Business Transformation at Telefónica De España
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Case Code: BSTR256 Case Length: 20 Pages Period: 1998-2006 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.400 Organization: Telefónica de España Industry: Telecom and Broadband Countries: Spain Themes: Business Transformation, Corporate Growth Strategies |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Transformation Program
In Telefónica de España, the business transformation program was designed around three modules - growth, competitiveness, and commitment. The company planned to achieve growth by putting in efforts to develop broadband capabilities and revamp the product categories. Competitiveness was to be achieved by improving quality and efficiency and by acquiring online capabilities. Commitment was to be achieved by becoming a high performance organization. Instead of a long-term program, the transformation was aimed to be achieved through a series of short-term programs each of one-year duration...
Growth
In tune with market changes that included new products like ADSL lines, voice mails, lines with caller ids, the growing competition that came with liberalization, and changing customer preferences, Telefónica de España aimed to provide the latest telecommunication technologies and to create internal efficiencies by establishing new ADSL connections, while maintaining its lead in the fixed line and broadband segment and introducing new products.
ADSL
Telefónica de España had begun testing the new technology ADSL way back in 1997, recognizing the need to provide high-speed Internet access. The services provided through ADSL were superior to the existing telephone lines, and allowed high-speed transmission. The company began concentrating on ADSL as it realized that it was a growth driver and a part of its transformation process...
Competitiveness
Telefónica de España's plans to enhance its competitiveness involved improving the quality of its services by using practices like Six Sigma and improving process and development of online capabilities. By December 2001, Telefónica de España had a quality system in place, that was in compliance with UNE-EN-ISO 9001: 2000 standards According to del Rey, "Competitors can attract people on price for about three months or so. We try to have the clients for a long period, forever. Quality is our differentiator and over time people realize that our price is more or less the same as that of the competitors. It is our belief and our bet that quality will keep customers with us in the long run."...
Commitment
In order to improve commitment, Telefónica de España reorganized the market and customer segments and came up with a set of values to bring forth change in attitude.
Customer Segments
For each of the customer segments - households, SOHO, SMEs and large corporations, Telefónica de España had different products to offer. For basic households, the company offered basic voice services. These accounted for 84% of the total household customers as of 2005. Connected digital households accounted for 14% of the household customers and the services provided for this segment included voice services and medium speed broadband Internet. The services provided for Advanced Digital households included voice along with broadband and digital home services like Imagenio, Internet TV, and video communications...
The Results
In the first year after implementing the business transformation program, Telefónica de España was able to reverse the trend of decreasing EBITDA. The EBITDA, which had been going down from 1997 to 2000, showed a positive trend and began growing by the year 2001. In 1997, EBITDA stood at € 5,537 million. It went down to € 5,251 million in 1998, € 4,958 million in 1999, and to € 4,448 million in the year 2000. In 2001, it grew by 1.9% to € 4,508 million. Telefónica de España attributed the growth to price discounts, new packages, reduction in operating expenses, and tariff increases...
Exhibits
Exhibit I: Telefónica SA - Principal Subsidiaries
Exhibit II: Telefónica De España - Financial Performance
Exhibit III: Telecom Market in Spain
Exhibit IV: Telefónica De España Subsidiaries
Exhibit V: Services Offered by Telefónica De España
Exhibit VI: Telefónica - Corporate Values
Exhibit VII: Telefónica De España - Financial Performance (2001-05)
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