Vodaphones Internalisation in Egypt - Case Study Example

VODAPHONES INTERNALISATION IN EGYPT Affiliation Internalization theories are strategies that most multinational and other focus on when trying to venture into a new market. A lot of company’s model considered both the advantage and disadvantage. It is very vital for a company to understand which theory suites its services and which does not. For one company like Vodaphone to settle on strategy the strategy has to have an upper hand than another. Vodaphone has used two different theories in Egypt but the one that has made them be first among equals is the Uppsala Model. The organization ventured on areas that seemed to have a chance and has regionally extended into the North Africa market. There always different types of business entry mode in a country. Vodaphone can choose between equity mode and non-equity modes. Their main difference is the degree of risk one has over the other. The equity one involved wholly owned or joint ventures with existing countries. Vodaphone seemed to have preferred this as it joint and bought an existing company to continue with its expansion. There are different objective for using a joint venture rather than a wholly owned business. One that is always close to telecommunication companies is taking advantage of the market share so as to offer a large network base and platform for clients. Vodaphone in Egypt has seen it become one of the largest mobile phone subscribers in terms of market base. It joined the Egypt market in 1998 and has continued with its excellent performance all through this time. Internalization is the process where companies like Vodaphone increase its business activities under a local subsidiary in Egypt. Since the start Vodaphone made it clear that it was part of that their focus on the Uppsala Model. By acquiring Raya Telecom Vodaphone wanted strategically to grow and to ensure they capitalize on the Uppsala model of business. This focuses on the how Vodaphone gradually increases its activities in Egypt from the telecommunication to being a data provider. The first part of Uppsala is companies first acquiring their local market. This is probably concentrated by Vodaphone in the UK. After acquiring its base it now grows steadily in other market using a local base that now is Raya Telecom in Egypt. This Uppsala model breeds in Market imperfection theory which is more focused on the unfair allocation and services and tries to reduce the probe. Local companies in telecommunication in Egypt failed to deliver on these services and has seen Vodaphone growth become a tremendous. The imperfection market where there are a lot of macro and micro economic challenges are the trendsetter for a country like Egypt. The macro environment where there is a lot of government interference shows a very big market for the imperfect market theory. The challenges that also face a certain market include the strategies for acquiring the new market. Through different strategies Vodaphone also branched to outsourcing in Egypt this has been favored by the availability of labor and the low cost of doing business. The strategy always favor a company with a sound financial background that can always withstand competition and market wars that have seen affect a lot of telecommunications countries all over the world. The advantage of Using Uppsala model is Vodaphone has already committed a specified amount to reach so that first they can achieve their objective. Failure to this it has a cap of what not to spend if certain targets are not met. Wholly business are a bit complicated and the involve of two ways one is acquisition while the other Greenfield where the company sets up a new company from scratch. This has also been known to be a high risk involve. We try to understand the Vodaphones model in Egypt since the late nineties. Using The Uppsala model Videophone has an idea that their level of investment can increase or decrease depending on the state of the nation and this is vital for the business. There is also the need to ensure that the market is not dominated by one rival as this will discourage other companies in the same industry. The industry also involves on the micro factors of the company such as the tax the pricing strategy and also the formidable issues of business. There is need to regulate the foreign exchange of the business and the test of it. The impact of internalization has to follow a certain stage for it to be successful. The identification of the market and the calculation on the price and value addition always depend on the market growth while factoring the inflation risks and identifying the solution of all of it. The analysis is that the Uppsala model is not the most efficient in a country where the macro factors that is stability is still an issue. It world have been better to sync with Foreign direct investing as this will reduce the problem of price wars. This has been clearly stated that it is good for targeting low income countries by using the price and cost advantage. Though Vodaphone has strategically used the Uppsala model from communication to business ousting it would have been exposed to more advantages using the foreign investment by not acquiring anything in the Egypt market but only lease the equipment. If the Vodaphone Company invested its product and infrastructure it would have been more profitable in the long run than buying already an existing company. The advantages of Foreign Advantage is the Vodaphone will be in a position to dictate the infrastructure they are ready to part with rather than having already a specific designed program me by the new company they have invested in. This will help in regulating and maximizing their cost in the business world. It is also important to ensure with foreign data investment Vodaphone is able to take back its profit to the mother company in an easy access manner and also able to administer inconsequential challenges (Hickson, K., 2014). These advantages have a higher chance than the Uppsala model that is a bit rigid in volatile nations. The factors of development in the Uppsala model do not agree with the minimization and maximization of output with countries like Egypt undergoing a very critical path with a lot of instability it will be good to note that its influence is not affected by the crisis. This rough path has seen most of the other multinationals pull out but any investment would need a wait and sees approach to ensure that a lot is served and all options are exhausted. During the future of this telecommunications companies mergers and acquisitions could work well with a multinational like Vodaphone. It would help Vodaphone use other staff from existing companies without having the challenge of hiring its staff and also would require any business to be able to use already existing customer base rather than having to acquire new clients which has been a very difficult phase for the telecommunications challenge. Vodaphone should consult widely during mergers and acquisitions so as to minimize the factors of being involved with government syndicate companies that might bring out the difficulty of running a business in a fair and transparent manner. Any multinational has its own principles and mission and managing in a foreign unstable country brings out the questions of ethics in the business. Is everything being followed to the latter if not what should be done and in what manner. Vodaphone understand that acquiring more market share and the battle to more of pricing is more important in the next decade in Egypt and its counterpart. There should always be ways where there can be an importance in acquiring more of the market share in existing platforms so as to reduce the chances of fighting high cost and the other problems at hand. The challenges facing this company are not only the countries dynamics but the communication dynamics which pose a new threat. From the new applications that have made it possible to communicate it is important they choose their new battle zone carefully. There has been issue regarding the formulation of clear goals for the future of multinational such as Vodaphone which have been blamed for bureaucracy and such issues have brought out possible solutions like decentralization. If decentralization is well executed it means it will lead to more accessibility for the business to be able to be more efficient in executing its mandates. This cannot be a decision by the Vodaphone Egypt but the top decision maker in UK. Vodaphone should also strategically avoid war countries just because of their interest in market share. This has always reflected in the way other countries perceive multinationals as greedy and not really customer friendly. The competitive field of pricing will not hold a lot of strength in the future and quality and efficient will. Customers will try and access the companies if it involves itself more (Dauvergne, P 2013). The money market platform will be a very big catch for Vodaphone Egypt in the next years. This is an added service for telecommunications companies. The most favorable companies are companies with a large network base. They are winning on this aspect as they tend to hold customer to their area due to the added information. Though leading companies have formed the Apple pay this will not be a market for the manufacturers only but also the providers. The goal is to ensure service is across beyond one border and make it a regional base. Vodaphone has a good chance in this as it also has other regions in Africa where it is a leading shareholder. There is need to understand that the possibilities of an application for the money transfer is high and to capitalize in this Vodaphones research and development matters and can help in maximizing its output. As the future is changing fast it is good that Vodaphone avoids acquisitions and prefers mergers with existing countries. Though acquisition is good as it helps amass power a lot of shareholders don’t think their companies need to invest in more for infrastructure rather but invest in information as this the information age. REFERENCE Dauvergne, P., and Lister, J. 2013. Eco-Business: A Big-Brand Takeover of Joint Ventures. Cambridge, Massachusetts: MIT Press. Hickson, K., 2014. Race for Intenalisation: Energy, Economy, Environment and Ethics. New Jersey: World Scientific Read More