<p align="justify">Telefonica is a multinational telecommunication company with headquarters in Madrid, Spain. It is one of the largest mobile network providers and telephone operators. The company also provides subscription television and broadband services. It currently operates in Europe and the Americas. The company has more than 120,000 employees and generated revenue of 48.7 billion Euros in 2018 (Telefonica, 2019). The company was founded in 1924. Also, the company operates several other brands as well such as Vivo, O2, and Movistar. As of 2017, Forbes declared it the 110th largest company in the world (Forbes, 2018). The company has more than 356 million customers in Europe and the Americas.</p>
<p align="justify">Following is a detailed Porter Five Forces Model Analysis of Telefonica:</p>
<h2 align="justify">Competitive Rivalry &#8211; High</h2>
<p align="justify">The company operates in a highly competitive environment. In the Americas and Europe, the company faces many competitors such as Sprint, AT&;T, Verizon, and many others. Also, the industry is not growing rapidly. The services that the competitors provide are similar and not differentiated. The fixed costs are also high in the form of installing infrastructure and obtaining regulatory approvals. Exiting the business is also not easy as the investment is extensive and infrastructure would take a long time to take down. The cost a customer would incur of switching to another service provider is also low as they can easily purchase a new plan. All of these factors make the industrial environment for Telefonica highly competitive.</p>
<h2 align="justify">The Threat of New Entrants – Low</h2>
<p align="justify">Telefonica has been in the business for decades. It has evolved itself to a point where it has a cost and performance advantage over others. It also offers certain proprietary services and has established itself as a brand. A new entrant wishing to enter the telecommunication market would have to incur great expenses in the form of establishing infrastructure, marketing to attract customers, employing and training an extensive workforce, and developing itself as a brand. Also, reaching all areas and ensuring excellent services takes time. The learning effect is prominent in the industry as companies attempt to understand consumer demands and meet them. Government regulations and licenses further make this difficult. Thus, a significant capital investment makes the threat of new entrants low for Telefonica.</p>
<h2 align="justify">Bargaining Power of Suppliers – Medium</h2>
<p align="justify">The services that suppliers provide for Telefonica include procuring equipment, installing equipment, maintaining it, and providing other materials needed to operate the business. The company relies excessively on suppliers to maintain its network and ensure that it has the latest equipment at all times. The products, especially the equipment it purchases from its suppliers have specific specifications and are not standardized. The company relies on the relationships it has with its suppliers to ensure its performance remains the same. It would prefer to work with the same suppliers for extended durations as they understand the network and can maintain it with greater efficiency. At the same time, numerous suppliers would be happy to serve Telefonica. Any attempts a supplier makes to force Telefonica to increase prices will only be effective up to a certain extent. Otherwise, it can switch to another supplier which would have a moderate cost.</p>
<h2 align="justify">Bargaining Power of Buyers – Low</h2>
<p align="justify">The number of buyers in the telecommunication industry is large. Their number is large and each of them makes relatively small purchases in the form of monthly subscriptions. The customer would be required to purchase a new plan if they want to switch to another service provider. Also, the company easily provides the required information that customers need. Customers cannot establish their own telephony and cellular network. The prices are decided in the plans the customers’ purchase. If the company slightly amends them, the customers are likely to stay (FFU, 2018). These factors show that the bargaining power of the buyers is low.</p>
<h2 align="justify">The Threat of Substitutes – Moderate</h2>
<p align="justify">Some of the services that Telefonica provides, such as cellular service, can be a substitute for the telephony services it provides. Television subscriptions can be substituted with other forms of entertainment such as radio. However, in all of these cases, the substitutes do not provide the exact level of facilities as these services do. Customers are not likely to go for the substitutes. The switching would require them to purchase additional items that would provide the required service. Thus, the threat of substitutes is moderate for Telefonica.</p>
<h2 align="justify">References</h2>
<p style="text-align: left;" align="justify">FFU, 2018. Telefonica, S.A. Porter Five Forces Analysis. [Online] Available at: <a href="http://fernfortuniversity.com/term-papers/porter5/analysis/3966-telefonica--s-a-.php">http://fernfortuniversity.com/term-papers/porter5/analysis/3966-telefonica&#8211;s-a-.php</a> [Accessed 05 Dec. 2019].<br />
Forbes, 2018. #23 Telefónica. [Online] Available at: <a href="https://www.forbes.com/companies/telefonica/#14e9933d14bf">https://www.forbes.com/companies/telefonica/#14e9933d14bf</a> [Accessed 05 Dec. 2019].<br />
Telefonica, 2019. IN BRIEF. [Online] Available at: <a href="https://www.telefonica.com/en/web/about_telefonica/in-brief">https://www.telefonica.com/en/web/about_telefonica/in-brief</a> [Accessed 05 Dec. 2019].</p>