As major sectors of the global economy are being disrupted by the coronavirus pandemic, the odds that many countries around the globe will slip into recession are increasingly becoming likely as companies suffer declining revenue.
The impact of the global pandemic has led to layoffs across the globe, with many companies desperately in need of whatever reliefs their country governments have to offer.
“There is an almost guaranteed recession either now or in the near future,” Forbes said adding that companies with “flexible approach to their business model are less likely to collapse in a downturn.”
For a country like Nigeria, for example, many businesses have been disrupted by the impact of the virus outbreak as the lull in the country’s economic activities occasioned by the COVID-19 lockdown in Lagos, Abuja and Ogun State has hit the bottom line of most companies.
In a situation where Nigeria is able to contain the outbreak of coronavirus, the country’s least worst-case scenario, it will be reporting a GDP growth of -3.4 percent in 2020, as projected by McKinsey.
This would be a growth decline of almost six percentage points from the country’s last year’s expansion of 2.5 percent. The international monetary fund (IMF) also projected the same volume of contraction for Africa’s largest economy in 2020.
While acknowledging the fact that COVID-19 outbreak is having a severe impact on Nigeria as high downside risks have heightened, the IMF’s document for Fund’s Request for Purchase Under the Rapid Financing Instrument report for Nigeria which came with the $3.4 billion relief fund to the country advised that Nigeria would require greater domestic policy action and full utilization of the authorities’ toolkit.
“Any continuous increase in domestic infections that would delay economic normalization would lead to a longer disruption in economic activity. Under such a scenario, economic growth would fall even more sharply,” IMF said.
On reinventing business models for continuity amid a possible recession Forbes outlined the following considerations that could impact businesses to survive the heat from the pandemic:
Flee to the base
For businesses to increase the odds of survival, the New Jersey-based company said they should seek to get to the base of the proverbial pyramid by providing goods or services related to basic survival and safety, or by finding ways to support businesses that provide goods or services in these areas.
‘In times of uncertainly, humans tend to ensure that their basic survival and security needs are covered before indulging in discretionary items,” Forbes said adding that businesses that provide these essential products or services tend to operate towards the bottom of the pyramid of human needs.
Any change within a business presents a shock to the operations. The fewer negative shocks that a business has to endure, the more resources could be dedicated to its growth, according to Forbes.
The New Jersey Company is of the opinion that times of disruption are often the best to implement bold changes in an organization.
According to Forbes, most organizations are often aware of improvements that need to be made but these changes are frequently de-prioritized to minimize the impact on operations. “Some then use the opportunity of a major disruption to combine a series of incremental initiatives into a bigger cohesive change effort.”
Adopt commercial strategy
Businesses that endured previous crises often attribute their massive post-crisis success to their ability to hang on longer than their competitors, according to Forbes.
Meanwhile, a recent McKinsey study stated that 30-40percent of customers are trying new products or services because of lack of availability of the products or services that they normally purchase., and 12 percent of these shoppers will not switch back.
“With an eye on cost management, consider adapting the commercial strategy and reallocating spends to keep customers engaged. For businesses operating towards the top of the pyramid, review product offerings and pricing along with promotion tactics in order to remain relevant.”
To withstand the wave from the pandemic, Forbes said that remaining top of mind and reducing customer churn should be a business priority as customer acquisition in any business is one of the most difficult tasks.
“With some preparation and foresight, companies with executable business continuity plans in place are usually better positioned to dedicate the resources required to quickly implement a strategic response to disruption by pivoting or reinventing their business model,” it said.