Understanding the business cycle is important for companies because it affects their strategies during different times. Let’s break down the phases:

1. Boom Phase:

   • This is when people spend a lot, and the economy is growing quickly, sometimes more than 3% each year.
   • During this phase, businesses might think about expanding and starting new projects because they expect to sell more.

2. Recession Phase:

   • This phase happens when the economy shrinks for two straight quarters, meaning it’s not growing at all.
   • For example, during the financial crisis of 2008-2009, the UK economy shrank by about 6%.
   • Companies may need to cut costs, which could mean laying off workers or stopping plans to grow to save money.

3. Recovery Phase:

   • The economy starts to grow again, usually between 2% and 3% a year.
   • Businesses can get ready to increase production and hire more workers when people start feeling better about spending money. Retail sales can go up by about 5% during this time.

By understanding which phase of the business cycle they are in, companies can make better choices about where to put their money, what opportunities to pursue, and how to handle risks. This helps them stay strong even when the economy changes.