1451 words 6 pages
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
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Political instability or inflation in host country may have bad impact on success after acquisition.

4. What is the value that Telefonica brings to the companies it acquires?
Companies learn valuable skills and receive new technology. In addition acquisition leads to productivity, growth, product and process innovation and greater economic growth. Additional capital from acquiring company can lead to further development.

5. In Your judgment, does inward investment by Telefonica benefit a host nation? Explain your reasoning.
FDI can make a positive contribution to a host economy by supplying capital, technology, and management resources that would otherwise not be available and thus boost the country’s economic growth. New technology received may result in economic development and industrialization. Developing countries with lack of research and development rely on advanced industrialized nations for much of the technology required to stimulate economic growth and FDI can provide it.
Another benefit is that FDI brings jobs to a host country that would otherwise not be created there. Effects of FDI on employment are both direct and indirect. Direct benefits arise when Telefonica employed host country citizens directly. Indirect benefits arise when jobs are created in local suppliers as a result of the investment and when jobs are created because of increased local spending by employees of


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