National Crisis And Their Implications To Multinational Corporations

Challenges faced by Multinational Companies during National Crisis

Discuss about the National Crisis and Their Implications to Multinational Corporations. 

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 27^th 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 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). 

Implications of National Crisis on MNCs Management Control

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 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 the children and employability of youth and forth: to develop a sustainable services and products to satisfy the different needs of customers.

Personnel Localization Strategy in National Crisis

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 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. 

Case Study of Vodafone International in Egypt

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 

References

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Vodafone Egypt 2018, About Vodafone Egypt, viewed 30 April 2018, <https://www.vodafone.com.eg/vodafoneportalWeb/en/P613722281289132343406>.

Wolters, T 2012, ‘Business diplomacy in multinational corporations: An exploratory qualitative study’, University of Twente, Netherlands.

Zhao, M, Tan, J & Park, S 2014, ‘From voids to sophistication: Institutional environment and MNC CSR crisis in emerging markets’, Journal of Business Ethics, vol 122, no. 4, pp. 655-674.