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Solved Stanford Case Study Solution: Repsol and YPF (A & B): A Perfect Marriage ? (Download Now)

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Solution Pages: 6

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Questions Covered in the Solution

Question # 1

Critically assess the corporate diplomacy of REPSOL before an expropriation of YPF. What could the company have done differently to mitigate the risks of expropriation?

Question # 02

What should be the strategy of REPSOL in response to recent expropriation?

Question # 03

How should REPSOL frame the issue against unjust expropriation?

Sample of Solution

Question # 1

Critically assess the corporate diplomacy of REPSOL before an expropriation of YPF. What could the company have done differently to mitigate the risks of expropriation?

            REPSOL has been the leading natural gas distributor but only limited to Spain by holding the chain of five refineries there. Since, it strategically expanded to different regions including Argentina, Peru, and Ecuador; it owned 60% of the largest gas field in Argentina. Moreover, in the persuasion of an upward stream of operations, REPSOL also purchased YPF (Yacimientos Petrolifers Fiscales) in two transactions, as it bought 14.99% at $38 per share while 85% at the price of $44.78 per share.

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Argentina would have given REPSOL more recognition from the Argentine government.

Question # 02

What should be the strategy of REPSOL in response to recent expropriation?

             Since the company has lost its share in YPF due to the expropriation of value $10.5 Billion by the Argentine government, REPSOL has been left with limited options. Eventually, it was much favorable for the company to have avoided such a situation rather than looking for subsequent recovery.  However, the company can pressurize the Argentine government through diplomatic ties, which may involve Spanish government or the International regulatory authority (ICSID). Since the Argentine government has been notorious for its cynical tactics against foreign companies, REPSOL can realize support from other multinational corporations to frame an agenda against Argentina for the whole world to see.

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Question # 03

How should REPSOL frame the issue against unjust expropriation?

            Since, the Argentine government has aggressively taken over the majority share of YPF from REPSOL, while replacing the Spanish executives with the government official and also threatening the company management of not paying anything. The issue can be framed in the International media while portraying the most corrupt and unjust business culture of Argentina which may also hurt other foreign investors. Like today it is REPSOL, but tomorrow it can be any other foreign company residing in Argentina. Eventually, with such an unfair business culture in Argentina, foreign investors would refrain from investing in the country while the existing investors would also look into their exit strategies. Hence, reduction or even resistance in foreign investment can pressurize Argentine government, as they are sufficiently dependent on foreign investments.

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