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business trends in the US Recession

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Discuss three major business trends in the US Recession.

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The first major business trend in US recession is the failure rate in the transportation industry. This industry also has a high delinquency rate. There are reasons why the transportation industry has been the hardest hit during the current recession. The reason that the transportation industry is worst hit is that government regulatory agencies exercise a strong control over the transportation industry. This makes the industry inflexible and vulnerable to the general recession in the industry. The first form of regulation that agencies exercise over the transportation industry is price regulation. That is the agencies are empowered to set the highest and the lowest prices for the product. This makes it difficult for transport operators to recoup low earnings through higher prices in other sectors. Not only that, there is regulation related to rate of return. This regulation ensures that transport business has a low rate of return and when that rate is adversely affected by recession, the business either closes down or becomes delinquent. It is not able to repay its debts. Further, the transportation industry is restricted by condition of service regulation. This makes it difficult for the transportation industry during recession to make decisions that would aid its survival. Also, there are entry and exist regulations. There are many areas where truck or truck plus trailer entry is restricted.

In addition, there are strong restrictions on mergers and acquisition. The anti-trust law is applied frequently in the transportation business. Even on the financial arrangements there is strict regulation. During the recession the transportation industry has been hit the hardest by regulations. The transportation industry includes trucking industry, railroad industry, and the airlines (Dejuán. O, Febrero, E, & Marcuzzo, M, 2011). The regulations for example railways to provide services in the uneconomic sectors, the result were cross-subsidization. This worked well when there was economic growth, however, since the economic recession; there has been a decline in the earnings of railroads because of lower freights. ...

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Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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