The eruption of the Coronavirus in China has forged a wave of uncertainty and agitation across the world.
Coronavirus, which is a family of viruses that can generate a range of illnesses in humans from the common cold to more acute forms of illnesses like SARS (Severe Acute Respiratory Syndrome) and MERS (Middle East Respiratory Syndrome) that could prove to be deadly.
The name Coronavirus is conceived after the shape of the virus with it absorbing the form of a crown with protrusions around it. In humans, they're normally dispersed through the airborne droplets of fluid that are developed by the infected individuals.
As of now the virus, scientifically designated as 2019 - nCoV, has spread across at least 68 countries and territories around the world and 1 international conveyance (the Diamond Princess cruise ship harbored in Yokohama, Japan).
With its death toll reaching 3,046 as of 2nd March, according to Worldometer, the virus’s outbreak has exceeded that of SARS, it’s worldwide death toll being 774.
The new cases are surging to double-digit percentages over the past 2 days with no indication of declining. Overall over 89,073 people are confirmed to have been affected.
As China strives to survive the onset of the coronavirus, sizable sectors and services of the nation have been afflicted that include retailers, restaurants, tourism and many more. It’s not just the human cost but the economic cost is also mounting and not just in China.
With the crisis embarking around the time of the Lunar New Year the exposure of industries towards commercial losses has escalated. The need for companies to act and make decisions promptly has risen with the virus spreading to over 56 countries and putting the world economy on survival mode. The virus has mangled global supply chains, struck air travel and convulsed markets as it appears all set to adversely impact the U.S. economy, the global economic engine.
The long term outlook becomes vital for companies in evaluating their supply chains and in ensuring that access to raw materials, components and finished goods in the future will not be hindered by any such catastrophes.
Wuhan is the industrial hub for the business operations of numerous Chinese and international companies that include automobile companies like Honda and Nissan and also various fast food chains that include McDonald’s, Pizza Hut and KFC. Thus as the virus spreads and expands from Wuhan’s epicentre the top priority becomes securing lives and reducing the circulation of the disease and the measures taken for the same are leaving a considerable impact upon the economy.
1. One of the major areas impacted is the prices of industrial commodities where China is a prominent buyer. Oil prices have descended discernibly owing to the reduced demand for gasoline, diesel and jet fuel, thus leading Saudi Arabia stressing on deep cuts in oil production in order to stabilize prices to deal with the falling demand.
As per data from EconoTimes U.S. crude oil fell 16% during the week, settling Friday at $44.76 a barrel. Brent crude, the international standard, dropped 14% for the week to its lowest levels since July 2017, closing Friday at $50.52 a barrel.
Meanwhile, shares of Exxon Mobil tumbled to $49.82 on Thursday, reaching a 15-year low, before rebounding more than 3% on Friday. Chevron Corp. shares hit their lowest level in nearly four years on Friday.
2. Various technology firms are halting their operations in China. For instance, Apple, that has suppliers within Wuhan, has closed a number of its supplier factories from the end of January to mid- February. It’s chief Chinese supplier Foxconn is reported to have curtailed almost all it’s Chinese production operations.
Hindrances in deliveries are particularly harmful for the countries which are hugely dependent on electronic supplies from China. For instance, in 2019 Japan imported more than 45 billion dollars’ worth of Chinese electrical and electronic goods.
3. Yet another impacted sector is that of the Automotive supply chain. Coronavirus has led to several automakers carmakers stretching the closure of their plants beyond the Chinese New Year until the second week of February.
4. With the virus showing no signs of a slowdown the Chinese Market is also one of the areas facing its brunt. Numerous global brands are bracing themselves for a considerable hit.
Another passion of Chinese travellers is luxury retail that represented 33% of the market share for personal luxury goods in 2018, a share that had been projected to rise to 46% by 2025. The industry is now facing its biggest challenge since 2008, as major luxury groups such as Kerring, LVMH and Tiffany become increasingly dependent on rising Chinese demand.
5. One sector that has been prominently impacted on a global scale is the Tourism sector. Various airlines going to and from China have also been suspended that include American, Delta and United Airlines.
6. Food and beverage chains like McDonalds and Starbucks have also shut down their stores and curtailed their services in China. Starbucks, which operates over 4000 stores in mainland China recently disclosed that more than half its stores in the country have been temporarily sealed owing to the outbreak. The firm said the financial impact “cannot be reasonably estimated at this time”
"China is a critical market for us and we're very concerned about the situation over there," McDonald's CEO Chris Kempczinski has stated over the brand shutting down its stores in Hubei province.
China’s isolation amidst the eruption of coronavirus has induced a shock rippling throughout the globe and bears the threat of impacting the economy, not only on an international but also on a global scale.
With the virus bringing disruption in the worldwide trade as well as supply chains thus leading to declining asset prices, the need for limiting risks and effectively maintaining the flow of goods and services has highly escalated.
This is crucial for business leaders to comprehend their vulnerabilities in light of the circumstances and to implement long term solutions in order to reduce risks, both for the people as well as the production in the future. For more blogs on Analytics, Do read Analytics Steps!
Mallika is an eager and enthusiastic writer at Analytics Steps. Mallika believes that words hold the power to clarify and illuminate technicalities of various subjects and help readers in gaining understanding and knowledge. Her love for exploring and absorbing new technologies helps her keep pace with the ever changing digital world.
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