Callback Enquiry +1 514 288 1997
The Global Leader in
Residence and Citizenship Planning

Enterprise Competitiveness in the Pandemic Context

DR. JOSÉ CABALLERO

DR. JOSÉ CABALLERO

Dr. José Caballero is the Senior Economist at the IMD World Competitiveness Center. His research interests focus on the sources of the competitiveness of countries and, more specifically, on the competitiveness of enterprises. He is particularly interested in practices and processes that strengthen the competitiveness of firms, which ultimately lead to the achievement of long-term value creation.

The Covid-19 pandemic has reverberated throughout society, bringing about a plethora of negative outcomes, ranging from socio-political, such as diminishing trust in governments, to psychological, such as mental health issues, and economic, such as rising unemployment. Furthermore, there are business-specific consequences that are leading to mounting threats to enterprise competitiveness as a result of business travel restrictions and lower productivity.

Competitive enterprises prioritize talent

Enterprise competitiveness refers to the capacity of business to create long-term value by remaining profitable while generating employment. Research shows that the fundamental factors for enterprise competitiveness include dynamic governance practices, innovation-driven culture, human capital, and employee engagement. Highly competitive companies employ talent development to drive sustainable growth and profitability. Competitive enterprises prioritize talent to drive higher productivity through lower turnover and high levels of staff motivation. Talent development is complemented by policies that ensure attracting, recruiting, and retaining talent.

Business travel restrictions are obstructing economic prosperity

To fight Covid-19, governments have adopted travel restrictions. Policies vary among countries — while some have implemented complete travel bans, others have restricted travel from specific areas. The most noticeable effect has been the decline in the influx of tourists on which many economies depend, and the tourism industry, particularly food and beverage, accommodation, and transportation, has been hardest hit by the impact of restrictions.

Another sector greatly affected is trade in services. In the Euro area, for example, during March 2020 the export of services declined by 10.6% while the import of services saw a drop of 3.3% compared to 2019. The impact of business travel restrictions, in particular, is likely to negatively affect employment and overall economic growth in cities and towns across the world. Already, multiple aspects of business travel-related sectors such as event organizing have been affected, which has a ripple effect in a multitude of related service providers including florists and dry cleaners.

Impeded labor mobility is affecting global enterprise competitiveness

One of the more latent effects of the current travel restrictions is the impact on enterprise competitiveness, particularly on that of multi-national businesses. Enterprise competitiveness is highly dependent on a constant access to an adequate talent pool. In this sense, multi-national businesses are reliant on international labor mobility. International employee transfers are used, for example, to strengthen the skills and competencies of an enterprise’s talent pipeline. In addition, companies take advantage of relocating their staff internationally to fill specific vacancies in certain locations or to strengthen the available talent in others.

Covid-19 travel restrictions have hampered labor mobility. In some of the countries worst hit by the pandemic, evidence of the effect of travel bans began to surface last year. In the IMD World Competitiveness Center’s annual executive survey (conducted in March and April 2020), we observed some worrying signs in the ranking trends among the key indicators for enterprise competitiveness. It is important to note that the sample on which the following discussion is based consists of 63 countries and that the comparison is between the 2019 and 2020 rankings. There is a decline — in some cases sharp — in the availability of senior managers with significant international experience (see Table 1).

Table 1 – Availability of senior managers with significant international experience

Country 2019 ranking 2020 ranking Change 
Greece 37th 47th -10
Italy 43rd 50th -7
Spain 39th 46th -7
US 29th 31st -2

 

The trend is relatively similar in the availability of competent senior managers (see Table 2).

Table 2 – Availability of competent senior managers 

Country 2019 ranking 2020 ranking Change 
Spain 33rd 51st -18
Italy 32nd 39th -7
Greece 37th 43rd -6
Portugal 45th 45th 0


Other relevant indicators for enterprise competitiveness show similar tendencies of decline or stagnation (see Tables 3, 4 and 5). In the prioritization of attracting and retaining talent, one of the greatest declines is the UK which fell from the 16th rank to 32nd (see Table 3).

Table 3 Prioritization of attracting and retaining talent

Country 2019 ranking 2020 ranking Change 
UK 16th 32nd -16
Italy 50th 60th -10
Spain 53rd 57th -4
Portugal 48th 49th -1


Table 4 Prioritization of staff training

Country 2019 ranking 2020 ranking Change 
Italy 50th 60th -10
Spain 47th 54th -7
UK 37th 41st -4
US 38th 40th -2
Portugal 58th 58th 0


Table 5 Staff motivation

Country 2019 ranking 2020 ranking Change 
Italy 34th 42nd -8
Portugal 47th 51st -4
Spain 45th 49th -4


Productivity has not escaped the pandemic

International Labour Organization data estimating the percentage of hours of work lost in 2020 due to the pandemic when compared to the adjusted fourth quarter of 2019 shows the potential impact of the Covid-19 crisis on productivity. In Italy, 13.5% of hours of work was lost, while Portugal lost 13.4%, Spain lost 13.2%, the UK lost 12.8%, Greece lost 12.6%, and the US lost 9.2%. Such loss of work time in combination with other factors such as declining motivation levels among staff will have a substantial impact on overall productivity.

To succeed, businesses must be agile and keep staff motivated by developing talent

The preceding trends are indeed worrying for enterprise competitiveness. They have the potential to affect enterprises’ long-term financial performance and their job creation capacity. That is to say, the pandemic and the regulations adopted to counteract it, such as travel restrictions, could have a lasting negative effect on enterprises. Research shows that to remain competitive in the current situation, businesses must first remain flexible in relation to work practices, for example, by adopting working-from-home policies. Second, they should remain adaptable in terms of the utilization of available talent, for instance, by redeploying available skills and competences to meet the demands for new or modified services. Third, enterprise competitiveness requires businesses to sustain their staff’s level of motivation, which can be achieved by providing skills development programs, for example (see Bris et al.). These factors are fundamental to create the conditions for a smoother transition to a post-pandemic environment and to ensure long-term enterprise competitiveness.

Notes

This research focuses on the competitiveness of Swiss enterprises, IMD World Competitiveness Center and Accenture (2014). “Business Competitiveness Switzerland: Summary of Results.” See also Bris, A, and Caballero, J. (2015). “Revisiting the Fundamentals of Competitiveness: A Proposal” in IMD World Competitiveness Yearbook, 2015. Lausanne: IMD World Competitiveness Center.

All data for the IMD World Competitiveness Center’s annual executive survey are available from World Competitiveness Online.

References

Bris, A., Caballero, J., Cabolis, C. and Pistis, M. (2020). “Trends in the World Talent Ranking, 2020.” In the IMD World Talent Ranking, 2020. Lausanne: IMD World Competitiveness Center.

Cameron, D, and Morath, E. “Covid-19's Blow to Business Travel Is Expected to Last for Years.” The Wall Street Journal. Dow Jones & Company, January 17, 2021.

Schuler, T. “Impact of the COVID-19 Lockdown on Trade in Travel Services.” ECB. European Central Bank, June 17, 2020.

REQUEST A CALLBACK