Internet Marketing Vodafones Plans for Turkey - Case Study Example

International Marketing (Vodafone's plans for Turkey) Introduction Liberalization and globalization has opened newer vistas of trade and business all around the globe. Opening up of economies has now tilted the balance in favor of market forces. Globalisation of production and investment in recent years has led to a situation where long-term capital inflows from advanced economies to developing economies is taking place at a rapid pace. No doubt this has contributed immensely to the economic growth and development of these nations. Competitive MNCs have started exploring the overseas markets in order to take maximum advantage from the market dynamics. This way, losses in one market/ segment can be offset by gainful leverage from another market or segment. Today instead of the traditional approach of 'maximizing' the profits, organizations go ahead with multiple objectives, monetary as well as non-monetary. There are short-term objectives as well as long-term ones. Strategists are supposed to prioritize all such objectives, so that there is clarity and ease of decision making in situations where there is an apparent clash of objectives. Here we'll analyse Vodafone, its strengths, comparative advantages, its weaknesses and some of the opportunities that it can capitalize on in the Turkish telecom market. Vodafone has acquired competitive advantage over its rivals on account of its marketing efforts, brand building, value creation, innovation, operational efficiencies etc. Today Vodafone is one of the world's leading international mobile telecommunications group having an equity base in 27 countries across 5 continents, 186.8 million proportionate customers and 33 partner networks (Vodafone, 2006). Company's vision statement1 says, the company aspires 'to be the world's mobile communications leader, enriching customers' lives and helping individuals, businesses and communities to be more connected in a mobile world'. With this vision company plans to invest in Turkey. PESTEL Analysis The PEST or PESTEL analysis is a useful tool for any industry or business in understanding the market behavior. Since Vodafone is on way to strengthen its operations in Turkey, therefore, prior to the investment, the company would like to assess different factors for the purpose. The analysis mainly comprises of; Political factors Economic factors Socio-cultural factors Technological factors Environmental Factors Legal Factors All these factors have different relevance for different types of industries and businesses. Political The modern Republic of Turkey was founded in 1923 by the legendary Mustafa Kemal, better known as "Ataturk" or father of the Turks. The democratic tradition of modern Turkey has faced quite a few challenges with periods of instability. In the recent past Turkey has also been criticized for its human rights record. Amnesty International accused the Turkish government in November 2001 of systematically and regularly torturing its citizens. Corruption remains one of the key challenges for Turkey. After the parliamentary elections held in November 2002, the Justice and Development Party (AKP), a moderate Islamist group, won a resounding majority. This caused some worry amongst the proponents of Turkey's reforms program, as AKP is known to position itself as a champion of Turkey's beleaguered impoverished majority, and is therefore potentially vulnerable to damaging economic populism (Datamonitor, 2006). But so far all such apprehensions have been put to rest with the continuance of the economic reforms, a necessity for favorable investment climate in the country. Turkey has been successfully able to overcome the banking and currency crisis of 2000-2001 Economic Turkish economy was in real bad shape during the 1990s, with growth rates of about 3% only. The 2000-01 banking and currency crisis further crippled the economy. But with some active support from IMF, the economy has been able to stage a turnaround. Owing to successful economic and structural reforms, CAGR of the Turkish economy over 2000-2005 was 4.3%, with annual growth rates ranging between 5.8% and 8.9% during these years. EU is the major trading partner for Turkey. Geopolitically, Turkey is too important for the West to let it fail, therefore, the country would continue to support from western economies. The rates of inflation have come down from a whopping figure of about 55% in 2000 to a reasonable 9.5% in 2005 with GDP growth of 7.4% in 2005 from a dismal figure of -7.5% (negative) in 2000. Turkish economy has therefore displayed the resolve for accepting reforms and growth oriented programs. Turkey's large external debt (US$181.9 billion in 2005) and large current account deficit have so far had a negative impact on foreign investors' confidence in investing in the country, which resulted in low FDIs so far, but there indeed consistent improvement for the last couple of years. which make the country suitable for long-term investments. Socio-Cultural Turkish population is around 74 million with almost equal percentage of males and females. About half of the country's 20 million working population is employed in informal or 'grey' economy (Datamonitor, 2006), with rates of unemployment hovering around 10%. It is therefore quite apparent that Vodafone will have the advantage of availability of skilled human resources at reasonable costs. In terms of religious affiliations, over 99 percent of the population is Muslim. Turkey, however, has been a modern and secular state since 1924. But what makes it different form some other Islamic countries like Pakistan, is its ability to present a modern outlook. Technological The telecom field in itself is a technology intensive area; with newer trends in technology making the older one's outdated at a faster pace. Vodafone is known for being a tech savvy company. Technology is in fact a factor which not only affects the market but the entire process chain of any product, right from conducting feasibility studies to manufacturing, bottling, quality control, feedback and analyzing the data. More than 50% of the population is already hooked on to the mobile networks. Turkey has mainly three principal mobile operators - Turkcell, Avea and Telsim, offering 2G and 2.5G services. Therefore Vodafone will get a readymade ground for the expansion of 3G/4G networks and services, if and when it plans to introduce the services. In Turkey the usage of data service is also picking up fast. Vodafone is already providing a range of voice and data mobile telecommunications services, including text messages (short message service, SMS), picture messages (multi media message, MMS) and other data services, and is also developing advance services through third generation (3G) mobile technology. Introduction of EDGE-enabled services by Turkcell and Avea in Turkey should prove to be the engines of growth for further penetration and advancement of telecom scene in the country. Environmental Environmental degradation affects the quality of human life. Often rapid rates of population growth and poverty result in a faster rate of depletion of resources, which affects the overall development and economy of the country and the region. Despite being an Islamic nation, Turkey has been able to match the growth of population with usage of resources so far. In the region Turkey is also strategically placed in the US plan for bringing out peace and stability in Iraq. Turkey has played an important role in facilitating the operations of the coalition forces in Iraq and in return it got a developmental package with promises of more business in the development and re-construction of Iraq. This way Turkey is placed in an advantageous position. If Vodafone can establish itself firmly in Turkey during the next 1-2 years, it may be better placed to cater to the emerging markets in and around Turkey. Legal Turkey's economic growth has been a complex mix of industrial activity as well as its traditional agricultural sector, which still provides employment to a big percentage of people. The private sector is growing very rapidly but the state still plays a major role in basic industrial activities, banking, transport, and communication. Some of the technology intensive fields like banking and communication are opening up fast. Less state involvement in the sector also means less corruption, otherwise quite high in Turkey. The volatility in the political system, also results in an unstable framework of rules and regulations. Over the years though, Turkey has been quite stable on the political front. The 'Competition law', which enunciates the rules of free competition in the market, has also been amended from time to time in the country. Turkish Competition Law is based on Article 167/I of the Turkish Constitution which regulates the prevention of monopolization and cartelization (Erdem, 2006). Over the past 10 years, the improvement in Turkish Competition law has been making it more convenient for the market driven economy to create more space for competitive environment. MIS (Marketing Information System) A Marketing Information System is a support system for any company through which it gathers information about market, changes in market dynamics, response to some of the recently launched products and information about the strategies of its competitor and new entrants in the market. Smith et al (1968) defined the marketing information system as; "A structured, interacting complex information systems of persons, machines, and procedures designed to generate an orderly flow of pertinent information, collected from both intra- and extra-firm sources, for use as the basis for decision making in specified responsibility areas of marketing management." So far Vodafone has been operating its mobile services in UK, US, Germany, Italy, Spain, Greece, Hungary, Belgium, Poland, Portugal, Romania, Switzerland, Ireland, New Zealand, China, Australia, Fiji, Netherlands, Egypt, Kenya, Malta and South Africa with further plans for India and Turkey. Therefore, Vodafone has a wider arena for gathering information about the market. With an experience of such diverse markets, Vodafone is comfortably placed in a position to leverage its economies of scale from one market to another. While on the one hand, UK, US, Germany etc. are the developed markets, there are emerging markets of China, India and Turkey where Vodafone plans to establish itself as a prominent player. The marketing information system forms the basis for taking managerial decisions regarding the marketing, sales and marketing communication strategies. Operational strategies, mode of entry into the market, strategic alliances, pricing strategies, promotional planning etc. are all the areas which get benefited from a well informed Marketing and Management Information System. Such a system basically consists of four subsystems for gathering, processing, and utilizing the data collection from our environment (Kotler, 1988). The four subsystems are; The internal reporting/accounting system Marketing intelligence system Marketing research system Marketing management-science or marketing model system. Fig: Different Subsystems of MIS and their Internetworking Internal Reporting/ Accounting System: Such a system supplies the strategists with some crucial information from the account books which reflect the latest positions regarding sales, costs, inventories, cash flows, account payables and receivables etc. Vodafone has a robust system of accounting, with sufficient cash flows from different market segments. Marketing intelligence system: Such intelligence gathers the feelings and reactions from the market. This system comprises basically the in-house team of Vodafone or some marketing agency entrusted with the task. In this system all possible means of gathering information, conventional as well as unconventional are used. The census data, trade association statistics, and market studies form the basis of such intelligence. Vodafone takes inputs about its possible venture in Turkey. In fact Vodafone has already acquired Turkey's second largest mobile phone operator, Telsim Mobil Telekomunikasyon AS in 2006, which is bound to provide the company with sufficient input laced with local assistance. Marketing research system: This is a formal system of studying and analyzing the market trends. Such a task is generally taken up by market research organisations on behalf of companies to forecast the developmental trends in the market. Marketing management-science or marketing model system: Such modeling system assists the marketing team in analyzing complex marketing problems and operations through analytical models. Such an analysis helps in going into the reasons and logics for some particular behaviour from a market or segment. Once the company has this information, it can prepare strategies, with appropriate corrective measures, in order to effectively cater this particular market segment. Turkcell is the clear market leader in Turkey with around 30 million subscriber base, therefore to take it on Vodafone will have to plan strategies suitable for Turkish needs. Business Environment Risk Intelligence (BERI) BERI gives the company a fair idea about the prevailing business environment in a country. BERI tells us about the state of political stability, Economic growth, employment, cultural differences, foreign exchange market regulations etc. in the country. Turkey is known for political instability during the last couple of decades, its relations with Greece remained strained when Turkey took over the northern portion of Cyprus in 1974. The recent European Union accession negotiations promise to bring in an era of co-operation and co-existence amongst the two countries. In fact people of both Greece and Turkey are now coming out opening in support of a lasting solution to this age old problem, which is proving to be a drain in the economic prosperity of both nations. Turkey has also drawn international condemnation for its periodic military offensives against Kurdish separatists, which resulted in dislocation of part of the population in southeast Turkey. Frequent changes in the form of government and government functionaries have resulted in keeping at bay the potential investors in Turkey, but the scenario is now improving slowly but steadily. Economic liberalisation is the buzzword, and the government has started leaving the control of some of the public sector enterprises to the market forces. Taking over of Telsim Mobil Telekomunikasyon AS by Vodafone in December 2005, in an international bid telecast live on Turkish television is an important milestone for Vodafone. This will provide Vodafone a crucial impetus and plenty of scope for growth in Turkey, which remains largely unexplored, unlike the heavily saturated western European markets. The overall scenario macroeconomic development during the past couple of years points out that emerging markets like Argentina, Brazil, Russia, Turkey, China and India have facilitated a higher commitment of capital (BERI, 2007). All of these countries have managed to achieve credible fiscal discipline. The economic expansion has also been quite robust in these countries for the last 8-10 years, which made these countries favourite hunting grounds for some of the well known multinational corporations. For Turkey, the underground economies like trade in Drugs, arms smuggling, usury, prostitution, racketeering etc. are still a cause of concern for the Turkish government. The underground economies make up an estimated $100 billions worth of turnover, which is about 50% of Turkish national income. Business environment is distinctly affected by the presence of such factors in the air, but these factors cannot disappear overnight, and business has learnt to live with such factors. Vodafone is not alien to such a scenario, as it has been dealing with the mafias and cartel in many other economies around the world. Turkey has suffered from high and persistent inflation for more than two decades. On account of its inefficient tax system, high agricultural subsidies and deficit in public enterprise Turkey's economy has suffered huge fiscal deficit in the past. And in order to control the deficit, Turkey continued to finance the deficit through domestic and foreign borrowing, which led to an increase in the money supply, rise in the price level and subsequent depreciation of the lira. This forms part of a perfect script for an economic crisis. But, Turkey has learned from its experiences and the country in on the path of progress. In recent years Turkey has also eased the process of approval of Foreign Direct Investments (FDIs) in the country, by reducing some of the complicated bureaucratic steps and redundancies. Despite the ongoing disputes over the divided island of Cyprus and complicacies regarding EU membership Turkey's economic future appears bright, owing to the decent figures of growth achieved by the country in recent years (Gorvett, 2006). Vodafone has set for itself five key strategic objectives; In Europe, the company is to focus on both cost reduction and revenue stimulation To deliver strong growth in emerging markets To satisfy the needs of its customer and extending its current mobile services with offering of innovating and delivering total communications solutions To actively manage its portfolio for maximizing the returns, To align its financial policies regarding capital structure and shareholder returns to support the overall strategy Objectives for Vodafone With these key objectives the company has initiated steps for marking its formidable presence in the Turkish market. The company will have to compete with Turkey's largest wireless telecommunications firm Turkcell, in the process. Turkcell too has big plans for the immediate future, which is "evaluating opportunities" to build its own broadband fixed-line network as part of its efforts to continue developing its business in Turkey2. Since Vodafone has already left its footprints in Turkey through the acquisition of a local telecom operator, the company stands to gain from local expertise as well. The company will have to rely on its marketing communication strategies for attracting more and more Turkish customer to its fold. With Turkish economy showing robust signs of an upward trend, Vodafone will have its task cut out to create adequate business space for itself. For taking care of its business objectives, the company has divided its operations into three key business units viz. European businesses, where the level of competition is most intense and the company is focusing on leveraging its regional scale to deliver cost reduction and revenue stimulation. Second unit comprises of Eastern Europe, Middle East, Africa, Asia Pacific and Affiliates (EMAPA) regions. In these areas the company is set for delivering strong growth in emerging markets. The third business unit is called New Businesses, which is supposed to enable the company to serve the total communications needs of its customers by taking advantage of evolving technology and new opportunities to deliver new services. Conclusion Having studied the market scenario in Turkey, it can be concluded that the country presence a good investment opportunity for Vodafone. There is not as intense competition in Turkey as in some of the European or Asian markets. Vodafone can very well take fullest advantage of its strengths like its Leading market position, Steady revenue growth, Strong performance of Cellco Partnership and Increased research expenditure. This will help the company to make the maximum out of the emerging 3G markets and needs of Turkish economy. International Marketing Plan Planning forms an integral part of management. A Marketing plan is a way of achieving something within the available resources and time limits. Such a plan basically involves, setting objectives and selecting strategies accordingly. Vodafone has made its presence felt in Turkey in the year 2006 itself, now in order to consolidate its hold over the market, it needs to prepare a marketing plan suitable for the market, appealing to its people, supportive for local sentiments, and creates a buzz in the market. Vodafone is a well known brand; therefore, the company will have to prepare its marketing communication campaign accordingly. For example, while devising a marketing plan for 3G products for the year 2007-08, the company will have to think about two broad strategies; i. How Vodafone will take on the competition, if any and ii. How the day to day operations will be executed to supplement the marketing plan. 3G is a relatively newer concept in Turkish market; therefore company won't face much of competition here. But how the product will be accepted and what should be the pricing strategy are some of the key questions which the company needs to think about in its marketing plan. For this Vodafone will have to; Prepare the terms of reference for the newer market Take into account, the purchasing power of Turkish customers Educate the customers about the benefits of upgrading to 3G technique State the founding philosophy called the mission statement and company objectives Do an external audit or competitor analysis References 1. BERI (2007), Emerging Market Trickery. Available online at http://www.beri.com/ (March 19, 2007) 2. CountryWatch, Inc. (2007), Turkey: Country Review, Houston, Texas 3. Datamonitor (2007), Vodafone Group Plc: Company Profile, Datamonitor Europe, London. 4. Datamonitor (2006). Vodafone completes Turkish buy, Datamonitor Europe, London. 5. Erdem, Halil Ercment (2006), Turkey follows Europe's lead on competition., By:, International Financial Law Review, 02626969, May2006, Vol. 25, Issue 5 6. FAO, Chapter 9: Marketing Information Systems, FAO Corporate Document Depository, http://www.fao.org/docrep/W3241E/w3241e0a.htm (March 17, 2007) 7. Gorvett, Jon (2006), Turkey's economic future looks bright. International Herald Tribune / 12.06.2006. available online at http://www.investinturkey.gov.tr/cms/news.show.phpid=392 (March 19, 2007) 8. Kotler. P & Levy. SJ (1969) 'Broadening the Concept of Marketing' Journal of Marketing January pp10-15 9. Kotler, P. (1988) Marketing Management: Analysis Planning and Control, Prentice-Hall 10. Marketing Information System (MIS): defined by the Sticky-Marketing.com monthly magazine, http://www.sticky-marketing.net/glossary/marketing_information_system.htm (March 17, 2007) 11. Smith, Samuel V, Richard H. Brien and James E. Stafford, eds., (1968) 'Readings in Marketing Information Systems'. Boston: Houghton Mifflin Company, p.7 12. Tatoglu, Ekrem (2000), Western joint ventures in Turkey: strategic motives and partner selection criteria. European Business Review, Volume 12 Number 3 2000 pp. 137-147 13. Sakarya, Sema; Molly Eckman, Karen H. Hyllegard (2007). Market selection for international expansion. International Marketing Review, Volume 24 Number 2 2007 pp. 208-238 14. Time is right for telecom in Turkey, available online at http://www.ericsson.com/solutions/operators/news/2005/q2/20050412_turkey.shtml (March 16, 2007) 15. Turkcell CEO Ciliv bets on broadband to grow operations, available online at http://www.investinturkey.gov.tr/cms/news.show.phpid=404 (March 20, 2007) 16. Vodafone (2007), available online at http://online.vodafone.co.uk/dispatch/Portal/appmanager/vodafone/wrp_nfpb=true&_pageLabel=template02&pageID=VIRTUAL_HOME (March 16, 2007) 17. Vodafone (2006), Leading the way in mobile innovations, as on 30th June 2006. available at http://online.vodafone.co.uk/dispatch/Portal/appmanager/vodafone/wrp_nfpb=true&_pageLabel=template10&pageID=PAV_0014 (March 16, 2007) Read More