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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 …show more content…

Licensing may result in a firm’s giving away its know-how to a potential foreign competitor. Firms cannot maximize its profitability, as it does not have strong control over manufacturing, marketing and strategy in a foreign country. Benefits of acquisition There are many benefits of acquiring current assets than undertaking greenfield investments. First mergers and acquisitions are quicker to execute. In fast evolving markets this is very important consideration. When Telefonica wanted to build a service presence in Latin America, it did so through a series of acquisitions, purchasing telecommunications companies in Brazil and Argentina. The reason was Telefonica knew that was the quickest way to establish a sizable presence in the target market. Second reason for Telefonica preferred to acquire firms was because those firms had valuable strategic assets such as brand loyalty, customer relationships, trademarks or patents, distribution systems, production systems and so on. Hence it was easier and less risky for Telefonica to acquire those assets than to build them from ground up through a greenfield investment. Thirdly Telefonica might have believed that they can increase the efficiency of the acquired unit by transferring capital, technology or management skills. However, there are some risks involved in merging with or acquiring the firms as companies may fail to realize

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