Impending Implication of COVID-19 on Global Business


McKinsey & Company writes about latest perspectives on the coronavirus outbreak, the twin threats to lives and livelihoods, and how organizations can prepare for the next normal.

Supply-chain and logistical disruptions

The pandemic has left businesses and governments to grapple with a perplexing collection of supply-chain and logistical disruptions. Over a year ago, we knew we were facing upheavals in health, education, and workplace systems.

Ramifications such as the semiconductor shortage, however, were harder to predict. This week, McKinsey examined a variety of unexpected pandemic consequences and looked for ways to address them.

Global semiconductor shortage

The global semiconductor shortage threatens economic recoveries and poses an urgent problem for carmakers, which have already announced production rollbacks—and billions of dollars in expected revenue losses—as a result.

McKinsey experts examined the causes of the shortage, including a drop in consumer demand for vehicles at the onset of the pandemic, which prompted semiconductor suppliers to shift production to other products. Automakers and suppliers should consider significant strategic changes to head off a repeat.

Plight of grocery sector

Grocery is another industry that has been turned upside down by the pandemic, not once but multiple times as consumers respond to the evolving situation.

At Tesco, online sales doubled in the United Kingdom, where the company has a strong online business, and in Central Europe, where growth is coming off a low base, said Matthew Simister, Tesco’s Central Europe CEO, in an interview.

The devastation in India is among the saddest unanticipated turns in the pandemic. After the first wave of the disease faded quickly in 2020, the current disaster took the lives of nearly 28,000 people in one week last month, amid 2.3 million new reported cases.

Some of the health repercussions of the pandemic are indirect, such as the side effect of fewer people seeking treatment for mental and behavioral health problems. McKinsey’s behavioral-health-services interactive tracks how many people are accessing care for problems including substance abuse and serious mental illness.

Key findings

  • Large companies create flows to households in OECD economies differently today compared with 25 years ago. The McKinsey Global Institute mapped the pathways through which a dollar of company revenue reaches households. Comparing two periods, 1994–96 and 2016–18, productivity gains amounted to 25 percent in real terms, though wages grew only 11 percent. Where did the gains from labor productivity go? Predominantly to capital income.
  • Industrial companies can digitally transform with six building blocks, including upskilling and focusing on data management. There’s good reason to try: a McKinsey analysis of 350 industrial companies found that those that made investments in automation, e-commerce, and other areas achieved higher revenues and total returns to shareholders than digital laggards.
  • Refrigeration pioneer Dometic Group has spent the past 100 years innovating into areas including mobile homes, sports and outdoor tools, and home food and beverage equipment. On the Inside the Strategy Room podcast, Peter Kjellberg, chief marketing officer and head of global verticals at Dometic, explains his system to test whether a company will support a brand reinvention: look into the CEO’s eyes, and if he or she does not display genuine enthusiasm, forget it.

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Source: McKinsey & Company


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