Factors Affecting the Consumer Electronics Industry

Topic: Industry
Words: 839 Pages: 3

Exposure to the Business Cycle

The shifts in the business cycle and the ability of companies on the market to adapt to it are crucial factors in industry appraisal. The current situation with the virus outbreak and the following lockdown has a substantial adverse impact on the global economy. Rising unemployment rates, a significant drop in consumer confidence, a decrease in housing prices, and the fall of the most extensive traded stocks in the United States point toward a shrinking economy (Amadeo, 2020). Amadeo (2020) states that “The U.S. economy entered the contraction phase of the business cycle in February 2020.” A prolonged period of expansion before this phase gave companies a sufficient amount of time to prepare ahead and get their businesses ready for a rebound (Amadeo, 2020). Exposure to the last stages of the business cycle is not a complete stop for companies that are ready for it and possess the ability to recover through investments and innovation later.

Moreover, the global business cycle has a different effect on durable goods companies, especially on those that are prone to shocks due to technological innovations. Na and Oh (2020) state that “the recent literature has proposed that shocks to the demand and supply of investment goods are an important driver of business cycles” (p. 2). The importance of IT technologies continuously grows more critical, signifying the ability of the consumer electronics industry to quickly recover by directing investments into the development of new technologies (Na & Oh, 2020). The higher role of this type of shock over the state of the business cycle ensures that this industry stays relevant.

Consumer electronics, being a durable good that is primarily driven by innovative IT technologies, is a unique market that has a higher chance to recover after the recession part of the business cycle. Moreover, the consumer electronics industry is populated primarily by large companies. These companies, along with others that rely on innovations, possess the highest chance of recovery (Amadeo, 2020). Therefore, the consumer electronics market has more potential to improve its performance over the next 12 months. To further decrease the impact of the recession on the business cycle, companies can follow the current investment boom in healthcare-related IT technologies.

Relative Financial Norms and Standards

The impact of COVID-19 on the behavior of customers brought a tremendous shock to many industries, and durable goods markets are not excluded. The effect of this outbreak on the global market is a significantly weaker purchase intent for many product categories, which can be seen worldwide, except in China (Arora et al., 2020). This issue brought the customer electronics market to a halt as people’s purchase priorities shifted towards essential goods (Arora et al., 2020). However, since the beginning of pandemics, the companies in this sector began working on mitigating this issue.

Financial norms are not homogenous across the population, and the changes in consumer behavior vary significantly. The study by Chetty et al. (2020) shows that “the initial impacts of COVID-19 on economic activity were largely driven by a reduction in spending by higher-income individuals due to health concerns” (p. 4). To mitigate this withdrawal of a crucial income stream, the U.S. government issued several stimulus payments that successfully increased spending across low- and middle-income households (Chetty et al., 2020). A temporary shift in the target demographics of a company’s products can help it to capitalize on this situation and preserve and expand its customer base.

Companies in the consumer electronics industry must actively put resources towards restoring consumer confidence. To avoid being swept by the changes in financial norms and habits, firms must examine and adapt to the new standards. The successful adaptation to the new means of employee-customer interaction, for example, was easily achievable for durable goods industries and boosted their performance (Chetty et al., 2020). Compliance with the new standards demanding increased attention to health concerns further increased the chances of this industry to recovery.

The examination of the new customer behavior model can provide vital statistics that can help companies to avoid being negatively affected by this situation. In the case of consumer electronics, customers across the globe have shown an increased interest in online shopping (Arora et al., 2020). Research by Arora et al. (2020) supports this claim by stating that “in China and the United States, 75 percent or more of consumers reported trying a new shopping method” (p. 14). What will truly benefit the consumer electronics industry is the fact that about 70 to 80 percent of consumers expressed their intent to continue shopping online, noting its convenience (Arora et al., 2020). While there are some reservations left in customers regarding the need to conserve funds, their confidence has slowly been restored to the past levels (Chetty et al., 2020). The consumer electronics industry is already heavily influenced by innovative technologies and possesses greater adaptability to this shift in financial norms. Companies that operate in this industry and align their priorities with customers’ demands can expect to experience growth in the next 12 months.


Amadeo, K. (2020). Where are we in the current business cycle? The Balance. Web.

Arora, N., Charm, N., Grimmelt, A., Ortega, M., Robinson, K., Staack, Y., Whitehead, S., & Yamakawa, N. (2020). Consumer sentiment is evolving as countries around the world begin to reopen. Perspectives On Retail And Consumer Goods, 8, 6-17.

Chetty, R., Friedman, J., Hendren, N., Stepner, M., & Team, T. O. (2020). The economic impacts of COVID-19: Evidence from a new public database built using private-sector data. National Bureau of Economic Research, a27431. Web.

Na, S., & Oh, H. (2020). Computerizing households and the role of investment-specific productivity in business cycles. International Finance Discussion Paper, 2020(1292). Web.

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