How to respond to the COVID-19 pandemic? A lecture note on Reshaping Business Strategy Under Crisis Conditions

1. A lecture note on
Reshaping Business Strategy
Under Crisis Conditions
Raj Kumar Bhattarai, PhD
Nepal Commerce Campus
Tribhuvan University
raj@ncc.edu.np
June 29, 2020
Raj K. Bhattarai

2. 1. Business strategy questions and
arguments
2. Crisis conditions and reflections
3. Framework for reshaping business
strategy
4. Behavioral considerations under a
crisis condition
Raj K. Bhattarai
Brief contents

3. Business strategy questions and
arguments
Raj K. Bhattarai

4. Foundational questions
Raj K. Bhattarai
 Should organizations be made IMMUNE TO CHANGE in
consideration of stability, models, and best practices of
doing business?
OR
 Should organizations be made SUSCEPTIBLE TO CHANGE
in consideration of adaptability, model-less, and contingent
practices of doing business?

5. Understanding the terms
Raj K. Bhattarai
CRISIS CONDITION
The time/situation of intense pressure, danger, shortage, difficulty
BUSINESS STRAGEGY
A plan of action or a way forward designed to overcome or pass
through the pressure, danger, shortage, and difficulty concerning
a business

6. The arguments
Raj K. Bhattarai
• Crisis will invalidate the assumptions and forecasts on
which the business strategy was based
• There is a sharp conflict between long-termism and
short-termism
• The dichotomy of rational decision-making and non-
rational decision-making is always standing
• Superiority of experience and creativity over education is
overwhelming
• Domination of existing situation (crisis or boon) is
persisting around the business

7. Crisis conditions and reflections
Raj K. Bhattarai

8. Crisis conditions: Likely cases
Raj K. Bhattarai
• Global pandamic, regional epidemic
• Natural disaster, calamity
• War, embargo, sanction
• Terrorism, riot, revolution
• Industrial accident, unrest
• Security lapses—physical, digital
• Others—ethical charge, system failure, demise of
key personnel

9. Level of crisis conditions
Raj K. Bhattarai
• Business firm crisis (Surya Nepal in early 2010s)
• Industry crisis (Carpet indusry since mid 1990s)
• National crisis (Nepal earthquake and blockade: 2015)
• Regional crisis (Asian financial crisis: 1997)
• Global crisis (COVID-19: 2020)

10. COVID-19 crisis: Impact in Nepal (MSMEs n=100)
Raj K. Bhattarai
Description Unit Range
Business permanently being closed % 10-12
Business losing 50 to 100% revenue % 40-45
Business gaining 50 to 100% revenue % 5-8
Business running with damaged WRISTS % 90-94
Business running with shortage of workforce % 27-30
Employees losing 50 to 100% jobs % 30-35

11. COVID-19 crisis: Business response in Nepal (n=100)
Raj K. Bhattarai
Description Unit Range
Business reducing production % 70-75
Business increasing production
activities
% 3-5
Business diversifying products % 3-4
Business initiating online sales % 22-28
Business renegotiating with buyers/
suppliers
% 35-40

12. The WRISTS of MSMEs
Raj K. Bhattarai
I have made the acronym ‘Wrists’ as a metaphor to refer
the PULSE of the followings of the MSMEs
Wages [salary and/or compensation to the employees]
Rent [house rent, land rent, machinery rent]
Interest [interest on bank loan, and borrowings]
Supplies [goods and services to and from the firms]
Taxes [direct and indirect taxes]
Subsidies [any assistance to and from the firms]

13. Framework for reshaping business
strategy
Raj K. Bhattarai

14. Basic assumptions
Raj K. Bhattarai
Reshaping business strategy becomes sensible when:
➡ You are alreagy in a business;
➡ You need to be in business;
➡ You have business commitments; and
➡ Your existing strategy does not work

15. Basic questions (adapted from HBP, UV0792-PDF-ENG)
Raj K. Bhattarai
1. Who is affected?
2. What does each constituent group want or
need in this situation?
3. What information do you have, and what
information do you need?
4. What decision(s) need to be made?
5. What options are available to you?
6. What are the implications for the decision-
maker and the various stakeholders in each
situation?

16. Relationship of business strategy and crisis
Raj K. Bhattarai
• The existing strategy encounters with a CRISIS CONDITION
• The strategist encounters with URGENCY, AMBIGUITY,
THREAT, OPPORTUNITY, STRESS AND EMOTIONS
• A crisis invites TRANSFORMATIONAL CHANGE

17. A few indicators of Nepalese Business (National Economic Census, 2018)
Raj K. Bhattarai
Particulars Quantity Unit
Total amount of sales 2,915,609 million Rs.
Total amount of profit 853,213 million Rs.
Average profit rate
Highest: Agriculture, forestry and fishing 55.7%
Lowest: Manufacturing 14.7%
29.3 %
Average amount of sales per entity 3,236 thousand Rs.
Average amount of profit per entity 947 thousand Rs.
Business establishments
Registered establishments 50.1%
Not Registered establishments 49.9%
923,356 establishments
Persons engaged 3,228,457 persons

18. A few indicators of Nepalese Business (Adapted from National Economic Census, 2018)
Raj K. Bhattarai
Particulars Quantity Unit
Share of economically active population in
informal sector (adapted from ILO)
> 70 %
Share of informal sector in employment
(adapted from ILO)
84.6 %
Working age population 15+ years (adapted
from Labor Force Survey, 2017/18)
20,744 thousand
Unemployed people 908 thousand
Largest employer: agriculture, forestry, and
fishing
1,523 thousand

19. Informal employment by age (adapted from National Economic Census, 2018)
Raj K. Bhattarai

20. Reshaping the strategy: Understanding the business actors
Raj K. Bhattarai
Demand sector actors
Formal Informal
Supply
sector
actors
Formal SIMPLE ZONE
(for reshaping strategy)
COMPLEX ZONE
(for reshaping strategy)
Informal COMPLEX ZONE
(for reshaping strategy)
SIMPLE ZONE
(for reshaping strategy)

21. Reshaping strategy: Principal deliberations
Raj K. Bhattarai
•Commitment and containment
•Change IN and change OF
•Recovery and growth path

22. Reshaping strategy: Understanding the options
Raj K. Bhattarai
Assumptions of business future
Optimistic Pessimistic
Level
of
crisis
High
Long-term
CHANGE TO BUILD
DEVELOP IMMUNITY
START TO DIVEST
BE RESILIENT
Short-term BE OPPORTUNIST
Low
Long-term
REJUVINATE TO
SUSTAIN
BE
SELECTIVE
Short term TOLERATE TO ADAPT

23. Behavioral considerations
under a crisis condition
Raj K. Bhattarai

24. Lessons learned from China’s response (Adapted from HBR March 10, 2020)
Raj K. Bhattarai
How Chinese companies have responded to Coronavirus
1. Look ahead and constantly reframe your efforts
2. Use an adaptive, bottom-up approach to complement top-
down efforts
3. Proactively create clarity and security for employees
4. Reallocate labor flexibility to different activities
5. Shift your sales channel mix
6. Use social media to coordinate employees and partners

25. Lessons from China (Adapted from HBR March 10, 2020)
Raj K. Bhattarai
7. Prepare for a faster recovery than you expect
8. Expect different recovery speeds for different sectors
9. Look for opportunity amid adversity
10. Adapt your recovery strategy by location
11. Rapidly innovate around new needs
12. Spot new consumption habit being formed

26. In addition: A few considerations beyond the business process
Raj K. Bhattarai
� Maintain mental health of you, your family, and
your employees
� Practice empathy among the business network
actors
� Get engaged in reciporcal interdependance
� Balance your expenses against your revenue status
� Selectively postpone your good decisions

27. In addition: A few considerations beyond the business process-2
Raj K. Bhattarai
� Rethink of the pulse within the WRISTS of your
business
� Concentrate on short terms (days, weeks, and months)
� Keep communicating with selected ones
transparently
� Keep you and your team engaged
� Do not forget to balance power and resources
between you and your team members

28. Questions?
Raj K. Bhattarai

29. Thanks
Raj K. Bhattarai