1. SWOT Analysis for Telefonica de Espaa I. Strengths -Strong Position in Spain.

They knew that domestic demands for telephone services would continue in the underserved Spanish market -Has competitive advantage vis--vis local entrepreneurs. They knew well that they are more advanced than local businessmen in accessing technology, capital, and managerial talent. -Linguistic and cultural ties between Spain and South America. Against any other foreign company that may chose to invade South America, they had greater advantage, culturewise and linguistically. II. Weaknesses -Lacked access to the latest technology and managerial talent. They had poor or less access to the latest technology and had poor or less management skills. -Lacked competitive advantage against foreign competitors. Their competitors had by far, the greater skill than they and that they had access to better technology than Telefonica.

III. Opportunities. -South American markets. With their almost similar ties and culture, they can be sure that the locals would prefer them over other foreign company. -Local market. They had a strong position still in Spain. IV. Threats -Entry of Foreign rivals. The entry of foreign rivals who offered cheaper prices, more advanced services and smaller profit margins posed a great threat on them. -Abolishing of telephone monopolies on 1998. Any European firm could provide service to anywhere in Europe. VI. Conclusion. The option to invade the other European markets would have been futile since they had a much greater advancement in marketable skills than those of the Telefonica de Espaa. If the Telefonica did push through with their plan for Europe, they would have lost the business battle. Their investments may have stagnated over the years since their competitors could offer a better

service than they. It would have been an impossible feat to attain. It would have been better if they averted their eyes somewhere else. To a better location where there lay no competition for them. And there was a better location: South America. Seeing the opportunities that lay ahead if I took the Telefonica to South America, I also would not have hesitated. Since language and cultural barriers are almost non-existent, it would be easy for me to make it into the South American markets. And plus, I also have advantage on both local and other foreign investors. I may lack the technological advantage compared to other foreign companies, but I have the upper hand in communication. The same goes for the local entrepreneurs. I have a more superior technological and managerial advancement compared to them, and linguistic and cultural barriers do not exist so I still get the upper hand. If I were put in the situation of the marketing strategists, seeing that I had everything to gain and nothing to lose, Id wisely invest in the South American markets.

2. I can characterize the corporate strategy adopted by Telefonica de Espaa as local skeptics dubbed as conquistador capitalism. As Telefonica joined the European Union, they were faced with a lot of threats and competition because of other countries entering their borders carrying with them technology and promises of good service with cheaper rates. And, the European Union also announced that on 1998, state-sponsored telephone monopolies would be abolished and that any telecommunications firm would be able to provide service anywhere in the European Union. They tried to assess their choices. Should they close their barriers against other potential rivals from the European Union? Should they change their marketing strategy and their scope of operations? Or should they try to enter the European Union markets and try to compete with other European rivals whom they know had better advantage managerial and service-wise? Seeing that they had no bout against the other big European companies such as British Telecom and Deutshe Telekom, who had better exposure and experience with managerial approaches and access to more moderns and advanced technology, they forgot about the plan of conquering the European markets and instead averted their eyes to the South American market. Seeing that they had much more of an advantage there against foreign investors and local owners, they started buying shares from soon to be privatized monopolized telephone companies. Soon they were cutting off thousands of workers to remove unnecessary costs but still doubling its network rates. They also bought almost all the shares in telephone companies in the south Americas, making tem the biggest private telephone company. But there were also down sides to that. Minority share holders had lots of complaints that the parent company charges exorbitant fees for its rendered services and that the parent company transfers product lines with high growth potential from its subsidiaries to itself. I believe that the skeptics name for Telefonica was correct. It totally conquered almost the whole South Americas telecommunications system and has more than doubled its network lines in SA compared to the ones it has in Spain. But still, because of its aggressive approach to the South American markets, it has earned for itself a lot of criticisms and also lots of complaints

from the people it renders its services to. Though it earned and even tripled everything that it had back in Spain, it was not exempt from competition. Seeing its success, Bellsouth signed up 1 million cellular phone subscribers in Sao Paolo, rendering almost half of the market there within only 10 months of operation. Bellsouth now poses a great threat to the New Conquistador. Whatever its approach may be, it had better think of the possible outcome, and since the world is entering the 21st century, it must be able to give a better service to its customers rather than lose them to new competition. 3. Before we begin to address the problems and complaints of the minority shareholders, let us first examine what their problems are. Minority shareholders in Telefonica South America have been complaining about the exorbitant management fees the parent company is charging which is causing their interest to dwindle and also, they complain about the practice of the parent company to transfer product lines which have high growth potential from the subsidiaries to the parent. It is only normal for the minority shareholder to feel unhappy with the way Telefonica South America runs the South American telecommunications market. It was pointed out that due to their charging of excessive management fees, the subsidiary companies have lesser interest and also the practice of taking away a high growth potential product line from the subsidiaries to itself. It is really normal for the minority shareholders to be angry since that could have doubled or even tripled their income but since the parent corporation took it away, as well as charging them with insanely high fees. If I were a senior manager of the Telefonica South America, I would of course listen to their complaints first. Id study their complaints very well and Id look if there is any validity to their complaints. If I do find that what they are complaining to me about is really valid, then Id assess what I could be able to do to help them. First, Id look at their major complaint: the exorbitantly high management fees. What is the basis for the parent corporation to charge really high fees on the minority shareholders? If I could see that they are rendering good management services from the parent corporation, then I can see no reason for their complaints on the fees charged to them. Giving out good service is well worth a high price any day. But if I can see that the parent corporation is charging insanely high fees for no good reason at all, then I would recommend to the CEO that they should lessen the fees charged to the subsidiaries, since charging them with really high fees could lessen their revenues. It would be bad for the subsidiaries and for the parent company in the long run. They might lose their grip on the South American markets. Since there will be other investors coming into the South American markets, they might find themselves losing their minority shareholders to other foreign investors that offer a better deal for the shareholders. It would also not be good for the image of the company if they would wish to venture to other countries besides South American countries because their reputation might precede them. Next, I would try to view the other complaint posed by the minority shareholders: the high growth potential product lines and the practice of the parent company of transferring them from the subsidiaries to itself. I can really say that this is really an unfair practice because one can clearly see that the parent company is taking what should be for the subsidiary. I would

recommend to the CEO that this practice should be stopped and that a chance should be given to the subsidiaries in order for them to increase their inputs through these product lines. As was said in the case study, the Telefonica South America subsidiaries value of shares stagnated for two years, even though the shares of the parent company continued to do well. The product lines should be returned to them in order for the value of their shares to go up. The parent company should take good notice of these complaints posed by the Telefonica South America subsidiaries and also of the people who subscribe to them. Since in the long run, it would wholly damage, not only the reputation of the company but also the chances that they may be able to expand into other parts of the world. They should rid themselves of this negative image and should start giving high value services not only to the subsidiaries but also to the subscribers. And since other international companies are taking interest in taking the South American markets for themselves and being a threat to the Telefonica South America, the Telefonica SA should start with the reforms right away. Even as early as 1999 it was force to $8 million in refunds to Sao Paolo customers because of poor service. They should start minding the fact that we are entering the 21st century and that the people now immune to the marketing strategies of the olden times. The strategies of the past no longer work on the people of today so they should start thinking of a new strategy or just reform itself for the betterment of its service to the people and the subsidiaries. 4. Before we delve into the issue of the deregulation of South American telephone industries and its effects on Telefonica, let us first examine what deregulation really is and its effects on countries that choose to deregulate any service or infrastructure it owns. Deregulation is the process wherein reforms are conducted on government control over business. Reforms on government control includes the loosening or even withdrawal of interference with business behaviors. Parts of reforms also are liberalization of market entry and, in most nations, the privatization of state assets. The deregulation of telecommunications is very important in the aspect of globalization since it facilitates the integration of communication throughout countries thus making it easier for countries to do business in the international scale. (, 1998. ) Deregulation may also bring competition from other countries since it is open to other countries that choose to bring business to that country. It may pose a threat to already existing businesses but it may bring about a great positive outcome for the locales who wish for a high value service but for a cheaper price. It may even come to a war of who could give a cheaper price to the customers. It really is greatly beneficial to the customers since they would have more choices than before. Deregulation has reached the South American shores and they are now in the process of deregulating their formerly state owned telephone monopolies. This now poses a great threat to the New Conquistador. They may have stiff competition since the South American Markets are now open to other foreign countries as well. As was mentioned, Telefonica South America already has existing competitors since its success in the South American markets. BellSouth in 1999 signed up one million cellular phone subscribers in Sao Paolo, capturing half of the existing

subscribers in that market alone. That could pose a really great threat to Telefonica and since the other countries are starting to deregulate their telephone monopolies, that may only be the beginning of their problems. And due to their poor service, in due time, they may even loose their grip on the South American markets to other foreign companies who offer better services at a cheaper price. Telefonica South America, in my opinion, should start giving out customer oriented services. I have read once before that the customers of today no longer fall for the marketing strategies of the olden days. They already know the pros and cons of the service that is being offered. They are really getting smarter on the aspect of marketing strategies and other such things. The marketing strategists of Telefonica South America should think of a better plan on hauling in the customers and keeping them subscribing to them. It may be easy to reel in customers but the really tough job is to keep them, especially with all the competition around. They should start reforming on their Customer Care and quality service aspect, if they intend to keep the South American markets under their reigns. They should also renew good relation with their minority stock holders because if they choose to withdraw their shares and invest in the new foreign companies, that would totally jeopardize the operations of Telefonica in the South American markets and their vision of being the 5th largest telephone operations company would, all go down the drain. Therefore, they should really pay more attention to the greatest aspects of the business that they are totally ignoring: the minority shareholders and the customers. If those two aspects chose to go to other foreign companies, that would spell disaster for Telefonica. They should maintain good relationship with the minority shareholders and the customers because in the long run, the parent company would still benefit greatly from this union. Not only will they ensure that they would have their customers and investors firmly in place, they can also be assured that their grip on the South American markets will remain as strong as it was and that no foreign competitor can ever take its place.