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‘A global disruption requires a global response’

Eric Pray weighs a lobster in his garage in Portland, Maine on May 29, 2020. The coronavirus shutdown has prompted Pray to that selling his product direct to customers. AP Photo by Robert F. Bukaty

When the border between the U.S. and Canada closed earlier this year to contain COVID-19, the owners of a small boutique hotel in northern Vermont saw their clientele dwindle virtually overnight. 

They took out a loan, and wondered if they should take out another. As the pandemic dragged on—with a steep drop in foot traffic—the husband and wife team found it harder to ignore a nagging question: Was the hotel worth keeping?

As nations across the world have come up with individual approaches to combat the spread of the coronavirus, the repercussions for international businesses have been intense. The Global Resilience Institute at Northeastern published two papers in October that address the challenges faced by domestic companies and multinational corporations and offer solutions in preparation for the next global disruption.

The project, funded through a grant from the Federal Emergency Management Agency, was undertaken by Luis Dau, associate professor of international business and strategy at Northeastern, in collaboration with his colleague Elizabeth Moore, assistant teaching professor of international business and strategy.

Courtesy photos.

The researchers found that the ability to adapt and pivot quickly, along with a willingness to pool knowledge and resources, contributed to the survival of businesses in sectors hit hardest by the pandemic, including the restaurant, hospitality, and events industries.

Some businesses found it easier to pivot. When demand for hand sanitizer surged in the spring at the outset of the pandemic, a whiskey distillery and kombucha brewery offered their excess alcohol to the sanitizer-making effort.

“There is so much we can learn from these companies,” says Dau. “Not putting all their eggs in one basket can be really beneficial, allowing them to rely simultaneously on their different businesses during the recovery.”

Some fisheries opted to bypass complicated supply chains by selling directly to customers.

“A lot of fishers, instead of trying to sell to restaurants, realized they couldn’t, and actually went out and sold the fish by themselves, literally on Facebook Marketplace,” says Moore. “We saw a rapid transition to other modes of selling that was really unique.”

Some businesses overcame challenges by creating strategic alliances with other businesses, she says. In Vermont, a restaurant was forced to close its doors because it lacked an outdoor patio. The bookstore next door had the outdoor space, but no foot traffic. So the owners of the two businesses partnered up to share their spaces with the caveat that the bookstore would put its books on display outside.

Moore found that established relationships can lead to new opportunities. To support coastal communities, banks teamed up with consultants to offer training programs that helped small businesses make sense of existing trading relationships and branch into new markets. For example, there’s a strong relationship between some of the Nordic countries and Maine, giving businesses access to beneficial shipping routes and ports. Businesses throughout the Northeast could potentially seek other potential relationships overseas, Moore says.

But alongside the innovative solutions, the studies found fears and uncertainty among business owners. As key real estate in small tourist cities and towns has gotten bought out by large buyers, one of the biggest concerns shared by owners of restaurants and shops was that international buyers would snatch up valuable commercial properties.

The business owners also told Moore they’d encountered challenges navigating the policies and rules implemented by different countries. Developing a standard set of solutions ahead of the next pandemic or global crisis will be crucial for the viability of international companies, she says.

Companies should avoid depending on the same suppliers or buyers, but instead cultivate an alternate distribution network, says Dau. That way, if there’s a problem with one supplier or a political issue with the country in which the supplier is based, companies can avoid disruptions to their supply chain and access to necessary resources.

“This may seem evident, but if a firm does not preemptively develop this network of suppliers and buyers, it will be much more challenging to do so once a serious disruption occurs,” Dau says.

Building and strengthening those relationships ahead of time has other benefits. At the height of the pandemic, many businesses struggled to keep up with the ever-evolving regulatory requirements. To address that problem, some domestic and multinational corporations set up learning groups in which they took turns keeping an eye on regulatory changes within their sectors.

“In this project, we saw it mostly in domestic communities, but that’s something that could be certainly expanded globally,” Moore says.

Multinational corporations, which commonly impart guidelines to their subsidiaries, would benefit from learning from their subsidiaries, too.

“This knowledge-sharing can make companies more resilient, more prepared for any kind of disruption,” says Dau. “There are different types of valuable knowledge they can share across their network of affiliated firms, including institutional knowledge, competitive knowledge, and internationalization knowledge,” Dau says.

Because multinational corporations and international organizations are global actors, they can assist government response efforts by developing frameworks for sharing resources and knowledge during a crisis. And governments can make it easier for businesses to stay afloat—and help the economy to rebound—by relaxing restrictions on loans and providing more flexible funding, says Dau.

“We’re making a case for the benefits of connectedness for companies and for governments in an era when we’re seeing increased nationalism and isolationism across the globe,” he says. “My hope is that a silver lining of the coronavirus pandemic is in helping people and governments see the dangers of isolationism.”

Above all, preparedness will go a long way in surviving the next global disruption, the researchers say. While businesses won’t be able to completely avoid fallout from a crisis, they’ll be better equipped to respond. 

“One takeaway that I would tell all businesses, regardless of size, regardless of where they are, regardless of whether they’re multinational or not, is try your best to be as knowledgeable as possible,” Moore says.

All businesses could be in a stronger position next time there’s a crisis by building and using their knowledge about financing options and what it means for a business to take on debt in their decision-making.

“We will likely experience other serious pandemics and global disruptions within our lifetimes,” says Dau. “So if companies develop relevant contingency plans and personnel training, they will be much more prepared and resilient as a result.”

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