The New Conquistador

International Business

"The new conquistador"

Case Summary

A telecommunication company named Telefonica was founded in 1924 originated in Spain. Before European Union formation, this company obtained monopoly concession on telephone services in Spain, begin to nationalize in 1945, Government owned 41% of telefonica's shares. After European Union formation, state-sponsored telephone monopolies were abolished; telefónica faced threat of new entries from European rivals. Building strategy to win the markets by trimmed excess payrolls ruthlessly and expand capacity aggressively. However, telefonica lacked competitive advantages against European rivals so they invest in Latin American first before entering European markets. Challenges faced by this company towards their marketing strategies are critics made by minor investors towards telefonica: Denounced by the local skeptics as "conquistador capitalism" because telefonica laid off thousands of workers to trimmed excess payrolls, create chaotic disruptions of services led to numerous complaints and huge management fees must be paid by South Americans subsidiaries. Also the operational challenges became an obstacle in the industry; telefónica was forced to paid $8 million refunds due to poor services in Sao Paulo then forced to take a $300 million write off for currency losses after devaluation of Brazil. Lastly, the most influential problems are the increasing of competitive pressures due to government new policy in different area. In current Situation, telefonica having built strong bases in Spain and Latin America; In 2005, Telefónica turned its attentions back to Europe acquired Cesky Telecom,O2 and, purchased a minority in telecom Italia and invested minor shares in China Netcom in 2005 and 2008.

Discussion Questions

1. SWOT ANALYSIS in 1986:

* STRENGTHS

Telefonica has a strong position in Spain due to high demand for telephone services in Spain. Similar language applies in South American country.

* WEAKNESS

Telefonica is lacking in terms of technology and managerial talent in EU market.

* OPPORTUNITIES

Telefonica is looking on the privatization of telecommunication companies in South American countries.

* THREATS

Spain is joining the EU on 1986 which create possibility of any major changes in the market.

From the analysis above, it is similar with the managers, especially about the decision to expand their business to South American countries

2. We would characterize the strategy as a great strategy because the manager of the company knew all too well the problems of the problems of state-owned telecommunications