Abstract
The outbreak of the COVID-19 virus is an acute reminder that pandemics, just as the occasionally happening catastrophes, have occurred in the past and will continue happening in the coming future. Since all calamities cause adverse effects to the normal operations of human beings, COVID-19 is no exemption. Currently, the pandemic in question has had grievous social and economic impacts on humans across the world. Every society has been affected, which has led to change in behavior on how businesses and customers operate. Lockdowns and restriction of movement are measures that the World Health Organization is imposing on the world’s citizens to help control the spread of the virus. This research paper addresses key pandemic-related business issues and how the economy of different states has been affected. Effects that the pandemic has caused on various industries such as manufacturing, agriculture, transport, and banking are demonstrated and discussed with examples of companies hit by the impacts stated.
The effect of COVID-19 on companies has left entrepreneurs dealing with a heavy blow on their business activities. This research paper aims at analyzing the issues and challenges business owners are facing during the pandemic. Surveys and research examples have been used in this paper and the issues vary based on how far the entrepreneurs are in their business journey.
High Turnover Rates
Retaining employees is one of the most pressing issues that businesses face, especially in the highly competitive employment market of the 21st century. More jobs than people have been created, resulting in the experience of labor shortages. Employee turnover is expected to increase in the future, forcing business organizations to have a well-structured and robust employee retention plan. COVID-19 pandemic has brought about high turnover rates in many organizations. A survey conducted in Canada shows that 49% of workers are deliberating on quitting their current employment. The employees expressed dissatisfaction with the lack of preparedness some organizations have in making the workplace safe and healthy from the pandemic (Sharma, 2020). Social interactions among workers and clients have also reduced, making employees seek different job opportunities that engage with clients.
Expensive Personal Protective Equipment
World Health Organization has stipulated safety protocols that organizations worldwide must implement to fight this global public health pandemic. Employees must have personal protective equipment in the workplace, and businesses that will refuse to follow the health safety rules will be permanently closed. The cost for the required personal protective equipment in the United States ever since the virus began its rampage has increased up to 1064% (Berklan, 2020). As if that is not enough, the price of PPE for nursing facilities using nitrile gloves is much higher due to a shortage of vinyl gloves. Organizations have incurred massive expenses in purchasing PPEs in a bid to contain the spread of the virus. Isolation gowns, reusable face shields, and 3-ply masks are equipment that has reported the most significant increase in their prices (Berklan, 2020). Many industries have cut their staff due to the unavoidable expenses of implementing the health safety protocols resulting in slow production due to the low labor force.
Change of Customer Behavior
The behavior of consumers during this pandemic will change, and this will, in turn, affect the everyday running of business industries. Many countries are in lockdown where their citizens must stay at home and respect the public health protocols of maintaining social distance. While at home, people have started to develop new skills that allow them to take care of themselves in a much safer way. Different recipes on the internet help people learn how to bake, thereby allowing them not to rely on the bakery shop on preparing cakes for them. Food industries have taken a tremendous hit from the pandemic causing many shops to close down. Gyms have been shut down as people cannot maintain social distance and a lot of people opt to buy gym equipment and keep fit at home (Donthu & Gustafsson, 2020). Most urban areas are infected zones, and people escape to rural areas making business organizations in the urban areas close down.
Consumers have had to shift their spending patterns to cope with the challenging economic times caused by the pandemic. Businesses have been experiencing different shopping habits from customers as they reprioritize what they considered essential. Morgan (2020) looks at the changing consumption trends as a long-term effect on businesses globally. Electronics sales have been on the decline as customers now consider hand sanitizers and toilet paper essential items. Panic buying of the high-demand products took hold, forcing the other businesses that do not provide goods to close down due to the low demand for their products. Cosmetics products took a massive hit as stay-at-home orders and working from home became the new normal. The decline in sun care product sales was noted as no one was available for luxury and entertainment on the beaches due to the lockdown measures.
A massive hit on small businesses is seen when consumers fail to know about a business reopening. Once a company meets the public health safety protocols and purchases the required personal protective equipment for its employees, it can reopen. However, clients find it challenging to keep track of whether the organization they frequently purchased products is reopened or not; many businesses are opening in stages, whereas others remain closed (Partida, 2020). Furthermore, small business owners fear that their companies’ reopening will not be worthwhile as they will not make profits as before, affecting several of the activities such as advertising their products for customer awareness. Some businesses had to relocate as their lease ran out in the middle of the pandemic.
Bankruptcy Among Businesses
The immense financial pressure on various industry sectors brought about by the COVID-19 outbreak can cause bankruptcy. Donthu & Gustafsson report that the hospitality sector is greatly affected as 80% of the hotel rooms are empty, and tourism destinations are expected to make no profits. Containment measures, for example, the stay-at-home action, have witnessed large meetings such as sporting events and expositions postponed until further notice while others called off. They are purchasing safety equipment, which is expensive, and offering insurance cover on workers who contract the virus while on duty is costly for some businesses, leading to bankruptcy. CMX Cinemas filed for chapter 11 bankruptcy and had to close down a chain of movie theaters having dine in options (Pandise, 2021). The bankruptcy is due to the coronavirus’s devastation in the United States economy.
Effects on Transport, Real Estate and Banking Sectors
The transport sector has witnessed disruptions caused by the COVID-19 pandemic affecting trading activities negatively. The stop of international travels containing the virus’s spread results in a significant decline in airline sales with passengers requesting refunds. Rail travel also saw a decrease in bookings as lockdown restriction measures saw many citizens staying at home. Shipping and movement of products globally has decreased gradually as the demand for certain goods stopped (“COVID-19’s impact”, 2020). The freight industry slowed down its activities worldwide because there were no commodities to be transported.
The real estate sector has been significantly affected by the coronavirus pandemic globally. The stay-at-home orders and economic unpredictability brought about a drop in home sales, especially in many metro areas. Sellers are reluctant to register their properties in the market as they will not allow strangers to enter their homes due to fears of contracting the virus. Furthermore, homebuyers have reduced their activities, causing a significant decline in demand for new home transactions and homes’ prices (Gascon & Haas, 2020). Home rents had to go down half the cost to allow residents who had lost their jobs due to the pandemic.
Widespread concern on the daily activities of financial institutions is being felt ever since the coronavirus outbreak started. The financial industry may have plans that are already or being implemented to counter the economic hardship caused by the pandemic. However, the techniques may not fully tackle the unknown variable of COVID-19 that has had several countries experiencing the third wave. The banking market industries have experienced several issues since the start of the pandemic. Employees in these sectors have been uneasy about their health safety measures since they interact with many clients in a day. Clients want the reassurance of strength and stability from the financial institutions during the pandemic, not knowing that the bank finances are under stress from the economic crisis due to the pandemic (“COVID-19 and the banking industry”, n.d). Also, the banks are under pressure from the regulators who want to know that the risk management is effective, boards are engaged, and appropriate capital and liquidity standards are in place.
Worry among Entrepreneurs
Business owners are worried about the pandemic having a second, third, and even fourth wave as nobody knows when the virus would come to an end. Many business owners stay worried, not knowing if they might have to close their organizations again due to a second wave or shut down their operations entirely. Some of the struggles associated with another pandemic wave include a business owner spending a significant amount of capital doing everything necessary and complying with public health protocols for reopening the business (Partida, 2020). Still, due to a second wave, the organization is forced to be closed down again. Bars and restaurant owners found themselves in such situations worldwide where after opening, they were forced to shut down their operations again due to an increase in cases linked to the business types.
The COVID-19 pandemic has been related to bringing confusion in the business sector. Business owners are confused about where they should focus their resources and time to realize profits and allow smooth business operations. For smooth operations to occur, the safety and well-being of clients and employees need to be at the forefront of the business owner’s plans. However, government legislation makes it hard for these businesses to cope, causing owners to have difficulty predicting the business’s next move. Since the pandemic is unprecedented, it is more difficult for companies to operate without knowing what tomorrow will be like (Joy, 2020). Thus, business owners are unable to plan for the future, making the organization’s survival low.
During a crisis such as the one we are currently experiencing, business owners must think quickly and decide to better their operations. However, COVID-19 poses high risks in that entrepreneurs cannot make quick decisions due to constant overthinking. The uncertainty of whether the virus will continue multiplying are be contained it hard for organizations to take action and move forward. Decisions will be delayed, which will only lead to more business problems (Joy, 2020). The pandemic is just too much of a risk for business owners to conduct an analysis paralysis as it requires time and resources that the company cannot afford to offer at a time of crisis. Business owners are at best left with two alternatives, and they are: close down the organization and wait for the virus to be fully contained or continue operation of the business with close to no profits made.
Keeping up with government regulations during this pandemic has proven to be a challenging task for business owners. Almost every day, governments worldwide are forced to come up with new rules that directly affect business owners making the business landscape change rapidly. The fast pace in transforming the business landscape makes it hard for small business organizations to cope, resulting in their demise. The business owners will be required to follow and monitor news from the government daily and ascertain that the information they are receiving is legit. News from local, state, and federal official government sources such as websites are valid information (Joy, 2020). It is expensive and stressful for business owners to keep up with the frequent change in their daily operations.
Reduction in Revenue
A reduction in revenue has been realized during this challenging time of the pandemic. Various reasons have resulted in the drop in revenue recognized in numerous businesses. Bakery shops have been forced to close down as people bake their cakes at home and not head to the shops to purchase a cake. Due to social distancing, many dine-in facilities have cut down their intake customer number, which reduces the business’s revenue. A survey reported by Partida (2020) indicates that about 62% of small businesses have witnessed a general drop in revenue, and only 12% reporting an increase. A dip in revenue has hurt numerous companies as they lack funds that would help in the business’s growth to deliver quality services and produce good products.
Effect on Supply Chain
The novel coronavirus has brought about difficulties in the supply chain, thus hindering many operations globally. China exports most building supplies, and about 30% of the United States of America’s building supply imports come from China (Ghori, 2020). To contain the virus, the halting of importations from China was of need since COVID-19 started in Wuhan, China. Big companies such as Amazon are under pressure due to experience of a severe supply chain downturn. Many deliveries arrived late due to lockdown in some countries, while other people who shopped on Amazon were refunded due to sold-out products. The strain on the global supply chain has made many retailers reduce product variety to make their supply chains more controllable.
Difficulty in Adapting
Some businesses such as the salon and spa industries are not built to withstand a pandemic as they make a living from the company by touching people. While people are walking at home and restriction of movement still under place, nobody will need to make themselves attractive by visiting salons. Furthermore, they cannot work online as that would not contribute in any way to offering their services. These businesses do have an online presence. However, there is no online business provided since it is impossible. The shutdowns worldwide have made many salon owners to lay off their employees and apply for unemployment benefits (Wischhover, 2020). Many salons are unable to continue paying salaries and rent. Therefore, they have been forced to close down and stop operations. Independent contracts and freelance are heavily hit as the unemployment benefits were not eligible to their businesses.
As the pandemic continues wreaking havoc on the economy, farm products have witnessed a rise in prices. Farmers who sell their products are having difficulty acquiring the products due to the spike in prices; this is a crucial issue that the farming business is going through. Consumers of the farm produce are making tough choices about what food to make essential. The price rise is brought about by a shortage of products imported from other countries, but due to the lockdown, the supply has been on a downturn. Farmer’s health is also threatened by the pandemic, with other farmers contracting the virus, making them weak, thereby lowering the labor force in the farms (“COVID-19 on farming”, 2020). Agriculture is the backbone of any country’s economy, so quick handling of agriculture issues is crucial to a country’s economic growth.
Business industries in rural areas where network connections are poor have had a problem receiving government information concerning the pandemic. Governments worldwide release new details on measures to be implemented by businesses to control the spread of the virus. However, companies based in rural areas find it hectic to keep up with the standards due to the poor internet connection. The poor connection has significantly disadvantaged these businesses and resulted in some of them being shut down as they cannot comply with government measures. Some organizations have fallen victim to wrong information gotten from unreliable sources, which has caused them to spend a lot of finances on the faulty equipment as prescribed by the World Health Organization. Personal protective equipment reaches rural-based businesses late, which costs them a lot of money from profits since the business operations are halted until the equipment reaches.
Government orders have made numerous business organizations seek a new way to market their products. Many companies have opted for online marketing as a better option for conducting their operations during this pandemic. Stiff competition has been experienced in the online world, with some organizations collapsing as they are new to the online marketing platform. The pressure new business owners are participating in the online marketing platform is extreme, making them unable to compete. Adapting to the new business environment has proven difficult for many companies, thereby increasing the number of unemployed citizens. Online marketing is also risky as it is prone to cyber theft (“Target data theft”, 2014); for example, in 2013, online shoppers of Target company had their debit and credit card information taken from them due to cyber theft.
In conclusion, COVID-19 has caused more harm than good to the world. Apart from claiming over a million lives, people have lost their jobs, and the economy is on a downturn. Business owners have been hit most, with many companies stopping their operations while others continue operating, recording close to no profits. The pandemic’s impact will likely last longer, but hopefully, businesses will adapt to the situation, and normalcy will return. Innovative techniques on how industries adapt to crises need to be established to counter the wreak witnessed during the awakening of COVID-19.
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