February 11, 2020

Source: The Economic Observer

Chen Shouming, Professor of Tongji SEM

Severely hit by the sudden outbreak of the COVID-19 pandemic, the normal operation of SMEs suffers huge impact, leaving the owners and managers sleepless at night.

In the face of emergencies, we need to stay calm and respond rationally by contemplating corporate strategies and solutions. The survival of the fittest is the core of corporate strategy. This epidemic brings about a drastic short-term change in the business environment of the company. Since the mid- to long-term environment for business sees no fundamental changes, companies still have to maintain their strategic focus. What we need to consider now is how to overcome the difficulties, that is, short-term coping strategies.

People often compare big ships and small boats to the operating characteristics of large enterprises and small ones. We can use the scene of encountering short-term heavy winds and waves during the voyage of ships to analyze and discuss the response strategies of SMEs under the current epidemic. Obviously, making sure not to overturn the ship is the captain’s most important goal. To this end–

The captain must have overall awareness with a faith in victory. The confidence of the enterprise manager can infect and encourage employees; at the same time, managers must fully estimate the impact and the length of it caused by the epidemic without underestimation; scenario planning should be in place to calmly deal with different situations that may occur in the future.

Moderately “go with the stream”. The smaller the ship is, the easier it is to change direction. It is a wise choice for SMEs to make U-turns and follow the trend in the storm. But keep in mind that the period is abnormal and the business environment is atypical. For example, it is expedient for high-end catering companies to start take-out service.

Move forward without burden. SMEs have to actively save themselves instead of waiting for help or relying on others. Decisive actions should be taken to abandon some non-essential resources, and only core personnel and core business stay. Cash is king. Companies need to increase income and reduce expenditure.

Work together in the same boat. A major advantage of SMEs is their strong sense of community with shared fate. At this time, managers should strengthen communication with employees while keeping basic income and expenditure transparent. They can also take measures such as replacing part of the salary with company’s share to unite the employees to share risks and overcome difficulties.

Cooperate with other ships of shared interests. Enterprises should strive for the support of upstream and downstream enterprises, financial units, and landlords by actively communicating with relevant parties. In addition, it is necessary to study the policies issued by the central and local governments that support SMEs to make good use of the policies.

Seek help from the big ships. Big ships have much better resistance to wind and waves than small boats. SMEs should seek help from big companies by exploring ways of win-win cooperation. The recent “renting” of catering companies’ employees to e-commerce companies is a good example.

The SMEs are in a market where thousands of sailors are competing for each other. “Thousands of sails pass by the sinking boat”, if companies can survive this epidemic, they will enjoy a good environment with the rebound of consumption and investment. With the organization capacity and teams refined by the strong winds and waves, companies will definitely be able to sail to the vast sea, and stand out in the future competition.