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1 MARCH 2020
BCG Solution to Crisis Management
COVID-19: Critical Business Response
COVID-19 Rapid Rebound
• Conduct top-down scenario assessment on possible “inflection time point” – when the situation gets stabilized and consumption confidence returns.
• Leverage intelligence (for example, activate your salesforce for customer / distributor contact or surveys) to identify
“inflection point” and ramp up sales activities, inventory and trade support.
• Deploy resources to jumpstart social and online-to-offline strategic collaborations, and pilot test new operation models.
• Explore opportunities to configure “comeback celebration campaign” in advance, quickly pick up marketing spending post-epidemic.
• Avoid removing all ads, social media posts, etc. – cautiously select marketing channels during epidemic.
• Craft new product and service story and create new selling points.
Previous crisis show that business positions will change as industries recover. Business leaders need to be alert and active in understanding shifts and how to invest, position, and build structural advantage for this new reality. Source: Boston Consulting Group
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COVID-19 has led to major interruptions and profit warnings globally across sectors
Severe business impacts due to COVID-19… …resulting in fastest S&P 500 correction ever
Source: Deutsche Bank, Wall Street Journal, Financial Times, Business Insider, Bloomberg; BHI
150
100
0
200
50
Feb-
18
Oct
-87
No. of days
Feb-
46
Sep-
99
Aug
81
Nov
-07
Mar
-60
Jun-
69
Feb-
20
Mar
-68
Jun-
53
Aug-
98
Apr-
62Fe
b-84
Jan-
90Ap
r-73
May
-66
Aug-
15Au
g-46
Nov
-18
Oct
-56
Aug-
90
Apr-
00O
ct-9
7O
ct-5
5
Time taken for S&P500 to correct 10% from peak
6 days: Fastest correction in the S&P500 on record
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Responding to the crisis – being part of the solution
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Be part of the solution: How to navigate the crisis
Protect your people, ensure continuity, and mitigate short-term losses
Pro-actively seize demand rebound and bring business back on track
Build advantage by making strategic enhancements and building resilience
Now: Tackle immediate priorities
Near-term: Prepare for the rebound
Medium-term: Pursue structural enhancements
Day-to-day agile approach to navigate changing environment
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Now: Take decisive actions to minimize disruptions (I/II)
Set-up a rapid-response team to take clear decisions and control of the situation
Communicate decisively and regularly to prevent misinformation and organizational paralysis
Clearly direct your people on what to do, inform them about business & health impact
Actively monitor the situation and use an agile approach to navigate the changing environment
Update hygiene program (incl. quarantine requirements) to ensure safe environment for employees and customers
Arrange flexible working plans and provide required infrastructure/ solutions
Observe employees' morale and performance during crisis period, plan for relief measures
Take control of the situation Protect people & customers Ensure operational continuityCategorize your operations by business criticality (systemic, critical, optional)
Define clear contingency plans for systemic and critical operations and put safeguarding measures into place
Stabilize cash flows to ensure sufficient liquidity
Note: Non-exhaustive list of actions
Now: Tackle immediate priorities
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Now: Take decisive actions to minimize disruptions (II/II)
Reach out to customers/distributors to understand their needs (e.g. provide credit line), leveraging your salesforce in new ways
Shift to online channels to provide products and services by working with both O2O & offline partners to cope with sudden shifts in demand
Optimize pricing and product offering to meet immediate consumer needs (e.g. "stocking up" and "home enjoyment")
Adjust inventory level in real time, reshuffle to new reality, and avoid inventory glut
Identify alternative suppliers for critical components, plan for changing lead times and re-route logistics
Set up dedicated funding or adjust trade terms to address cash flow concerns of suppliers
Serve your customers' needs Ensure a robust supply chainLive your purpose now to help the society and economy get back on track
Leverage your resources to make a difference by providing products and services to affected people (beyond monetary donations)
Engage your staff, your customers and business ecosystem to create tangible impact
Execute on your purpose
Note: Non-exhaustive list of actions
Now: Tackle immediate priorities
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Executing on your Purpose: an example
Now: Tackle immediate priorities
Leading Asian retailer planned crisis relief in three steps
Step 3: Develop medium term OB strategy and advocacy plans
Leverage learnings from sanitizer's quick implementation
Prioritise key crisis products that need development
Develop ways of working for OB to ensure quick route to market
Develop brands to enhance customer advocacy
Step 1: Help with sourcing of key products (incl. masks & sanitizer)
Investigate demand planning / supply needed; identify key products with supply shortage
Identify branded suppliers to source, leveraging BCG global contacts
Quickly align with supply chain and store ops to ensure shipment and delivery
Set up SWAT PMO
Step 2: Launch market-wide social impact campaigns
e.g. Refill stations for free refills of own brand sanitizers
e.g. Free hand washing stations in areas with high traffic
Promote hygiene education via social media ; accompanied with instore educational campaign
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Near-term: Targeted efforts required to achieve rebound
Conduct top-down scenario assessment on possible “inflection time point” –when the situation gets stabilized and consumption confidence returns
Look for new channels and new disruptive formats that works under epidemic
Reward innovative ideas and proactive movements, closely monitor competitive moves
Re-define budgets and targets monthly by geography
Closely monitor and synchronize the team
Maintain ongoing relationship and extend credit to key distributors to secure core channels and quickly replenish after the epidemic
Leverage intelligence (e.g. activate your salesforce for customer/ distributor reach out or surveys) to identify "infection point" and ramp up sales activities, inventory, and trade support
Deploy resources to jumpstart social/O2O strategic collaborations, and pilot test new operation models
Build value chain preparedness
Explore opportunities to configure “comeback celebration campaign” in advance, quickly pick up ad spending post-epidemic
Avoid removing all ads, cautiously select marketing channels during epidemic
Craft new product and service story and create new selling points
Adjust communication message
Note: Non-exhaustive list of actions
Prepare for the rebound
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Rebound:an example
During the SARS outbreak in 2003, as demand dropped and entertainment venues were closed, most international beverage brands withdrew ATL/BTL marketing investment in affected Asian markets
Beverage company focused on mid-term comeback campaign:• Mobilized sales force to conduct “outlet census” going to all PoS to understand
“which channels/outlets will open, when?”• Conducted top-down scenario assessment on possible “inflection time point” –
when consumption confidence comes back • Synchronized marketing, media and sales activities; configured a focused
“bounce-back campaign”• Prioritized new, more premium, fast growing brands to win in the market• Preemptively ramped up sales activities, inventory, and trade support when
“inflection time” approached (competitors with "wait & see" approach)
Beverage company captured rebound in consumption after SARS
Successful preparation for the rebound in 2003 paved way to become the #1 in the respective segment in China ever since then
Prepare for the rebound
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Mid-term: Prepare for the future and build structural advantage
Previous crises show that business positions will change as industries recover. We foresee game-change demands shifts in many sectors, e.g.
Boost in e-commerce and online service delivery – accelerated change in retail and F&B
Significant health care boom in emerging markets (e.g. China), incl. spill-over effects on related industries (e.g. insurance)
Further diversification of international supply chains – ongoing contingency planning as new normal
Note: Non-exhaustive list of actions
Business leaders need to be alert and active in understanding shifts, how to invest and position for this new reality, and build structural advantage
Medium-term: Pursue structural enhancements
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Examples: Companies provided support to customers in exchange of channel advantage; actively built partnerships
Support dealers on cash flow with funding
Launch joint-logistics to support distributors
Gain RTM control w/ customer credit ease
Form partnership and seek sources of growth
2003-SARS: Its customers suffering from poor cash flow from people not going out
2003-SARS: More potential partners with high willingness to collaborate after SARS
2003-SARS: Car dealers in trouble with cash flow, as
consumers delayed purchases
COVID-19: logistics capacity highly constrained, causing challenges to distributors
Adjusted performance target on dealers:
• Car manufacturer canceled performance review to ease dealers' pressure
Established contingency fund:• Established 10M fund to
support dealers on employee salary
Carefully tracking and targeted supply:
• Contacted distributors one-by-one during critical reopening period
Joint-dispatch to support distributors, using its own logistics company
Offer credit ease to local key customer in return for high data transparency and brand-led-retail
Take the chance to increase direct-owned store presence as well as eCommerce to uplift business share in DTC
Collaborate with technology partners and build eco-system
• e.g. introduced Brand Co.+ Sportsband Kit in Apr. 2008, with chip integrated in shoes
• e.g. Brand Co.+ Sportswatch introduced in Sep. 2010
Full distribution capacity restored >50%, matching the 60% store reopen, leading competition by ~20%1
1. By end of Feb.9th
Source: Press release, expert interviews; BCG analysis
National F&B playerCar manufacturer Int'l apparel retailer Int'l apparel retailer
Medium-term: Pursue structural enhancements
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We support you through this time of change & uncertainty
Rapid Response RoomSet up and run team to take control of overall
situation, incl. rapid assessment, contingency plans, communication plans & execution, liquidity forecast
and management, spend rationalization
Commercial ResponseDefine and execute on optimization levers to mitigate revenue impact / ensure rapid rebound, incl. digital/ eCommerce push, sales force activation, distribution
relationship mgmt, marketing, inventory planning
Global CoordinationDefine and assess global response for multinational
groups, incl. scenario definition and stress testing by geography, portfolio optimization, situation analysis,
communication strategies
Operations ContinuityEnsure business continuity and stabilize
operations/supply chain, incl. criticality assessment, contingency planning, inventory recalibration,
alternative supplier sourcing
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Key steps that will be addressed
Form a centralresponse team
Address supply chain and operations continuity response
• Set-up a rapid-response team with clear decision rights to take control of the situation• Design a communications mechanism for decisive & accurate information transfer• Actively monitor the situation and use an agile approach to inform all stakeholders
Take care of your people
• Update hygiene program to ensure safe environment for employees and customers • Arrange flexible working plans and provide required infrastructure/ solutions• Monitor employees' morale & performance during crisis period, plan for relief measures
Address customer and revenue response
• Create tailored response plans to address the assessed scenarios• Assess customers/distributors needs (e.g. provide credit line), determine how to best leverage
your salesforce / communications• Monitor real-time development of financial/operational KPIs (advanced analytics as needed)
• Set up an operational core team to create transparency (e.g. along supply chain)• Categorize your operations by business criticality (systemic, critical, optional)• Define clear contingency plans for systemic and critical ops with safeguarding measures• Stabilize cash flows to ensure sufficient liquidity, e.g. by mitigating discretionary spend
Understand and evaluate scenarios
• Understand /prioritize range of scenarios and analyze potential evolutions• Evaluate potential impact on the company's financial performance and operations as well as
other key stakeholders (incl. employees, customers, and suppliers)
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ResponseContingency planning
Rapid response room: Response to key issues from Day 1 Simultaneous rapid assessment and contingency planning to ensure near- and medium term success
Rapid assessment Response / execution
Backup
Revenues• Assessment of 1st order impact on revenues• Assessment credit risks to current accounts receivable• Analysis of risks to customer pipeline
Cost, Operations & Supply Chain• Operational continuity assessment• Short-term work-around options & medium-term alternative sourcing• Forecast of impact on inventories and associated cash impact• Assessment of direct risks production scheduling & committed deliveries
Organization and Governance• Assessment of hygiene program, communication and response planning• Assessment of alternative working arrangements• Review of governance framework
Financial• Contingency plan to secure sufficient liquidity for a potentially
prolonged impact scenario• Mitigating discretionary cost actions to build financial flexibility• Rationalization plan of short/medium-term capital spending• Detailed assessment of impact on budget and guidance to shareholders• Review of commitments, MAC clauses and Force Majeure options• Visibility and plan for 2nd order impact on time sensitive projects,
contractual commitments and customer relationships
Operational• Revised operations plan based on a risk-based assessment of inbound
supply and customer demand• Plan & visibility on 2nd order impact on supply base- i.e. what is the
impact on tier 2 suppliers• Contingency plan for balancing production, supply and inventories
should a critical element of the supply chain be impacted
IllustrativeDay 1: Set-up of team to take immediate action while more detailed assessment and planning is conducted
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Advisory expert group
Draft structure for the rapid response team
Rapid Response Leadership
• Has authority for entire response effort and critical decisions• Oversees overall progress and provides daily guidance• Reports to Management Team
Situation / Transparency Scenario assessment
• Understand and prioritize scenarios & analyze their potential evolutions
• Evaluate potential impact on the company's financials and operations & stakeholders (employees, customers and suppliers)
• Create tailored response plans to mitigate scenarios
Customer focusOperational continuity
• Monitor real-time development of key socio-economic indicators, operational KPIs, etc.
• Serve as fact base for company-wide analyses and scenario assessments
• Design a communications for decisive & accurate information exchange
• Categorize ops by business criticality (systemic, critical, optional)
• Closely monitor and maintain operational data fact base to inform scenario assessment
• Define clear contingency plans for systemic and critical ops
• Reach out and assess customer needs and revenue implications
• Develop responses across channels and leveraging sales force as appropriate
Team setup:• Strategy & Finance• Commercial leaders• Supply chain leaders • Economists, data scientists,
analysts
Team setup:• Economists, health experts• Financial data analysts• Human resources• Marketing communications• Investor relations
Team setup:• End-2-end supply chain
leaders & analysts across regions (incl. procurement, logistics, manufacturing)
Team setup:• Sales• Marketing• Pricing• Finance support
• Consists of HR/Legal/Health care/Crisis Management experts
• Advises on legal, regulatory and health related matters
Management Team
People / workforce
• Assess potential impact of virus spread on company workforce
• Assessment and development of hygiene program, communication and response planning
• Ownership of alternative working arrangements
Team setup:• Economists, health experts• Financial data analysts• Human resources• Marketing communications• Investor relations
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We can hit the ground running to achieve rapid impact
Proven suite of tools to
implement from Day 1
Deep knowledge in all markets affected by COVID-19
Deep, relevant, sector and functional experience
Differentiated hands-on working
style –"performance
partners"
Track record of delivering results with significant
impact
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Legal context regarding our support
The situation surrounding COVID-19 is dynamic and rapidly evolving, on a daily basis. Although we have taken great care prior to producing this deck, it represents BCG’s view at a particular
point in time. This deck is not intended to: (i) constitute medical or safety advice, nor be a substitute for the same; nor (ii) be seen as a formal endorsement or recommendation of a
particular response. As such you are advised to make your own assessment as to the appropriate course of action to take, using this deck as guidance. Please carefully consider
local laws and guidance in your area, particularly the most recent advice issued by your local (and national) health authorities, before making any decision.
17
The services and materials provided by Boston Consulting Group (BCG) are subject to BCG's Standard Terms (a copy of which is available upon request) or such other agreement as may have been previously executed by BCG. BCG does not provide legal, accounting, or tax advice. The Client is responsible for obtaining independent advice concerning these matters. This advice may affect the guidance given by BCG. Further, BCG has made no undertaking to update these materials after the date hereof, notwithstanding that such information may become outdated or inaccurate.
The materials contained in this presentation are designed for the sole use by the board of directors or senior management of the Client and solely for the limited purposes described in the presentation. The materials shall not be copied or given to any person or entity other than the Client (“Third Party”) without the prior written consent of BCG. These materials serve only as the focus for discussion; they are incomplete without the accompanying oral commentary and may not be relied on as a stand-alone document. Further, Third Parties may not, and it is unreasonable for any Third Party to, rely on these materials for any purpose whatsoever. To the fullest extent permitted by law (and except to the extent otherwise agreed in a signed writing by BCG), BCG shall have no liability whatsoever to any Third Party, and any Third Party hereby waives any rights and claims it may have at any time against BCG with regard to the services, this presentation, or other materials, including the accuracy or completeness thereof. Receipt and review of this document shall be deemed agreement with and consideration for the foregoing.
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