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The coronavirus epidemic, which originated in China last December, is spreading rapidly across the globe threatening both human lives and economic growth. Following a week-long rout at the end of February, stocks lost some 10% of their value in global markets, prompting media outlets to call this the “worst week since the 2008 crisis.”
As the world reels under the shock, what role can companies play in leading the recovery from such disasters? Knowledge@Wharton discussed this question with Wharton management professors Michael Useem and Tyler Wry as well as George Washington University’s Luis Ballesteros. Their research indicates that corporations can play a positive role in the recovery from disasters like the coronavirus epidemic. The reason is that companies can react faster than traditional relief providers such as governments, multilateral agencies and non-governmental organizations.
An edited transcript of the interview appears below. (Listen to the podcast at the top of this page.)
Knowledge@Wharton: Your research is very topical in view of the coronavirus contagion. What is your assessment of the disaster? Is this something you see as being short-lived or will it require a longer recovery process?
Luis Ballesteros: We recently completed a study on several types of disruptions, including pandemics, and their economic consequences for business organizations.
What is potentially damaging for companies in the case of the coronavirus is the reliance on China. Arguably, the internationalization of business in the last 20 years has been highly driven by the role of China and the role of technology. If you consider what China was in 2002-2003, when we had the last big pandemic, China’s share of global GDP at the time was around 4%. Now, that same number is close to 20%. That tells you the dependence that the global economy has on China, and the importance it has for not only large companies that are located in Wuhan city [from where the virus originated], but also small- and medium-sized enterprises that are able to compete at a global level because they have been outsourcing their production to China to achieve a lower labor cost.
The situation is still evolving; no one knows what is going to happen. Some large companies like Apple and the car companies located in Wuhan have reduced their annual growth estimates. Small and medium enterprises are likely to suffer the most from this shock. There are estimates coming from China that around 97% of small and medium Chinese enterprises may be financially hit by the virus. We know from our research that around 75% of them might be out of market if they do not get back to operate within three weeks, simply because they are going to run out of cash.
Other estimates suggest that the virus could make the global economy lose over $1 trillion in income. This is an evolving situation, and the fact that the business organizations have been highly affected has driven their response.
“The fact that the emergency is assessed by business organizations faster than governments is really important because the ultimate cost of the shock depends on what happens during the first weeks.” –– Luis Ballesteros
Tyler Wry: I think Luis hit it on the head. The big challenge that comes from something like this is the disruption to companies that have ties with China. And because the global economy is so intertwined, this has huge implications for global supply chains and especially for small- and medium-sized enterprises that rely on these to be competitive, both in domestic and global markets. In terms of what the overall effects of this virus are going to be, I think it’s still an open question. It’s probably going to lead to some firms failing. Larger firms will be able to absorb the hit, but how disruptive this becomes, how long-term the consequences are, and what the recovery period looks like – all that will depend on how long it takes to get this under control.
If we look at previous pandemics — SARS, MERS, other coronaviruses — this will come to an end. A vaccine will be developed. It will be brought under control, and things will get back to normal until the next disruption. But if this ends up being something that takes a while because of the specifics of this disease and how communicable it is, it could create bigger challenges than some others have.
Michael Useem: To put that into perspective, SARS, back in 2002-2003 is estimated to have knocked about 1% out of the annual growth of the Chinese GDP. We’ve already heard Luis mention that maybe worldwide it could be at least a couple of points and even more. That’s a way of saying that this is a crisis of a magnitude potentially that exceeds anything that we’ve seen in recent years.
That said, what’s especially interesting to us is the fact that companies now [realize], appreciating the kinds of numbers we’re looking at, that they have to become involved in several ways. On the more — let’s call it the “reactive” side — companies we know from direct contact are now spending a lot of time thinking about the impact on their employees, especially if they have operations in China. Like Apple, for instance, where the suppliers are in China.
The first concern, of course, is the health of the employees, and many companies now are making a lot of phone calls to make certain that’s the primary agenda. Then there are all these, call them “very important” — not even secondary — very important, though second-concern agendas — of making payroll, of getting parts for auto-making even in Korea, which has been affected directly by its part suppliers around Wuhan.
And third, many companies now are beginning to think about what they can do more proactively to help China, to stop the epidemic spread. So makers of medical equipment, as happened in the case of Ebola in West Africa, are mobilizing to contribute equipment and expertise. For us, that’s one of the new developments of the last 15 years, where companies worldwide quickly work to defend their own self-interests and concerns, obviously the health of their employees among those, but they are increasingly playing an active role on the global stage in providing equipment, supplies, expertise and beyond.
Knowledge@Wharton: We have here a natural link to your research, in terms of how companies respond to lead the recovery process. Could you talk about your study and some of the key findings?
Wry: What makes a case like this interesting is that it’s different from other types of natural disasters, where you have some sort of destruction of physical infrastructure. When you look at earthquakes, hurricanes, floods, a lot of the corporate response is, “Okay, how can we quickly get in to restore market function?” You know, build the infrastructure back up, get markets working again, and get back to business as usual.
There is a really interesting question about what the corporate response looks like in a context like this, where the human suffering is not as acute or on the same sort of scale as the rapid-onset natural disaster. As Mike was saying, companies are coming in to lend support, logistics and expertise to aid in the recovery. I think that is going to happen because there is interest in getting things back up and running and doing everything that companies can to minimize the amount of disruption this is going to cause. What does that looks like in this specific context? I’m not sure.
“We know from our research that if companies get involved faster it tends to have a positive effect on recovery.” –– Tyler Wry
Ballesteros: That’s an important point. This is a specific type of disruption that is evolving. That complicates the response and changes the potential effect of aid coming from traditional sources like governments and multilateral agencies, but also private companies. But what is interesting, and basically fits what Tyler, Mike, and I have been studying, is the rapid response by business organizations. This space is much faster than whatever response comes from traditional actors. This is basically at the center of what we think is the factor explaining the effect of why countries that receive a substantial amount of aid from multinational enterprises recover faster. The fact that the emergency is assessed by business organizations faster than governments is really important because the ultimate cost of the shock depends on what happens during the first weeks.
If you saw what happened with the coronavirus, it’s precisely what we have seen in so many other cases, especially in natural disasters. There was the traditional period of assessment by the World Health Organization in trying to understand whether or not this should be a global public-health emergency. It took time for them to ring the bell and when they called an emergency, reports suggest that they did not have an accurate appreciation of the Chinese efforts to manage the disruption. We saw, for instance, a huge spike in the number of victims that happened in just one day. The reason for that is that we know now that there was an undercounting of the magnitude of the crisis. This has a lot of implications for funding that comes from abroad, and especially funding that comes from traditional sources, such as the OECD and national governments. The activation of the traditional system relies on the formal declarations of emergency.
So there’s a lot of uncertainty among sources of emergency aid. On the other hand, you see cases of multinational enterprises that have local operations in Wuhan that were responding before any formal declaration of emergency; helping their employees just a few days after the first news of the crisis. It took several days for traditional responders to come to the area.
Useem: Every crisis of this magnitude often feels like, well, this is an event we haven’t dealt with before — which is partly true. This is, in a sense, as unique as the Fukushima disaster after the tsunami in Japan back in 2011. Who would have ever anticipated that those nuclear power plants located at Fukushima would be close to full meltdown? But that did happen. And with the coronavirus now, I think nobody truly anticipated it would break out with the scale that it has displayed.
That said, we’re in a different era now than we were 20 years ago. Companies have accepted the norm that a company of any magnitude, regardless of country, when a new crisis of this magnitude comes along, they have to step forward, first of all to ensure employee safety, and secondly to get the business operating. Call it “resilience.”
The third and really interesting avenue that we’ve been tracking is that since the relief coming from governments, the World Bank, United Nations and NGOs no longer matches the need for support, for supplies, for face masks in the case of China, companies are increasingly stepping forward. This is because of the norm that if you are a company or a human, in a crisis like this you have to do something that goes beyond your own immediate self-interest. So what’s remarkable, and we’re going to see more of this in China I think, is you’re going to see companies probably still in the germination stage in executive thinking, saying, “What can we do, not bottom line, not getting our supply chains going again — but what can we do to help China and the people of Wuhan dig out of the disaster that they’ve encountered?”
Knowledge@Wharton: What are some of the most important lessons that can be learned — from past disasters and the way companies responded to them — that could help people today in dealing with the coronavirus crisis?
Ballesteros: The elements that we observed in the different studies that we have worked on are related to the capacities that business organizations have in normal market operations that are used during the responses to these grand challenges. There are two ways business organizations normally respond — one is donating cash and the other is donating in-kind resources.
In-kind resources might be related with a company sending their engineers to the affected area to use their skills to orchestrate a response. You have companies like DHL that have played a central role in logistics, in navigating the delivery of disaster goods to the affected area, coordinating with national governments, in airports, to deliver to the victims.
Coca-Cola, during the tsunami of 2004, transformed the bottling line to produce water and used their own trucks to deliver to the victims. So what Tyler, Mike, and I observed is that the effect of the response by multinational enterprises is the highest. The reason is that the response builds on the core competencies and skills that companies have in the markets they serve.
“If you are absent from the field when there is a crisis, and you could have done something, people are relatively unforgiving of those that sat on their hands during a tough moment.” –– Michael Useem
When that happens, there are many things that are important. One, for the organization it’s less costly to respond, because it’s tapping into its own resources. On the other hand, the efficiency is higher because there is this particular set of abilities and resources that the company has, that no other entity has — and those are used during the response. With the coronavirus, for instance, you have technology companies donating equipment to build a new field hospital in Wuhan. Auto companies coordinating with emergency teams on the ground in the area to try to help the victims, and especially their employees, fits this narrative. We cannot actually measure what’s going to be the impact of that, but if we can extrapolate any lesson from our previous research, it’s precisely that. What we’re seeing is a coordinated effort by business organizations, especially those organizations whose supply chains rely on China. And when that response taps into their core competencies and market activity, it is a win-win situation for the firms and for the affected communities.
Wry: One of the really interesting things about a case like this with the coronavirus is it raises the question of what the companies do when a disaster is in the process of unfolding. When you have a discrete event, the efforts become much more around recovery. But when there is something that is unfolding, and it is something that might fall a little bit outside of the core competencies that businesses have, what is their role in helping to deal with this? Obviously they’re motivated. And we know from our research that if companies get involved faster it tends to have a positive effect on recovery. But how can companies learn from previous instances where there have been pandemics, epidemics — both in China and in different parts of the world? What are the mechanisms that can increase the learning and the effectiveness and the coordination of these collective corporate responses and how can they best work with other players who are on the ground and have the main expertise in epidemiology, immunology and the domains that are going to be really important for getting this under control?
I think that this is an area for future research. We certainly have some interesting suggestions that companies can, should, and do play a role here. But in terms of what are the lessons that you take? How do we ensure that learning takes root and companies become progressively more effective in dealing with these things? I think we’re still looking for the answers.
Useem: Here’s a final thought building on what’s just been said. A belief, a norm, a kind of an almost world culture in business has now emerged, that companies should be engaged — not just with delivery and shareholder value — but helping governments develop policy. When a company has a unique position of being present in a country, or having a supply chain that’s able to divert its resources in a different direction, as that understanding has developed, companies, just like humans, have to be involved. Sitting in a company office or a university office, for that matter, we ought to be asking: “What can we do to help contribute in our own way — goods, supplies, expertise, money — to help solve the problem?”
We have found in several instances, building now from experience and not from research — but I think it’s going to be a research-supported proposition, too – that if you are absent from the field when there is a crisis, and you could have done something, people are relatively unforgiving of those who sat on their hands during a tough moment.
For example, we tracked one bank during the Fukushima crisis in Japan after the tsunami in 2011. It was on the verge of withdrawing its 1,000 employees from Tokyo. It had a huge presence. It’s one of the world’s great banks. It opted to stay the course, to not evacuate when others were. And to this day, the government of Japan is thankful to the company for taking this stand. It’s a judgment call on how that is done, of course. It has to be exquisitely exercised. But the bigger point, I think, from our research is that as companies, as universities, we have to get involved when there’s a crisis of this magnitude.
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Anumakonda Jagadeesh
2019–20 coronavirus outbreak
The 2019–20 coronavirus outbreak is an ongoing public health emergency of international concern involving coronavirus disease 2019. It is caused by SARS-CoV-2, first identified in Wuhan, Hubei, China. As of 4 March 2020, more than 93,000 cases have been confirmed, of which 7,100 were classified as serious. 80 countries and territories have been affected, with major outbreaks in Central China, South Korea, Italy, and Iran. More than 3,200 people have died: almost 3,000 in mainland China and more than 220 in other countries. More than 50,000 people have recovered.
The virus primarily spreads between people in a similar way to influenza, via respiratory droplets produced during coughing or sneezing. The time between exposure and symptom onset is typically five days, but may range from two to fourteen days. Symptoms may include fever, cough, and shortness of breath. Complications may include pneumonia and acute respiratory distress syndrome. There is currently no vaccine or specific antiviral treatment, though research is ongoing. Efforts are aimed at managing symptoms and supportive therapy. Recommended preventive measures include hand washing, maintaining distance from people who are sick, and monitoring and self-isolation for fourteen days for people who suspect they are infected.
Public health responses in China and around the world have included travel restrictions, quarantines, and curfews. These have included the lockdown of Hubei and various curfew measures in China; the quarantine of the cruise ship Diamond Princess in Japanese waters; as well as lockdowns in Italy. Some airports and train stations have instituted screening methods such as temperature checks and health declaration forms. Several countries have issued advisories warning against travel to regions with ongoing community transmission, such as Central China, Italy and Iran.
Wider concerns about consequences of the outbreak include political and economic instability. They have also included xenophobia and racism against people of Chinese and East Asian descent, and the spread of misinformation about the virus, primarily online.
Signs and symptoms
COVID-19 symptoms
Those infected may either be asymptomatic or develop symptoms such as fever, cough, fatigue, shortness of breath, or muscle pain. A WHO review of 55,924 laboratory-confirmed cases in China indicated the following typical signs and symptoms:[74]
Symptom Percentage
Fever 87.9%
Dry cough 67.7%
Fatigue 38.1%
Sputum production
33.4%
Shortness of breath 18.6%
Sore throat 13.9%
Headache 13.6%
Muscle pain or joint pain
14.8%
Chills 11.4%
Nausea or vomiting 5%
Nasal congestion 4.8%
Diarrhoea 3.7%
Haemoptysis
0.9%
Conjunctival congestion
0.8%
The first person known to have fallen ill due to the new virus was in Wuhan on 1 December 2019. A public notice on the outbreak was released 30 days later by Wuhan health authority on 31 December 2019; the initial notice informed Wuhan residents that there was no clear evidence of human-to-human transmission of the virus, that the disease is preventable and controllable, and that people can wear masks when going out. WHO was informed of the outbreak on the same day.
On 7 January 2020, the Chinese Communist Party Politburo Standing Committee discussed novel coronavirus prevention and control.
On 20 January, Zhong Nanshan, a scientist at China’s National Health Commission who played a prominent role in the SARS epidemic, declared its potential for human-to-human transmission, after two cases emerged in Guangdong of infection by family members who had visited Wuhan. This was later confirmed by the Wuhan government, which announced a number of new measures such as cancelling the Chinese New Year celebrations, in addition to measures such as checking the temperature of passengers at transport terminals first introduced on 14 January. A quarantine was announced on 23 January 2020 stopping travel in and out of Wuhan.
On 25 January, Chinese authorities banned the use of private vehicles in Wuhan. Only vehicles that are transporting critical supplies or emergency response vehicles are allowed to move within the city.
On 26 January, a leading group tasked with the prevention and control of the novel coronavirus outbreak was established, led by Chinese Premier Li Keqiang. The leading group decided to extend the Spring Festival holiday to contain the outbreak.
China Customs started requiring that all passengers entering and exiting China fill in an extra health declaration form from 26 January. The health declaration form was mentioned in China’s Frontier Health and Quarantine Law, granting the customs rights to require it if needed.
On 27 January, the General Office of the State Council of China, one of the top governing bodies of the People’s Republic, officially declared a nation-wide extension on the New Year holiday and the postponement of the coming spring semester. The office extended the previously scheduled public holiday from 30 January, to 2 February, while it said school openings for the spring semester would be announced in the future. Some universities with open campuses also banned the public from visiting. On 23 January, the education department in Hunan, which neighbours the centre of the outbreak Hubei province, stated it would strictly ban off-school tutors and restrict student gatherings. Education departments in Shanghai and Shenzhen also imposed bans on off-school tutoring and requested that schools track and report students who had been to Wuhan or Hubei province during the winter break. The semi-autonomous regions of Hong Kong and Macau also announced adjustments on schooling schedules. Hong Kong’s Chief Executive Carrie Lam declared an emergency at a press conference on 25 January, saying the government would close primary and secondary schools for two more weeks on top of the previously scheduled New Year holiday, pushing the date for school reopening to 17 February. Macau closed several museums and libraries, and prolonged the New Year holiday break to 11 February for higher education institutions and 10 February for others. The University of Macau said they would track the physical conditions of students who have been to Wuhan during the New Year break.
After the Chinese New Year on 25 January, there would be another peak of people travelling back from their hometowns to workplaces as a part of Chunyun. Several provinces and cities encouraged people to stay in their hometowns and not travel back. Eastern China’s Suzhou also encouraged remote working via the Internet and further prolonged the spring festival break.
The Civil Aviation Administration of China and the China State Railway Group, which regulate China’s civil aviation and operates rail services, announced on 24 January that passengers could have full refunds for their plane and train tickets without any additional surcharges, regardless of whether their flight or train will go through Wuhan or not. China’s Ministry of Culture and Tourism ordered travel agencies and online tourism firms to suspend package tours and stop offering “flight+hotel” bundles.
Additional provinces and cities outside Hubei imposed travel restrictions. Beijing suspended all intercity bus services on 25 January, with several others following suit.
On 1 February 2020, Xinhua News reported that China’s Supreme People’s Procuratorate (SPP) has “asked procuratorates nationwide to fully play their role to create a favourable judicial environment in the fight against the novel coronavirus outbreak.” This includes severe punishments for those found guilty of dereliction of duty and the withholding of information for officials. Tougher charges were proscribed for commercial criminal activities such as “the pushing up of prices, profiteering and severely disturbing market order” along with the “production and sale of fake and shoddy protective equipment and medicines.” Prosecuting actions against patients who deliberately spread the infection or refuse examination or compulsory isolation along with threats of violence against medical personnel were also urged. The statement also included urging to prosecute those found “fabricating coronavirus-related information that may lead to panic among the public, making up and spreading rumors about the virus, sabotaging the implementation of the law and endangering public security” and also stressed “harshly punishing the illegal hunting of wildlife under state protection, as well as improving inspection and quarantine measures for fresh food and meat products.”
Museums throughout China are temporarily closed. The National Cultural Heritage Administration (NCHA) asked museums around the country to move their exhibits and galleries temporarily online via a program that the NCHA is launching.
Cities under quarantine (
• v
• t
• e
)
Place Province Start date City level
Population Cases Deaths Recoveries
Border shutdown[179]
Wuhan
Hubei 2020-01-23 Sub-provincial 11,081,000 49,540 2,282 24,890
Xiaogan
Hubei 2020-01-24 Prefectural 4,920,000 3,518 120 2,713
Huanggang
Hubei 2020-01-23 Prefectural 6,330,000 2,907 121 2,406
Jingzhou
Hubei 2020-01-24 Prefectural 5,590,200 1,580 48 1,215
Ezhou
Hubei 2020-01-23 Prefectural 1,077,700 1,392 49 880
Suizhou
Hubei 2020-01-24 Prefectural 2,216,700 1,307 42 937
Xiangyang[180]
Hubei 2020-01-28 Prefectural 5,669,000 1,175 34 940
Huangshi
Hubei 2020-01-24 Prefectural 2,470,700 1,014 36 783
Yichang
Hubei 2020-01-24 Prefectural 4,135,850 931 32 608
Jingmen
Hubei 2020-01-24 Prefectural 2,896,500 928 39 664
Xianning
Hubei 2020-01-24 Prefectural 2,543,300 836 14 759
Shiyan
Hubei 2020-01-24 Prefectural 3,406,000 672 7 505
Xiantao
Hubei 2020-01-24 Sub-prefectural 1,140,500 575 20 477
Tianmen
Hubei 2020-01-24 Sub-prefectural 1,272,300 496 14 421
Enshi
Hubei 2020-01-24 Prefectural 3,378,000 252 4 205
Qianjiang
Hubei 2020-01-24 Sub-prefectural 966,000 198 9 142
Quarantine total 59,170,000 67,332 2,871 38,556
* Infected and death data as of 24:00 3 March 2020.[181][182] Outbreak ongoing: tolls are not definitive.
Socio-economic impact
The coronavirus outbreak has been attributed to several instances of supply shortages, stemming from: globally increased usage of equipment to fight the outbreaks, panic buying and disruption to factory and logistic operations. The U.S. FDA has issued warnings about shortages to drugs and medical equipment due to increased market demand and supplier disruption. Several localities, such as the United States, Italy and Hong Kong, also witnessed panic buying that led to shelves being cleared of grocery essentials such as food, toilet paper and bottled water, inducing supply shortages. The technology industry in particular has been warning about delays to shipments of electronic goods. According to WHO director-general Tedros Adhanom, the demand for personal protection equipment has risen 100-fold and this demand has lead to the increase in prices of up to twenty times the normal price and also induced delays on the supply of medical items for four to six months.
A number of provincial-level administrators of the China Communist Party were dismissed over their handling of the quarantine efforts in Central China, a sign of discontent with the political establishment’s response to the outbreak in those regions. Some commentators have suggested that outcry over the disease could be a rare protest against the CCP. Additionally, protests in the special administrative region of Hong Kong have strengthened due to fears of immigration from Mainland China. Taiwan has also voiced concern over being included in any travel ban involving the People’s Republic of China due to the “one-China policy” and its disputed political status. A few countries have been using the epidemic to build political bridges with Beijing, raising accusations that these countries, which include Cambodia among others, were putting politics before health, attempting to use the outbreak to show tribute to the CCP. It is thought that existing tensions between the U.S. and China may have delayed a coordinated effort to combat the outbreak in Wuhan.
As Mainland China is a major economy and a manufacturing hub, the viral outbreak has been seen to pose a major destabilising threat to the global economy. Agathe Demarais of the Economist Intelligence Unit has forecast that markets will remain volatile until a clearer image emerges on potential outcomes. Some analysts have estimated that the economic fallout of the epidemic on global growth could surpass that of the SARS outbreak. Dr. Panos Kouvelis, director of “The Boeing Center” at Washington University in St. Louis, estimates a $300+ billion impact on world’s supply chain that could last up to two years.[576] Organization of the Petroleum Exporting Countries reportedly “scrambled” after a steep decline in oil prices due to lower demand from China. Global stock markets fell on 24 February 2020 due to a significant rise in the number of COVID-19 cases outside Mainland China.[578][579] On 27 February, due to mounting worries about the coronavirus outbreak, various U.S. stock indexes including the NASDAQ-100, the S&P 500 Index, and the Dow Jones Industrial Average posted their sharpest falls since 2008, with the Dow falling 1,191 points, the largest one-day drop since the financial crisis of 2007–08. All three indexes ended the week down more than 10 percent.
Coronavirus fears have led to panic buying of essentials in Singapore and elsewhere, including (but not limited to) toilet paper, dried and/or instant noodles, bread, rice and vegetables
Tourism is one of the worst affected sectors due to a sharp fall in tourists from Mainland China and travel advisories warning against travel to parts of Central China, Italy, South Korea and Iran. As a consequence, numerous airlines have cancelled flights due to lower demand, including British Airways, China Eastern and Qantas. Several train stations and ferry ports have also been closed. The epidemic coincided with the Chunyun, a major travel season associated with the Chinese New Year holiday. A number of events involving large crowds were cancelled by national and regional governments, including annual New Year festivals, with private companies also independently closing their shops and tourist attractions such as Hong Kong Disneyland and Shanghai Disneyland. Many Lunar New Year events and tourist attractions have been closed to prevent mass gatherings, including the Forbidden City in Beijing and traditional temple fairs. In 24 of China’s 31 provinces, municipalities and regions, authorities extended the New Year’s holiday to 10 February, instructing most workplaces not to re-open until that date. These regions represented 80% of the country’s GDP and 90% of exports. Hong Kong raised its infectious disease response level to the highest and declared an emergency, closing schools until March and cancelling its New Year celebrations.
Saudi Arabia has temporarily banned foreigners from entering Mecca and Medina, two of Islam’s holiest pilgrimage sites, to prevent the spread of coronavirus in the Kingdom.
Another recent, and rapidly accelerating fallout of the disease is the cancellation of major events including technology conferences, fashion shows and sports.
(Wikipedia).
Dr.A.Jagadeesh Nellore(AP),India