INTERNATIONAL BUSINESS

I have an assignment for International business, I am posting information and expectiontations on what is expected in order for this assigment to be a go. I have attached the discussion question and the reading that goes along with the question that should be answered in paragraph form. I need inquote citations and

references

. This work should be done on a graduate level.

 

Double spaced

12in font

citatations

references

at least three paragraphs

Post to the discussion board your response to question 5 of the Spain’s Telefonica case on pages 278-279.

 

Include in your post personal observations as well as concrete examples from the readings to support your views. Initial posts should be several paragraphs, include direct references to the readings, and word choice and sentence structure should be suitable for graduate level work. Responses to your classmates should be constructive in nature.

278 Part 3 The Global Trade and Investment Environment

4. You are the international manager of a U.S.
business that has just developed a revolutionary
new personal computer that can perform the
same functions as existing PCs but costs only
half as much to manufacture. Several patents
protect the unique design of this computer. Your
CEO has asked you to formulate a recommenda-·
tion for how to expand into Western Europe.

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Your options ate (a) to export from the United
States, (b) to license a European firm to
facture and market the computer in Europe, or
(c) to set up a wholly owned subsidiary in
Europe. Evaluate the pros and cons of
alternative and. suggest a course of action to
your CEO.

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ask 0 global EDGE t giobasedge.!l1!Ulll.edu

Foreign Direct Investment

Use the globalEDGPM site to complete the following
exercises:

Exercise 1

The World Investment Report published annually by
UNCTAD provides quick electronic access to compre-
hensive statistics on the operations of the largest trans-
national corporations. Gather a list of the top 10
non-financial transnational corporations from develop-
ing countries. Provide a summary of the countries and
industries represented. Do you notice any common traits
from your analysis?

Exercise 2

An integral part of successful foreign direct investment
(FDI) is to understand the target market as well as the,
nature of the possible investment sector. As such, your
energy company is seeking FDI opportunities in Jordan.
The Multilaterial Investment Guarantee Agency has been.
identified as a resource to examine the energy industry
internationally. Based on the information available at .
this resource, prepare a report indicating recent and
important trends relevant to a possible FDr venture in
Jordan.

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~·’S· ., T If·pains e e ames

Established in the 1920s, Spain’s Telefonica was a typical
state-owned national telecommunications monopoly un-
til the 1990s. Then the Spanish government privatized
the company and deregulated the Spanish telecommuni-
cations market. What followed was a sharp reduction in
the workforce, rapid adoption of new technology, and
focus on driving up profits and shareholder value,

In this new era, Telefonica was looking for growth. Its
search first took it to Latin America. There, too, a wave

of deregulation and privatization was sweeping across
the region. For Telefonica, Latin America seemed to b
the perfect fit. Much of the region shared a com mOD
language and had deep cultural and historical ties t;
Spain. Also, after decades of slow growth, Latin Amen.
can markets were growing rapidly, increasing the adop
tion rate and usage not just of traditional fixed lin
telecommunications services, but also of mobile phone
and Internet connections. .

Foreign Direct Investment

Having already learned to transform itself from a
state-owned enterprise into an efficient and effective
competitor, Telefonica believed it could do the same
for companies it acquired in Latin America, many of

• which were once part of state-owned telecommunica-
tions monopolies. In the late 1990s, Telefonica in-
vested some $11 billion in Latin America, acquiring
companies throughout the region. Its largest invest-
ments were reserved for Brazil, the biggest market in
the region, where it spent some $6 billion to purchase
several companies, including the largest fixed line op-
erator in Sao Paulo, the leading mobile phone operator
in Rio de Janeiro, and the principal carrier in the state
of Rio Grande do SuI. In Argentina, it acquired 51
percent of the southern region’s monopoly provider, a
franchise that included the lucrative financial district
of Buenos Aires. In Chile, it became the leading share-
holder in the former state-owned monopoly, and so on.
Indeed, by the early 2000s Telefonica was the No. 1 or
2 player in almost every Latin American country, had
a continent-wide market share of about 40 percent,
and was generating 18 percent of its revenues from the
region.

Still, for all of its investment, Telefonica has not had it
all its own way in Latin America. Other companies could
also see the growth opportunities, and several foreign
telecommunications enterprises entered Latin America’s
newly opened markets. In the fast-growing mobile seg-

,’. ment, America Movil, controlled by the Mexican billion-
aire Carlos Slim, emerged as a strong challenger. By 2008,
the Mexican company had 182 million wireless sub-
scribers across Latin America, compared to Telefonica’s
123 million, and intense price competition between the
two companies was emerging.

1. D. R. John, ”Wal-Marr in Japan: Survival and Future of its
Japanese Business,”Icfai University Journal of International
Business 3 (2008), pp. 45-67; United Nations, World
Investment Report, 2009 (New York and Geneva: United
Nations, 2009); “Challenges Persist in Japan,” MMR, De-
cember 14, 2009, p. 45; and J. Matusitz and M. Foster,
“Successful Globalization Practices: The Case of Seiyu
in Japan,” Journal of Transnational Management, 2009,
pp.155-76.

2. United Nations, World Investment Report, 2009.
3. United Nations, World Investment Report, 20ID (New

York and Geneva: United Nations, 2010); and “Global
FFDl Flows Continue to Slide in 2009,” UN Conference
on Trade and Development, press release, September 17,
2009.

ChapterS 279

With the die already cast in Latin America by the
mid-20c0s, Telefonica turned its attention to neighbor-
ing countries in Europe. For years, there had been a tacit
agreement between national telecommunications com-
panies that they would not invade each other’s markets.
In 2005 this started to break down when France Tele-
com entered Spain, purchasing Amena, the country’s
second-largest mobile carrier behind Telefonica. Tele-
fonica moved quickly to make its own European acquisi-
tion, acquiring Britain’s major mobile phone operator,
02, for $31.4 billion. 02 already had significant opera-
tions in Germany as well as the United Kingdom. The
acquisition transformed Telefonica into the second-largest
mobile phone operator in the world, measured by cus-
tomers, behind China Mobile.55

1. What changes in the political and economic en-
vironment allowed Telefonica to start expanding
globally?

2. Why did Telefonica initially focus on Latin
America? Why was it slower to expand in Europe,
even though Spain is a member of the European
Union?

3. Telefonica has used acquisitions, rather than
greenfield ventures, as its entry strategy. Why do
you think this has been the case? What are the
potential risks associated with this entry strategy?

4. What is the value that Telefonica brings to the
companies it acquires?

5. In your judgment, does inward investment by
Telefonica benefit a host nation? Explain your
reasoning?

4. World Trade Organization, Irttemational Trade Statistics,
2008 (Geneva: WTO, 2008); and United Nations, World
Investment Report, 2008 (New York and Geneva: United
Nations, 2008).

5. United Nations, World Investment Report, 2010.
6. Ibid.
7. Ibid.
8. Ibid.
9. United Nations, World Investment Report, 2009.

10. Interviews by [he author while in China; United
Nations, World Investment Report, 2009; Linda Ng and
C. Tuan, “Building a Favorable Investment Environment:
Evidence for the Facilitation of FDI in China,” The
World Economy, 2002, pp. 1095-114; and S. Chan and

Keith Griffin
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