The Domino Effects of Businesses

Read an article from business times about "One restaurant's shutdown story shows how recession spreads" (link: https://www.businesstimes.com.sg/consumer/one-restaurants-shutdown-story-shows-how-recession-spreads)

It is quite an interesting read as it goes to show how businesses are linked to one another in a domino manner.

By looking at the various costs that a company spends that becomes the revenue of another company, you will be able to see how intertwined businesses are.

Using the restaurant, for example, in order to get the food into the restaurant to sell, it goes through many parties from the source before it reaches the restaurants.

Below is a diagram that shows which are the parties affected if a restaurant closes down.

As you can see, when a restaurant stops ordering food supplies, the distributor will cut the demand for food from the farmers. And with fewer demands of food needed for delivery, drivers will have fewer job requests. All these lead to lower income for all.

Imagine if tens of thousands of restaurants close down, how widespread and devastating the impact it will be.

And the impact will not be limited to the restaurants. These people who make a living could be paying their mortgage loans or school loans or car loans. And if they don't have income flowing in, these loans would default and a vicious cycle occurs.

Hence you can see the domino effects of businesses just by using a restaurant business. The same can be applied to other businesses as well just from looking at the supply chain.