2020 is definitely not our “just another year”. Early of this year seems promising with a lot of positive indicator in terms of economic trend and national stability. But the situation suddenly become a nightmare when Covid-19 spread worldwide and considered as global pandemic. We all know what’s the story after that. In brief summary, the border closed, we need to stay at home and minimize contact with other people, and everyday we saw one of our friends / family taken to the hospital.
This kind of situation definitely affect the economic situation, from the fortune 500 business until the small stall in the neighborhood market. Q2 and Q3 of 2020 become hard time for most of business, its like the great gear of world economic suddenly being jammed. Some business already closed and some of it still try to struggle by doing cost leadership strategy and shift the business.
Approaching the end of this year, there is already a glim of light at the end of the tunnel. The vaccine development start to progressing into the final stage and several countries have already successfully reduce the virus spread. But the preventive measure still applied to ensure there is no future spread. This kind of situation normally labelled as “New Normal Era”.
I personally think that New Normal Era situation give more challenge to the business compared to total lockdown. It’s because now the business owner have to pick risky choice, whether they have to wait until the situation get more stable, or reactivate the business with a lot of uncertainty. There are several challenge the business need to face:
1. The operation cost can’t cope with the revenue. Some of business has quite huge default operation cost due to technical or regulation requirement, such as Aviation business. They need a set number of customer to ensure the breakeven point to cover the operation cost.
2. Huge shifting cost. Not all business can swiftly shift towards other market with different commodities. Business with heavy investment with niche commodities will do a leap of faith when they choose to shift their business. Pouring fresh investment toward uncertain market with the implementation speed that need to be faster than normal timeline is definitely not something that will put on as first choice.
3. Health protocol limitation. Even some government already let the business open, they still put strict health criteria, it definitely reduce the amount of market the business can grab. It definitely affect into the business with no.1 type, which hard to make optimum revenue. I saw some restaurant need to make the people queuing even the are plenty seat left, mostly due to physicals distancing protocol. Airport and Airline also have to struggle maintain the safety criteria based on the regulation.
4. Regulation uncertainty and differentiation. Some government don’t set up proper guideline about the covid protocol and tend to suddenly change the regulation. This condition get worse when different body of the government do not align their strategy, which the consequence make confusion on the field. This situation make the company hard to plan their cost leadership strategy because every decision is just for very short term decision based on the very current situation.
What kind of things can help for this situation?
I think the very first things to do is the government have to be more properly set up their regulation. Health is the number one priority, but business also need to be saved because at the end of the day the nation is funded by business activities. The clarity of regulation and synergy become the key, the market can adapt, but the rule need to be properly defined to ensure there is no ambiguity between different body government and easy to implement. It will be even better if each nation start to talk to each other to standardize their regulation. This kind of synergy will be very important to ensure faster recovery for international business. Because at the end of the day, there is no single nation who can live alone.
The second one is direct cash funding by the government towards the below margin people. It really essential to ensure to clockwork of the business still ticking in the lowest part of market, because if the government supply food and stuffs, it will just affect big distributor who can supply a huge amount of items. Let the market do the shopping by itself so the spread of money can be evenly distributed.
The third one is maintain liquidity, sometimes those simple word can translated into harsh decision such as reducing workforce / reducing salary, close some unproductive branch, and also postponed any great investment that can’t give direct revenue. But this kind of decision need to made to save the business. The alternative way is to find loan or paid the employee by equity. The flexibility of bank / investor to help the business will be very helpful to ensure the sustainability of the business. Collaboration and understanding between business owner, workforce, and third party partner is really essential to ensure for the survival. Any political maneuver, personal interest, or any impossible challenge need to stopped for now. All elements need to become reasonable for any situation and decision.
I know its easy to speak but its even harder to do it concretely, but hopefully it can be my personal reminder that health is important, but the gear of economic can’t be stopped either. The balance between those two need clear considerations. I think its one of the rare moment when everyone have to set back, collaborate, and move aside personal interest towards greater goal, which is the removal of the virus and the survival of the economy.