The Effect of the COVID-19 Pandemic on Businesses
The COVID-19 pandemic affected all people on the planet, disrupting their lives, putting at risk their health, and leaving many unemployed. Businesses worldwide were also hit by the pandemic, especially those which relied on international partnerships since, in 2020, global trade and investment activity both experienced considerable falls (Ranald, 2020). Nevertheless, even those companies which focused on their domestic markets were harmed by the lockdowns which were introduced by governments and states around the world. Yet, it is essential to note that there were also instances when businesses greatly benefited from the situation which ensued in the wake of lockdowns. Thus, it becomes interesting to trace exactly in which ways the pandemic impacted various forms of business and to determine how companies had to adjust their financial goals during this period.
As mentioned earlier, global trade experienced a significant downturn during the pandemic, and many companies simply lost substantial portions of their revenues and had to be on the edge of bankruptcy. The problem of lockdowns and closed borders of countries led to a situation when airline companies no longer had passengers and were forced to stop operating in certain destinations. According to research, due to pandemic-related restrictions, airlines failed to generate nearly four hundred billion dollars in passenger revenue (Kumar, 2021). As a result, numerous companies had to focus on avoiding bankruptcy, making it their primary financial goal for the next months.
Larger operators could withstand a high cash burn rate and could receive additional revenues from freight operations. Yet, smaller carriers did not have enough resources and were critically harmed by the onset of the pandemic. For instance, Compass Airlines, a U.S. regional carrier, had to cease its operations in April of 2020 due to American Airlines, the parent company, cur its domestic capacity by eighty percent (Slotnick, 2020). Thus, the airline industry was among the harder-hit ones during the COVID-19 pandemic and lost many players because of the new circumstances.
There were numerous other spheres which experienced a considerable drop in the stream of customers yet still managed to maintain decent performance by significantly cutting costs. One of such industries was the auto one, which did not see any noteworthy bankruptcies but was particularly concerned about reducing expenses. Multiple car manufacturers reported fewer sales than in the previous years, for instance, General Motors announced an eleven percent decrease in the number of sold vehicles in 2020 (Boudette, 2021). The companies had to compensate such large sums or at least find viable ways to reduce them.
Therefore, the majority of the industry players set goals to minimize their costs during the pandemic to avoid more serious problems. General Motors also had to take out a sixteen-billion-dollar loan to add liquidity (Lucas, 2020). Based on the fact that the loan was interest-only, it meant that the company planned to repay the principal in the near future (“Discounted,” 2013). More than ninety percent of the German companies working in the automotive industry had to lay off workers and use a scheme whereby these employees were paid by the government (Hofstätter et al., 2020). Additionally, car manufacturers utilized zero-based budgeting and, taking into consideration lockdowns, had to relocate their business to digital channels, which also helped them decrease their expenses. As the aforementioned information suggests, the automotive industry did not experience a downturn comparable in scope to that of the airline industry, which ultimately helped it survive the pandemic by slightly cutting costs.
The pandemic and the restrictions also delivered a lot of value to certain industries and businesses and opened new opportunities for them. Certain companies managed to utilize the circumstances of lockdowns to their advantage, and the representatives of the telecommuting industry were the most successful ones. During the pandemic, thousands of businesses had to embrace remote working to protect the health of their employees and ensure faster virus containment. Thus, these companies had to use various online platforms to maintain communication among all team members and to continue functioning as usual.
Zoom is the enterprise which was particularly successful in using the pandemic to its advantage and established beating the competition as its main financial goal. Since the beginning of the pandemic, Zoom gained the largest market share among all web conferencing platforms of more than forty percent, with a market capitalization of forty billion dollars (“Top,” 2020). Thus, Zoom managed to implement an appropriate strategy and eventually was able to attain its financial goal. Nevertheless, Zoom may considerably lose its capitalization after the end of the pandemic. Therefore, investing in the company at this point may lead to a future value, the amount one’s investment will be worth in a certain period of time, which will be negative (“Introduction,” 5). In other words, companies which grew during the pandemic may lose all of their value in several years from now.
Other companies which benefited from the pandemic not only retained their leadership positions in their respective industry but also managed to maximize their sales. Lockdowns forced people to spend more time at home, disrupting their usual work and leisure activities. Subsequently, hundreds of thousands of individuals decided to buy computers for work and entertainment. As a result, Nvidia, the leading producer of graphics cards for personal computers, experienced the highest demand for its products in history. In the first quarter of 2021, the company nearly doubled its sales compared to the previous year and attained its record revenue of more than five billion dollars (“NVIDIA,” 2021). Thus, the pandemic and the lockdowns ultimately allowed Nvidia to reach its goal of maximizing profits and sales, demonstrating impressive growth in one year.
The COVID-19 pandemic will forever remain in history as one of the most disruptive events which affected every nation on the planet and harmed thousands of businesses. For example, the airline industry saw a major decrease in the number of passengers and had to close numerous destinations due to travel restrictions imposed by governments. Other industries, such as the automotive one, were more resilient but still lost large portions of their revenues and had to cut their costs to survive. Despite the fact that the majority of companies experienced considerable losses or general issues related to the pandemic, some enterprises managed to attain success. For instance, the demand for telecommuting services grew substantially since thousands of companies transitioned to remote work and required infrastructure to establish communication of employees, which led to a growth of platforms such as Zoom. Nvidia is another enterprise which benefited from the pandemic since more people required computers and computer parts to work from home and entertain themselves. Thus, the pandemic, despite all of its negative effects, actually helped some businesses to succeed and grow.
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