The COVID-19 pandemic has forever altered the way business does business. It has ushered in changes in the world of business that have far-reaching and long-lasting consequences not only for business itself, but for the whole of society.
In many ways, the pandemic has accelerated currently emerging trends in the global economy and in the world of business. Among them, briefly, are the following:
It has put the last nail in the coffin of globalization. Travel bans and restrictions on the flow of people and goods across national boundaries have further isolated countries and regions from one another and have effectively sealed off borders and restricted commerce. The preventive measures adopted by each country to control the spread — and possible recurrence — of the deadly virus and to minimize the economic and social costs associated with it have, by all indications, become permanent features under the new normal. The unrestricted movement of people and goods across the globe that has been the hallmark of the global economy since the end of World War II has become, for all intents and purposes, a thing of the past. This development has serious implications on the scope and volume of global trade, and has sounded the death knell of many flourishing industries, such as the travel and hospitality businesses.
Big Business will thrive. The financial difficulties arising from the pandemic have been especially hard on small businesses, including promising start-ups, many of which have folded up or have been absorbed by their big counterparts. Healthier airlines, such as Qantas and British Airways, are poised to snap up airport slots from their struggling rivals, and may acquire others that are just barely staying aloft. Aiming for global dominance, China and the US are actively encouraging corporations under their aegis to go global by buying out struggling companies the world over. As the tech world splits up into rival Chinese and Western camps, each side will groom its champions for both economic and political reasons.
As big corporations buy up smaller ones, many of those under threat of takeover will look to merge with peers. And as the global economy rebounds from the ongoing Economic Recession, big firms will have better access to capital markets, giving them a decided advantage over their smaller competitors.
Supply chains will be reconfigured, shortened and localized. The global economic recession that is taking place in the aftermath of the pandemic has shrunk markets and disrupted supply chains the world over. A survey conducted recently by The Economist has shown that a good majority of corporate CEOs — 82% to be exact — expect that global supply chains will become less common in the post-COVID-19 era.
In the face of increasing financial difficulties, many small firms that form part of the global supply chains of larger multinational companies have gone out of business, forcing many big manufacturers and distributors to seek alternative sources by offering more attractive terms to those that are still in business, and by courting potential suppliers and distributors that are situated closer to home. The currently raging trade war and other risks of doing business on a global scale have forced many companies that have located in China to bring their production facilities back home, or to relocate elsewhere in Asia, thus significantly shrinking their geographic reach.
New ways of doing business will emerge and new business opportunities will arise.
These include, among others, the following:
• Video conferencing will replace business travel and large face-to-face meetings and conferences.
• Financial technology, more commonly known as Fintech, will go mainstream and will account for a significantly larger share of banking and financial services, taking away business from traditional financial institutions that rely less on software.
• E-commerce will increasingly dominate all types of business transactions, notably in the retail merchandising and food distribution sectors.
• Once considered unthinkable, the world’s biggest tech firms are poised to embrace open data. Making a sharp break from the past, Microsoft, Google, and Facebook have joined forces with other tech companies in a collective initiative to share information to fight the coronavirus pandemic.
In an equally surprising move, Big Pharma appears to have seized the moment when many of its big players decided to join forces in three essential areas to fight back the deadly virus: devising diagnostic tests to identify those who are infected with the virus and those who are not, coming up with therapies that will shorten the course of the disease and lessen its severity, and developing vaccines to stem its further spread.
A STRATEGIC REFOCUSING
By far the most transformative change that is taking place in the corporate world as a result of the pandemic is the shift in the strategic focus of corporate CEOs and business leaders away from the traditional goal of shareholder wealth maximization to the more inclusive and mutually beneficial concern for the economic well-being of ALL other corporate stakeholders — their customers, their workers, their business partners, and the community.
If anything, the COVID-19 pandemic has sent the powerful message to corporate managers the world over that their economic fortunes and those of their other stakeholders are intimately and inextricably intertwined, and that what benefits or adversely affects one will also be felt by all others. The realization that “we’re all in this together” has tended to foster closer ties between business firms and their stakeholders.
Historically, corporations take a step back every time they face a major crisis by cutting down on costs or trying to squeeze every centavo from their customers. These defensive moves often take the form of reduced consumer and employee benefits and more stringent conditions imposed on their business partners, in essence, withholding rather than sharing economic value with their stakeholders.
In the face of the current pandemic, a significant number of business establishments have gone the extra mile in continuing to serve their customers, retaining and catering to the special needs of their workforce, and firming up their relationships with their suppliers and distributors, with all of whom they share a common misfortune, and on whom they depend for their survival.
Today, as the role of business continues to evolve towards stakeholder capitalism, businesses are responding to challenging times with greater compassion for their stakeholders and taking positive steps in addressing their economic interests — not as acts of altruism, but as a means of achieving sustainability and meeting their long-run strategic objectives.
The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.
For previous articles, visit map.org.ph
Dr. Niceto “Nick” S. Poblador is a retired UP Professor, and until recently was Professorial Lecturer at the UP School of Economics.