Managing firms throughout the business cycle

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The first decade of the 21st century has been a rollercoaster ride for economic activity. Business confidence was high at the start of the millennium. This was particularly fuelled by the growth of the internet as a means of buying and selling. A lot of companies have developed websites and there has been a rapid increase in online purchasing. At the same time a number of countries opened up their markets to international trade. For example, Poland and the Baltic States of Estonia, Latvia and Lithuania joined the European Union. China and India have also grown to become world economic forces. However, during 2008/9 the rapid growth of world markets came to a halt. Many of the problems stemmed from banks lending money to risky borrowers. When some of these failed to pay back this led to a rapid loss of confidence in the banking system. Banks became reluctant to lend – for example, for mortgages or business loans. This led to a sudden dip in people spending which reduced demand for products and services. The effect was catastrophic for many businesses. Many famous companies closed down. Perhaps the best known high street business to suffer was Woolworths which closed…

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