In 2020, French GDP fell by 8.3%. The Covid-19 crisis has affected the entire economy, but some companies have resisted better than others. How can such resilience be explained ? A study conducted by ESSEC Business School on 306 French companies at the end of 2020 provides some answers to this question.
To understand why some companies have managed to do well while others are currently on the brink, we looked at three factors : industry, general characteristics of companies and their strategy.
No economic fatality
First, it emerges that the sector of activity only partly explains the various fortunes of companies. In other words, within the same sector, some companies were able to sink into difficulties while others resisted.
The impact of the sector of activity was measured using the 11 categories of the INSEE classification. Statistical analyzes show that it explains exactly 50% of the change in business turnover.
This result can be explained in large part by the disproportionate impact of health measures in the hotel and restaurant industry. In this sector, 86% of companies experienced a decline in their turnover, 14% of them managed to maintain it … and none managed to increase it. On the other hand, the situation is more contrasted in the other sectors: in IT and telecommunications for example, 41% of companies have managed to maintain or increase their turnover, while in the construction and construction sector. BTP, more than a third of companies have succeeded in stabilizing or increasing theirs.
There is therefore no economic fatality. Just being in a “good” or “bad” industry during a recession like the one we are currently experiencing is not enough to explain the differences in performance.
Beyond age and size (which explain only 2% of performance differences), company strategy plays a crucial role. It explains 48% of the change in their turnover since the start of the Covid-19 crisis. But not all strategies are created equal in the face of a recession …
Innovation, digital and HR investment: winning strategies
Strict cost management is sometimes touted as the best way to weather a recession. Unexpectedly, companies that use this strategy have seen a larger drop in revenue than others. One possible explanation is that they have not made the necessary efforts to adapt their offer to the new needs of their customers.
Companies that focus on improving the quality of their products or services have also suffered more than others. There, the explanation is simple: in times of recession, consumers, worried about the future, become more price sensitive. In particular, they tend to shift their purchases to cheaper products.
Finally, innovation, digital and HR investment seem to have been the “winning” strategies since the start of the Covid-19 crisis. The advantage of the strategy based on innovation and HR investment is that it has made it possible to rapidly develop offers adapted to new consumer demands. For their part, companies that have put digital at the heart of their strategy have managed to maintain the link with their customers… but also to reach new customers.
Not all companies have therefore suffered as much from the Covid-19 crisis. If the fact of being in the “good” or in the “bad” sector undeniably plays an important role but not necessarily decisive, the strategy can explain the disparities between the companies present on the same activity. To avoid a collapse in turnover in times of crisis, it is better to focus on innovation, digital and investment in human resources rather than on strict cost management or quality improvement of its products or services.
Source: study conducted by ESSEC Business School on 306 French companies at the end of 2020
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