We are now almost halfway through 2020. Actually, it seems as if it were longer than that. As individuals, we may feel overwhelmed by the disruptions that have beset us since early this year. Regarding the business sector, most businesses continue to face hardships as they have had to take extraordinary measures to stay afloat.
While the COVID-19 virus seems to have ebbed locally – as evidenced by the number of new infections remaining at zero or only just above that – it is increasingly unlikely that we will encounter the second wave of severe viral transmission, especially if we firmly commit to maintaining physical distancing.
Things seem to be making a return to normalcy. But this impression may be far from accurate, as seen from the business sector’s perspective. In the ‘New Normal’ environment, running a business seems to be even more difficult than before.
Businesses can be categorized into two main sectors, i.e., the industry and service sectors. Despite different business contexts, both sectors now face the same plight of macroeconomic challenges. That is to say, weakened purchasing power both at home and abroad – as seen in 2020 and likely to linger into the next – has shrunk the size of the market, relative to the pre-COVID-19 period.
Under these circumstances, consumers have tightened their belts, focusing on necessities rather than luxuries or expensive items. Looking into the tendency of recovery among businesses over the next year, as gauged by their value (not the growth rate as influenced by the low base of 2020), industries and services trading in necessities are poised to recover, while others may rebound later rather than sooner.
| Post-COVID-19: ‘New Normal’ | Industries | Services |
| Recovery | Food, Medical supplies | Utilities (ex. electricity), Telecom |
| Limited recovery | Automobiles, Real estate, Gems and jewelry, Furniture, Electrical appliances | Tourism, Retail, Restaurants, Private hospitals |
Given lackluster demand versus oversupply, business operators who fail to generate sales turnover sufficient to cover expenses incurred for a substantial period will finally be forced out of business by market mechanisms. Only those who can adjust themselves to the ‘New Normal’ environment will survive.
Looking at the industrial sector, various companies have been compelled to review their investment plans, fine-tuning strategies while prioritizing stability to ensure that their businesses remain resilient in any circumstances without compromising efficiency in terms of products and the manufacturing process or supply chain, in order to be in step with the present environment.
Increased investment in necessities will thus become more prevalent in each country. That is to say, several countries will prioritize policies for the procurement of necessities to ensure sufficient inventory.
For investment in other products, supply chains will focus mainly on proximity to the market or buyers. Thailand is also likely to see this trend. Investment in food, medical supplies, automation, machinery and robotics is set to rise for the sake of business security and enhanced efficiency.
Over the short term, Thailand may receive a modest windfall from a looming food crisis and the need for increased food reserves in certain countries, thanks to its status as one of the world’s major food-producing and exporting countries.
Over the medium to long term, however, demand for Thai food exports will depend mainly upon how soon its trading partners are able to be self-reliant. Another challenge is whether or not Thailand will be chosen as a manufacturing base for foreign entities, as foreign investment is sorely needed, especially in high-tech industries.
For the service sector, a key variable is fast-changing and more complex customer behavior. Businesses may have to trade-off between short-term pain and long-term gain.
For instance, retail stores and restaurants whose main revenue streams come from on-premise sales, as well as accommodation businesses, must try in every way to ensure the confidence of patrons, especially through proactive measures. Doing this requires greater expenses which inevitably eat into their profitability.
Still, these actions are needed, as they could finally be favorable to businesses over the long term. On the other hand, if nothing is done, business operators may finally lose their customers to their rivals or to other service channels instead. Therefore, service providers who can bolster consumer confidence and deliver a positive customer experience could stay afloat amid rising competition.
For sure, there is no single, fixed recipe for businesses to withstand the COVID-19 crisis and the economic downturn. On the surface, SMEs would seem to be more flexible. Looking closely, however, they are under severe pressure due to their declining market accessibility, not to mention limited funding resources and lack of technological capabilities required for business adjustment.
The SMEs’ plight is now a concern. The government should not sit idle but rather should provide continuous support to SME entrepreneurs – now numbering more than 3 million and employing over 13 million workers.
At the end of the day, the ‘New Normal’ environment will prompt us to rethink, review and reshape our strategies in order to drive the country forward, ensuring greater competitive capabilities and sustainability of Thai businesses over the long term.
