the case of telefonica ( final)

8/6/2019 The Case of Telefonica ( Final)

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The case of The case of TelefonicaTelefonica

Armyra MariaElenoglou StellaSalavati Vasiliki


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In 1980, Telefonica was a national and

inefficient company.

In 1982, after the change of direction ,

Telefonica had to redefine its goals.


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G lobal telecommunication industryG lobal telecommunication industryy Since 1984, the trend of privatization of

telecommunications

y The opening of new markets ( especially emerging

markets)

y the increasing competition

y

The impending decrease of pricesy The need of taking advantage of scale economies

were obvious


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Spanish MarketSpanish Market

y Because of the Political pressure,

Spanish market had a monopolistic

structure until 1996.

y In 1997, Retevision was created and

the structure converted into a

private duopoly.


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For the above reasons :For the above reasons :y Telefonica had to become an international

firm in order to survive. (So, it had tofollow the trends, otherwise it would beabsorbed by a big company soon)

y Telefonica had to enter new markets andgain a satisfactory share as thecompetition in Spain market wasincreasing.


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The choice of Latin AmericaThe choice of Latin America

Telefonica decided to enter Latin America because:They share a lot of culture similarities.

The consumers of these countries facedTelefonica as a friend.The levels of penetration are low ( emergingmarket)

The expectations of growth are highTo find the necessary money , Telefonicaparticipated in the London, Frankfurt, NY andParis stock exchange. ( it went also abroad)


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The booming of industryThe booming of industry

y In 1986, there was a great augmentation

in demand because of the participation of

Spain in E.U.y From 1990 to 1998, Telefonica made great

investments in Latin America, cause of incresing demand, and managed to gainextensive share in Chile, Argentina andPeru markets.


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The international conditionsThe international conditions

y The opening of European markets

y The attractiveness of emerging marketssuch as those in Latin America and Africa

y The lack of the necessary resources

made the strategic alliances inevitable.


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Strategic AlliancesStrategic AlliancesThe decade of 90s, the mergersThe decade of 90s, the mergers

decadedecadey In 1993, Telefonica made an alliance with

Unisource in order to increase its presence inEurope.

y However, the result was disappointing (despite

the fact that it obtained 25% of joint venture) .y Telefonica felt sidelined because itconcentrated on investments in Latin America.


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Strategic AlliancesStrategic AlliancesThe decade of 90s, the mergers decadeThe decade of 90s, the mergers decade

y To strengthen these investments and prevent its

domestic market made an alliance with Concert

to without the agreement of Unisource.

y Because of the conflicting interests between

Concert to and AT&T Worldparteners, Telefonica

was obliged to leave the Unisource.


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Characteristics of Latin AmericasCharacteristics of Latin AmericasTelecom marketTelecom market

y Latin America s market was characterized by a nationalistic

environment.

y The impending need of flows of information among cities and

internationally made these countries to adopt a new

transmission structure.

y The market growth rate was 10% per year

y The expectations of revenues augmentation were great.


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The most important competitors inThe most important competitors inLatin AmericaLatin America

y France and Italia s consortium in Argentina ( viaTelecom Argentina)

y France Telecom and SBC in Mexico ( via Telmexand Telecom)

y Telecom Italia in Chile, Bolivia, Brazil and Cuba (via Entel in Chile,.., Etesca in Cuba)y G TE in Venezuela and Argentinay Bell South in Venezuela, Argentina, Chile, Uruguay

and Panama ( via a license to operate longdistance services of Domos)

y AT&T in Columbia, Ecuador, Mexico, Argentinaand Venezuela ( via CANTV, Alestra)


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The strategies of entering aThe strategies of entering atelecommunication markettelecommunication market

y Telefonica and its competitors used thesame ways to enter a market in the mostcases. ( through foreign direct investmentscreating joint ventures)

y So , there was the need for a differentstrategy to win a satisfactory marketshare.


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Internal CompetenciesInternal Competencies

So as to diversify , Telefonica had use the internal

competencies which were :

The great adaptability in changes of the external

environment ( p.e. shifting technology base in the

sector)

The finding of all the necessary resources rapidly.

The great investments not only in technology but

also in human resources.


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Internal CompetenciesInternal Competenciesy Having these strengths, Telefonica could

take advantage of the existing opportunities directly

and

Offer a great quality of services

Telefonica had to restructure its corporate articulation to

optimize its efficiency.It create eight subsidiaries and one

corporate center. It also changed its name from

Telefonica de Espania to Telefonica S.A.


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TelefonicaTelefonica in Latin Americain Latin AmericaTelefonicay entered Latin America in 1987y controlled the most important telecom

companiesy was the leader of the market since 1990y optimize the quality of services ( digital networks)y The earnings of Telefonica from this market

were about 50% of totals in 1998. Through theseearnings It managed to increase its capital by 24%and reinforce its financial stability.


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The case of BrazilThe case of Brazily Brazilian market had a great interest for two reason :

1. It was one of the largest potential

telecommunication market

2. The fastest growing cellular phones in the world.

Telefonica entered this market purchasing a percentage

of 50.12% of CRT and made it base for its businesssuch as cable TV.


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Brazilian crisisBrazilian crisis

The creating financial instability of the markets

made Telebras restructure its corporate

configuration

And gave the chance in Telefonica :

to buy Telebras

And to consolidate its leadership in Latin America.

On the other hand, Telefonicas loss was about a

quarter of its capitalization!!!


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Evaluation of strategiesEvaluation of strategies- -RecomendationRecomendation

y The strategy of Telefonica in Europe reducedits presence and competitiveness.

y Companies have to have a more balanced ininvestments so in emerging markets as indeveloped markets.

y It is also imperative to continue investingheavily in technology.

y As the competition is increasing, Telefonicathrough segmetation have to create differenttype of services ( or combinations of theexisting services) in order to target theexpecting segments.

the case of telefonica ( final)

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