Question

Marina manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Marina recommend to the company's owner?

Answer 1

Answer:

Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.

Explanation:

During the recession, the number of unemployment will rise and the purchasing power that people have will be reduced.

When this happen, the supply of the diamond watches in the market will heavily outnumbered the number of consumers that afford to buy it. (this is applicable to all type of products, not only diamond watches)

Because of this,  when expecting a recession in the future, companies tend to reduce the amount of supply to minimize their loss. They can resell it after market has been restabilized.