Multinational Corporations: Vodafone Egypt and Management Strategies

This report analyzes the management strategies of Vodafone Egypt, a multinational corporation (MNC), focusing on the challenges of operating in the Egyptian market. It examines the interplay between localization and internationalization, exploring how Vodafone adapted to local economic, political, and social conditions. The case study highlights the decision-making process of Vodafone Egypt's CEO, Hatem Dowidar, during the 2011 Egyptian crisis, when the government requested the shutdown of mobile services. The report discusses theoretical frameworks such as the Uppsala model, contingency theory, and agency theory to understand the complexities of MNC management, including the influence of corporate culture, the importance of local knowledge, and the role of CSR. It assesses various strategic options available to the CEO and concludes with recommendations emphasizing the need to balance global values with local requirements and the importance of business diplomacy. The report also references the company's commitment to ethical behavior, sustainability, and community development through its CSR initiatives, providing a comprehensive overview of Vodafone Egypt's operations and management challenges.

Management of Multinational Corporations: The case of Vodafone Egypt
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The multinational companies (MNCs) that establish subsidiaries are required to adapt to the
conditions of the host countries, including the economic, political and social conditions. The
management control in the headquarter assists in aligning the managerial decisions and actions
with the corporate goals. The MNCs use various mechanisms represented in planning, training
and development and procedures standardization of their subsidiaries. Researchers argue about
the degree of internationalization in relation to control. The highly internationalized companies
depend on their goals and performance evaluation. The local requirements of the host country
have to be aligned with the organizational global strategy to avoid any conflicts between the
global and local goals (Sageder 2018). Vodafone international has entered the Egyptian market
in 1998 as part of its expansion plan in the emerging markets. It was the second operator in the
Egyptian telecommunication market as the first operator is Mobinil (Vodafone Egyot 2018). The
theoretical argument that supports and rejects localization are related to the external factors as
different value systems, organizational legitimacy and the efficiency and effectiveness of the
corporate social responsibility (CSR) (Bustamante 2011). The corporate culture of the parent
company influences the management and staff involvement in the control process.
The cultural distance has a positive relationship to the delegation of the expatriates. On the
contrast, the geographical distance imposes more control (Sageder 2018). The subsidiary
adaptation to the local culture is a result of the country-specific knowledge that decreases the
MNCs foreignness. Accordingly, if the MNC is operating in an unfamiliar business environment,
it has to be adaptive and responsive (Luo 2016). The CEO of Vodafone Egypt, Hatem Dowidar
has faced a complicated decision-making process when the political crisis of the Egyptian strikes
on the 27th of January evolved and the government of Egypt asked him to cut the mobile service
in the Tahrir square to be able to manage the situation. The emergency law in Egypt enforces the

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three telecommunication companies dominating the market to cut the communication services
when it is needed, if they refused, the government has the right to cut it by force. This case
represents a culture difference between the home country values and the Egyptian values. The
company CEO in Egypt had to take a difficult decision that affects the company global
reputation. The political influence is not limited to the emerging countries, as the legal
requirements could complicate the business processes that have to meet all of the legal
regulations in all countries. The solution is business localization to facilitate the operations of the
MNCs (Sageder 2018).
According to the contingency theory, different factors influence the management control design.
The contingency theory examines the MNCs characteristics under the conditions of uncertainty.
The uncertainty conditions include culture and environmental uncertainty. The adaptation to the
host country requirement requires autonomy in decision making for local managers. The Agency
theory investigates the headquarters control in the developed and emerging markets. The foreign
subsidiaries are coordinated in the light of the decision rights and process control to reduce
information asymmetry between the subsidiaries and the headquarters. The environmental
factors are less relevant to the agency framework (Sageder 2018).
The personnel localization strategy refers to the market factors that influence the MNCs. The
host country enables them to become the most important local forces for the implementation of
localization (Sun 2012). According to the Uppsala model, the implementation of the company's
internationalization takes place in several stages. MNCs start their operations on a small scale,
then it expands its business in the foreign market gradually. This means that companies are
developed in several stages of decision making in their local countries before taking the decision
of internationalization. It also assumes that companies start to expand in the near markets with

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similar views, then they take the decision of expanding in other global markets (Nouria &
Abdelkader 2016).
In 2006, Vodafone Egypt launched Vodafone International Services, its offshore in order to
outsource the business process and IT services. The company has witnessed further expansion in
2007 by acquiring Raya Telecom to complement its activities. It has also acquired Sarmady
company in 2008, the specialized company in developing content and service with large
popularity in Egypt. Accordingly, Vodafone Egypt became the leader of innovation in the
market. The company vision is to become the communications leader in the increasingly
connected world, its mission is to connect and empower people and communities to accelerate
the development in Egypt. In this regard, Vodafone Egypt is highly committed to ethical,
responsible and honest built on Vodafone's global value system. The Vodafone Egypt
Foundation was established to support NGOs and the civil society to accelerate the
implementation of development projects in 2003 (Vodafone Egyot 2018).
An integrated analytical framework could be built on the Uppsala internationalization process
model. The company's internationalization process is influenced by its knowledge and expertise.
Factors that influence the company's internationalization are related to the organizations' ability
to exploit its firm-specific assets through the internationalization process, the decision of
investing in the host country and the government role in influencing the international investment
and take its advantage (Amal et al. 2013). Vodafone Egypt vision and values in relation to the
CSR are considered similar to the parent company values. Vodafone UK CSR aims to first;
demonstrate a responsible, honest and ethical behavior, Second: to promote greater eco-
efficiency, third: to contribute to the community development while focusing on the wellbeing of

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the children and employability of youth and forth: to develop a sustainable services and products
to satisfy the different needs of customers.
Local managers are among a network of social relationships that facilitate the establishment of
reliable business connections (Kuhlmann & Hutchings 2010; Gilani & Razeghi 2010). This
means that the selection of Hatem Dowidar as the CEO to Vodafone Egypt made it easier for
him to take the right decision when the government of Egypt ordered them to shut down the
mobile networks in the Tahrir square on January 27. The Egyptian authorities also asked the
three mobile operators to send propaganda short messages (SMS) to influence the Egyptians not
to take the side of the protesting forces. The legal system in the emerging markets is different
from the system in the underdeveloped and the developed countries. Some countries have high
bureaucracy than other countries (Zhao, Tan & Park 2014). Managers in the subsidiaries need to
manage the complexities they face in the host countries through the development of diplomatic
know-how. Not all of the MNCs have realized the importance of developing the diplomatic skills
of their managers, instead, they tend to hire a political diplomat. The MNCs have to expect
conflicts from the stakeholders and influence the host government decision making. As the
MNCs increase their business activities in the host countries, they face local pressures. They
have to adapt to different national laws and agreements between countries and other MNCs.
Accordingly, negotiations should take place between the local authorities and the business
diplomats (Wolters 2012).
The Vodafone Egypt CEO had to choose between alternative solutions. He could obey the
Egyptian government order and suspend the mobile service in the Tahrir square. He could also
obey the order by suspending services and send propaganda short messages (SMS). Also, he
could refuse to do any of what the government has asked for at the time of crisis. He could also

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set a proxy limit of the user-generated content and send the short messages. Finally, he could ban
the internet service, but not the calls. The CEO of Vodafone Egypt should have considered that
the best solution is to stay in the Egyptian market. The company has made a big success in the
Egyptian market, accordingly, he has to adapt to the regulations organized by the
telecommunication law and the emergency law. Also, the company should take a neutral position
and not divide the Egyptian people (Duncan 2015).
The service shutdown was made from the UK, although the developments in the information
communication technologies enable the headquarters and subsidiaries to access data worldwide
and allow the headquarters to monitor the operations and performance of the subsidiaries. It is
obvious that Vodafone UK did not interfere in the decision of Hatem Dowidar and allowed him
to fully adapt to the local regulations.
If I were in the position of Hatem Dowidar, I would have set the proxy limits and the security
settings to limit the user authority to generate content. This action was likely to cope with the
governmental requirements and not to completely cut the service. This action was able to
balances between the Egyptian government requirements and the parent company values, as it
focuses on the development of sustainable services and products to satisfy the different needs of
customers. Also, I would have asked a business diplomat who has negotiation skills to help me in
such difficult situation to achieve a win-win situation with the Egyptian authorities instead of
completely cutting the mobile service.
This essay has shed the light on the importance of localization versus internationalization in
managing MNCs in different cultural countries and the benefits and limitations of the adaptation
to the local requirements with the application in the case of Vodafone Egypt in managing the
implications of the national crisis of January 2011.

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