Staff report
Across the country, the Coronavirus continues to take its toll. This is true for individuals, communities, and businesses. Especially hard hit are small- and medium-sized businesses who often lack the contingency planning and reserve capacity to weather economic uncertainties, much less biological crises. The difficulties now faced by business were recently documented in a study completed by the Marcum-Hofstra University national survey of 256 CEOs from primarily medium-sized corporations across the business sectors.
The most devastating impact of the virus on US businesses is seen in four key areas. These include: employee health, access to goods and services required for continuous production, market instability, and foreign operations. These are the four pillars of modern business success. Any level of disruption in these factors can lead to the collapse of a medium-sized business. The disruption associated with the Coronavirus is of a magnitude not experienced by the business sector since the Great Depression. Of the CEOs surveyed, 60% indicate that since the outbreak their company’s supply chains have been significantly disrupted, while only 35% of businesses prepared for this significant threat.
More than ever, today’s medium-sized business produce and sell their products abroad. The Coronavirus has had a devastating impact of international business. When queried about their business activity in other countries, the CEOs surveyed indicated that the virus has shut down their subsidiaries and sales in China, Japan, Korea, Italy, Spain and the UK. A large majority of the business studied, this has devastating consequences, especially in the manufacturing and technology sectors. As a result, 40% of the CEOs indicate that they have undertaken emergency efforts to secure supplies and open markets in other countries.
Virtually all CEOs in the study report operating within an integrated supply chain. Often these supply chains are made up of single-source business partners whose production is tailored to the OEM business’s strict requirements. As a result, the supply chain is susceptible to tumbledown phenomena where problems experienced by one of the partners impact all of the partners. CEOs in the survey report that the Coronavirus has only increased this disruptive process.
Quotes from CEOs who took part in the survey reflect the frustrations and difficulties linked to coping with the virus. CEOs comments included: “Not being able to visit suppliers sites,” “Becoming out of touch with clients,” “Infrequent contact with international partners,” and “Deferring hiring for critical positions.” These problems will only grow as the coronavirus pandemic continues.
Overall, the Marcum-Hofstra survey documents a harsh reality. For 60% of medium-sized businesses, the future looks largely positive. They are firms characterized by diversified supply chains, products, and markets. The remaining 40% face a far less certain future, one that will require governmental support, access to capital, and new market development. Losing these firms would change the economic landscape well beyond Corona’s devastation.
The Marcum-Hofstra CEO Survey was conducted during the week of March 16, 2020. 256 C-level executives from middle-market companies across a representative cross-section of business sectors were included in the study. The study is a partnership between Marcum Group and the Zarb School of Business at Hofstra University