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The Corporate Winners and Losers in a Pandemic-Disrupted World

In the 2016 sci-fi movie “Arrival,” 12 alien ships arrive on Earth and provoking chaos, panic and exposure to geopolitical conflicts. Similarly, the arrival and subsequent spread of COVID-19 across the globe is causing disproportionate impacts and turmoil across the largest business sectors.

Recent reports from JP Morgan and business consultancy McKinsey demonstrate just how business strategy combined with this invisible enemy has substantially strengthened some sectors while others have faced great hardship and a greatly reduced value.

Between December 2018 and May 2020, six sectors increased their market value by $275 billion, seven lost $373 billion, and ten maintained their positions relatively stable. Winners included the semiconductor, pharmaceuticals, personal products, software, hardware and entertainment sectors. At the other end of the spectrum and most negatively impacted were transportation, capital goods, insurance, banks, financial services, utilities and energy.

These numbers demonstrate the power of evolutionary programs and how their competitive strategies closely aligned with digital transformation has increased their competitive advantage against their direct competitors. Segments that have tended to be more conservative and resistant to change are falling further behind with progressive losses in their market positions.

On July 30, the United States announced a record 32.9% drop in GDP for the 2nd quarter but some of the tech giants reported unprecedented results generating aggregate sales close to $250 billion and a net profit of more than $40 billion in just 3 months and during a pandemic!

At the other end of the spectrum, the Oil sector was hit hard with equally historic losses including Chevron losing $8.3 billion and Exxon $11 billion. Simultaneously, Apple marked its highest market value on July 31 worth $1.84 trillion surpassing oil giant Saudi Aramco, of the same sector. The world has never more digital than it is now!

At some point in the future, hopefully sooner than later, there will a vaccine to help mitigate this evil. But it will not be a magic wand and the world will not immediately, if ever, return to its pre-pandemic state. Many analysts have drawn parallels to the 2008-09 financial crisis, but there is no historical precedent for this pandemic and the constantly moving fissures between economic groups are transforming business at an unprecedented rate.

Recently Microsoft CEO Satya Nadella shared they have seen two years in digital transformation in the past two months. Examples of this sudden market change or shift include:

  • E-Commerce: 10 years of growth in just 3 months in the US from 5% in 2009 to approximately 15% at the end of 2019 and reaching 35% at the end of the Q1 2020. This acceleration trend is expected to continue.
  • Online delivery: 8-week growth equivalent to every past decade.
  • Telemedicine: 10-fold increase in subscriber volume in just 15 days.
  • At-Home Fitness: with closed gyms and fitness centers several new brands appeared, such as Tempo, which received an investment of $60 million and suddenly reached a market value of $250 million.

In the second part of this blog we will explore how accelerating digital transformation strategies is critical to expand leadership positions in this new business environment.