France was hit very hard by the COVID pandemic. In addition to the health crisis and the consequent loss of human life, there is no foreseeable end to the unprecedented economic crisis it provoked. The resilience of French companies is being severely tested. Despite all of this, many businesses seem to be weathering the storm. What strategies should be adopted in such a context, and what can be expected for the years to come? In a recently-published report, Jérôme Barthélemy and Radu Vranceanu, Professors of Strategy Management and Economics at ESSEC Business School, shed some light on the subject.
Jérôme Barthélemy and Radu Vranceanu, known for the numerous articles and books they have already published, turn their attention in this new report to the impact of Covid-19 global health crisis on companies in France. They partnered with Timothée Berthaud and Sébastien Castel from the ESSEC Conseil Junior (a student association which is Europe’s oldest and leading Junior enterprise) to carry out a quantitative survey of ESSEC’s corporate partners.
In October and November 2020, a questionnaire was sent to all ESSEC partner companies. Out of these, 306 partner companies—of varying size and from a wide variety of sectors—responded. The analysis of the responses to this quantitative survey shows the following:
Of the companies surveyed, 72.54% recorded a decrease in their turnover because of the crisis, but more than a quarter did not experience any decline in activity, and nearly 15% even enjoyed an increase in their turnover. The crisis did cause an overall increase in supported short-time working (under the chômage partiel scheme, whereby the loss of income from the hours not worked is compensated by partial unemployment benefits), however almost 45% of the companies interviewed have not needed to resort to this measure.
It was the industrial sector that was most strongly impacted by the health crisis, with more than 55% of companies experiencing a decrease in capacity utilization. However, over 40% of the industrial companies who responded to the survey stated that they had been able to maintain their production capacities at the same level, and 10% even reported an increase in utilization.
French companies have proven their ability to react and adapt, and are trying to find solutions to the loss of business they suffered, starting with a sharp reduction in their expenses. In the face of the crisis, they are showing dynamism and reactivity: nearly 70% of them have adapted their strategy, reinventing themselves and developing new products or services. Their predominant strategy has been to focus heavily on improving existing services.
Digital transformation has become indispensable
When the pandemic hit in mid-March 2020, overnight, companies had to adapt and they switched massively to teleworking, which resulted in a more frequent and sometimes even systematic organization of remote digital meetings. Of the companies surveyed, 97.70% have deployed more digital tools to interact with their customers as a result of the health crisis.
Although the digitalization of product and service marketing is nothing new and the crisis has only negatively impacted 5% of companies in this area, the use of digital distribution has become increasingly important for over 40% of the surveyed French companies.
It is interesting to note that the share of companies who have not increased their investments in IT and digital equipment because of the Covid-19 crisis matches that of companies for which these investments have become slightly more important. This kind of investment was already considered important by 36.93% of the companies, and the health crisis has only reinforced this view.
Despite the crisis, not all companies have yet understood the importance of investing in the digital skills of their staff. For 48.69% of the respondents, investments in this field have stagnated since the crisis. In contrast, the majority of companies have significantly increased their investment in IT equipment.
What lessons can be learned?
The conclusions of the report are quite encouraging. Research in management has demonstrated that the dual strategy, which combines a defensive strategy, consisting primarily in cutting costs, with an offensive strategy of investing in new products or services, is the most effective for weathering a recession. It is therefore likely that the impact of the Covid-19 crisis on French companies will be less dramatic than initially anticipated.