Ibf Assignment 1
Ibf Assignment 1
Ibf Assignment 1
As we adjust to life with the new coronavirus around us, our behaviours and habits are
quickly changing. What will be the impact of these changes on the organisations and
industries around us?
We broadly see three business categories:
• The winners: sectors that will benefit;
• The losers: sectors that will suffer;
• The inbetweeners: sectors that could go either way depending on how they respond.
The third category is the most interesting, as actions they take now will move them into one
of the first two categories. Let’s look at each in turn.
The winners
These sectors have found themselves serendipitously on the right side of history. By applying
a basic level of competence, they should thrive. The natural strategy for these companies is to
aggressively invest in opportunities and growth.
Ecommerce marketplaces
People are moving online to do their shopping. Already, Amazon is adding 100,000 new jobs
to manage the extra demand. Some other marketplaces are struggling to add capacity. For
example, online grocer Ocado has suspended new orders until it can clear its backlog of
deliveries. Some marketplaces are turning to technology for help. Chinese ecommerce giant
JD.com is using unmanned vehicles to deliver food and medical supplies in Wuhan.
Pharmaceuticals
Pharmaceutical companies are inevitably playing a large role in the crisis. Gilead, which
owns the rights to treatment drug Remdesivir; Moderna, actively working on a vaccine;
Roche, a major supplier of testing kits; and Fujifilm, with existing treatment drug Avigan, are
all poised to benefit.
Logistics/delivery
As people around the world are blocked from leaving their homes, products and services will
need to be delivered. Cainiao, Alibaba Group’s logistics arm, launched the Green Channel
initiative on January 25 in response to the increased demand for protective clothing and
medical supplies, especially for front-line medical staff in Hubei province. In just nine days,
Cainiao received more than 7,000 calls and shipped over 5 million medical products to
Wuhan and neighbouring cities.
Meanwhile, UK food delivery app Deliveroo has launched a “no contact drop off service”.
This provides restaurants with additional packaging and seals for orders to be left on
customers’ doorsteps.
Video conferencing
Videoconferencing start-up Zoom has benefited massively. The company’s sales and share
price are already up over 50% in 2020. Webex from Cisco and Skype and teams from
Microsoft are also seeing major upticks in sales. Most are offering special deals for their
conferencing services during the outbreak.
The losers
For the losers, their managements will need a Herculean effort to pull them through the crisis.
Even if they succeed, many will be seriously damaged. The natural strategy in these sectors
will be to cut costs, de-risk operations and be ready to return when conditions improve.
Tourism
The US Travel Association is projecting that close to 5 million travel-related American jobs
will be lost. This is more than 25% of the 15.8 million Americans who work in the sector.
The situation is equally dire elsewhere. For example, all ski resorts in Italy, France, Austria
and Switzerland are effectively closed for the season.
Investment banking
Hundreds of London and New York investment bankers are set to lose their jobs amid a
slump in deal-making. Shares of leading US banks JPMorgan Chase, Bank of
America and Citigroup are all down more than 30% from January highs.
Financial news spoke to senior London investment bankers who predicted a drop in fees of
up to 50% in the first six months of 2020. That would mean around USD 10.7 Billion in lost
revenues across equity deals – the worst first half of a year since 2009.
Traditional retail
With people confined to their homes, there isn’t much point keeping traditional retail stores
open. The largest US mall owner, Simon Property Group, announced on March 18 that it
would close all its malls across the country. Similar decisions have been made across Europe
and Asia. Apart from grocers and pharmacies, it will take a long time for traditional retail to
recover.
The inbetweeners
These sectors will probably struggle if they continue as is. Many companies will fail, though
a few will adapt their business models to take advantage of new and emerging opportunities.
In some cases, this will build a solid foundation for continued success.
Banking
Most banks will lose money as individuals and businesses struggle to pay back loans. If the
world economy enters a recession, which seems very likely, the market for financial products
will also fall.
Banks can, however, generate goodwill with businesses that need assistance, and create
relationships with new customers. Several UK incumbents, including Barclays, Santander
and RBS, are already offering emergency loans and overdrafts to at-risk business customers.
Many consumers will need temporary solutions, which could yield a spike in demand for
small and medium-sized loans.
Healthcare
Some players in this sector emerge with new ideas that could improve healthcare. Others will
be pushed past breaking point and will never return.
Chinese digital firm Baidu is among those that has been quick to innovative. It launched a
Fight Pneumonia app to help the public get accurate and useful information about the
epidemic in real time. It is also offering its online medical advice platform free to users
seeking COVID-19 consultations. This has seen over 100,000 doctors across China
responding to tens of millions of inquiries.
Baidu has also released an intelligent healthcare unit that responds to common questions
through a conversational chatbot. This so-called “call bot” makes automated phone calls to
ask people about their recent travels, health condition and contacts.
Manufacturing
Many manufacturers will struggle as the goods they produce are no longer in demand, but
more agile operators will shift to making different products. For example, Chinese car
manufacturer BYD has opened up production lines for surgical masks and hand sanitisers. It
was one of 2,500 Chinese companies to respond to a call from President Xi Jinping for a
“people’s war” against the virus. GM, Ford and Tesla are talking about producing ventilators.
LVMH, the French luxury goods company behind Louis Vuitton, Christian Dior and
Givenchy, is also shifting to produce hand sanitisers, and aims to make 12 tonnes within the
first week of production. LVMH is giving the product to French authorities to distribute at
hospitals at no charge.
Education
Most schools, universities and private education providers have closed their doors, but not
necessarily their operations. As more and more people are confined to their homes, there is a
golden opportunity for education institutions to expand the scale and scope of their operations
online.
In China, Kuaishou, a social video platform valued at US$28 billion (£23.5 billion),
has promoted online schooling to compensate for school and university closures. The
company and other video platforms have partnered with the ministry of education to open a
national online cloud classroom to serve students.
Reference:
• Wade Micheal, 2020, Coronavirus: your guide to winners and losers in
the business world.
• 2020, Global Trade And Impact Of The Corona Virus Epidemic.
• 2020, United Nation Conference On Trade Development.
• Abay Kibrom, 2020, Winners And Losers From Covid 19.