COVID-19: Implications for Business, Facts and Insights – McKinsey

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The coronavirus outbreak is first and foremost a human tragedy, affecting hundreds of thousands of people. It is also having a growing impact on the global economy. This article is intended to provide business leaders with a perspective on the evolving situation and implications for their companies. The outbreak is moving quickly, and some of the perspectives in this article may fall rapidly out of date. This article reflects our perspective as of March 1, 2020. We will update it regularly as the outbreak evolves.

What we know about the outbreak

COVID-19 crossed an inflexion point during the week of February 24, 2020. Cases outside China exceeded those within China for the first time, with 54 countries reporting cases as of February 29. The outbreak is most concentrated in four transmission complexes—China (centred in Hubei), East Asia (centred in South Korea and Japan), the Middle East (centred in Iran), and Western Europe (centred in Italy). In total, the most-affected countries represent nearly 40 per cent of the global economy. The daily movements of people and the sheer number of personal connections within these transmission complexes make it unlikely that COVID-19 can be contained. And while the situation in China has stabilized with the implementation of extraordinary public-health measures, new cases are also rising elsewhere, including Latin America (Brazil), the United States (California, Oregon, and Washington), and Africa (Algeria and Nigeria). The US Centers for Disease Control and Prevention has set clear expectations that the United States will experience community transmission, and evidence is emerging that it may be happening already.

While the future is uncertain, it is likely that countries in the four mature transmission complexes will see continued case growth; new complexes may emerge. This could contribute to a perception of “leakage,” as the public comes to believe that the infections aren’t contained. Consumer confidence, especially in those complexes, may erode and could be further weakened by restrictions on travel and limits on mass gatherings. China will most likely recover first, but the global impact will be felt much longer. We expect a slowdown in global growth for 2020. In what follows, we review the two most likely scenarios for economic impact and recovery and provide insights and best practices on how business leaders can navigate this uncertain and fast-changing situation.

Economic impact

In our base-case scenario (Exhibit 1), continued spread within established complexes, as well as community transmission in new complexes, drives a 0.3- to a 0.7-percentage-point reduction in global GDP growth for 2020. China, meanwhile, continues on its path to recovery, achieving a near-complete economic restart by mid-Q2 (in spite of the current challenges of slow permissions and lack of migrant-worker capacity). As other geographies experience continued case growth, it is likely that movement restrictions will be imposed to attempt to stop or slow the progression of the disease. This will almost certainly drive a sharp reduction in demand, which in turn lowers economic growth through Q2 and early Q3. Demand recovery will depend on a slowing of case growth, the most likely cause of which would be “seasonality”—a reduction in transmissions similar to that seen with influenza in the northern hemisphere as the weather warms. Demand may also return if the disease’s fatality ratio proves to be much lower than we are currently seeing.

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Exhibit 1

COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur

Regions that have not yet seen rapid case growth (such as the Americas) are increasingly likely to see more sustained community transmission (for example, expansion of the emergency clusters in the western United States). Greater awareness of COVID-19, plus additional time to prepare, may help these complexes manage case growth. However, complexes with less robust health systems could see the more general transmission. Lower demand could slow growth of the global economy between 1.8 percent and 2.2 percent instead of the 2.5 percent envisioned at the start of the year.

Unsurprisingly, sectors will be affected to different degrees. Some sectors, like aviation, tourism, and hospitality, will see lost demand (once customers choose not to eat at a restaurant, those meals stay uneaten). This demand is largely irrecoverable. Other sectors will see delayed demand. In consumer goods, for example, customers may put off discretionary spending because of worry about the pandemic but will eventually purchase such items later, once the fear subsides and confidence returns. These demand shocks—extended for some time in regions that are unable to contain the virus—can mean significantly lower annual growth. Some sectors, such as aviation, will be more deeply affected.

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In the pessimistic scenario, case numbers grow rapidly in current complexes and new centres of sustained community transmission erupt in North America, South America, and Africa. Our pessimistic scenario assumes that the virus is not highly seasonal and that cases continue to grow throughout 2020. This scenario would see a significant impact on economic growth throughout 2020, resulting in a global recession.

In both the base-case and pessimistic scenarios, in addition to facing consumer-demand headwinds, companies will need to navigate supply-chain challenges. Currently, we see that companies with strong, centralized procurement teams and good relationships with suppliers in China are feeling more confident about their understanding of the risks these suppliers face (including tier-2 and tier-3 suppliers). Others are still grappling with their exposure in China and other transmission complexes. Given the relatively quick economic restart in China, many companies are focused on temporary stabilization measures rather than moving supply chains out of China. COVID-19 is also serving as an accelerant for companies to make strategic, longer-term changes to supply chains—changes that had often already been under consideration.

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To better understand which scenario may prevail, planning teams can consider a set of leading indicators like those in Exhibit 2.

Exhibit 2
COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur

Where business should focus

Seven actions can help businesses of all kinds.

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Protect your employees. The COVID-19 crisis has been emotionally challenging for many people, changing day-to-day life in unprecedented ways. For companies, business, as usual, is not an option. They can start by drawing up and executing a plan to support employees that is consistent with the most conservative guidelines that might apply and has trigger points for policy changes. Some companies are actively benchmarking their efforts against others to determine the right policies and levels of support for their people. Leaders must communicate with employees with the right level of specificity and frequency.

Set up a cross-functional COVID-19 response team. Companies should nominate a direct report of the CEO to lead the effort and should appoint members from every function and discipline to assist. Further, in most cases, team members will need to step out of their day-to-day roles and dedicate most of their time to virus response. A few workstreams will be common for most companies: a) employees’ health, welfare, and ability to perform their roles; b) financial stress-testing and development of a contingency plan; c) supply-chain monitoring, rapid response, and long-term resiliency (see below for more); d) marketing and sales responses to demand shocks; and e) coordination and communication with relevant constituencies. These subteams should define specific goals for the next 48 hours, adjusted continually, as well as weekly goals, all based on the company’s agreed-on planning scenario. The response team should install a simple operating cadence and discipline that focuses on output and decisions, and does not tolerate meetings that achieve neither.

Ensure that liquidity is sufficient to weather the storm. Businesses need to define scenarios tailored to the company’s context. For the critical variables that will affect revenue and cost, they can define input numbers through analytics and expert input. Companies should model their financials (cash flow, P&L, balance sheet) in each scenario and identify triggers that might significantly impair liquidity. For each such trigger, companies should define moves to stabilize the organization in each scenario (optimizing accounts payable and receivable; cost reduction; divestments and M&A).

Stabilize the supply chain. Companies need to define the extent and likely duration of their supply-chain exposure to areas that are experiencing community transmission, including tier-1, -2, and -3 suppliers, and inventory levels. Most companies are primarily focused on immediate stabilization, given that most Chinese plants are currently in restart mode. They also need to consider rationing critical parts, prebooking rail/air-freight capacity, using after-sales stock as a bridge until production restarts, gaining higher priority from their suppliers, and, of course, supporting supplier restarts. Companies should start planning how to manage supply for products that may, as supply comes back on line, see unusual spikes in demand due to hoarding. In some cases, medium or longer-term stabilization may be warranted, which calls for updates to demand planning, further network optimization, and searching for and accelerating qualification of new suppliers. Some of this may be advisable anyway, absent the current crisis, to ensure resilience in their supply chain—an ongoing challenge that the COVID-19 situation has clearly highlighted.

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Stay close to your customers. Companies that navigate disruptions better often succeed because they invest in their core customer segments and anticipate their behaviours. In China, for example, while consumer demand is down, it has not disappeared—people have dramatically shifted toward online shopping for all types of goods, including food and product delivery. Companies should invest in online as part of their push for omnichannel distribution; this includes ensuring the quality of goods sold online. Customers’ changing preferences are not likely to go back to pre-outbreak norms.

Practice the plan. Many top teams do not invest time in understanding what it takes to plan for disruptions until they are in one. This is where roundtables or simulations are invaluable. Companies can use tabletop simulations to define and verify their activation protocols for different phases of response (contingency planning only, full-scale response, other). Simulations should clarify decision owners, ensure that roles for each top-team member are clear, call out the “elephants in the room” that may slow down the response, and ensure that, in the event, the actions needed to carry out the plan are fully understood and the required investment readily available.

Demonstrate purpose. Businesses are only as strong as the communities of which they are apart. Companies need to figure out how to support response efforts—for example, by providing money, equipment, or expertise. For example, a few companies have shifted production to create medical masks and clothing.

The checklist in Exhibit 3 can help companies make sure they are doing everything necessary.

Exhibit 3

COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur

The coronavirus crisis is a story with an unclear ending. What is clear is that the human impact is already tragic and that companies have an imperative to act immediately to protect their employees, address business challenges and risks, and help to mitigate the outbreak in whatever ways they can.

For the full set of our latest perspectives, please see the attached briefing, which we will update regularly. We welcome your comments and questions at [email protected]

For more of the latest information on COVID-19, please see reports from the European Centre for Disease Control and Prevention, the US Centers for Disease Control and Prevention, and the World Health Organization; and Johns Hopkins University’s live tracker of global cases.

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Latest News

ECOVACS ROBOTICS Introduces 9-in-1 DEEBOT T9 In Indonesia – Our Best DEEBOT Just Got Better!

“The Best Just Got Better" with the first robotic vacuum cleaners in the market to combine upgraded vacuuming and mopping capabilities in one go

 

JAKARTA, INDONESIA - Media OutReach - 13 April 2021 - ECOVACS ROBOTICS, the world's leading home service robotics maker, today launched the DEEBOT T9, the first models with intelligent 9-in-1 obstacle avoidance robotic vacuum cleaner that combines powerful vacuuming and mopping functions with a built-in mobile air freshener. The upgraded DEEBOT T9 with these cutting-edge features is more powerful and smarter than ever before.


COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur


COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur


COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand Spur


DEEBOT T9 raises the bar for home cleaning with 9 stunning features, including the ECOVACS' leading TrueDetect 3D 2.0, a real-time strategic obstacle detection and avoidance technology; TrueMapping 2.0 for precise navigation; ECOVACS HOME App upgraded with 3D Map, and OZMO™ Pro 2.0 Electric Oscillating Mopping System that ensures stubborn stains are removed more efficiently and quietly, compared to previous generation.


"We keep a close eye on market demand and there was a clear indication that consumers want smart products that make homecare even simpler, doing as much and as thorough as they can, in one go. ECOVACS is committed to giving consumers the latest in smart and unique cleaning experience," said David Qian, Chief Executive Officer of ECOVACS ROBOTICS. "We've introduced our new-generation technologies, combined with multiple features while adding even more to our DEEBOT T9 to make sure every inch and floor surface is covered. Our Best DEEBOT Just Got Better."


Upgraded ECOVACS HOME App with Improved Obstacle Avoidance and Navigation Technology


TrueDetect 3D 2.0 technology comes with an upgraded algorithm to quickly detect different types of obstacles and strategically avoid them. The DEEBOT T9 can detect object sizes right down to mere millimeters, which is ten times more accurate than products using traditional infra-red technology, with a detection range of 70-350 millimeters. Moreover, DEEBOT T9 can navigate smoothly in different indoor environments and lighting conditions without any interruptions, even in total darkness. TrueDetect 3D 2.0 technology allows the robotic vacuum cleaner to avoid collisions, entanglements, or disruptions, so users do not have to monitor the robot and clean it continuously.

Combining TrueDetect 3D 2.0 and TrueMapping 2.0 with 3D Maps brings a whole new level of automated cleaning efficiency and flexibility for users. They can quickly locate the robotic vacuum cleaner's exact position via the 2D and 3D Maps. They can also manage their entire cleaning task on-the-fly, by toggling between the 2D and 3D Maps with the upgraded ECOVACS HOME App.

The new ECOVACS HOME App is designed for intuitive use, enhancing the user experience and reinforces the ECOVACS branding. The App is easy to navigate, offering users an optimal cleaning route. The interface integrates all the common features so that users can access critical functions easily. They can customize the amount of water used, suction power, cleaning times, and routes for different rooms.


A Luxurious Cleaning Experience with Built-in Air Freshener


The DEEBOT T9 is the first in the industry to clean floors and freshen the air at the same time. Connected to the DEEBOT's mobile system, the air freshener gives users a vacuuming and fragrance experience that goes beyond traditional cleaning.

The air freshener's unique design releases the fragrance onto the floor directly to remove musty and pet odors, while the fan at the bottom of the air freshener unit spreads the fragrance evenly.

The air freshener uses replaceable capsules, that can last up to 60 days, featuring three kinds of fragrances. Users can choose to switch the air freshener on or off using the ECOVACS HOME App, and extend its lifespan.


Powerful In-depth Cleaning Performance with OZMO Pro 2.0 and Auto-Empty Station Compatibility


The DEEBOT T9 comes with latest OZMO™ Pro 2.0 Electric Oscillating Mopping System with a newly designed motor and movement structure that minimizes noise.

The enhanced suction power of 3000 Pa also raises the bar in cleaning performance. The high-strength fiberglass structure keeps the suction power consistent when vacuuming both hard floors and carpets. The high-frequency vibration of up to 480 times per minute increases the mopping performance, making it comparable to an electric mop.

The DEEBOT T9 uses a disposable mopping pad that can be safely discarded immediately after cleaning. The specially-designed microfibers absorb water evenly, efficiently capture dust, and reduce residual water stains. The composite structure increases friction between the mopping pad and the floor and helps the OZMO™ Pro 2.0 Electric Oscillating Mopping System effectively remove stubborn stains on the floor.

A power-up kit is available for the DEEBOT T9 that further enhances the cleaning performance and user experience. The Auto-Empty Station, which clears the robot's dustbin automatically after cleaning with minimal human intervention, is also compatible with DEEBOT T9.


Pricing and Availability


DEEBOT T9's suggested retail price is IDR 8.29 Million. It will be officially available at Shopee with special price of IDR 8.09 Million and comes with a IDR 200K discounted voucher and a free giftpack on April 17 to 18 ECOVACS X Shopee Brand Day.


It is also available at Lazada, Tokopedia, and Blibli from April 19 onwards with an IDR 200K discounted voucher and free giftpack as launch promotion until April 22.

For more information, please visit ecovacs.com or connect with us on COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand SpurFacebook and COVID-19: Implications for Business, Facts and Insights - McKinsey - Brand SpurInstagram.


About ECOVACS ROBOTICS

Innovating Since Day One – Creating the Intelligent Home.


At ECOVACS ROBOTICS, we care about innovating solutions to enhance your lifestyle. Based on a deep understanding of use cases and consumer experiences, we design robots that help you "live smart, enjoy life."


With over 20 years of design and industry-leading research, we have led the market as homes become more intelligent and responsive. We are building a world where your home asks less of your attention, becomes more seamless and powerful, and frees you to spend more time doing what you love.


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