International managment (Vodafone) - Essay Example

?Recent popular uprisings in North Africa (Tunisia, Egypt, Libya) have not only changed the internal situations in the countries, but also affected the whole world because changed some aspects of the geopolitical situation. Furthermore, there is also an opinion that African uprisings were, to some extent, caused by the overall global situation. Some relate Arab uprisings to the global capitalist crisis, which has gradually moved from the US and Europe to African countries (Wright, 2011). Since Tunisia and other North African countries are closely bounded with European economy, it should be expected that at some point in time the global economic crisis would, finally, reach Africa – indeed, prices for food went up causing people protest against their low incomes, high rates of unemployment and poverty. The authoritarian regimes of North African politicians have resulted in problems for the authorities themselves, and for the countries and companies working with North Africa. Therefore, it is interesting how in particular multinational corporations have been influenced by the African crisis and to what extent the popular uprisings have affected their African, and even international, operations. For this purpose the cases of three international companies – Vodafone, Hikma and Shell – will be analyze with the purpose of determining how each of them acted in ‘unexpected’ circumstances and what management lessons can be learnt from the experience of the chosen companies. All the three international companies, Vodafone, Hikma and Shell, had operations in North African countries and, in general, all the three experienced some losses, whether related to profit, image or overall operations. Vodafone in North Africa Vodafone is mobile service provider – a large international corporation that has more than 371 million customers all over the globe – the company conducts operations in more than 30 countries of the Americas, Europe and Asia, Africa and Australia (About us, 2010). The company is devoted to innovations – they were the first to implement international mobile roaming, mobile internet access on the move, and even created Vodafone Money Transfer system for clients in the emerging markets to be able to send and receive money safely and easily. As the company claims, Vodafone is the company that loves change. So, driven by the desire to constantly change and expand, in 2010 Vodafone entered into agreement with a Libyan state owned mobile network, Almadar Aljadid (Al-Madar) (Al-Madar, 2010). The agreement implied that Al-Madar would have access to Vodafone’s products while Vodafone would be able to use Al-Madar’s network to provide mobile telecommunication services in Africa. For this agreement one of the target population groups of Vodafone were multinational companies, for whom Vodafone’s service would solve a number of communication problems. However, as public uprisings started in North Africa, Vodafone faced a public relations disaster. Vodafone was blamed for impacting the Egyptian society because of cooperating with Egyptian ex-President Mubarak (ESG Insider, 2011). In February the company, experiencing pressure from the government of Egypt, had to close its nationwide network. At the same time, on behalf of the regime, the operator spread anonymous text messages to service users that encouraged people not to oppose the existing regime and, on the contrary, fight against those willing to change the rule. It should be remembered that Al-Madar company, through which Vodafone was providing its services in Africa, is owned by Col. Gadaffi’s eldest son. So Al-Madar, in an attempt to limit communication between the rebels, shut down its mobile phone network. Therefore, it can be concluded that it was not Vodafone who closed the network. Nevertheless, the company itself does not refuse the fact of sending text messages that called for loyalty to the regime. Allnutt (2011), an editor-in-chief of Radio Free Europe, believes Vodafone’s shutting down the networks to be a human rights violation. At the same time, the author realized that coming into a foreign country the company has to comply with local laws. That is exactly how Vodafone behaved – in Egypt the company simply followed the government’s order. Similarly, Vodafone was forced to send out the text messages under “emergency powers provisions of the Telecoms Act” (Allnutt, 2011). So Vodafone’s situation is as follows: having entered a new market the company had to comply with that country’s legislation and obey the government. At the same time, what the state requested from the company violated certain international standards related to human rights. Conducting business in a non-democratic regime has lead Vodafone to damaging it image and violating international human rights. Furthermore, The Arabic Network for Human Rights (ANHRI) has filed a lawsuit against Vodafone blaming the company in “participation in harming and killing demonstrators by cutting off Internet and telecommunication services in Egypt” (ESG Insider, 2011). The only obvious company’s response was an apology for sending the messages. So, it is obvious that having entered the foreign market Vodafone had no political crisis management plan. Being used to working in democratic and developed countries, the company simply was not ready to deal with a non-democratic regime. This raised a number of moral and ethical issues regarding Vodafone’s operations in Africa. To avoid such situations the company should, first of all, have foreseen the situation. The crisis management team should have included such a scenario into its crisis management plans and trainings. Surely, after the event had happened, not much could be done. In addition, since the company had to comply with local legislation, it had no right to refuse fulfilling the government’s orders, though, according to Vodafone, the company protested against sending the messages (Associated Press, 2011). Nevertheless, what it could have done in advance is joining the Global Network Initiative (GNI). This organization supports Information & Communications Technology companies like Vodafone in dealing with “increasing government pressure to comply with domestic laws and policies in ways that may conflict with the internationally recognized human rights of freedom of expression and privacy” (Global Network Initiative, 2011). At the same time, being an international company, the organization should make business decisions considering social consequences. Though the income of the company might have decreased if it left the African market, its image and reputation wouldn’t have been damaged in such a case. Hikma Pharmaceuticals in North Africa Hikma is a multinational pharmaceutical company that was founded in Jordan in 1978. From its foundation the company aimed at becoming a pharmaceutical market leader in the MENA region (North Africa). The company is still growing and expanding through organic growth and acquisition (Our history, 2011). Currently Middle East and North Africa account for over 60% of the company’s revenue. Nevertheless, though Hikma is a strong and powerful company, the popular uprising in Tunisia, Egypt and Libya still have impact on its operations. The popular uprisings resulted into decreased sales, disrupted distribution channels and local manufactures. However, the company has already had experience working on difficult markets of Lebanon, Sudan, Algeria and Iraq. Therefore, Hikma was quite ready and rather prepared for the hardships of North Africa. At the same time, it still had to close its operations in Egypt and Tunisia for nearly a week, while the future of Libyan operations was uncertain in the times of uprisings in the Middle East. Predictably, Hikma decreased its sales growth forecast and, as a result, its shares lost in price (Guardian.co.uk, 2011). The overall situation is not good as well, since Hikma’s manufacturing facilities are located in North Africa, so their work is disrupted in the times of uprisings. Another problem is that delivery chains also work worse – many distributors have no ways of receiving Hikma’s productions. In addition, since the overall state of the countries’ economies is going down, the company will continue losing money. Due to the economic problems of South African countries the purchasing power of organizations and individuals is to decrease, thus leaving them without an opportunity to purchase more from Hikma (The Economist Intelligence Unit Limited, 2011). Furthermore, political instability leads to fluctuation of local currencies. As a result, profits from drug sales may decrease. At the same time, it should be remembered that public uprisings frequently end up in many people’s being injured or in need for certain medication. So, as Middle East Business Intelligence Journal (2011) outlines, Hikma will only benefit from increased health spending in the region. Notwithstanding the fact that recent popular uprisings in North Africa have had a negative effect on the company’s operations and profits, Hikma’s executives are sure the region to a great market in the long run. The company is not going to withdraw its operations from Africa because the uprisings and change of regimes that follows them may have great positive effects for the corporation. First of all new regimes are believed to decrease the levels of bureaucracy related to drug pricing, registration and public purchasing mechanisms. These processes have always been a problem of the pharmaceutical companies operating in Africa. So now Hikma is planning to even increase its market share in the region, as more transparent legislative and administrative systems come to force. Economic reforms that are to be brought by the uprising will, as Hikma believes, decrease the levels of poverty and inequality, thus increasing the levels of healthcare spending and, consequently, company’s income. Another positive aspect of Hikma’s operations is that the corporation has managed to create a strong enough infrastructure of manufacturing and supply facilities, as to overcome the temporary crisis. In addition, a competitive advantage of the company is a wide array of generics and proprietary medicines that are in strong demand (ibid). Hikma’s strategies are a good example for other companies to follow. This corporation does not only have a strong and organized structure, but also an advantage of diversified products and markets. Surely, all of the multinational corporations have an advantage of working in different markets and, thus, lower their risks. Hikma, however, has developed efficient enough approach and strategies for continuous growth and expansion into new markets. The company does not stay focused on the MENA region, as it was at the beginning of its operations, but is also expanding into European and American markets. Entering these markets will allow the company to hedge potential risks of working in politically and economically unstable Africa. As for the MENA region, the situation is gradually getting better. As the operations have been restored, shares of Hikma Pharmaceuticals started going up again. Furthermore, the demand for their products is strong, even though sales activities in Libya and Yemen remain limited (Sandle, 2011). All this signifies that though Hikma’s operation were negatively affected by the popular uprisings, the company has managed to recover, return to its previous positions and even build great plans for the future. This tells that Hikma had, in advance, created processes and systems to deal with uncertainties and risks. The company, though had invested into these developments in the past, has benefited in the present and, thus, is sure to successfully continue growing and developing. Royal Dutch Shell plc in North Africa Royal Dutch Shell plc is a multinational corporation that was founded in the Netherlands. The corporation unites a group of energy and petrochemical companies (Who we are, 2011). Currently the company has an upstream business in Lybia, marketing and retail sites and upstream assets in Egypt since 1911, onshore exploration in Algeria, over 2,500 employees in Tunisia, and 6 huge manufacturing plants in Saudi Arabia (Where we operate, 2011). However, though the company seems to be strong and powerful, recent popular uprisings in North Africa have affected it as well. The anti-government demonstrations in North Africa and in the Middle East have lead to fluctuations in world oil prices. Along with the prices for oil, those for gas are also rising. Increased prices for Shell’s products are not, of course, a bad thing for the company – the higher the prices, the higher the profit. However, under threat is Shell’s operations in North Africa. Because of the uprisings in Libya, for instance, the company had to withdraw nearly all of its foreign employees from the country. Though this does not directly influence oil production itself, the potential of strikes on the wells was present (The Daily News Global, 2011). The situation in Egypt was quite similar. In addition, the company now has to wait for the new governments to accept its contracts with the previous ones. All this caused a decrease in oil and gas supply from Africa and Middle East to Europe and America. So, though the prices went up, the supply of products sold by Shell lowered. And, actually, a decrease in supply caused an increase in prices. Furthermore, as Augustino Fontevecchia from Forbes outlines (2011), “the level of production and reserve exposure to MENA has had a direct impact on companies’ stock performance.” Just like many of its industry’s companies, Shell underperformed in the period of popular uprisings and its stock went down. At the same time, in some period of time, due to Shell’s extensive exposure and stored stocks of the products, the shares of the company started growing again. So, an increase in oil prices is likely to benefit the both company and its shareholders (Siegel, 2011). Shell, just like other international oil companies, cut production and evacuated its staff from dangerous countries. Surely, it is a normal decision of a company to keep its employees in safely. Probably there would be no other option to implement in such a situation. However, these actions have impacted not the company only, but the global economy as well. At the same time, is stated that there is not such a shortage of oil as to justify the desperately increased prices (VOA, 2011). In addition, International Energy Agency claims that 12 world countries are ready to increase oil production if needed (ibid). For this reason there exists an opinion that an increase in oil priced is caused mostly by fears of traders, not by a shortage of oil. A similar point of view is supported by Gerald Jensen, professor of finance at Northern Illinois University, who believes that an increase in prices for oil was caused by an excess of money in the world. “That excess availability of money has to some extent driven up the prices of commodities,” Jensen said, - “And that includes a lot of different commodities, including oil” (Brinckerhoff, 2011). So, it can be said that political problems of North African countries, though have had a rather controversial impact on Shell. On one hand, the company had to cut oil production and evacuate its employees from the politically unstable countries. On the other hand, however, its stock went up together with the prices for oil in the world. As a result, the company itself has not suffered much. On the contrary, unlike the end users of oil products, who now have to pay more, Shell might even increase its revenue. So in case of Shell the recent popular uprisings in North Africa (Tunisia, Egypt, Libya) have had a greater impact on the world oil market and economy in general than on the company itself. Though Shell took certain measures to lower the impact of the uprisings on its operations, neither had a desperately strong effect on the company’s operations. Furthermore, since all of the company’s actions were planned and pre-determined for such emergency situations, the influence of large company’s cutting its operation was not crucial for the global economy. Instead, unrelated to the company forces, such as world money supply or traders’ predictions, made a favor to Shell having caused an increase in oil prices. Conclusions Recent popular uprisings in North Africa have shaken both the MENA countries and the global society. The demonstrations against non-democratic governments paralyzed or slowed down operations of many multinational corporations. However, to some extent it might be said that the very same multinational corporation played certain role in the development of the conflicts. International companies are frequently blamed for undermining development and exacerbating inequality and poverty in the developing countries. Furthermore, they leave no space for operations of small and middle-sized domestic companies, thus transferring money “that could be put towards poverty eradication into the hands of the rich” (Adusei, 2009). Another point of view is that revolutions in North Africa have purely social roots – unemployed want to have jobs and those who works want to earn living wages (SocialistSouthAfrica.co.za, 2011). In any case, the result is clear – companies have to embrace change and adapt to the innovations, whether they impact the company positively or negatively in the short run. For Vodafone North African demonstrations and confrontations became a beginning of a crisis. The company lost its positive image and reputation having ‘cooperated’ with the non-democratic government. Surely, Vodafone was obliged to obey the orders of the government, but whether certain orders should be fulfilled is a matter of ethics and morale. Vodafone’s situation is a good illustration for all the multinational corporations of how international human rights and ethics principles can enter into opposition with local legislation of a foreign market. Therefore, multinational corporations should take this case as an example of, first of all, poor crisis management and, secondly, discrepancy between globally accepted norms and specific local regulations. As Hikma Pharmaceuticals, this company, though have been negatively affected by the popular uprisings, is happy to face the potentially positive change of regimes and continue expanding operations in the region. The company’s great achievement is that it had managed to create a system and infrastructure that allowed it to continue working under the extremely changed conditions. This is a great example for other companies to follow – Hikma has not only completely restored its operations and market positions, but is planning to significantly grow in the long run. Royal Dutch Shell, though is conducting operations in North Africa, has not suffered much. Though traders, in panic, have cause an increase in oil prices, the company itself only benefits. Its stock price has recovered and is growing after the crisis, while increased prices for oil will bring additional profit. Shell acted in a planned and deliberate manner, so the only influence African uprisings had on the company is cut oil production and evacuated employees. References About us (2010). Vodafone Limited. Retrieved from http://www.vodafone.com/content/index/about/about_us.html Adusei, L. (2009). Multinational corporations: The new colonisers in Africa. Pambazuka News. Retrieved from http://www.pambazuka.org/en/category/features/56716 Allnutt, L. (2011). Vodafone in Egypt: How tech companies can uphold, not violate, human rights. The Christian Science Monitor. Retrieved from http://www.csmonitor.com/Commentary/Opinion/2011/0222/Vodafone-in-Egypt-How-tech-companies-can-uphold-not-violate-human-rights Al-Madar (2010). Vodafone Inks Marketing Deal in Libya. Telecoms, March 2010 (494). 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