How Is Covid-19 Affecting Companies?

Mar 8, 2020 By Deepa Gopal
Deepa Gopal's picture

Falling stock pricesThe recent coronavirus epidemic has sent waves of panic across the globe. Not only is this disease impacting people all around the world, but it is also devastating to the global economy.

We live in a world where the cars we drive and the smartphones in our pockets are made up of parts that are manufactured in different countries. 

Fear over the Covid-19 coronavirus has slowed down manufacturing businesses and increasing the costs of assembled products. The stock market has had its biggest loss in recent years as many investors are pulling back their investments. 

Let's look at how the virus is impacting the way the world does business.

Supply Chain: What Is It?

A supply chain is simply defined as the management of a product as it moves from raw materials to finished goods. This involves different organizations, technologies, people, resources and activities. 

For example, Apple's iPhones are designed at the company headquarters in California. The different parts that make up the iPhone are manufactured in the United States as well as in countries such as South Korea, Italy, Germany, Japan, and others. These parts are then shipped to China where the phones are assembled and shipped to markets around the world.  

As you can imagine, the slightest disruption to this chain can affect the production process. Coronavirus has led to the temporary closure of factories in China, Italy, and South Korea. This has created a shortage of parts. Sometimes companies have to resort to buying parts at a higher price from other factories, which increases the cost of the product.

Interestingly, the closure of factories has had an unintended positive impact. The air pollution in China has dropped to the lowest it has been in recent decades, with levels of nitrogen oxide, a pollutant from the burning of fossil fuels, down by 30%!

A Widespread Impact

Air quality over China during shutdownThe impact of the coronavirus isn’t just affecting the manufacturing industry. The airline industry estimates that it will lose $60-$120 billion in revenue due to heavy travel restrictions around the world.

Hotels, restaurants, and food and beverage industries are seeing a decline as people travel and eat out less. Wedding and real estate industries are affected because more people are staying at home to prevent contracting the disease. The closure of factories is also affecting the wages of people who rely on daily labor. 

The economic dilemma that the world faces from Covid-19 brings up an important question - should companies rely on a single country for manufacturing parts or assembling products?

After the epidemic dies down, industries may start taking notes on expanding where their products’ parts are being manufactured in order to prevent shortages like we are seeing now.

Sources: NYTimes, CNN, Vox, NBC, hbr.org, cips.org