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The Covid-19 Pandemic and Its Impact to Multinational Companies

Updated on March 20, 2020
Rhylee Suyom profile image

Rhylee Suyom has hopped in three different worlds: the academe, the corporate, and the media. He enjoys being with nature and his family.

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The Covid-19 Pandemic and Its Impact to Multinational Companies

During the time of a pandemic, everybody gets affected despite of the social status. Included among the struck ones would be businesses both small, medium, and large scale. Multinational Companies (MNCs) are not excused in this kind of crisis. With that, it would assert that MNCs both short term and medium-term operations and profitability are affected that they should handle it critically considering all existing models and theories without compromising the safety of its employees.

Large scale business addresses the needs of their customers by opening affiliates in different places. Multinational Companies (MNCs) are companies that operates subsidiaries, affiliates, and branches in foreign countries (Eiteman, Moffett & Stonehill, 2013). These MNCs have workers in various countries that make them affected by crisis like pandemics heavily. The distribution of their employee can serve as both advantage and disadvantage.

The Covid-19 Pandemic

Pandemics heavily impact businesses just like how it affects humans. The Economist (2020) stresses out that trade networks and teeming cities can make societies both more vulnerable and richer, but the impact of Covid-19 is highly different from the pre-existing pathogens since there is less knowledge about the virus. It should be underscored as well that there is no approved cure or vaccine for the virus yet making it more difficult to deal with.

In general, Covid-19 pandemic affects MNCs both short-term and medium-term operations and medium term for various companies. The intensity of impact depends on the kind of product that the MNCs provide. If the hypothetical MNC to be used for this paper would Business Process Outsourcing companies (BPOs), the impact will be less compared to other companies whose services are not necessarily crucial during the time of Covid-19. The hypothetical MNC will be a company that will include IT companies, call center companies, and other outsourcing companies. Despite that, planning should be considered no matter what the nature of the products of the MNCs are. A company may consider crisis planning which will include educating the management and the employees as well on how to handle and how to react to crises and disruptive events just like Covid-19 (Eiteman, Moffett & Stonehill, 2013). This can be helpful with at least handling the problem and controlling its impact.

A way to control the spread of the virus is by lock down. Cities and countries undergo lock down and citizens are advised to stay home. Checkpoints and police guarding the borders are everywhere. This posts a separate challenge for the MNCs are the situation varies from one country to another. This is not to include the problem on the workforce and the possible labor problems if the workers are continued to be asked to report to work. Since the MNC is a BPO, the product will be the services of the employee. Hence, Covid-19 Pandemic will highly affect the operations of these business process outsourcing companies.

Short-term operations and profitability

The pandemic will heavily affect the short-term operations and profitability because there are countries which declared lock down which will deprive the employees from public transportation. Aside from this, for companies that produce non-essential products during the pandemic, chances are their operations will be halted or kept to the skeletal force level. In a survey done in India, it was stated that most of the surveyed employees and professionals about 67% affirmed that jobs in the BPO and MNCs will be the most vulnerable during the spread of the Covid-19 (Economic Times, 2020). Despite having a pandemic, it should also be considered that the client might have different situations and manner of handling since they are situated in a different country. The different countries where the affiliates and branches of the MNCs might face different sets of problems as the control of the virus is contextual and relative to the decisions of the government.

The short-term operations and profitability will be highly affected. Even if work from home is considered, the level productivity will not be as high as that of the normal operations. Other problems with work from home mode should also be considered. With that, companies should revise their goals, targets, and expectations for 2020 as well as addressing the disruptions in the supply chain as well as prioritizing those with high demand (Businesswire, 2020). Pandemics like Covid-19 are way beyond a company’s control no matter how large scale it is. MNCs should consider the possibility of having to stop their operations in case they will not consider work from home mode since for countries with lock down, people are restricted from going outside their home. If they persist to asking their employees to report, the lack of public transportation will be a problem.

Given this situation, continuity plans are highly useful. The management should do an intensive analysis of the situation. Preparedness plans should deal with human factors including hygiene, employee education, staff movement, and evacuation, sick leave policies since these are essential for the employee’s welfare (Staples, 2020). Furthermore, the operational issues should be focused. In the case of the selected MNC, the alternative plans to deliver the necessary service should be considered.

Medium term Operations and Profitability

If the short-term operations and profitability were affected, the medium-term operations and profitability will also be affected. One thing to be considered is that the pandemic’s duration cannot be estimated and way beyond everybody’s control. Even after the pandemic, the companies will feel the aftershocks of the crisis as people had to rely on the government and that the economy is not on the growing side. The recovery is yet to happen by the next year or two. For the profitability, the condition where the affiliate is located may have an impact on the client’s continued avail of the service. If they realize that the way the government handled the pandemic has greatly affected their business in another country, they might consider other companies located in a different country who can offer a better service term.

After these concerns, MNCs should assess their investment strategies by pressure testing them as well as the resilience of their supply chains to shocks (Staples, 2020). This will involve the assessment if the company has been geared to be ready for these kinds of crises. Revision of the plans should be considered as preparedness is the key (Nohria, 2020). MNCs would have to revisit their plans and to revise what should be improved after the pandemic.

Speculation can also be done afterwards. This is the attempt to investigate the future prices through expectations (Eiteman, Moffett & Stonehill, 2013). This will help the administration of the MNCs to change their expectations and speculations based on the effect and impact of the pandemic after Covid-19 has been hurdled. Furthermore, the risks should be anticipated using the Stakeholders Capitalism Model as the financial and operating risk will be evaluated and readied in the future in case another case like a pandemic happens again (Eiteman, Moffett & Stonehill, 2013). This will help in improving not only the short-term and the medium-term goals but also the long-term goals.

Conclusion

Numerous theories can be applied to the MNCs in terms of the impact of Covid-19 to their companies. However, the major points that should be considered is the preparedness, having the contingency and continuity plan, as well as the consideration of risks and improvement of the goals. These are problems that are way beyond any company’s control so the best way to deal with these would be enough preparation.

References

COVID-19 impacts professional life: Jobs at MNCs to be most vulnerable; virus affects hiring. The Economic Times. (2020). Retrieved 20 March 2020, from https://economictimes.indiatimes.com/https://economictimes.indiatimes.com/magazines/panache/covid-19-impacts-professional-life-jobs-at-mncs-to-be-most-vulnerable-virus-affects-hiring/articleshow/74710055.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.

Eiteman, D., Stonehill, A., & Moffett, M. (2013). Multinational Business Finance, Global Edition. Pearson.

Nohria, N. (2020). What Organizations Need to Survive a Pandemic. Harvard Business Review. Retrieved 20 March 2020, from https://hbr.org/2020/01/what-organizations-need-to-survive-a-pandemic.

Staples, J. (2020). Preparing for a Pandemic. Harvard Business Review. Retrieved 20 March 2020, from https://hbr.org/2006/05/preparing-for-a-pandemic.

Throughout history, pandemics have had profound economic effects. The Economist. (2020). Retrieved 20 March 2020, from https://www.economist.com/finance-and-economics/2020/03/12/throughout-history-pandemics-have-had-profound-economic-effects.

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    • Rhylee Suyom profile imageAUTHOR

      Professor S 

      2 months ago from Angeles City, Pampanga, PHILIPPINES

      Thanks for your comment, Michael. You are right about the types of MNCs and how they should 'behave' especially the pandemic we are currently in.

      I live just a couple of clicks away from the famed Clark Air Base here in Angeles City which was transformed into a business hub (usually by medium-scale to MNC-size operations). Just today, there are two confirmed cases of COVID-19 patients from the 'base' and the community lock down is now escalated into a city-wide lock down meaning that no one gets out of their homes. I have read many messages and local reports about these businesses inside the 'base' totally shutting down down due to bankruptcy (something which is quite questionable) considering that some are MNC-scale types. Just an estimate though...out of the may former students, colleagues, and acquaintances who are working directly or indirectly inside the 'base,' ONLY TWO confirmed that they are still working at the moment. Should profits, savings, or resources from offshore affiliates 'still earning' be used to support those in quarantine and lock downs? Yes, I believe so. Should, the government at least offer a form of incentive to those MNCs which will help feed families while everyone is in quarantine? Yes, I believe so too.

    • MisterHubs1982 profile image

      Michael Rivers 

      2 months ago from North Carolina

      I am to assume you are referencing Multi-National Companies that focus on the shipping of products, such as Amazon. In that case, the leadership of Amazon may not show concern over lockdowns or even cause them to be ignored altogether.

      Other than that, what is the important step that businesses should take? Should they shut down temporarily and provide paid leave while keeping their staff on the payroll? I can understand small businesses struggling to do this, but MNCs should have no issue with this UNLESS they are essential for food, medicine, information, delivery systems, and defense.

      Ultimately, this just shows how those at the corporate end see their employees/stakeholders as expendables, as opposed to assets/necessities and -dare I say it- people. But I'm not an owner of such an MNC, so I know nothing.

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