Expanding Walmart into Turkey - Case Study Example

Expanding Walmart into Turkey I. Table of Contents I.Table of Contents 2 II.Introduction of Turkey and Walmart 3 III.Cultural Influences on Business 4 IV.Economic and Legal Influences on Business 7 V.Political and Government Influences on Trade/Business 8 VI.Involvement in International Organizations 8 VII.Importing/Exporting Strategies 9 VIII.Recommendations 10 IX. References 11 II. Introduction of Turkey and Walmart Wal-Mart Stores, Inc. commonly known as Walmart is considered to be one of the world’s biggest chain retailers. Founded in the year 1962 by Sam Walton, today the business is considered to be the world’s second largest public corporation and it provides the largest employment opportunity to individuals globally as well. Till date, the company provides employment opportunities to around 2.2 million people and has around 11,000 stores located globally. It is worth mentioning that the company operates its business with different names in different parts of the world. For instance, the company operates as Walmex in Mexico, Asda in United Kingdom, Seiyu in Japan and Best Price in India. It is worth mentioning that till date the business is located in around 15 countries under 55 different names (Wal-Mart Stores, Inc., 2013). The Republic of Turkey generally known as Turkey is a transcontinental nation located in the western part of Asia. The country is considered to be a democratic, secular, unitary constitutional republic with diverse cultural heritage. Turkey is measured to be the official language that almost 85% of the people use and English is the secondary language. In terms of the present day statistics, the nation is listed in the 15th position in accordance with Gross Domestic Product (GDP) and Purchasing Power Parity (PPP) and is placed in the 17th position concerning nominal Gross Domestic Product (GDP). Istanbul is considered to be the most populated state in the nation. In terms of education, turkey is determined to be one of the most literate countries having a literacy rate of almost 94.1% as of 2011, additionally the current health care suspect of the country is considered to be quite sound in comparison with the past. It is worth mentioning that two of the universities of turkey are globally recognized as the best universities in the world (CIA, 2013; Zürcher, 2004). The main objective of this study is to provide a comprehensive analysis of Turkey that would facilitate in understanding the various factors that are essential for a business to evaluate before establishing in any nation. The study would also provide a recommendation section that would help in understanding whether Walmart’s plan to expand in Turkey would be profitable for the company in the long run or not. III. Cultural Influences on Business Cultural facet is considered to be one of the major constituents that any business needs to consider before expanding in a new country. The vital reason behind this is that it plays a major role in the dynamics of the way in which a business operates in the international market. Hofstedes cultural dimension is considered to be a framework that aids in understanding the effects of a society’s culture on the worth of its members and how these values or worth relate to the behavior of an individual through a structure derived from factor analysis. With the increasing business expansion, it has been viewed that the theory is being used widely in various sectors for analyzing a nation before expansion (THECB, 2013). In this regard, it can be stated that Turkey is considered to have an assorted culture that is a mixture of various elements along with western culture and traditional culture (Kaya, 2004). A broad explanation of Turkey can be derived through the 5–D model: Power Distance These dimensions deal with the fact that all individuals in a society do not enjoy the same privileges that result from differences in attitude that exist amid people belonging to different classes of people in the society. In this context, according to Geert Hofstede, it has been viewed that Turkey scores 66 in this dimension. It is determined that the nation follows a dependent and hierarchical structure within the organizations wherein, superiors often remain inaccessible and the superiors are considered to be an ideal voice within the organization. Power is considered to be centralized and managers are viewed to follow their superiors or higher level management without implementing their own ideas or knowledge to a great extent. Additionally, organizations follow a very formal form of control where communication to the higher level is done indirectly and information of the organization is only provided to selective employees of the association, which is also followed personally by individuals (The Hofstede Centre, 2013; Tandon, 2012). Considering this facet, it can be ascertained that Walmart might have to change a few of its rules that are being followed in its home country as failure in developing a formal form of culture within the organization may affect the business functionality by a considerable extent. Individualism This dimension of Hofstede helps in addressing the degree of interdependence a society maintains amidst its people. It facilitates in identifying whether the people within that society portray their self-image in “I” or “we” purview. In this context, it has been viewed that according to the research conducted by Hofstede Turkey scores 37 which reflects a huge difference in the individualism aspect within the people residing in two countries as the United States scores 91. People in Turkey generally stay or do activities in groups that look after each other’s interest in exchange of loyalty. However, the facet of communication to the higher level is done in an indirect way maintaining harmony in order to avoid open conflicts amid the individuals within a group. Furthermore, it has been observed that the people follow a moral base while fulfilling any task and the element of time is given prior importance to establish a relationship of trust amid the people residing in the society (The Hofstede Centre, 2013; Tandon, 2012). Therefore, it is believed that Walmart might have to implement new plans and working procedures as the score variation suggests that there exist a huge difference in this dimension between two cultures. Moreover, the business must also develop strategies that help in attaining direct feedbacks from its customers as it is very essential for any international business operating in another country to know what the customers want in order to maintain its competitive position. Masculinity / Femininity Turkey scores 45 in this dimension which reflects that the society follows a feminine approach to deal with the different aspects of the society. People are viewed to be quite cooperative with each other, and they often show consensus along with valuing and encouraging people to achieve their individual goals. Moreover, prior importance is given to avoid conflicts in both private and professional lives. In this context, America is viewed to be attaining a score of 62 which implies that the nation follows a masculine form of governance. Thus, Walmart might have to make minor changes in the generic policies which might depend on the employees (The Hofstede Centre, 2013; Tandon, 2012). Uncertainty Avoidance Uncertainty avoidance highlights the different policies on how society deals with different unavoidable situations arising frequently. On the other hand, Turkey scores 85 in uncertainty avoidance dimension which implies that there is major need for the establishment of laws and rules in the society. Consequently, Walmart might need to design new guidelines that would not only help in maintaining a proper coordination amid the employees within the organization but would also aid them in following a more generalized way of dealing with any such issues (The Hofstede Centre, 2013; Tandon, 2012). Long Term Orientataion In this regard, Turkey does not attain any score as per the study made by Hofstede which signifies that Walmart should implement plans that can be modified or changed after a limited period. This is owing to the fact that it has been recognized that people in the nation tend to change their likings in a rapid way (The Hofstede Centre, 2013; Tandon, 2012). Furthermore, approaches must also be taken to reject items that are banned or not accepted by the society in Turkey. IV. Economic and Legal Influences on Business Turkey is recognized to be one of the most emerging economies around the globe. According to the report published by World Bank in 2012, it is observed that Turkey’s Gross National Income based on Purchasing Power Parity (PPP) is placed at the 17th position. Additionally, the conversion of international dollar is increasing at an alarming rate which directly reflects that the nation is growing. Furthermore, according to a research conducted by World Bank, it is observed that the nation is one of the rapidly developing countries and the largest holder of national economy in Central along with Eastern Europe (The World Bank Group, 2013). However, it is worth mentioning that changing climatic condition has resulted in decreasing the level of production within the nation resulting in low GDP figures (Trading Economics, 2013). This has resulted in escalating inflation rate which has affected an individual’s decision to make money related judgments. Furthermore, it has also been ascertained that the current unemployment rate is also increasing as people are involving more in agriculture production. This might affect Walmart to gather employees at the initial period of establishment (Tansel & Tasci, 2004; Azariadis & Drazen, 1990). V. Political and Government Influences on Trade/Business Turkey’s economy is measured to have those factors that are attracting multinational industries to expand their business in the country. It is stated that the nation is one of the chief manufacturers of automobiles, electronic goods and products such as textile and ships among others. The government of the nation is implementing strategies to expand its banking, communication and transport aspects (Zürcher, 2012; The World Bank Group, 2011). It has been observed that Turkish government is building relations with international communities to develop policies that would facilitate in strengthening the economic condition along with infrastructure, communication and other aspects of the country. Furthermore, the government has collaborated with European Union (EU) to align its commercial policy to that of EU, thereby helping the nation to develop its foreign trade. This has facilitated the country to invest a huge amount in other nations especially in countries such as Russia, Romania and Bulgaria among others. However, it is worth mentioning that Custom Union does not cover agriculture product. Therefore, in this aspect if Walmart emphasizes creating market for agriculture product then it can enable to flourish the business effectively (Zürcher, 2012). It is worth mentioning that the government is also taking initiatives to develop Iraq as the biggest export market as the nation is determined to be more than 95% foreign exchange provider to Turkey (Schuknecht, 2012). VI. Involvement in International Organizations The involvement of Turkey in international organizations can be viewed from the past. It has been observed that Turkey was one of the founding members of the United Nations. The nation has also been a member of various international organizations such as Organization for Economic Co-operation and Development (OECD), an affiliate state of Council of Europe since 1949 and North Atlantic Treaty Organization (NATO) since 1952. The nation has also been a member of the World Trade Organization. Furthermore, the nation has also developed various policies such as the European Free Trade Association (EFTA) and has formed the Black Sea Economic Cooperation Business Council as a way of expanding its trade aspect along with developing the economic condition (CIA, 2013). VII. Importing/Exporting Strategies In comparison with the last few decades, it has been observed that Turkey has implemented major changes in many areas. Among these areas, Turkey’s trade policy is considered to be a major facet. The change in the trade policy of Turkey can be viewed from the 80s that mainly emphasized trade liberalization resulting in increasing the volume of trade to a great extent. However, later on, in the year 2001, the country suffered the most severe economic crisis resulting in decreasing the GDP by 5.7% (Gros & Selçuki, 2013). Following this, the government signed numerous free trade treaties With European Free Trade Association (EFTA) and many other countries located globally resulting in making the country one of the leaders in conducting trade activities. For instance, it has been determined that in the year 2011, the total bilateral trade increased from US $14.8 billion to a figure of US $19.9 billion in terms of US exports to Turkey and Turkish export to the U.S increased from US $4.2 billion to the figure of US $5.2 billion in the year 2011 (Bureau of European and Eurasian Affairs, 2013). Since Turkey’s economy fundamentally depends on the export of goods from the nation, initiatives are also being taken by the government to establish healthy relations with the US, China and Russia along with other European nations (Anadolu Agency, 2013). VIII. Recommendations Expanding a business in other nations has become a common strategy of every multinational company as a way of spreading brand awareness and strengthening the financial condition of the country. However, there exist numerous aspects that need to be studied properly before making any financial investment in a selected country. With the growing importance of a becoming super power, every nation is implementing their own strategies with regard to developing policies that would help in strengthening the GDP and other economical aspects of the country. Consequently, Walmart, one of the world’s biggest business entities by revenue is planning to expand its business in Turkey. In this aspect, it has been viewed that the country can be considered as a market where Walmart can be expanded. With reference to the above mentioned discussion, it can be determined that the cultural aspect of the country seems to be largely different from what is followed in Walmart’s home country i.e. the USA. However, in this context, if proper steps are taken by management with experts from Turkey, policies can be developed which can mitigate the probable issues. Other than the cultural aspects, the country seems to have better trading policies and adequate resources that would aid the business to flourish in the market in the near future. IX. References Anadolu Agency (2013). Turkish imports and exports reduced in March 2013. Turkish Weekly. Ankara. Azariadis, C., & Drazen, A. (1990). Threshold Externalities in Economic Development. The Quarterly Journal of Economics, 105(2), 501-526. Bureau of European and Eurasian Affairs. (2013). U.S. relations with Turkey. Retrieved from http://www.state.gov/r/pa/ei/bgn/3432.htm CIA. (2013). Turkey. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/tu.htm Gros, D., & Selçuki, C. (2013). The Changing Structure of Turkey’s Trade and Industrial Competitiveness: Implications for the EU. Centre for European Policy Studies, 1-9. Schuknecht, L. (2012). Political business cycles and fiscal policies in developing countries. kyklos, 49(2), 155-170. THECB. (2013). Hofstede’s 5D model of cultural dimensions. Retrieved from http://www.txprofdev.org/apps/onlineteaching/global/Hofstede_Model.pdf The Hofstede Centre. (2013). National culture. Retrieved from: http://geert-hofstede.com/turkey.html Tandon, A. (2012). Business culture in Turkey. Retrieved from http://www.slideshare.net/ashish_tandon/business-culture-in-turkey-13557477 The World Bank Group. (2013). Turkey. Retrieved from http://data.worldbank.org/country/turkey Trading Economics. (2013). Turkey unemployment Rate. Retrieved from http://www.tradingeconomics.com/united-kingdom/unemployment-rate The World Bank Group. (2011). Information & Communication Technology. World Bank Information & Communication Technologies Sector Strategy, 1-29. Tansel, A., & Tasci, H. M. (2004). Determinants of unemployment duration for men and women in Turkey. IZA. Kaya, I. (2004). Social Theory and Later Modernities: The Turkish Experience. The United States of America: Liverpool University Press. Wal-Mart Stores, Inc. (2013). Our locations. Retrieved from http://corporate.walmart.com/our-story/our-business/locations Zürcher, E. J. (2012). Turkey: a modern history. The United Kingdon: IB Tauris Publishers. Read More