Question

Case study: Spain's Telefonica Established in the 1920s, Spain's Telefonica was a typical state-owned national telecommunications monopoly until the 1990s. Then the Spanish government privatized the company and deregulated the Spanish telecommunications market. What followed was a sharp reduction in the workforce, rapid adoption of new technology, and focus on driving up profits and shareholder value. In this new era, Telefonica was looking for growth. Its search first took it to Latin America. There, too, a wave of deregulation and privatization was sweeping across the region. For Telefonica, Latin America seemed to be the perfect fit. Much of the region shared a common language and had deep cultural and historical ties to Spain. Also, after decades of slow growth, Latin American markets were growing rapidly, increasing the adoption rate and usage not just of traditional fixed line telecommunications services, but also of mobile phones and Interet connections. Having already learned to transform itself from a state-owned enterprise into an efficient and effective competitor, Telefonica believed it could do the same for companies it acquired in Latin America, many of which were once part of state-owned telecommunications monopolies, in the late 1990s, Telefonica invested some $11 billion in Latin America, acquiring companies throughout the region. Its largest investments

Answer 1

1. Mega changes like deregulation of Telecommunications sector and privatisation alongwith rapid evolution of technology and changing consumption habits alongwith economic cycles like Dotcom bubble and Great Recession were some factors driving changes.
2. Telefonica focussed in Latin America for growth opportunities as bugger players were absent and lacked proliferation of Internet services. European Union was slow to respond due to already presence of large players and multiple smaller players which would have to be acquired first to enter new market.
3. Telefonica has used merger acquisition strategy because this gives competitive edge about knowing customers base and their preference through acquisition of local player and helps establish brand resonance early. This too has potential risks like lack of customer adoption and merger acquisition laws which degrade the physical convergence of assets giving low quality network.
4. Telefonica brings global brand image and huge customer base plus expertise in operating across continents and geographical domains with strong legacy.
5. Inward investment always benefits host nation as it creates employment opportunities and brings FDI as well as strong competitive advantage in long run.