Financial Crisis: Good Or Bad?

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Crisis: good vs. bad The statistic of crises that occurred after the WWII is tremendous: 139 financial crisis occurred in the period between 1973 and 1997, while just 38 crisis occurred in the period between 1945 and 1971. According to (Dicken, 2011), 255 recessions disrupted 17 western economies in the period from 1870 to 2006, while two-thirds of them lasted less than one year, and 33 of them endured over two years. After the “golden age” and economic growth period from the early 1950s to the early 1970s, the world economy´s patter was uneven with lots of growth (1950s to 1960s, 1994-1995, and 2000s) and recessions (1990s, 1998-1999) (Mitra, 2012). Moreover, the collapse of the banking system in 2008 has been the biggest global economic crisis…show more content…
While the more advanced latent stage of the crisis with the threat of bankruptcy leads to the restrictive behaviour of suppliers and creditors, the manifested phase of the crisis notably declines strategic success factors. Furthermore, Hauschildt (2000) affirms that the causes of the crisis can be both internal and external. The external causes embrace market imbalance and changes, competitive pressure, currency collapse, high interest levels, the deregulation of key industries, insufficient government policy strategies, environmental changes, etc. On the contrary, internal causes are induced within the company, including managerial mistakes and incompetence, overestimation of possessed skills and control over particular procedures and events, or “blind” focus focus on growth. However, John, Lang and Netter (1992) found during their research that managers usually blame external factors as the main causes of the crisis, and seldom mention the managerial mistakes and fails as the root of the crisis. Notwithstanding, Pearce and Robbins (1993) claim that the companies’ crises can be caused by a combination of internal and external factors (Faghfouri, 2012). Non-linear dynamics and complexity make a crisis hard to detect. A minor “trigger” initiates a destructive cycle of crisis escalation, which may then swiftly disseminate throughout the system, jumping from one system to another. Thus, it is almost impossible to predict…show more content…
Despite the lack of finance, confidentiality, loss of markets and customers during crisis time, grate venture can be created, and in addition, during the crisis the price of labour, materials, services and rent notably decline, and competition tends to flatten. For instance, during the recession or depression times the appeared opportunities were effectively employed by the establishing of such companies as Microsoft, Genentech, Gap, United Technologies, Polaroid, Atari, Apple and Revlon. Thus, the crises of the twenty first century foster innovation and technological change, such as green technologies, nanotechnology, cloud computing, social networking etc., and consequently, facilitate value creation, innovation, and solving of the economic and social problems. In addition, firms during the crisis tend to create better value for existing customers rather than looking for new customers that, in turn, contributes to significant improvement of goods and services and cost-cutting. Consequently, there is a phenomenon of successful entrepreneurship and innovation during crisis. For instance, during the financial crisis in 2008, the USA generated 12 million jobs and 20 per cent of US GDP product compared to 10 million jobs and 17 per cent of GDP in 2005 (Mitra,

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