of the fraction of personal income that people don't immediately
spend. The rate jumped from 0.3 percent in early 2008 to 4.2 percent in
February 2009
We expect a drop in consumer spending in a recession. But customers'
attitudes toward big business also declined. The Boston Consulting Group
disclosed preliminary results from a survey showing that Americans and
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Europeans now have an intensified distrust of big business that might affect
their future spending-even when the economic picture gets brighter. Large
companies need to focus on rebuilding relationships with consumers to help
reduce buyers' skepticism toward big brands.
Sources: Sean Gregory, "Inside the Cocoon." Time (2009): 59; "From Buy, Buy to Bye-Bye:
Consumer Psychology," The Economist (2009): 67.
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Your task is to analyse and present your justifications to each of the below
questions :
Discussion Questions (Total = 25 marks)
1. Will Americans return to their old free-spending ways when the
economy improves? Has their attitude toward spending versus saving
changed forever? (7 marks)
Will they ever trust big business again? (5 marks)
3. What can brands do to gain back consumer trust? (6 marks)
4.
How did this recession affect Malaysian consumers? (7 marks)
2.
Important Issues :
1) Students are strongly encouraged to apply theories / concepts in
relevant chapters when attempting the questions.
2) Students must support their findings with relevant evidences from
any of these sources such as academic books, newspapers, relevant
magazines, relevant publish materials, journals; to name some when
attempting the above questions.
Due : Week 11; 9th of October 2017; 12 noon.
Do attach a copy of the Turnitin report (duplication percentage must not
exceed 20%) and the Case Study Evaluation Rubric when submitting your
hardcopy of assignment.