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Internal and External Risks for Companies in the E-commerce Industry from COVID-19 Pandemic

Internal and External Risks for Companies in the E-commerce Industry

Internal Risks

One major change expected in e-commerce organizations is the management of orders and distribution channels. During or after a pandemic, resources become more limited and less available whenever needed. If there is ineffective management of resources, an organization lacks the strength it needs to sustain itself during and after a pandemic. There are so many changes within an organization that requires urgent attention when a problem is identified. For instance, a pandemic leads to unprecedented lockdowns that affects how employees respond and work thereafter. Organizations need to develop strategies that not only protect their long-term objective but also focused on offering the best to its stakeholders.

There are several internal risks to an organization as relates to unexpected events like the COVID-19 pandemic. Lack of raw materials or important elements of its distribution channel is one of these factors that though minor during normal times, means a lot during and after a pandemic. Alibaba group solves this problem by having suppliers sell directly to the customers through its platform. The company does not need to store the products in its warehouses as Amazon does, and a sudden rise in demand on its platform rarely causes any effect because of a large pool of suppliers in its Taobao market. On the other hand, Amazon has a vast number of warehouses and a distribution network that enables it to make free two-day shipping to its prime customers. Before a pandemic cause’s shortage at Amazon, the company will surely have had enough time to locate new products and possibly shift its supply chain whenever there is a need.

During and after a pandemic, management and specifically personnel management becomes crucial in moving an organization ahead of difficult times. Whenever the organization is unable to actively and effectively manage personnel after a pandemic, it is obvious that the organization may experience a rise in personnel turnover rates and poor personnel morale. Amazon is offering extra time off with full pay for employees diagnosed with COVID-19. This is one of how big companies are keeping employees focused on their role at work, by relieving them any unnecessary worries during hard economic times. The risk of having a poorly managed workplace during and after a pandemic is real in a dynamic economy. Alibaba Group, contrary to Amazon, acts as a middle man. The most crucial part of its supply chain is the suppliers. The company has invested hugely in technology that focuses on offering help to small and medium-sized enterprises in China hugely impacted by the pandemic. Alibaba has survived major pandemics like the 2003 SARS, which left many companies unable to continue with their business any longer. By offering low-interest and interest-free loans to small and medium-sized companies, Taobao and Tmall merchants can easily continue with their businesses, while retaining a flexible supply chain for Alibaba group at the end.

External Risks

The external environment is as much important as is the internal environment. Any pandemic causes huge external risks to organizations. Without adequate preparation against external risks, internal preparedness cannot guarantee an organization to stand firm in times of economic changes. During and after a pandemic, the global economy and demographics are affected, and ways to remain resilient in such times is usually one of the major focus among big companies. If a pandemic causes a decline in the economy, people have fewer savings and less available for consumption. This further translates to a decline in revenue for e-commerce companies. Even with an agile and visible supply chain, preparedness against external risks is vital to keeping the business running at all times.

Pandemics hit some organizations harder than others, and the majority of these companies are caused to make changes internally and influence external changes equally. Jobs are lost and people have less revenue to save. Fewer savings result in a decrease in consumer spending within the economy. E-commerce companies are majorly affected when consumer spending decreases because it depends on what consumers order from their homes. However, some organizations that are prepared well before a pandemic experience a surge in demand as more people buy online. For example, Amazon has had a huge boost after the COVID-19 pandemic as more consumers purchase commodities online.

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