Carter Sheehan

2-27-14
English 12
Ms. Dashcund






The Recession and its Impact on Consumer Electronics










Todays economic recession has had such an impact on todays society that every last
dollar, every last decision made, must be carefully thought through to avoid that uh-oh
moment. Although we are now emerging from this recession, the impact that has been left on the
advancement of computer technology has altered how the leading competitors of computer
technology focus. Although the result of the recession is clear, there is still much to be answered;
how has the recession affected consumer electronics? In my research, I expect to find ways that
companies have been able to refresh, or re-design how the current generation of technology is
used. Also in my research, I expect to find the various methods that may have been used to save
money in the production of computer parts, devices, and how these are marketed toward the end
user. I expect to find all of the many different ways that computer hardware and the IT industry
as a whole has been affected by todays economic recession.
With more than three years of computer diagnosing, research, and repairing experience, I
have seen the technological advances from the few companies that have tried to create the next
big thing. I have studied computer hardware and earned my CompTIA A+ certification as well
as other industry certifications, so I know computer hardware inside and out. Other similar works
from Google Subnet and their article Recession Hits Google on PCWorld.com and Stephen J.
Dubners article How Will the Recession Affect Clean Technology? on Freakonomics.com,
describe how the recession has affected even the largest organizations, and what they are doing
to be economically smart. Using some of the work that these two contributors have done, I will
be adding to these works by diving into the topics of what the big and small companies have
done to remain afloat, and even successful while facing this recession. The research done is of



great importance to anyone and everyone, because if youre a
prospecting end user, looking for a new buy or a business, my research will bring forth to your
attention what impact the recession has had on the industry and the current generation of
technology.
While conducting my research, sources such as articles, papers, wall street journal
reports, and interviews will be used. The information found or given will be carefully evaluated
and cross checked with other sources and when possible, with the actual business that the
information is about. Those who may read my research may already know of the topic or what
information is already out there for finding. This paper is written out of information that is found
and/or acquired by myself, and will be about the challenges that the manufacturers, sellers, and
buyers face when confronted with the changing technology of computers, although there may not
be anything new. My goal with conducting my research is to discover the ways that consumer
electronic manufacturers, and the chain that follows them have adapted to this recession and
what makes them successful in such a terrible economy.















I have conducted a research project in order to acquire the knowledge of how the 2008 recession
has affected the consumer electronics industry from the manufacturers to the consumer. In my
research paper, the topic I have chosen to discuss is the effects that the 2008 recession has had on
the consumer electronic market. To solve this problem I have searched for sources to gather
information including blog postings, stock reports, and other online sources. Concluding my
research, I have discovered information including the changes to the manufacturing process, the
marketing strategies that many retailers have made, and the change in the way that a consumer
has to think. The changes that have occurred will have an effect on the future economy as
consumers are now more conscious about which items they are purchasing and how those
purchases can be used to make their life easier.



The effects that the 2008 recession has had on the current global market has been
extremely negative. Many organizations, small businesses, even consumers have all been
affected by the terribly unstable economy. Manufacturers and retailers have had to change their
marketing approach to remain profitable. Considering consumer electronics during the recession,
many changes had to be made to draw in customers to purchase what may not have been huge
advancements in technology but was just marketed or implemented differently.
What can be said to determine the role that the information technology industry has had
on the recession of 2008?
If you look at the housing bubble and all the crazy things the banks did,
supporting and enabling that were the computerized models. They spun out equations that
said from a risk-management perspective this was OK. In particular, they used the
Gaussian copula formula to calculate the risk of the credit fault swaps. Some people
realized those equations had serious flaws from the beginning. But when things are going
well people ignore those risks and make money while they can. These computers had a
role in convincing people everything was OK
(Forbes)
1

Many of those who were part of the cause that created the crash believed that the market was
stable. As stable as it may have been, those who believed in that theory were only being
informed by the information presented to them from the computer generated models of the
current structure of the network. This information can (and could have been) easily manipulated
by someone who had the know-how and the willingness to create a situation that should have
been seen,
During the creation of many of the common consumer grade electronics on the market,



manufacturers had to make changes to their routines and operation strategy to keep costs for
making their products low, but maintain a high profit margin. Electronics manufacturers who
have retooled their operations to boost profits are emerging from the recession faster than their
counterparts in the automotive and industry sectors, according to survey of North American
manufacturers. (EETimes)
2
One way that manufacturers have been able to lower their costs of
creating their products is to remove hourly employees and implement an automated assembly
line. With an automated assembly crew, a one time payment must be made to purchase the
machines but they are only a one time payment (unless repairs or maintenance is required.)
Another benefit of having a machines do all of the work, products can be made at a much higher
speed, as well as not having to worry about overworking an employee, meaning that downtime
can be minimized. No pay in addition to no downtime in addition to faster production is a near
certain equation to higher profit or minimal loss.
Although steps can be taken to provide a manufacturer with a greater chance of a profit
margin or minimizing their losses, the recession has wiped out many peoples savings and amount
of money, so acquiring funding for manufacturing operations can be difficult to find. The
financial difficulties faced by the private sector could add to pressure for government
intervention in the financing of national backbone infrastructure. (Computer Weekly)
3

Manufacturers and organizations have been negatively affected for the funding and finding such
funding is becoming increasingly more and more difficult. Many organizations have had their
debt or their funding paid off or given to them by the federal government. It is very
understandable why the government would do such a thing: to rebuild the economy or to save the
economy. This lack of funding has an even further negative effect on manufacturers and their
innovations. As the funding that is required is only needed to remain in production of current



products, many programs that support further innovation of new technology or products have
been decreased in size or removed completely, causing a pause in technological advancements.
Along with the lack of funding for basic operation within the manufacturers,
manufacturers must reach further into other markets to provide their customers with services to
create a new flow of revenue. Along with a greater emphasis on complementary services,
Andrews said manufacturers need to integrate their manufacturing operations with emerging
networking technology. Manufacturing experts have been touting emerging cloud-enhanced
services as a way for North American manufacturers to add value to their products, reduce
operating costs and become more competitive in global markets. (EETimes)
4
Many experts
believe that manufacturers should implement services along with their products, and those who
already have began to include extra services have jump on their competition. For example,
cloud-enhanced services refers to providing cloud services to consumers meaning that things
that were once separate services can be bundled for a lower price rather than trying to sell the
customer on two separate things, who may be a value conscious buyer and may not buy into both
services. Pursuing this strategy, manufacturers can create a new stream of revenue for their
businesses.
The 2008 recession, having taken its toll on manufacturers, has also had a very negative
effect on the consumers themselves. According to figures from Microsofts CE studies group,
nearly 66-percent of consumers indicated they will spend less for major technology purchases
until the volatility of the market steadies or their personal situation is better. (Electronic House)
5

Many consumers and non-consumers have been negatively affected by the recession as the stock
market and housing markets have crashed and the value of their possessions have dropped or
their investments have become worthless. Those who have been affected have become more



cautious about what investments are made within their household, and purchases of electronics
are no exception. spending in the electronics category fell by 14-percent year-over-year in
September, following modest declines of 3-percent and 6-percent in the previous months.
(Electronic House)
6
This situation leads to a sort of constriction on the consumer electronics
market as (in the past) consumers would have purchased what was state of the art or what was
what they considered what they wanted. This thinking from the consumer makes it difficult for
the manufacturers to create innovations due to the lack of funding. The lack of funding can be
linked to a consumer not wanting to pay for the added features but instead to make purchases
on electronics that are based on what they need, not what they want.
Best Buy, a well known consumer electronics retailer, has been negatively affected by the
2008 recession. The largest U.S. electronics chain is expected to report profit declined to 34
cents a share from 43 cents a year earlier Sales are expected to rise to $10.4 billion from $9
billion (Marketwatch)
7
Although a recession was impacted many of the markets, Best Buy
still managed to see a rise in sales.
Another segment of the market not seeing red is the Blu-Ray hardware and software
market, We have good reason to predict that this Q4 sales period will see the Blu-ray
Disc revolution take hold in US mainstream markets and we will witness strong sales
performance in every other geographical region, says a spokesman for the BDA global
promotions committee. (Electronic House)
8

Many consumer electronic retailers have had the ability to weather the recession with the help of
the few innovations that have occurred even in such troubling times.
None of the aforementioned retail locations were affected by the swinging stock market
and banking crisis on a short term basis. In fact, mass market stalwarts Target and Wal-



Mart, Costco and BJs, actually saw a slight rise in their CE business during the ongoing
financial crisis, according to industry analysts.
(Electronic House)
9

The recession has caused many markets to crash and burn, while even though market share costs
have decreased, many consumer electronics retailers have seen an increase in sales.
A large corporation such as Google has been, for many years, promising the best of the
best engineers who are looking for job opportunities many perks to drive those who they are
interested in toward their business. It wooed the best engineers with generous perks, workplaces
that feature pool tables and volleyball courts, and a promise they could spend time pursuing side
projects. (Jessica Vascellaro, Scott Morrison)
10
This promise from Google is intended to pull in
possible employees to their business and allow them to work on their own ideas and side
projects. This can be very beneficial to the consumer electronics market as new and exciting
advancements in technologies can be created.
Products such as Google Checkout, a Web payment service, and Google TV Ads, which
sells television advertising time, haven't generated significant revenue, leaving online ads
still accounting for 97% of revenue. Google's share price has fallen to $275.11 in trading
Tuesday on the Nasdaq Stock Market, less than half its record close of $741.79 in
November 2007.
(Jessica Vascellaro, Scott Morrison)
11

Google soon began to feel the effects of the recession as the amount per share had dropped
dramatically. Also, much of Googles current revenue has been generated by Googles
advertising services. So with the U.S. economy in a recession, Google is ratcheting back
spending and cutting new projects. "We have to behave as though we don't know" what's going



to happen (Jessica Vascellaro, Scott Morrison)
12
Google, much like a manufacturer, must
now make drastic changes to how their resources are used to create further opportunity for the
business. Google begins to cut programs and projects in an effort to preserve what funding they
currently have. This negatively affects the consumer electronics market as those projects that
may continued to success for the business and the creator, but has been thrown away.
In conclusion, the consumer electronics industry has been greatly negatively affected in
many aspects from the manufacturers to the retailer, to the consumer. Such things as value of
these electronics and the development/manufacturing process has been drastically changed to
benefit those who run the organizations that create and distribute them. Although the market has
suffered a great deal, many retailers and manufacturers have still continued to weather the
recession and sustain their daily operations to provide consumers with a product that suit their
needs and that they can be satisfied with owning.





1
- Ed Sperling, Forbes.com IT's Role in the Recession
2, 4
- George leopold, EETimes.com - Electronics manufacturers emerging from recession.
3
- Computer Weekly - The big picture of how the recession will affect the IT industry.
5, 6, 8, 9
- Sherwin, Richard M. "Is the consumer electronics industry recession proof? Not really..."
7
- Andria Cheng, Marketwatch.com - Best Buy's results still to reflect pain of recession.
10, 11, 12
- Jessica Vascellaro, Scott Morrison, Wall Street Journal Report - Google Gears Down
for Tougher Times. The Wall Street Journal





Works Cited
Best Buy's results still to reflect pain of recession. Andria Cheng, 19 June 2009. Web. 1
Feb. 2014. <http://www.marketwatch.com/story/recession-to-eat-into-best-buys-profit-analysts>.
This blog post provides the reader with information regarding stock market information of Best
Buy, an example of a business that was affected by the recession.
The big picture of how the recession will affect the IT industry. ComputerWeekly.com,
19 Feb. 2009. Web. 1 Feb. 2014. <http://www.computerweekly.com/news/2240088479/The-big-
picture-of-how-recession-will-affect-IT-industry>. This blog post provides the reader with
information regarding the IT industry as a whole and the affects that the recession will have on it.
Electronics manufacturers emerging from recession. George leopold, 21 Aug. 2012.
Web. 1 Feb. 2014. <http://www.eetimes.com/document.asp?doc_id=1262374>. This blog post
provides the reader with information regarding the now emerging electronic manufacturers after
the global economy crash.
Recession Hits Google. Google Subnet, 3 Dec. 2008. Web. 1 Feb. 2014.
<http://www.pcworld.com/article/154902/google_job_cuts.html>. This blog post provides the
reader with information regarding the affects that the recession is having on the globally-known
corporation, Google.
Sherwin, Richard M. "Is the consumer electronics industry recession proof? Not really..."
Electronichouse.com. EH Publishing, 17 Oct. 2008. Web. 1 Feb. 2014.
<http://www.electronichouse.com/article/is_the_consumer_electronics_industry_recession_proof
_not_really/>. In this article by Richard M. Sherwin, Richard provides the reader with
information regarding the consumer electronic market and how it has been affected by the



crashing economy.
Sperling, Ed. "IT's Role in the Recession." IT's Role in the Recession. Forbes, 1 June
2009. Web. 2 Feb. 2014. <http://www.forbes.com/2009/05/31/recession-computer-models-
technology-cio-network-recession.html>. This post provides the reader with information
regarding the IT industry as a whole and its role in the recession and how it is part of the
recession.
Vascellaro, Jessica E., and Scott Morrison. "Weblog post." Google Gears Down for
Tougher Times. The Wall Street Journal, 3 Dec. 2008. Web. 2 Feb. 2014.
<http://online.wsj.com/news/articles/SB122826503489174369?mod=googlenews_wsj&mg=reno
64-
wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB122826503489174369.html%3Fm
od%3Dgooglenews_wsj>. This blog post provides the reader with information regarding the
current economic recession and the affects it is having on even the largest of businesses, Google.