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IMPACT OF COVID-19 ON PROFITABILITY OF ICT SMALL AND MEDIUM SCALE ENTERPRISE

IMPACT OF COVID-19 ON PROFITABILITY OF ICT SMALL AND MEDIUM SCALE ENTERPRISE

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IMPACT OF COVID-19 ON PROFITABILITY OF ICT SMALL AND MEDIUM SCALE ENTERPRISE

Abstract

The goal of this study is to look into how Covid-19 affects ICT small and medium-sized businesses. Since the beginning of 2020, Covid-19 has caused changes in the global business climate. The effects on ICT small and medium-sized firms are mostly unknown, hence this study is unique.

The goal of this study is to learn more about how ICT small and medium-sized enterprises are responding to the epidemic. The project will use a qualitative research method to investigate and gain a better knowledge of the ICT experiences that small and medium-sized enterprises face through data gathering.

The literature review has been completed, and the theories are primarily relevant to the digital business environment and value chain operations. The literature review has been summarised into a conceptual framework that depicts the relationships between the theories and Covid-19.

Furthermore, the conceptual framework was applied to analyse the empirical data collected in a multi-case research. The analysis chapter explores the similarities and contrasts between the cases, as well as their connection to theory.

Finally, the conclusion chapter of this study summarises the findings and analysis and includes theoretical implications, recommendations, limits, and suggestions for future research.

Chapter one

INTRODUCTION

1.1 Background of the Study

The coronavirus outbreak, currently known as Covid-19 (shortened for “coronavirus disease of 2019”), began in the Wuhan region of China. The virus spreads extremely quickly amongst people, and in just a few months, tens of thousands of people worldwide have been affected. Furthermore, as the Covid-19 outbreak expands, companies around the world are harmed.

Some of the world’s largest corporations had severe consequences, such as disrupted manufacturing, empty stores, and declining demand for their products (Eavis, 2020).

Some businesses may also struggle because their investors are less willing to lend them money following the epidemic (Eavis, 2020). Airlines, leisure, and hospitality are among the hardest hit sectors. Bars and restaurants are also severely impacted (Fraser, 2020).

This pandemic has become the most serious threat to the global economy and financial markets, with China, North America, and Europe being the hardest hit markets, and the Organisation for Economic Cooperation and Development (OECD) has reduced its 2020 real GDP growth projections for almost all economies (see appendix A) (Nee Lee, 2020).

Furthermore, some countries are implementing various sorts of lockdown to slow the spread of the virus. These include nationwide quarantines, as well as school and workplace closures (Kaplan, Frias, & McFall-Johnsen, 2020).

According to Ben May (2020), the head of global macro research at Oxford Economics, the amount of distribution to economies from containment measures is an important problem in addition to the number of Covid-19 cases.

Widespread lockdowns, such as those in China, the United Kingdom, and Italy, have been targeted as viral hotspots, and if enough precautions are not taken, it may generate even more panic and further undermine the world economy.

The Covid-19 epidemic has raised concerns about its influence on the global economy and markets, resulting in falling stock prices and bond yields (Nee Lee, 2020).

Furthermore, the scenario has caused significant banks and institutions to lower their global economic estimates, and a new OECD research shows that growth forecasts for 2020 have been reduced in almost every economy.

The worldwide economic growth rate was 2.9% earlier this year, but it has now dropped to 2.4% (Nee Lee, 2020). The manufacturing sector, particularly in China, has been hammered hard by the viral spread. A downturn of this magnitude could have a detrimental impact on other nations with strong economic ties to China.

Chinese manufacturers are taking longer than predicted to restore operations, and the further spread of Covid-19 in other nations across the world suggests that global industrial production will remain sluggish for longer than expected (Nee Lee, 2020).

According to a report by the United Nations Conference on Trade and Development (2020), China’s status is critical to the global economy. China is not only a major player in the global economy due to its manufacturing industry and exports of consumer goods, but it is also the primary supplier of intermediate inputs (energy, raw materials, and semi-finished items) to manufacturing enterprises worldwide.

Currently, China accounts for around 20% of global manufacturing trade in intermediate items. Many businesses are concerned that the measures implemented to combat Covid-19, including as limitations on economic activity and movement of persons, are impeding the supply of crucial parts from Chinese producers, harming their output (UNCTAD, 2020).

As the Covid-19 outbreak has the potential to affect any given country’s productivity capacity and exports, European automobile manufacturers may face a critical shortage of components required for their operations, while Japanese companies may struggle to obtain necessary parts for digital cameras, among other things.

Many businesses are currently required to respond on numerous fronts at once, including both worker safety and operational viability, as many are encountering supply chain issues (Alicke et al., 2020).

According to a McKinsey & Company (2020) publication, companies should take some urgent steps in response to Covid-19. Some of these steps include optimising production and distribution capacity, as well as determining accurate final-customer demand estimates. Some businesses may face inventory shortages as a result of travel restrictions and lockdowns, thus it is critical to plan for these potential consequences (McKinsey, 2020).

Since the Covid-19 epidemic, many ICT small and medium-sized businesses have begun to see short-term impacts. For example, Americans are adjusting to e-commerce faster, with online grocery sales more than doubling in the middle of March compared to earlier in the month.

This is due to physical stores closing owing to the virus, forcing individuals to shop online for their requirements (Holman, 2020). According to Adobe Analytics (2020), overall e-commerce has climbed by 25%.

However, as with other external impacts, firms, particularly ICT small and medium-sized businesses, should adapt to changes brought about by external influences by changing their marketing, operations, and business models in order to improve customer satisfaction (Denger, 2020).

For newer and modern businesses, integrity is a key part of corporate operations, as is ensuring that a planned response to external effect is carried out. According to Denger (2020)

some strategies for adapting a business to the current Covid-19 situation include communicating with customers and explaining how the crisis affects one’s business, meeting customer commitments

And ensuring operational continuity, which will be difficult but now more important than ever. Furthermore, as a result of the Covid-19 pandemic, many internet retailers have begun to develop new product offerings and sales techniques; however, this may result in them unknowingly taking on tax liabilities that they have not before encountered (Demery, 2020).

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