An investigation into the feasibility of expansion of Telefonica S.A. to Algeria

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Team Business Proposal Title Page

Team 80

Client (Company): Telefónica S.A.

Chosen target country: Algeria

Product/Service: Broadband Internet service

Broadband, or high-speed Internet access means access to the Internet at data rates in excess of

the maximum possible when using dial-up access, and when using a modem and telephone

network.

Number of pages, including title page: 34

Team members:

Name Country

1. Zhenlei Wang USA

2. Kateryna Nekrasa Ukraine

3. Paula X. Bayona Colombia

4. Anais Noto Scotland, UK

5. Ali Ozpercin UK

6. Vincent Hayes Ireland

2

Contents

3 Executive Summary

5 The Organization: Telefónica

11 Product: Broadband Internet Service

13 Market Opportunity Analysis

15 Basic Characteristics

17 Economic Environment

20 Political and Legal Environment

22 Cultural Environment

25 Entry Mode

26 Staffing

27 Marketing

32 Appendix

3

Executive Summary

This report will demonstrate the weakness of internet services in Algeria and show that

Telefonica, one of the global leaders in the telecommunication sector, can fill this gap.

The Organization: Telefónica

Telefonica provides communication, information and entertainment solutions and is

present in 24 countries, especially in Latin America and Europe.

Telefonica has a wide range of global services in the form of different companies such as

Telefonica Digital that provides financial services, advertising, video and media, cloud;

Telefonica Global solutions that offers global services to multinational, wholesale and roaming

companies; Telefonica Security engineering that provides integral technology security; and

telecommunication services providing mobiles, landlines through the 4 operators (O2, Movistar

and Vivo), Telefonica included.

Telefonica is the eighth largest with respect to market capitalisation on a worldwide basis.

The company’s competitive advantage in international development stems from its strong brand,

rich experience in finance as well as a huge focus on research and development.

The Market: Algeria

Algeria’s market is now experiencing the beginning of its heyday. The great potential of

the economy, public finance, and the absence of at least one permanently employed competitive

niche offer wide horizons for foreign implementation. There is a great lack of Internet access

compare to other developing countries. The majority of the Algerian population is between 15

and 30 years old, which is the most open-minded bracket to technology.

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Market Entry Mode

Creating a franchise of Telefonica will fully utilize the company’s brand reputation, form

a close relationship with the local customers, provide high quality promotion, and result in rapid

market penetration.

Staffing and Marketing Strategy

We recommend employing local Algerians for their advantages such as understanding the

Algerian customers’ needs. We suggest adapting the Algerian culture and make the local

Algerians feel like if there were part of the company. Hold events in order to create a community

and to built a trend that would inspire Algerian and foster a greater desire to use Internet services.

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The Organization: Telefónica

In order to introduce our report, it is essential to present the basic characteristics of

Telefonica. Telefónica is one of the world leaders’ integrated operators in the telecommunication

sector, providing communication, information and entertainment solutions, with presence in

Europe and Latin America. In 2012, Telefonica was present in 24 countries managed by more

than 130,250 professionals and its revenue was 62,356 million euros. Telefonica has also

seduced 315, 7 million customers in December 2012. It has acquired 3 other brand names along

its history which are the following ones.

In december 2012, Telefonica is one of the global leaders in the telecommunication sector

since the group stands at the seventh position in terms of capitalization, at the first position as a

European integrated operator and finally at the eighteenth position in the Eurostoxx 50 ranking

(Europe's leading Blue-chip index for the Eurozone, provides a Blue-chip representation of

supersector leaders in the Eurozone). Telefónica has one of the most international profiles in the

sector with more than 76% of its business outside its home market and a reference point in the

Spanish and Portuguese speaking market. Telefónica is a listed company and has more than 1.5

6

million direct shareholders. Its capital traded on the continuous market on the Spanish Stock

Exchanges (Madrid, Barcelona, Bilbao and Valencia) and on those of London, New York, Lima

and Buenos Aires. In Latin America, Telefónica gives service to more than 211.9 million

customers as of the end of December 2012 becoming the leader operator in Brazil, Argentina,

Chile and Peru and has substantial operations in Colombia, Costa Rica, Ecuador, El Salvador,

Guatemala, Mexico, Nicaragua, Panama, Puerto Rico, Uruguay and Venezuela. In Europe, on top

of the Spanish operations, the Company has operating companies in the United Kingdom, Ireland,

Germany, Czech Republic and Slovakia, providing services to more than 103.1 million

customers in this area at the end of December 2012.

History Timeline

1924-1964: CTNE established in Madrid and becomes biggest Spanish Enterprise

1965-1989: Starts operations of first European data transmission special network and

begins trading on New York stock exchange.

1990-1994: Enters Chile, Argentina and Peru. Launches the analogue mobile service

MoviLine and the digital mobile telephony Movistar.

1995-1999: Telefonica becomes fully public. Launchs ADSL a fixed broadband access

service. Enters Brazil.

2000-2004: Imagenio is launched. New strategic focus on profitable growth. Acquisitions

conducted in Latin America.

2005-2008: Creates presence in Northern Europe with acquisition of O2. Alliance with

Telecom Italia. Gains presence in China. Increases presence in Latin America further.

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2009-2012: Acquistions of companies in Germany, Israel and Spain. Control of Vivo

gained through buy out. Sale of stake in China Unicom. Obtained mobile license for

Costa Rica. IPO of Telefonica Deutschland.

(Telefonica, 2013)

Products/Services

● Telefonica Digital: Telefónica Digital is a global business division of Telefónica

headquartered in London with regional hubs in the Silicon Valley, Sao Paulo, Spain and

Israel. Its mission is to seize the opportunities within the digital world and deliver new

growth for Telefónica. The unit expects to create annual revenues of approximately €5bn

for Telefónica by 2015 with an annual revenue growth rate of 20%, as well as driving

considerable additional benefits to Telefónica operations.Provides financial services,

advertising, video & media, cloud, M2m, eHealth, security, applications in order to

capitalise on opportunities in the digital world to grow Telefonica.

● Telefonica Global Solutions: As one of the largest communications companies in the

world Telefonica Global Solutions have been building secure, reliable communications

networks and services for our customers for many years. And now, over 300 million of

them depend on us every day. Telefonica Global Solutions is where the customers expect

it to be. It Offers global services to multinational, wholesale and roaming companies.

Services to MNCs include applications, central services, collaboration, manage data

centre services, manage security, service management centre, central cost manager, cloud

computing, desktop services, managed mobility, managed voice and data. Services for

wholesale include voice services, satellite services, interconnection services, capacity

services, corporate services and mobility services.

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● Telefonica Security engineering: Provides to all Telefonica Group companies since

1984 integral technology security (fire protection, information security and fraud

preventions solutions.

● O2: Provides mobile, landline and broadband services in the UK, Ireland, Germany,

Czech Republic, and Slovakia.

● Vivo: Provides mobile telecommunications for Brazil.

● Movistar: Provides landline and mobile services to Spain and Latin America.

Key Competitors

Telefonica’s direct competitors are America Movil S.A.B d C.V, BT Group plc and

Vodafone Group plc. Key figures for these firms can be viewed in the table below.

Company AMX BT VOD TEF

Market Cap. 61.13B 31.52B 124.33B 61.13B

Employees 158,719 89,000 86,373 N/A

Revenue 60.46B 29.10B 71.81B 83.74B

Net income 7.13B 3.43B -2.73B 5.09B

(Yahoo Finance, 2013)

On a worldwide basis Telefonica ranks eighth with respect to market capitalisation. Worldwide

competitors can be viewed in the table below ranked by sales.

Company Price Market Cap.

Nippon Telegraph and

Telephone Corporation

22.83 54.66B

Deutsche Telekom AG 10.54 45.32B

Verizon Communications Inc. 47.05 134.48B

Vodafone Group plc. 25.28 124.33B

9

France T 10.12 26.59B

NTT DOCOMO Inc. 15.48 64.21B

Telecom Italia S.P.A 7.10 13.69B

Telefonica 13.45 61.13B

(Yahoo Finance, 2013)

Telefonica International Development

Telefonica was founded in Spain. Its first major international strategy was an expansion

to Chile and Argentina in 1990 followed by Peru in 1994 and Brazil in 1998. Currently

Telefonica is present in 24 countries including Ireland, UK, Spain, Germany, Italy, Czech

Republic, Slovakia, China, Mexico, Venezuela, Columbia, Ecuador, Peru, Brazil, Uruguay,

Argentina, Chile, Guatemala, Panama, El Salvador, Nicaragua and Costa Rica.

There are a number of criteria which are driving Telefonica’s international strategy. The

first of which is countries which speak Portuguese and/or Spanish. This is illustrated by

Telefonica’s market domination in South America where they are the leader in this sector.

After this initial international strategy Telefonia seemed to aim to establish itself in

developed markets in Europe where demand would be assured.

The most recent theme of Telefonica’s internationalisation is expanding to emerging

markets such as China. With great potential of growth these markets are highly lucrative for

companies such as Telefonica.

Telefonica Analysis

Strengths

● Significant market position

● Strong focus on R&D

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● Large geographical presence

● Strong finances

● Strong brand through effective advertising and marketing

Weaknesses

● Small presence in emerging markets other than China

● Global competition is fierce

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Product: Broadband Internet Service

Algeria - a Country Perspective

The Algerian market is now experiencing the beginning of its heyday. The great potential

of the economy, public finance, the absence of at least one permanently employed competitive

niche offer wide horizons for foreign biznesmenov.Tak is gaining momentum and the

introduction of broadband Internet services in the country.

Broadband Internet Access

Broadband, or high-speed Internet access means access to the Internet at data rates in

excess of the maximum possible when using dial-up access, and when using a modem and

telephone network . Performed using wire, fiber optic and wireless communication lines of

various types.

If the dial has a limited bit rate of 56 kbit / c and fully occupies the telephone line,

broadband technologies offer many times the speed of data exchange and do not monopolize the

telephone line. In addition to high speed, broadband access provides a continuous connection to

the Internet (no need for dial-up) and the so-called "two-way" communication, that is, as an

opportunity to take ("boot") and transfer ("upload") information at high speeds.

Allocate mobile broadband (mobile broadband) and fixed broadband. Fixed broadband is

based on wired connections, while mobile broadband includes transmitting data wirelessly.

The Use of Broadband Internet Services in Europe

As of September 2012, the largest provider of broadband Internet access in Europe are:

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No. Company Location

Subscribers

(September 2012, in

thousands)

1 Deutsche Telecom Germany 16.427

2 France Telecom France 12.951

3 Telefonica Spain 9.525

4 Telecome Italia Italy 7.186

5 Vodafone UK 5.800

6 BT Group UK 5.342

7 SFR France 4.773

8 Iliad France 4.528

9 TalkTalk UK 4.249

10 Virgin Media UK 4.243

We see that in Algeria Telefonica Internet is not developed at all .Therefore, we plan to

introduce it in the country, because we believe that Algerians’ life will become much easier

whenthey would have access to Internet through Telefonica.

13

Market Opportunity Analysis

Algeria is a country which is located in North of Africa and growing day by day. With

advanced technological improvement in all around the world, every single part of world has been

enhancing the percentage of internet usage, in other words we are in a technology age and in a

global world because of this increasing demand of internet. From this aspect, the percentage of

internet usage and market opportunities will be investigated for Algeria in this part.

Algerian Internet Usage and Population Growth:

YEAR Users Populati

on

% Pen. Usage

Source

2000 50,000 31,795,5

00

0.2 % ITU

2005 1,920,00

0

33,033,5

46

5.8 % ITU

2007 2,460,00

0

33,506,5

67

7.3 % ITU

2008 3,500,00

0

33,769,6

69

10.4 % ITU

2009 4,100,00

0

34,178,1

88

12.0 % ITU

2010 4,700,00

0

34,586,1

84

13.6 % ITU

2012 5,230,00

0

37,367,2

26

14.0 % IWS

Source: internet world stats

As we can observe from the figures above, the usage of internet was increased

approximately a hundred times in the past twelve years. However, although these figures are

illustrates the demand of internet supplier in Algeria, they has already a lot of internet supplier.

From some statistics, “Continued delays with the licensing of 3G spectrum to Algeria’s

mobile network operators has held back full competition in the country’s internet and broadband

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sector. It is now planned for 2013. In the meantime, fixed-line incumbent Algerie Telecom, itself

a mobile operator has expanded its ADSL and WiMAX networks and upgraded its CDMA WLL

system with broadband capabilities. ADSL prices are already among the lowest in Africa. Several

of the country’s ISPs are rolling out their own WiMAX wireless broadband infrastructure. The

full liberalisation of VoIP internet telephony is enabling them to become players in the voice

market as well. Converged triple-play voice, data and video services have been introduced, and

Algerie Telecom is investing heavily in the expansion of its national fibre infrastructure”

(www.budde.com.au).

These information shows that there are existing companies in Algeria that continues to

provide internet services but there are still weak and insufficient services “almost half of the

country’s ISPs lost their licences in 2011 due to unpaid licence fees in Algeria”

(www.budde.com.au). It means that, if the companies who are planning to implement themselves

in Algeria in order to provide internet service can only be successful if they set up strong and

systematic institution. Moreover, there is significant opportunity to work with local companies

because of their weaknesses. These factors are going to provide advantages to both local

companies and international company.

In conclusion, Algeria could be a potentially lucrative with respect to investments in the

internet sector. Although there are some risks, the advantages are greater than the risks.

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Basic Characteristics

Located in the north tip of the world's second-largest

and second-most-populous continent, the African continent,

Algeria is the tenth largest country in the world and the

largest country in Africa. Algeria is also the 34th populous

country of the world, with a total population of 37,367,226

in 2012 (ranks right before Canada) and an annual population growth rate of 1.92%. Urban

population accounts for 66% of the entire population, with an estimated 2.3% change over 2010-

2015. Major cities include Algiers, the capital, with 2.74 million citizens and Oran (770,000).

Climate, Terrain, and Natural Resources

The climate in Algeria is similar to that of other Mediterranean countries. During winters,

the weather is mild and wet; during summers, the weather is hot, dry along the coast, and drier

on high plateaus. Another common weather during the summer is sirocco—a hot, dry wind that

brings large quantities of red Sahara sand to the coastal region and raises the temperature up to

40°C and higher for two to four days .

The terrain of Algeria is mostly high plateau and desert. Some mountains and coastal

plains are discontinuous and narrow. On the one hand, Algeria is richly endowed with many

natural resources. Some examples are petroleum, phosphates, lead, natural gas, uranium, zinc,

and iron ore. On the other hand, Algeria also experiences natural hazards such as earthquakes

and mudslides, especially during the wet season when the country experience increases in

precipitation.

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Literacy Rate

According to the United Nations Children's Fund, adult literacy rate is defined as

“percentage of persons aged 15 and over who can read and write.” (The United Nations

Children's Fund, 2012) Almost 70% of the total Algerian population is literate. Statistics in 2002

show that 60.1% of the female population was literate, whereas the level for male population was

79.6%. These rates are comparably higher than many other African countries. This is crucial

because the nature of our product demands a certain level of literacy from our target audiences’

in order for them to fully benefit from the changes that broadband internet will bring into the

country.

The median age in Algeria is 28.1 years. Young adults who are at their early working age

(15-24 years) make up 18.9% of the entire population, and prime working age adults ages 25-54

years contributes another 42.4%. Together, the two groups represents over 61% of all

Algerians—a potential active and quickly growing population that are demanding Internet access,

making it easier to market broadband service into the country.

The above figure illustrates the age and sex structure of Algeria. As depicted from the population pyramid, the

majority of the population are newborn Algerians and adults from 15 to 40 years of age—an ideal age bracket to

aim our broadband internet service at. The distribution of males and females is relatively the same.

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Economic Environment

GDP and Budget

Algeria’s gross domestic product (GDP) was $274.5 billion in 2012, with a per capita of

$7500 when dividing by the country’s population. The country has a modest growth rate of 2.6%

in 2012. Algeria ranks 48 in

terms of GDP when comparing

to the rest of the world. The

graph on the right depicts the

breakdown of GDP by sectors:

Revenues and expenditures in 2012 were $79.32 billion and $84.29 billion, respectively.

The difference resulted in a -2.4% budget deficit, which was close to that of other developing

nations such as China (-2.3%), Mexico (-2.4%), and Turkey (-2.6%). National business

investments on factories, machinery, equipment and other fixed assets have been steadily

increasing since 2004, taking up 32.3% of GDP last year.

Exports and Imports

Algeria’s economy relies heavily on the export of oil and gas. Algeria is the seventh

largest natural gas exporter (2010) and the twentieth largest crude oil producer (2009) in the

world. Hydrocarbon—a main source of electric energy that is primarily found in oil and gas—

has been providing strong revenues for the country that accounts for roughly one-third of GDP,

two-third of government revenues, and almost all of export earnings (95%). Major export

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partners are the United States and European countries such as Italy, Spain, and France. The U.S.

was the largest and most important importer of Algerian crude oil, with annual imports totaled

119,579 million barrels in 2010 and 64,816 million barrels in 2011 (EIA, 2012).

We’ve seen steady growth in imports for the past six years. Algeria imports reached an all

time high of $20.68 billion in December 2006 and then plunged to $6.04 billion three months

later (Trading Economics, 2012). Since then, the sector has shown a stable recovery. Gross

imports totaled $47.53 billion in 2012, a $2.6 billion increase from a year before. Main import

goods are capital goods, agricultural product, and consumer goods. Major import partners are

France, China, and Italy.

Inflation and Potential Risks

Algeria has experienced quite an inflation turbulence for the past three years. Inflation

averaged 8.5% in 2012—a drastic five percent increase when comparing that of 2011. The

Algerian dinars (AD) have been appreciating during the last five years. The exchange rate has

increased from around AD63:US$1 in 2008 to around AD77.8:US$1 last year. A large foreign-

exchange reserve of $190.5 billion (2012) should shield any serious downward pressure on the

currency.

Algeria is highly vulnerable to commodity price volatility. In terms of imports, its large

volume of agricultural product imports (15% of the country's overall import bill) leaves Algeria

vulnerable to shifts in international food prices (BMI, 2012). Moreover, the government's

policies of reducing imports with the aim of promoting domestic industry may lead to price

spikes. In terms of exports, the high dependency on oil and gas revenues leaves the country

unprotected to changing patterns of consumption. The weak performance of the euro during the

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past few years has decreased demand for hydrocarbons. In addition, the U.S. has begun to

increase consumption of domestic oil production (EIU, 2013).

20

Political and Legal Environment

Government

Algeria has a republic government—representatives elected by the people vote on

legislation. The current president Abdelaziz Bouteflika, who has been in power since 1999, is the

chief of state. He appoints the head of government, Prime Minister Abdelmakek Sellal and one-

third of the upper house members of the Bicameral Parliament. President Bouteflika has pursued

a slow and modest political and economic reform. The government dominates the economy

through investment in infrastructures and by maintaining high current spending on wages and

subsidies.

Political Risk

High youth unemployment rate, housing shortage, and restricted political expression

could all spark political unrest. In January 2011, three protesters were killed in five days during a

protest against rising food prices (EIU Country Monitor, 2012); in February 2013, 43 protestors

and nine policemen were injured during a protest against subsidized housing allocation (BBC

Monitoring, 2013). In response to the 2011 unrest, the government responded swiftly by granting

over $23 billion in public grants to appease protesters. However, the decline in energy prices

could limit the government’s ability to respond to future unrest.

Another barrier businesses face in Algeria is the strict restrictions on foreign investment.

Although the government has pledged series of diversification efforts from its dependence on

hydrocarbon in recent years, tough tax regime—a limit of 49% on foreign ownership—and

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cumbersome bureaucratic requirement—all imports must have a letter of credit—still give little

incentives to foreign companies (EIU, 2013).

Intellectual Property Right Problem

Algeria is not yet a member of the WTO. As a result, the country has not implemented the

Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement (BMI, P&H, 2013).

Algeria does not protect patents and data from unfair commercial use and disclosure. Moreover,

there is a growing trend in the state's intervention in the private sector. The Algerian government

has been attempting to give preferential treatment to domestic companies in the past few years

by passing laws that demand foreign contractors to form joint ventures (JVs) with local firms

(BMI Infrastructure, 2013). This together with the concerns over long-term property rights

created an unwelcoming environment that has discouraged investment in, and thus limited the

growth of the economy.

Note: Data in sections Basic characteristics, Economic Environment, and Political and Legal Environment,

Government are from CIA World Factbook: Algeria (2012) and The World Bank Data: Algeria (2012) unless cited

otherwise.

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Cultural Environment

This section will outline the cultural environment of Algeria and cultural factors that will affect

operations in the country.

Religion

The predominant religion in Algeria is Sunni Muslim with 99.6% of the population, with

the rest made up of Catholic 0.2% and others 0.2%. Islam is fundamental to Algeria’s way of life

and is present in the majority of aspects of life in Algeria. Islam is widely practiced and has a

significant effect on Algerian politics, economics and legislation (FITA, 2013).

Languages

The official language of Algeria is Arabic. There are various types of Arabic spoken

throughout Algeria. The Arabic spoken in Algeria differs greatly from written Arabic through a

differing simplified vowel system along with the adoption of numerous Berber, Turkish and

French words. The second language is Tamazight. French is also widely spoken.

Official business languages are French and Arabic however some firms do use English

(FITA, 2013).

Social Class Structure/Values/Key Concepts

The family is the most important unit of the Algerian social system and defines social

relations. The individual is always subordinate to the family or group. The honour of the family

is of great importance as it is intertwined with the family’s reputation and goodwill. In this case,

one individual acting poorly and losing honour will have a collective negative effect on the

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perception of the family. Individuals are aware of their responsibility of acting appropriately and

this is encouraged strongly by the family.

Members of the Algerian society are wary of losing face when interacting with others.

Areas of a sensitive nature include insulting and criticising people, putting people in an

uncomfortable along with dishonouring an individual.

Punctuality is perceived to be of importance in Algeria in comparison to other countries.

Senior figures set the standard with regards time keeping and this will be imitated by those

further down the hierarchy (Ferguson, 2010).

Business Etiquette/Practices

● The working week runs from Saturday to Thursday. Work usually commences at 8:30

until 12:00 and 14:30 until 17:30.

● Business meetings should be planned in advanced and confirmed a couple of days prior.

Meeting are normally held in an office. Appointments should not be planned during

Ramadan.

● Making an effort using Algerian business languages is appreciated and can help in

building a rapport.

● Decision making in Algerian business in a three step process. There are from senior

management down to middle management, middle managements own initiative and

middle management consultation with lower members of the company.

● Titles and seniority is important and should be acknowledged at all times.

● A good education is valued and respected by employers and colleagues.

● Algerians are not wary of their personal space and often stand in close proximity whilst

conversing.

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● Trust is very important in Algerian business and must be earned in order for a relationship

to move forward.

● Attire in the workplace is formal. It is important to note that women’s attire be in

accordance with Islam beliefs.

● Business cards ideally should be translated with French on one side and Arabic on the

other. Furthermore business cards should be offered only with the right hand.

● A great deal of importance is put on hospitality by Algerians and it should always be

accepted.

● The use finger pointing should be avoided as it is viewed as an ignorant gesture.

● Gifts are welcomed as a way of improving and developing relationships by Algerians.

(Ferguson, 2010)

Service and Algerian Culture Relationship

Although Algerian culture is considerably different from what Telefonica is familiar with,

there is ongoing change from traditional culture to a more modern culture. Telefonica also has

experience in operating in culturally different regions such as China in the recent past where they

have performed effectively and successfully in these regions. As a result it is possible for

Telefonica expand into Algerian markets without cultural issues being detrimental to this venture.

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Entry Mode

“Algeria has among the lowest broadband penetration rates in the region. The fixed-line

broadband services are monopolized by Algeria Telecom as all the ISPs have to use its network,

at the moment, however, fixed-line monopoly and delayed privatization of the incumbent is

causing limited infrastructure upgrade and poor quality of service.”

It is important to mention that Telefonica is a service enterprise, which means that using

franchising as an entry mode could be very useful for its process of expansion; as a franchisor,

being able to give a franchisee the right to use this brand and know how, is a technique used to

give some popularity to the company; besides, in marketing, the franchisor, is also known for

providing these franchisees advertising and sales promotion support, which is crucial when a

company is entering in a new market, with a new product.

Because Telefonica is involved with the services industry, it is of paramount importance

having a close relationship with the customers, which according to Dana- Nicoleta in her book

International Marketing, “franchises are closely associated to the consumer’s mind”; if the

company open franchises, the company will implement a face-to-face promotion, in which,

sellers will offer to the potential clients the product. Franchising is also a great and effective

method for rapid market penetration, meaning that for the expansion strategy for Telefonica that

involves new markets openings, franchising ensure a rapid international expansion.

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Staffing

Population and Employment

Algeria’s population has increased in the period comprehended by 2004-2012. In January

2004 it was estimated by 31.8 millions of people, last year, was estimated by 35.9 millions. Now,

as the following chart made by the Algerian authorities, there are some levels of unemployment

that in the past years, have declined. For example, in 2005, the percentages for unemployment

were 15.3% and 31.1% for young people and in 2009, 10% (it is still the same percentage

nowadays) and 21% for young people.

“Unemployment Rate in Algeria remained unchanged at 10 percent in the fourth quarter

of 2011 from 10 percent in the third quarter of 2011. Historically, from 1999 until 2011, Algeria

Unemployment Rate averaged 16.0 Percent reaching an all time high of 29.5 Percent in

September of 2000 and a record low of 10.0 Percent in September of 2010. In Algeria, the

unemployment rate measures the number of people actively looking for a job as a percentage of

the labor force”.

According to those statistics, we believe as consultants, that using home country nationals

would be the best option for staffing because we expect that having local employees can:

● Make an impact in the country’s economy and reduce the maintained percentage of

unemployment.

● Face cultural barriers in Algeria and have personnel that understand citizen’s needs.

● Lower costs in training staffing in terms of language.

● Create a link with the local target market.

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Marketing

"Algeria has a 2.5% broadband penetration rate as of 2011," noted Frost & Sullivan

Research Analyst Jonas Zelba. "However, the demand for high speed data services is evident and

is expected to increase, thus driving its growth."

According to that, what we pretend Telefonica to offer the Algerian Market basically

what they need and still don’t have: A fast broadband service, characterized by its quality and

speed. It is absolutely important to make this product be noticed and recognized as soon as it gets

inside the country. For it, we have planned a strategy focused in the differentiation of the product

and in the creation of a link between the enterprise and the main client, in order to guarantee its

consumption and its sales; the first impact is crucial to introduce the product into the market and

be able to compete with the existent competitors.

Marketing Strategy

If Telefonica wants to create the adequate promotion strategy in Africa, other aspects

must to be taken into account. For the community, it’s very important to feel like they are part of

this company. The company has to guarantee Africa that for them, its participation and

involvement is very important.

The strategy besides quality and customer service focuses, it also concentrates in two

other aspects: Branding and Sales. For branding, Africanizing a Spanish Brand is a complete

challenge, not only because of Africa’s poverty, but because of the multi-culture and its territory.

How different are societies and money distribution in these countries, on its urban and rural areas,

28

its populations and its citizens. How the main consumers are distributed and how is it possible to

achieve to the possible consumers according to their age?

In Africa, Telefonica is not just about the product but also about the brand (because it will

be using home-country national employees) and how it is meaningful to them; to achieve so, here

are some activities that should be part of the promotion strategy:

● Local events is a strategy that will make Africa and its communities feel noticed, because

it will represent to them that Telefonica actually cares about them and about their internal

activities, particularly for young people, one of the most attractive consumers. Events like

sports events, sport developments, scholarships and educational programs are a good way

to start, especially for a continent like Africa, where most of its countries lack of

resources and attention.

● Local trends, that will help the creation of a link between the company and the promotion

strategy, where the messages that Telefonica want to send to this consumers, basically

inspire and passionate; because as was mentioned, is not only about the product, but the

brand, where this brand can also be understood as a symbol of hope; that can also give

benefits to the company, in terms of growth and sales.

And for selling, sales promotion strategies are needed while also implementing public

relations and advertising strategies that also can connect and be cohesive to recover their image

based in a relationship, communication and commitment with Africa. But, the strategy also relies

in encouraging people wanting to be part of the company and acquiring its products, so, it has to

be sufficiently strong to make Africans feel too involved with the brand, and as a response, the

company will satisfy them by using modular and local campaigns customized and tailored to the

South African needs.

29

As was mentioned in the “entry mode” and staffing”, the company will have to open

franchises in order to make phone calls and attend people that comes by to know about the

product being offered, meaning, the company will implement a face-to-face promotion, in which,

the well-trained sellers (home-country nationals) will offer to the potential clients the product.

As consultants, for a company that provides services, such as Telefonica, is absolutely

important to work specially in its appearance, public image and prestige, in order to gain the trust

of its potential clients and maintain their buying loyalty. The product knowledge and technology

and empathy within the sellers, are the main aspects that initially, will represent the image of the

company in this new market.

Now, sellers will advise Algerians to choose a certain type of program (according to their

needs and budget), empowering sellers to negotiate the prices initially, to make the service

known and used. Besides, we intend that the company also creates platforms where Algerians

that haven’t noticed yet the franchises, by advertising in the streets, know that it is possible to

consult information by a specialized consulting system. Mostly Internet bases of the consulting

system where the public can be informed about prices, product features, branding, promotions

and news.

Additionally, the information can be consulted by telephone, (taking into account that for

Telefonica, isn’t a challenge creating these types of services) in which are call center solutions

with English, Arab and French speakers employees trained to give any information and also, for

suggestions and customer service skills, in order to face language challenges.

This phone guide will have a menu from which people can choose a specific subject and

the solution. If the menu does not include the subject that the customer needs, it will have access

to an adviser that will be ready to receive the main office in Spain. If it’s the first case, Algerians

30

employees will directly operate this call center, and any further information will be redirected to

Spanish employees (that only speak Spanish and English).

There’s an importance of empathy when creating and maintaining good customer

relationship, which is been taken this matter very seriously so that customers feel satisfied every

time they are buying or intending to buy a service from Telefonica. Transferring a sense of caring

to them and most importantly, a sense of understanding, makes each and every client feel noticed

and different with this personalized service, either in the offices or via telephone.

Taking into account the preferences of distribution, services, communications and

requirements of each of them, every day, the company work to meet the needs of customers with

effort and dedication, striving to make customers happy with the product and service quality,

taking suggestions, criticisms and requirements with gentle attitude of gratitude and learning to

be able to get to know the market more and more.

Promotion

Telefonica can communicate, inform and persuade its customers thanks to brokers that

could help to reach clients and then achieve our organizational objectives. Also, it is important

that Telefonica use internet advertising, “Algeria has recorded a 300% increase in internet

advertising during the third quarter of this year, compared to the same period of 2007, reports

Algerian daily Le Quotidien d’Oran”.

Market Penetration

In a very first period/stages, the product will require the assignment of discounts and low

prices, that make the product even more attractive than already is, helping the consumer to get

closer to it, to feel tempted and also, to attract more and more audience when the time goes by, as

the objective of repelling losses.

31

Thanks to the marketing strategy already mentioned, which is based is satisfying the

customer’s needs by a qualified product, the expectations are that the market respond positively

and in our favor, creating a competitive advantage from the very beginning, as was mentioned

before, the first impact is crucial for the process of expansion.

In addition to this, it’s important that Telefonica consider working on a strong promotion

campaign so the product is well known and we can gain a good portion of the market share

existing for broadband in Algeria. This way we will be able to accomplish a good penetration and

well positioning within the market.

Target Market

“Young consumers access the Internet through shared facilities like Internet cafes which

are gaining popularity in the country. This trend restricts the adoption of individual broadband

connections which are mainly adopted by the enterprise segment ,” said Frost & Sullivan

Research Analyst Jonas Zelba in comments published on the company’s website, meaning that

the local target market that should be considered for Telefonica are young consumers between

ages of 18-30 years, because according to the source, they are the most representative for the

market.

32

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