Possible company bankruptcies

Economic recession… It can easily be said that the world economy is facing the danger of serious consequences of inflation in the future. Currently, even well-developed economies face the risk of high inflation and recession. In an inflationary environment, even the ECB increased interest rates for the first time in 11 years.

It can be easily interpreted that the recession in the world economy also damaged the company’s financials. Almost all companies, especially starting with the restrictions during the pandemic and its aftermath, lost serious profits and therefore many of them were in danger of bankruptcy. However, the danger remains, even as restrictions are reduced to a minimum.

Financial debt burden… First of all, most companies suffered from restrictions such as reduced sales and thus rising debts due to lack of adequate inflows. Second, high inflation rates around the world have become extremely problematic for citizens. Therefore, living standards hurt corporate profits as consumer spending fell, which resulted in companies being heavily indebted. Relying on debt because the interest rates are high is a risky situation that threatens the financial situation of companies. In addition, many companies faced the danger of bankruptcy under the current conditions and continue to do so.

Adaptation to change and new technology… Apart from these, the pandemic directly affected consumer preferences. For example, e-commerce has grown tremendously during the pandemic as consumers shift from mall visits to online shopping. Although it was a bit mandatory due to restrictions in the beginning, people got used to the convenience it provides, and thus, consumer preferences shifted to e-commerce in the long run.

However, change in consumer preferences has reduced sales of goods and services for most companies. The pandemic, by its nature, hurt the companies that could not catch up with the most up-to-date technologies. For example, clothing companies that did not adapt to online shopping suffered serious damage. Kmart, a discount store chain, went bankrupt in 2022 due to the damage caused by the pandemic conditions and its failure to attempt to modernize its stores. Also, the famous clothing brand Forever21 and the formerly famous BlackBerry have declared bankruptcy. Since BlackBerry cannot compete with new technologies, it is not a surprise when the pandemic conditions are taken into account. For this reason, companies that had difficulty in adapting to the changes and did not develop were faced with the danger of bankruptcy, especially triggered by the current financial problems in the world.

Conclusion? The epidemic conditions created new norms and balances in terms of business and financial conditions as well as their economic effects. Some companies are struggling because of mismanagement, some because of the economic downturn and rising interest rates, others because of changing consumer preferences or changing consumer preferences. In this process, we can see that some old known brands are deleted from the market.

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