Over 5 years ago, Bill Gates repeatedly mentioned that the world would be brought to a standstill, not by nuclear weapons but something so minute, it is invisible to the naked eye; that is a virus.
On the 31st of December, the World Health Organisation was informed by the Chinese government about a certain kind of pneumonia that affected 41 people, all connected to a wet market in Wuhan. Later, it was identified that the spread of this highly infectious disease could have started in November. This rapid spread was due to the large gathering of people at the illegal wet markets, wherein, many live exotic animals living in unsanitary conditions could have boosted the transmission of this disease. Like any other respiratory diseases, it grows exponentially every day. First, China and now the world.
“Researchers believe that the new coronavirus originated in bats, then jumped to an intermediary species – most likely pangolins, pigs, or civets – that passed it to people. It can be spread among humans via respiratory droplets within six feet. The viruses can also survive for days on many surfaces.” (Holly Secon, 2020).
Initially, China quarantined 11 million of its citizens in Wuhan and Hubei on the 23rd of January. This was soon followed by other towns and provinces, hence, placing over a Billion people under strict lockdowns. This is China’s biggest quarantine ever faced.
While the virus spread rapidly around China and the world, the WHO (World Health Organisation) on the 30th of January declared it a “public health emergency”. To avoid the further spread of the virus, travel bans were established, preventing any foreign citizens travelling from China, by many countries. They also implemented a 14-day quarantine for any citizens or non-citizens travelling from any other part of the world.
Soon after China was placed under a lockdown, it was the start of the Covid19 induced recession for the economy as well. China is one of the world’s biggest manufacturing companies and exporter of many goods and services. This meant that a large number of multinational enterprises that depended on the Chinese workforce for manufacturing had little to no time to start looking for alternatives to keep their businesses afloat.
In a span of three months, Covid19 has spread to over 209 countries and has affected over 1,200,000 people as of the 6th of April. On the 11th of March, the World Health Organisation officially declared this virus as pandemic and with no available vaccine, they urged every government to take the necessary precautions to save its citizens during this uncertain time. Which meant minimising every form of social contact amongst people.
With the rapid rise of the virus, governments around the world closed their borders to visitors, while shutting down millions of businesses in various industries such as travel and tourism, entertainment, hospitality, retail and many more. Which also meant millions of businesses being shut, thus, creating mass unemployment problems around the world. The lockdown also meant that only essential businesses such as medical care and groceries would be the only industries working. Some countries such as India allowed grocery stores and pharmacies to be opened 24/7, giving the entire population access to essential commodities.
The question at this point is not whether the world will face a global recession but how bad will this recession be and for how long. Until there is a better understanding of this disease, there are very few resources that economists use to predict the end of this ongoing COVID-19 related recession. (Rogoff, 2020). Even though governments are trying to soften the blow by funnelling billions into the economy by borrowing money from the world bank, this cannot become a long term solution.
Stimulus packages have been declared around the world, providing the recently unemployed with the means to survive this public health crisis. The United Kingdom announced that the government will be paying unemployed or at risk job workers 80% of their wages, costing at least 10 Billion Pounds. They announced that renters and self-employed workers would receive some financial relief while calling this the worst recession of the century. (Bloomberg – Are you a robot?, 2020)
Australia announced $130 Billion jobkeeper payments to aid the unemployed as they deal with the negative impacts of COVID-19. (Bloomberg – Are you a robot?, 2020)
These efforts by various governments will only help cushion the blow while the population lives in fear and social isolation, but this cannot be a long term solution for any industry.
While the full economic impact of the virus remains uncertain at this point, all industries are looking for alternatives to keep their businesses afloat.
The live entertainment industry faced the biggest challenge as public gatherings of more than 5 people were made illegal. While the entertainment industry has faced many challenges in the past, for example, the entertainment and live shows industry had to increase security measures after 9/11 and/or rescheduling shows due to unforeseen circumstances. The entertainment industry survived as none of these situations had an immediate impact globally. Which meant years of preparation, investment and build up amounted to nothing. For example – live events such as Rabbit Eats Lettuce, Cirque Du Soleil, Coachella which attract thousands of visitors each year were forced to cancel or reschedule events until further notice. These events attract thousands each year and are viewed by millions around the world, hence generating billions for each country.
Whereas, Disney Parks, Experiences and Products, Inc. generates over $500 million through just admission revenue globally and is being shut down for the third time in history, denying entrance to over 11 million visitors each year. Consequently, closing the park also means reducing visitor traffic to all of its theme parks, hence reducing visitor traffic at local hotels and restaurants as well. The Southern California economy would be losing as much as $23 Million per day due to the closure of Disney’s theme parks, as they add more than 8.5 billion dollars to the SoCal economy. In the United States alone, Disney employs over 78,000 employees, whilst, globally they employ more than 200,000 employees, generating a tremendous amount through taxes, creating jobs which ultimately leads to increased spending capacity for the economy. During these unprecedented times, Disney being closed indefinitely has been generating huge losses for not just the company but the governments in which they play a huge role.
The coronavirus has caused a huge financial loss for the luxury hotel industry, for example; Marriott’s revenue has been shot down 75% during this time. During this time, Marriott had to furlough over 4000 of its employees in the US alone, and thousands of employees ranging from general managers to housekeeping staff worldwide. At the moment, due to decreased occupancy and productivity, they have decided to close off many hotels until further notice. Initially, when the outbreak was announced, occupancy decreased by 25% in the Asia-Pacific region. While occupancy rates in North America and Europe are down 70% compared to 2019. Unfortunately, since there has been an increase in uncertainty of the situation, the hotel industry believes that this will become worse before it becomes better.
While the travel and tourism industry will plummet before picking up pace, the fashion retail industry, on the other hand, scurries to find shelter while they adapt towards a technology-driven approach. COVID19 has had a significant impact on the fashion retail industry as consumers fear human contact and promote social isolation. While luxury departmental stores such as Macy’s and Myer were already witnessing a decrease in footfall in their stores, this trend has seen a significant increase during this COVID19 season. The luxury brand, Louis Vuitton has adapted to the current market and has pivoted to manufacture non-medical face masks in response to the French government’s request for more medical protective wear for the healthcare workers.
Whereas, major fast-fashion brands such as H&M and GAP are struggling to make ends meet at the moment. H&M and many other retailers have pursued to decrease or forgo many of its casual or non-essential employees amid the COVID19 crisis. To stay afloat, H&M continued to borrow $1.1 billion to strengthen its business as of now. Over the past month, GAP continued to cancel their fall/summer orders which were unintended for online sales to cope with the loss they will be facing in the upcoming future. As an adaptation strategy, H&M and other major fast-fashion retailers are opting to shift their business online and focus on a more direct B2C business model. Consequently, affecting thousands that work in the supply chain, from fabric manufacturers to designers. While GAP cancels orders, the Bangladesh Government estimates a loss of $3 billion and 2 million jobs due to the fall in manufacturing exports.
Whereas, grocery and pharmaceutical retailers are struggling to meet demand on most essential goods such as long-shelf-life food, health and disinfectant products such as sanitizers and hand washes.
While there has been negativity spreading across the globe due to the current circumstances we are in, there have been a few companies that have managed to thrive in this market. Which are – social media, virtual conferencing and online streaming services. As social distancing rules and regulation laws remain intact, it results in the closure of the majority of the offices, universities and schools. To adapt to the coronavirus pandemic, many of these institutions have turned towards conferencing and organisation technologies such as Zoom, Slack, Skype and many more. During the coronavirus pandemic, Zoom became a household name, wherein, every student or professional used this application to communicate and coordinate with team members and colleagues. Families and friends are using it to schedule virtual “cocktail hour” with their loved ones and so on. During this time, Zoom has become the 2nd most downloaded app, just after Tik Tok. A growing social media company that connects users through a series of entertaining videos of themselves.
Zoom’s business model makes it quick and efficient to use for businesses and individuals. According to Zoom’s CEO Eric Yuan, Zoom has witnessed a large increase in free users, meeting minutes and new video call users. Unlike Skype or Google Hangouts, Zoom’s UI comes in with a built “beautification” filter that allows users to experiment with different modes to make the conferencing experience more interactive. Although these are minute details that set the company apart from the rest, it has proved to be resourceful. Zoom is being used by industries of all kinds, including gyms who are now conducting online sessions with their clients.
While there are a few industries that are prospering at this time, there are many more that have been negatively impacted. While economists cannot accurately predict the complete effects of the pandemic just yet, multinationals must prepare for the unforeseen future ahead.
What can multinational enterprises learn from the pandemic?
While quarantine hit other countries, it caused huge employment problems for the economy as well. Especially in Australia, wherein, the majority of the unemployed workforce stems from casualised workers with no paid leave. This has become a huge liability for the government as of now.