Case study: Downsizing strategy influence on the structure of the firm
Case study: Downsizing strategy influence on the structure of the firm
Case study: Downsizing strategy influence on the structure of the firm
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Management, Vol. 17, 2012, 1, pp. 75-92<br />
A. H. de E. E. de los M<strong>on</strong>teros, C. S. Bravo: <str<strong>on</strong>g>Case</str<strong>on</strong>g> <str<strong>on</strong>g>study</str<strong>on</strong>g>: <str<strong>on</strong>g>Downsizing</str<strong>on</strong>g> <str<strong>on</strong>g>strategy</str<strong>on</strong>g> <str<strong>on</strong>g>influence</str<strong>on</strong>g> <strong>on</strong> <strong>the</strong>…<br />
Regarding <strong>the</strong> pr<strong>of</strong>itability <strong>of</strong> <strong>the</strong> largest companies, Telefónica was ranked<br />
third in <strong>the</strong> period 2003-2007, and by capitalizati<strong>on</strong>, it has moved from <strong>the</strong> 12th<br />
positi<strong>on</strong> to sec<strong>on</strong>d in 2008.<br />
In <strong>the</strong> event-<str<strong>on</strong>g>study</str<strong>on</strong>g>, we analyzed specifically four downsizing decisi<strong>on</strong>s<br />
taken by Telefónica: <strong>the</strong> divestment <strong>of</strong> Antena 3 TV, TPI, Airwave and<br />
Endemol, as shown below.<br />
Audiovisual sprot: 07/03<br />
Desinversi<strong>on</strong>es:<br />
Divestments<br />
Euroligue Marketing: 11/03<br />
Sistemas técnicos y loterías<br />
Endemol:<br />
Endemol:<br />
Antena 3 3 TV: TV:Oct-nov oc-nov ‘03<br />
/03<br />
del Estado: 06/07<br />
Announc: Anuncio: 05/07<br />
3G Mobile: 12/03<br />
Sale: Venta: 07/07<br />
07/07<br />
Tic tac ticket: 07/03<br />
One Travel: 04/05<br />
Airwave:<br />
Airwave:<br />
Prime Argentina<br />
Announcement: Anuncio: 13/06<br />
12/06<br />
Playa Madrid: 2003<br />
Sale: Venta: 04/07<br />
04/07<br />
Katalyx: 1Q 2003<br />
Emplaza: 01/04<br />
TPI:<br />
TPI:<br />
CANTV: 05/07<br />
Eutelsat: 2004<br />
Announc.: Anuncio: 02/06<br />
0/06<br />
Sale: Venta: 04/06<br />
04/06<br />
Radio Estereo: 11/04<br />
Radio C<strong>on</strong>tinental:11/04<br />
Pears<strong>on</strong>: 09/04<br />
Figure 5: Business Divestitures Analysis<br />
Data was taken from <strong>the</strong> Telefónica stock market prices during <strong>the</strong> period<br />
2000-2007. During <strong>the</strong>se years, Telef<strong>on</strong>ica carried out <strong>the</strong> downsizing strategies<br />
that are analyzed. Data <strong>of</strong> <strong>the</strong> two index prices against which <strong>the</strong> events are to<br />
be analyzed were taken during <strong>the</strong> same periods. Dow J<strong>on</strong>es was selected as an<br />
index <strong>of</strong> Industrial Average, an efficient market; and <strong>the</strong> S&P 500, which is<br />
comm<strong>on</strong>ly used as a proxy for <strong>the</strong> market as a whole, was <strong>the</strong> sec<strong>on</strong>d selected<br />
index. The IBEX index was removed from <strong>the</strong> <str<strong>on</strong>g>study</str<strong>on</strong>g> because Telefónica S.A.<br />
capitalizati<strong>on</strong> represents 15-20% <strong>of</strong> <strong>the</strong> total capitalizati<strong>on</strong> index, which distorts<br />
<strong>the</strong> result.<br />
By definiti<strong>on</strong>, a market has a beta, which represents <strong>the</strong> trend or slope <strong>of</strong><br />
<strong>the</strong> same. Individual companies that participate in <strong>the</strong> market are classified<br />
according to <strong>the</strong>ir deviati<strong>on</strong> from that market. Once <strong>the</strong> time windows are<br />
defined, betas are calculated for Telef<strong>on</strong>ica and each <strong>of</strong> <strong>the</strong> indices, calculated<br />
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