Topic: Impact of COVID-19 on MNCs

Submitted to

Course Teacher: Dr Farah Fatema

Course Name: Management Of Multinational Companies
Course Code: EIB 514/545
Department of International Business

Submitted by

Name: Gazi Md Abu Saleh

ID No.: 801826056
Program: MBA (Evening)
Department of International Business
Faculty of Business Studies
University of Dhaka.

Submission Date: 08/08/2020

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 What impact is COVID-19 having on MNCs?

1. From cultural perspective

A) Business strategy

Today’s CEOs are faced with overwhelming, competing challenges and uncharted waters as they
continue to navigate the impacts of the COVID-19 pandemic. Many organizations are already
taking “no regret” actions to emerge from the pandemic stronger. These leaders are facing the
crisis with a spirit of reinvention—accelerating digital transformation, establishing variable cost
structures, and implementing agile operations. But in recent weeks, the landscape has changed,
with the pandemic continuing to peak in some markets and returning in others. Amidst this
uncertainty, the steps for reopening and reinvention remain unchanged, but companies must now
consider how the pandemic’s progress, strength or recurrence in different geographies is
impacting their recovery strategies. Companies must outmaneuver uncertainty by course
correcting, again and again as circumstances change. This requires them to reassess assumptions,
re-evaluate scenarios and strengthen their ability to sense and respond.

B) Impact on customers

The corona virus outbreak has forced companies to reevaluate how contact centers are leveraged,
how employees deliver relevant customer experiences, where they work, and how digital
channels can be used to support business continuity through the crisis and beyond. The global
COVID-19 pandemic has forever changed our experiences―as customers, employees, citizens,
humans― and our attitudes and behaviors are changing as a result. For example. Once the
immediate threat of the virus has passed, companies will need to consider the impact of these
changes on the way we design, communicate, build and run the experiences that people need and
want. With these emerging new behaviors, organizations have an opportunity to accelerate the
pivot to digital commerce, by expanding existing offerings and creating new lines of service, like
the retailers rallying to provide “contactless” delivery and curb-side pick-up services for
consumers. This acceleration will force organizations to reimaging their digital strategies to
capture new marketplace opportunities and digital customer segments.

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C) Impact on workforce

Organizations globally are experiencing unprecedented workforce disruption. Virtually all

companies are still determining how we will work in the short- and long-term, as workforces and
communities try to function and perform, while struggling to cope with what is happening in
their daily lives. CHROs across industries are rising to the challenge, helping people and
organizations navigate massive workforce shifts, such as the urgent need to shift to a remote
workforce to protect and empower employees, serve customers and to establish business
continuity. For example, the now critical need for virtual care messaging and visits in healthcare.
CHROs’ expertise in developing agile workforce strategies is critical to keeping the global
economy viable and helping people and their families survive financially now and in the future.
Opportunities are emerging as companies and industries work together to keep people working.

D) Impact on operations

With the COVID-19 crisis, fundamental changes in consumer behavior, supply chains, and
routes to market are knocking companies off balance. Responding to the pandemic has
underscored the need for leaders to accelerate the adoption of agile ways of working and value
chain transformation to help outmaneuver uncertainty. Becoming an Intelligent Enterprise means
shifting from top-down decision-making, empowering teams guided by purpose, driven by data,
powered by technology and enabled by cloud for faster speed to market. It calls for razing rigid
structures and creating a porous organization with modules that plug and play. The Intelligent
Enterprise is capable of dynamic self-management and continual adaptation. It is built for agility,
resiliency and growth.

E) Impact on technology

Even before COVID-19, many organizations faced considerable IT challenges. Now, COVID-19
is pushing companies to rapidly operate in new ways and IT is being tested as never before. As
businesses juggle a range of new systems priorities and challenges― business continuity risks,
sudden changes in volume, real-time decision-making, workforce productivity, security

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risks―leaders must act quickly to address immediate systems resilience issues and lay a
foundation for the future. For example, are recognizing resilience as a key success factor.Once
we reach the other side of this pandemic, it will be important to establish long-term strategies for
greater resilience and to apply lessons learned from the experience to create a systems and talent
roadmap that better prepares your company for future disruptions.

F) Impact on industries

Even before COVID-19, many organizations faced considerable IT challenges. Now, COVID-19
is pushing companies to rapidly operate in new ways and IT is being tested as never before. As
businesses juggle a range of new systems priorities and challenges― business continuity risks,
sudden changes in volume, real-time decision-making, workforce productivity, security
risks―leaders must act quickly to address immediate systems resilience issues and lay a
foundation for the future. For example, are recognizing resilience as a key success factor. Once
we reach the other side of this pandemic, it will be important to establish long-term strategies for
greater resilience and to apply lessons learned from the experience to create a systems and talent
roadmap that better prepares your company for future disruptions.

2. From political perspectives

A) The struggle for a global response: The initial global response to the corona virus outbreak
has been criticized as piecemeal and contradictory: some countries in the West saw it as ‘an
Asian problem’; the EU’s inconsistent national policies struggled to deliver a coordinated
response; Trump called it a ‘hoax’ aimed at discrediting his leadership, while contradicting
public health experts on Twitter; and, in Brazil, President Bolsonaro defied health agencies to
attend packed public rallies. Travel restrictions, in many cases, blindsided countries. For
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example, the US ban on visitors who had been into the Schengen area came without warning,
impacting airlines on both sides of the Atlantic.

B) US – the politics of healthcare

Healthcare challenges - already top-of-mind for voters - will play heavily into the ongoing US
election campaign. Healthcare policy is fast becoming the central theme of the race.
Republican’s attempts to dismantle the ‘Obamacare’ or Affordable Care Act (which has been
weakened but is not dead) are likely to be a key campaign theme for the Democratic nominee.
While the US’ diagnostic capabilities, medical R&D, and ability to treat medically complex
cases are among the most sophisticated in the world, the system at large – balkanized and
without universal coverage – is ill-equipped to deal with an epidemic. The US has half the
number of doctors per patient compared with Germany and lags substantially behind many
OECD countries in its ratio of beds to 1,000 patients.

C) Euro Area fractures and a possible Brexit impact

Europe’s ability to stage a unified response to the crisis has also faced initial setbacks amid
disparate (or even contradictory) national responses; coordination issues between France and
Germany (on the border closing, for example); and chaos at borders between countries that took
unilateral decisions to close them. In addition, Italian bond yields saw their steepest rise since the
global financial crisis after ECB President Laggard said it was not the ECB’s job to close spreads
- a comment she subsequently apologized for. Only on 17 March did European countries agree to
the 30-day closure of EU and Schengen external borders. In the UK, meanwhile, the initial
public health response diverged sharply from that of most European countries. The government
initially saw no need to impose restrictions on movement or activities, instead allowing the virus
to spread based on the scientific concept of ‘herd immunity'. This stance was reversed when
models showed that the statistical occurrence of cases requiring ICU treatment would quickly
overwhelm the National Health Service.

D) Govt. responses between local versus national

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In the US, the virus reignited the debate on federal versus local government. During the corona
virus outbreak, sub-national governments were the first movers in dealing with the crisis; state
and city governments moved faster than the federal government in declaring states of emergency
and restrictions on movement. The Trump administration has recently attempted to take the lead
on the US national policy response to the corona virus outbreak, in cooperation with Congress.
But local authorities (at the governor, state and city level) have continued to disagree with the
White House on which measures to adopt. The crisis could exacerbate the longstanding divide on
this issue, with Democrats tending to be more supportive than Republicans of a stronger role for
the federal government. This stands in stark contrast to most other countries – including those
with relatively high levels of decentralization, such as Italy or Germany – where major public
crises tend to trigger a strong top-down approach, with a centralized decision-making process
and policy direction.

E) Information, fake news, and politics

While a public health crisis would, by definition, appear apolitical and a strict science/sanitary
challenge, public perceptions of the corona virus have proved very different depending on their
political affiliations and the echo chamber they live in. Leadership, trust, science-based language,
transparency and resistance to politicizing data are all key elements of success but have been
lacking in this crisis, in many geographies. Polls in the US have revealed that deep political and
cultural divide in the understanding of the crisis. In the current polarized climate, two sides of the
country appear to be living in different “realities”. An early March poll (NBC News/WSJ,)
showed 80 per cent of Democrats thought the worst of the corona virus outbreak was yet to
come, versus 40 per cent of Republicans. Similarly, 56 per cent of Democrats believed their day-
to-day lives would change in a major way in the future because of the crisis, while only 26 per
cent of Republicans thought so. This clearly shows the impact of political affiliations on
perceptions of the health crisis. These divergent perceptions have been shaped partly by political
signaling from leaders of the two parties, but also by different sources of information. Trump, for
instance, repeatedly downplayed the risks, comparing it to the seasonal flu and calling it a hoax.
This view was echoed on conservative news networks and websites.

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3. From unemployment situation

More than one in six young people have stopped working since the onset of the corona virus
pandemic while those who remain employed have seen their working hours cut by 23 percent,
according to the latest International Labor Organization (ILO) data. The COVID-19 economic
crisis is hitting young people harder and faster than any other group. Young people have to face
many hard situations including disruption to education and training, employment and income
losses, and greater difficulties in finding a job. The ILO also uses the term "lockdown
generation" to describe young people facing multiple shocks from the COVID-19 crisis,
including increased vulnerability to anxiety or depression. From a regional perspective, the
Americas' labor market suffers the most. Recently, a New York Times article was titled “7.7
million young people are unemployed." It also says "nearly 7.7 million American workers
younger than 30 are now unemployed and three million dropped out of the labor force in the past
month." One in three young workers are now unemployed, the highest rate since the U.S. started
tracking unemployment by age in 1948.Among these young people, nearly 40 percent worked in
retail and food service industries, where younger workers are typically the first let go and often
the last rehired. The situation is even worse for people of color. An effective way to solve this
problem is rigorous testing and tracing of corona virus infections. In countries with strong testing
and tracing, the average fall in working hours has been shorter when compared with countries
that don't take those measures. Testing and tracing can promote public confidence, encourages
consumption, supports employment, and helps minimize operational disruption at the workplace.
Besides this, the economic downturn is likely to hit young women the hardest. A former ILO
report shows that 41 percent of women are employed in sectors at high risk of job losses,
compared with 35 percent of men. Informal female workers are under greater threat. Society
should be aware of how COVID-19 is exacerbating challenges women habitually face.
Promoting gender equality rights can play a key role in returning to normal. In 2019, the youth
unemployment rate was 13.6 percent, a figure already higher than in any other group. Almost
267 million young people worldwide are not employed, studying, or undergoing training. Those
who were employed are also more like to take informal jobs such as low paid occupations, part-
time jobs, or as migrant workers. The COVID-19 pandemic is putting unprecedented challenges
on its way. All governments should take effective measures to help this group. 

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4. Financial situation

The COVID-19 pandemic has emerged as a new factor that will have lasting policy
consequences over the regulation of international trade and foreign direct investment (FDI)
undertaken by multinational enterprises (MNEs). The World Health Organization describes
COVID-19 as an infectious disease caused by the most recently discovered corona virus,
unknown before the outbreak began in Wuhan, China, in December 2019. COVID-19 is now a
pandemic affecting many countries globally. This has had some immediate consequences on FDI
flows and on state investment and trade policies. FDI flows are being adversely affected.
According to UNCTAD, “pandemic mitigation efforts and lockdowns around the world will
have devastating effects on all economies, independent of their links to global supply networks.
The demand shock will thus be the biggest factor pushing down investment.”  UNCTAD predicts
the pandemic may cause a drastic drop in global FDI flows of up to -30 to -40% during 2020-
2021. Equally, MNE earnings have been projected to slump. UNCTAD estimates that, “[o]n
average, the top 5000 MNEs, which account for a significant share of global FDI, have now seen
downward revisions of 2020 earnings estimates of 30% due to Covid-19, and the trend is likely
to continue”. The pandemic has also affected FDI and trade policies. Notably, at least 24
countries imposed restrictions on export of essential medical supplies, such as face masks,
between January and March 2020 and others have followed since and, additionally, many
countries retain high import tariffs on medicines and other medical supplies. In relation to FDI,
governments have introduced a range of measures designed to encourage domestic and foreign
investors to increase output of essential medical equipment including the easing of administrative
burdens and increasing incentives and fiscal benefits, while also using restrictive measures to
avoid adverse public health impacts through tougher inward screening. Furthermore, states have
offered public money to bail out companies that have suffered catastrophic losses due to
interrupted operations, notably in the airline business. Moreover, intellectual property (IP)
protections have been eased to allow for, in the words of UNCTAD, “faster utilization of IP-
protected technologies to speed up effective R&D and to facilitate mass production of needed
treatments, diagnostics and vaccines.” Some states have issued laws to facilitate the grant of non-
voluntary licenses to make use of existing technologies in developing responses to the virus.
These policies have significant implications. In relation to trade restrictions, while these may be

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justified under the national security and public health exemptions under the WTO GATT
Agreement, their wider implications are to restrict the free flow of essential medical supplies to
the detriment of populations affected by the virus, especially in poorer states that lack the
productive infrastructure to make their own supplies. Greater international co-operation in this
area is needed and, as in the case of the HIV/AIDs epidemic, the WTO and other international
fore should seek agreement on trade liberalization for medicines and essential health supplies. As
regards FDI policies, these may have adverse impacts on foreign investors who may, in response,
take advantage of investor protection standards in International Investment Agreements (IIAs) to
challenge any consequential losses. In particular, measures that favor domestic over foreign
producers may fall foul of the national treatment standard while measures favoring one foreign
investor over another could elicit a claim under the most-favored-nation standard. Expropriation
claims could arise from the requisitioning of foreign investors’ assets needed to combat the
pandemic or from forced closures of their businesses to restrict the spread of the virus. Breaches
of the fair and equitable treatment standard could arise out of export restrictions while the
general question of what constitutes a fair and reasonable policy in response to the pandemic is
one fraught with uncertainty. Some IIAs contain clauses that protect states against claims,
including general public policy exceptions and national security exceptions. However, their
interpretation by arbitral tribunals in investor-state disputes has resulted in uncertainty over the
extent to which such provisions can act as an effective answer to an investor
claim. Consequently, the risk of investor claims under IIAs remains significant. Some restraint
on the part of investors may be desirable but this cannot be guaranteed, especially if they are
facing economic extinction and an IIA claim may offer the only means of recouping losses.
Should there be a wave of such claims it could be met with great political hostility, further
undermining faith in the system of investor-state dispute settlement. The policy response to the
COVID-19 crisis has wider policy implications, not all of which are as yet clear. The ascendancy
of national policy over international co-operation in response to the crisis is one immediate
impact that bears examination. It highlights the increasing tension posed by the pandemic crisis
and its aftermath for economic globalization. It builds on existing trends towards trade
nationalism and the increased use of national security based FDI screening mechanisms. Some
predict the end of globalization as we know it, especially as the recession that will follow the
crisis is likely to exacerbate trends towards interests. Economic or social equity due to the role

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played by automation which makes production in developed states cheap enough to be
commercially attractive again, but which does little to alleviate unemployment among semi- and
unskilled workers. Equally, it ignores the reasons for establishing GVCs. GVCs offer a cost-
effective system of production that leads to lower costs for producers and consumers alike. In
addition, the location of production facilities in China offers firms a foothold in what is a huge
domestic market. This has been encouraged by the Chinese state and it is unlikely that this
structure can be easily, or cheaply, dismantled.

Finally, abandoning “just-in-time” supply chains may prove impossible in practice due to the
actual costs of duplicating such chains to ensure greater resilience. Should governments insist on
such measures, the cost of doing so is likely to be borne by consumers, who, in a time of global
recession, may find it hard to sustain the resulting demands on their increasingly scarce financial
resources? It is a hard policy choice and one that many firms will actively resist for fear of
inefficiency in production leading to possible financial ruin.

5) New business opportunities due to COVID-19

A) Masks

The demand for masks skyrocketed after medical communities around the world said they were
an important preventive measure to mitigate the spread of the virus.  The spike in demand for
masks led small-scale entrepreneurs to set up or pivot to manufacturing masks by investing very
little money ranging within Rs 20,000-Rs 30,0.
B) Surgical gowns

One of the main products included in PPE kits, surgical gowns saw a spike in demand during the
pandemic. Many businesses set up production units to manufacture surgical gowns, especially
for the healthcare community. There are many garment enterprises that tweaked their production
lines to manufacture surgical gowns in an effort to meet domestic as well as global demands.

C) Disposable gloves

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For many people, including doctors and other healthcare practitioners, wearing medical gloves
has become essential to avoid coming in contact with the highly-contagious corona virus. Gloves
have also been playing an important role in preventing infection via contact with surfaces. The
basic raw materials required to set up a manufacturing facility for disposable gloves include -
mould, latex, chlorine, among others, and a capital under Rs 50,000.

D) Touch less dispensers

Touch less dispensers isn’t new to the market, but they were mostly found at high-end places.
To prevent multiple people from touching the same surfaces, touch less dispensers are being
employed widely. Several entrepreneurs have pivoted to explore this business opportunity, and
many small-scale companies have either set up a proprietary firm or partnered with each other to
explore the touch less dispenser space. Pan pat-based Shree Shakhty Enterprise was also
compelled to innovate in order to survive the crisis. The company started building products that
could come in handy in the present COVID-19 situation. From sensor-based sanitizer dispensers
to hands-free hand wash systems and automatic foot sanitizers, Shree Shakhty ventured into
uncharted territory. 
E) Ayurvedic snacks

Best known for advocating the use of naturally healing and immunity-boosting herbs, Ayurveda
is an Indian medicinal legacy that has shown clinical promise. Indian entrepreneurs have been
able to tap this ancient practice and give it a somewhat modern twist by coming up with herbal
teas, ayurvedic snacks, juice shots infused with herbs, among others. The Ayurvedic snacks
business can be started with an investment under Rs 50,000.

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