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Vodafone Egypt (B), managing corporate cultural change and organizational performance
Harold Dennis Harlow,
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Harold Dennis Harlow, (2016) "Vodafone Egypt (B), managing corporate cultural change and organizational performance",
Emerald Emerging Markets Case Studies, Vol. 6 Issue: 4, pp.1-17, https://doi.org/10.1108/EEMCS-07-2013-0141
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DOI 10.1108/EEMCS-07-2013-0141 VOL. 6 NO. 4 2016, pp. 1-17, Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
key metrics for network operators. In addition, customer churn[1] is also a consideration, as
this parameter directly affects their customer acquisition and retention costs.
Availability of educated engineers and managers was a key concern. Egypt has a higher
education system that frequently turns out more graduates than jobs in engineering and IT.
While many of these graduates lack skills needed at multi-nationals, some Egyptian
universities were excellent sources of trained English-speaking technical employees. The
Vodafone human resources plan was to attract and hire only the best talent and to pay them
better wages than local companies, while offering opportunity for advancement and career
growth. Gaining employee commitment in a fast-changing technical environment would be
crucial to Vodafones success (Rankin, 2013). The company and the technology was new
experienced engineers and managers were in short supply because of the Mobinil market
entry which preceded the Vodafone investment and a human resource strategy of training
new staff and younger employees and growing them into the positions was crucial to
Vodafones business success. Business and technical management resources needed to
enter Egypt at that time were available at Vodafone headquarters and in units throughout
the world. Management and technical staff could be assigned to this project from Vodafone
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units and would be able to see it through to its conclusion while leading and training local
staff.
given the tremendous growth and accompanying lack of defined processes during
2002-2004. Connecting human resource practices and strategic outcomes was particularly
important because mistakes in interpretation by young aggressive managers were
inevitable, and guiding principles were often thought of as simply rough guidelines, not as
the way we do things here (Boselie et al., 2005). This had to change to further Vodafones
investment goals in Egypt. The following are the business level strategies and outcomes
needed by Vodafone Egypt:
The primary Vodafones strategy is profitable growth. Vodafone has developed a
business model with a pricing policy that Vodafone will not always offer the lowest price
nor will it continuously try to meet competitors offers on price (Gray, 2007). Value and
benefit to the customer are a key focus to implement this strategy. There is still
tremendous market growth with many new subscribers added each month, and this
profitable growth at an appropriate cost will be the key to Vodafones future success in
Egypt. Adjacent markets in international calling and services are also targeted but only
when Vodafone has a clear competitive advantage in cost or differentiated products.
For example, Vodafone is developing IT solutions that make their customer service the
best in Egypt and can be used throughout the Vodafone family of companies both
internally and externally as a customer interface (Gray, 2007).
The second Vodafone strategy is establishing brand preference. Vodafone uses
network quality and coverage, being first to market with key products, excellence in
customer service and brand relevance to Egypt as means to develop brand
preference. When high value customers travel outside Egypt, their connectivity options
and access to the global network drive brand identification and loyalty, and they
choose Vodafone because of its global presence. This has a carry-back effect to the
Egyptian market, as Vodafone is perceived (like Mercedes and BMW) to offer higher
product quality and service and is more of a high-end choice for mobile service.
The third Vodafone strategy is cost containment and use of group synergies. This
means using technical, managerial, marketing and financial resources of the group to
create synergies and thus add more value in Vodafone Egypt activities. It
encompasses having a culture of cost containment as well as a no compromise on
quality approach. This strategy is used throughout Vodafones companies to develop
a high degree of cost awareness and focus in all activities. Whenever possible, group
knowledge is used to solve complex technical and management problems with
systems and group developed expertise.
The final Vodafone strategy is to have superior management capability. To create the
culture of a new company requires a climate, competence and capacity to accomplish
Strategies
Tasks
Resourcing
Processes
Marke t led
Behaviour Customer focused
C ompetitor aware
Employe e drive n
concerns of moving forward were how to develop corporate cultures and behaviors as well
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as processes (planning and work systems) to enable growth in both technical and business
areas while maintaining the initial commitment and excitement of the engineering and
management team.
Resources and task orientation were strengths of Vodafone Egypt, and Ian planned to
promote those who quickly used the strategic ideas in the business. This resulted in a large
cadre of young dynamic engineering and marketing managers who were among the first to
be trained and enabled with the corporate strategic views.
One of the first issues to be addressed was how to avoid the trap of employees looking to
the top for their decision-making. Egypt was a very hierarchical business society, and it was
assumed that the CEO at Egyptian companies made most of the important decisions.
Surveys indicate that Egyptians prefer to be directed more than others in their work
(Trompenaars and Hampden-Turner, 1998), and the society incorporates a great deal of
power distance and respect for older persons. The previous CEO had been culturally adept
in this mode, and Ian knew from his management training that Egypt ranked very high when
it came to power distance (the cultural deference of those at the bottom of the society to
expect that power is distributed unequally and tolerate those at the top making most of the
major decisions). This would have to change for Vodafone Egypt to work well with the rest
of Vodafone and for the company to perform at the level needed.
toward the business. He also needed to, serve customers by looking at the pyramid from
the bottom up. Finally, he was going to, develop a customer led organization which uses
the CEO position to lead and motivate, not to make all the decisions. As he explained his
new program to his top level Egyptian and expatriate staff, he could sense the difficulties
that he was going to encounter.
Ians planned Vodafone corporate culture changes dealt with behavior toward one another
by providing the following:
open, clear and honest communication, and open door policy and open complaint
policy;
more training sessions (three days at first) for all staff in the Vodafone corporate culture,
communications and developing mutual respect through relationships training;
understanding that values must be shared across the global business; and
learning a common language about what matters to each other.
The mostly younger employees (most managers were aged 24 or 25 years) in their first
management position were a significant challenge. Very few expatriates (12 on staff) had
been hired, and this strategy was acceptable in the task environment of the first few years
but was becoming more difficult to manage as employees increasingly reverted to
culturally based behavior and attitudes toward work. Relationships were important in Egypt
and work rules were less stringent in most Egyptian companies, as managers looked at
their role as more of a keeper of the jobs than a motivator to high performance. Ian knew
that Egyptians at Vodafone needed a system and that the system was one that might
provide the solution to creating common values (Trompenaars and Hampden-Turner,
1998). Ian also realized that young managers needed seasoning to be able to manage
effectively, and this was only gained by experience or training and coaching. He decided
to assign his expatriate managers 10-12 Egyptian managers each to coach in
understanding the global rules of the game at Vodafone corporate and to develop
Vodafone values and a common language.
A corporate values-based culture manager was trained and assigned the job of developing
a Vodafone corporate culture based on the values and goals of Vodafone. This proved to
an adept way of both promoting two-way communication and developing managers who
understood that processes and procedures were important if the company was to grow and
standardize excellent management capability and customer-centric behaviors. The
manager began his work by developing a training plan and talent matrix of those managers
who accepted and promoted the Vodafone Way.
relationship-only approach (who you knew and their relationship mattered most), and Ian
was determined that merit-based policies would prevail at Vodafone Egypt.
All employees were expected to develop and participate in training to provide needed skills
for future jobs. Ian influenced promotions through his talent management system so that
when openings occurred, the best trained and most highly skilled were chosen for
promotion. Promotion was a joint exercise with the input of many different managers before
the final forced ranking decision was made. Nepotism was not rewarded, and those
sponsors who attempted this were quickly counseled otherwise.
Processes to make the business function better and more efficiently were important especially
those directed at customers. Customer call centers were the primary interface to most of
Vodafone Egypts customers, and a dedicated effort was made to develop intelligence in the
information technology software to enable customer service representatives to immediately see
the customers account information and prior record of service. This was further enhanced by
the high technical and English language caliber of customer service person that were hired at
Vodafone because of the perception that Vodafone offered employees unique opportunities in
advancement and promotion.
Processes were also installed to develop better control over programs and budgets and to
track responsibilities for successes and failures more directly. In a growing company, the
mantra is simply get the job done. Vodafone wanted to change that to a more efficient and
effective get the job done with the least resources needed while competing in a different
way. These changes were resisted at every level, as the company became less of a growth
company, and more procedures were imposed on resource and budget allocations.
Nonetheless, Ian pushed through to develop this change in culture and adhere to
profitability as the key the future growth of the company.
The results
The customer-centric business model at Vodafone Egypt was a strategy to give
customers reasons other than price to choose Vodafone. This strategy was
implemented by providing better call capability with fewer dropped calls than
competitors and superior customer service while offering competitive prices for
subscription and prepaid plans. By the end of 2006, the results of Ians business
makeover from 2002 to 2006 were:
Vodafone was more profitable than Mobinil even though Mobinil has more declared
customers (55/45 per cent). Mobinil revenues do not convert as readily into profits.
Vodafone has higher margins. (Vodafone is making the most profit in the market
(60/40 per cent).
Conclusion
In the Spring of 2007, as Ian Gray prepared to move to his new Vodafone assignment as
CEO of Eastern Europe, he tallied the many accomplishments of the Vodafone Egypt team
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he had guided over the past five years from 2002. His ideas of transferring the corporate
culture using a values-based business approach had clearly worked (Jaeger, 1986). The
response of his employees and staff had overwhelmingly worked toward increasing
processes, developing a customer-centric approach and managing to profitability in a
highly competitive market (Cummings and Worley, 2014). Vodafone Egypt was recognized
as the leader in Egyptian business practices and opportunities for talent. The Vodafone Egypt
customer service department was now handling the customer calls for Vodafone Australia and
Notes
1. Churn is the number of customers lost by the network either through other network operators
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Keywords: offering better deals or by customers dropping their service. The lower the churn, the lower the
Telecommunications, costs of customer acquisition and retention.
Change management, 2. As of 2007, most of Vodafones employees were in fact in these functions, as the need for network
Multinational business specialists had peaked.
cultures,
3. Network providers frequently provide a subsidized handset to customers who sign long-term
Performance-based contracts with the network provider. This results in lower handset prices and lessens the barrier
organizational systems, to mobile phone usage for those who cannot pay for a handset. This practice is losing appeal as
Wireless communications handset prices drop below 125LE in global markets due to Chinese low priced handsets.
References
Africa and the Middle East Telecom Weekly (2016), Egyptian market data, available at: www.
africantelecomsnews.com/resources/AfricaOpp_Egypt.shtml#Figure1
Further reading
Brown, A. (2004), Dataquest Insight: Mobile Phone and Chipset Forecast 2004-2010, Gartner and
Associates, Stamford.
Central Intelligence Agency (2009), CIA factbook, available at: www.cia.gov (accessed 8 January
2009).
Daily News Egypt (2014), Vodafone appoints Hatem Dowidar chairman, Daily News Egypt, available
at: www.dailynewsegypt.com/2014/06/11/hatem-dowidar-lead-vodafone-egypt-chairman-board-
ahmed-essam-ceo/ (accessed 6 January 2016).
Egypt in Figures (2009), Egypt in figures 2009, available at: www.egypt.gov.eg (accessed 21
November 2013).
FitzPatrick, P. and Mostafa, H. (2007), Full steam ahead: after a blazingly successful five years under
CEO Ian Gray, Vodafone Egypt has transitioned the hot seat to a new, but familiar, face, available at:
www.BusinessToday.com (accessed December 2007).
Harlow, H. (2007b), Commquest technologies: an entrepreneurial technology case study, Journal of
Business Entrepreneurship, No. 4, pp. 89-112.
Harlow, H. (2007c), Rate chart for TE DATA, available at: www.TelecomEgypt.com (accessed
15 November 2007).
Harlow, H. (2011a), Vodafone Egypt (A): the investment decision, Emerald Emerging Markets Case
Studies Collection, Emerald Group Publishing Limited, West Yorkshire.
House, R.J., Dorfman, P.W., Javidan, M., Hanges, P.J. and de Luque, M.F.S. (2013), Strategic
Leadership Across Cultures: GLOBE Study of CEO Leadership Behavior and Effectiveness in 24
Countries, Sage Publications, New York, NY.
Iveta, G. (2012), Human resources key performance indicators, Journal of Competitiveness, Vol. 4
No. 1, pp. 117-128.
Merrill Lynch (1999), Mobile Data Handbook, New York, NY.
Neary, D. (2002), Creating a company-wide, online, perfromance management system: a case at
TRW, Inc, Human Resource Management, Vol. 41 No. 4, pp. 491-498.
The World Bank (2012), Egyptian country data, available at: www.databank.worldbank.org/data/
views/reports/tableview.aspx, (accessed 15 November 2008).
General market overview. The population of Egypt was approximately 70 million at the time
of the Vodafone market entry. As of 2016, it is more than 85 million and is growing at 1.8 per
cent per year (one of the highest growth rates in the world) (Egypt in Figures, 2009, 2015).
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The urban population is 42.6 per cent (Egypt in Figures, 2009, 2013).
Most of the revenue for Vodafone and other carriers are provided by high value consumers
who use the mobile for the majority of their monthly communication. These high value
consumer generate large average revenue per unit and enable the profits upon which
mobile networks depend.
The market structure (Gray, 2007) has three competing companies: Vodafone, a strategic
partnership between Telecom Egypt (45 per cent of shares) and Vodafone PLC (55 per
cent of shares); Mobinil, a privately owned company with Orascom (31 per cent) and
Orange (32 per cent) as the major shareholders in addition to a free float (37 per cent);
2007 entrant Etilsalat holds the majority of its shares (66 per cent) with holdings by Egypt
Post (10 per cent), CIB (4 per cent) and the National Bank of Egypt (20 per cent):
Vodafone and Mobinil have approximately 43 and 52 per cent of the market as of 2007 and Etisalat
has a small share of approximately of 5 per cent. Mobinil is an established and entrenched
competitor with competitive strengths both technically and with its business partners. It was the first
company in the MENA region to gain ISO 14000 certification and was nominated for Best Brand and
Best CSR Contribution in the Telecoms World Awards Middle East competition (Mobinil, 2007). One
of its stockholders is the Orascom Group a very strong brand in its own right in the region. Etisalat
paid LE 16.6 billion or approximately 3.4 per cent of the 2006 gross domestic product of Egypt for
the mobile license. In return, Etisalat received a head start of several months to offer 3.5 G services
and high speed DSL via mobile. Etisalat has used this head start to gain a foothold in the market.
Subscribers are also duplicating service with several providers by having several chips and buying
new low price deals offered by Etisalat that were offered to lure customers from Mobinil and
Vodafone. The use of two or more chips to duplicate service is common practice in the MENA region
and simply involves changing the SIM cards of the mobile phone. It is unclear at this point if new
subscribers are choosing Etisalat, Mobinil and Vodafone at the same ratio as in the past or there are
new line market shares (Figure E3).