SUSTAINING COMPETITIVE ADVANTAGE AT DELL
Spain’s Telefonica
1. What changes in Political and economic environment allowed Telefonica to expand globally?
The changes that were involved in the political and economic environment, which allowed Telefonica to start expanding globally, were privatization and deregulation. In addition economic growth, removal of many restrictions on FDI and programs that opened to foreign investors made some countries more attractive to Telefonica for expansion. Spain’s Telefonica was established in the 1920s being a state-owned national telecommunications monopoly. Soon, the Spanish government privatized it, as well as deregulated the market for Spanish telecommunications. Due to these changes, Telefonica has a reduction in workforce, rapid adoption of new technology and began to focus on the increasing profits. Telefonica began to grow and expand globally. Hence a general shift towards democratic political institutions and free market economies encourages Telefonica to invest in different nations especially in developing nations such as countries in Latin America.
2. Why Telefonica initially focused on Latin America? Why was it slower to expand in Europe even though Spain is a member of European Union?
While changes were being made, Telefonica was looking for growth. The choice of a firm to engage in FDI occurs logically and empirically prior to the decision about where to locate. The major determinants for choosing a location for FDI are markets that have strong potential for growth, openness of recipient country to foreign trade, production cost in recipient countries, trade agreements, similarities in culture and language and the like. The markets were growing rapidly in Latin America and Telefonica acquired many companies, which were once part of state owned telecommunication monopolies. Latin America was also experiencing a rapid change of deregulation and privatization across the region. Moreover, Telefonica focused on Latin America because of similarities
1. What changes in Political and economic environment allowed Telefonica to expand globally?
The changes that were involved in the political and economic environment, which allowed Telefonica to start expanding globally, were privatization and deregulation. In addition economic growth, removal of many restrictions on FDI and programs that opened to foreign investors made some countries more attractive to Telefonica for expansion. Spain’s Telefonica was established in the 1920s being a state-owned national telecommunications monopoly. Soon, the Spanish government privatized it, as well as deregulated the market for Spanish telecommunications. Due to these changes, Telefonica has a reduction in workforce, rapid adoption of new technology and began to focus on the increasing profits. Telefonica began to grow and expand globally. Hence a general shift towards democratic political institutions and free market economies encourages Telefonica to invest in different nations especially in developing nations such as countries in Latin America.
2. Why Telefonica initially focused on Latin America? Why was it slower to expand in Europe even though Spain is a member of European Union?
While changes were being made, Telefonica was looking for growth. The choice of a firm to engage in FDI occurs logically and empirically prior to the decision about where to locate. The major determinants for choosing a location for FDI are markets that have strong potential for growth, openness of recipient country to foreign trade, production cost in recipient countries, trade agreements, similarities in culture and language and the like. The markets were growing rapidly in Latin America and Telefonica acquired many companies, which were once part of state owned telecommunication monopolies. Latin America was also experiencing a rapid change of deregulation and privatization across the region. Moreover, Telefonica focused on Latin America because of similarities