Business Opportunities Available in Turkey - Coursework Example

Turkey: Risk and business opportunities assessment Introduction In this essay, the researcher attempts to conduct a thorough risk assessment of and business opportunities available in Turkey. The research is entirely qualitative in nature with a purpose to recommend an appropriate market entry strategy for a British international supermarket chain. The geographic location of Turkey places the country in a very strategic position as a gateway between Asia and Europe. Such a prospective geographic location can be very alluring in the eyes of a manager who is running an international supermarket chain. That is why, the managers have endeavoured to expand their business operations in this part of the world. However, in their quest to adopt an appropriate market strategy, the organization wishes to learn about the political and economic environment and this purpose has been fulfilled in this research. Risk assessment of Turkey Political system According to the constitution of Turkey, the Turkish state along with the nation and its territorial region is an inseparable unit. The constitution defines Turkey as a social, democratic and secular state where each and every individual is considered equal who are devoid of any form of discrimination in front of the country’s law, regardless of their gender, race, political course, religion and any other form of consideration. The constitution guarantees freedom of press, speech, religion, opinion, movement and residence. It also values an individual’s or an entity’s right to demonstration, property, availing legal procedures and privacy (Invest in Turkey, 2014). The facts mentioned above are, fundamental characteristics of a democratic nation and a region that supposedly can be a good prospective of business expansion. However, as far as the political scenario of Turkey is concerned, there is more to it than meets the eye and therefore, requires a thorough scrutiny. Over the recent past, Turkey’s political scenario was highly instable. In-spite of the country’s economic growth, the political stress in the region has scaled to an all time high. The demonstrations by young Turkish people against the authoritative leadership exhibited the country’s government (Fitch Ratings, Inc, 2014). In addition to that, revelations regarding the government’s indulgence in corruption also compelled a number of politicians to resign from their duty (EDC, 2014). The revelations also led to the removal of several employees in the public sector (Michigan State University, 2014). Situations like this where the transparency of the government is under question can pose huge political risk for any international company that is completely unaware of the political tension that has escalated in the country over the last one year. Economic system Turkey is majorly a free market economy which is growing at a rapid rate owing to the developments made by the service sector and the manufacturing industry. The agricultural sector is highly developed within the country and it accounts for more than 25% of the state’s employment. This is precisely because of the fact that, the formation of the Republic state of Turkey is mainly based on the economic and social traditions introduced by the Ottoman kingdom (Turkish Odyssey, 2014). This has placed a huge burden of liabilities on the country as well as established its economic structure mostly around the agricultural sector. The government has introduced a highly belligerent privatization policy which has minimized the involvement of the state in various industries such as banking, communication and transport. The country has witnessed the evolution of several entrepreneurs from the middle class population who have been involved in significant business developments beyond the production of traditional clothing and textiles thereby, adding a hint of vitality to the economy. The governmental policies are mostly liberal that encourages business development. The construction, automobile as well as the electronic industry has experienced resounding growth for over the past few years, and this has boosted the country’s GDP considerably. The appropriately regulated banking sector and financial market has enabled the government to shield themselves from the impact of the financial crisis. While the GDP of western countries started to fall, Turkey’s GDP reached 9% in the year 2010 (Index mundi, 2014a). However, since then the country’s GDP fell sharply to about 4% in the year 2012-13 owing to the variability in the exchange rate and the escalation of political tensions. Currently, Turkey has been recognized as one of the most rapidly developing countries with a gradually growing younger population which are working effectively and contributing towards the economy. The development in the country’s economic infrastructure also provides a favourable landscape for business expansion. However, given the political tensions that have risen in the country, it is highly recommended that a company must device an appropriate market entry strategy before considering a business expansion. Cultural/ethical risk The Hofstede cultural dimension comparison between UK and Turkey shows a considerable amount of difference between the cultural values of these two countries (Geert-Hofstede, 2014). However, over the past few years, the government of Turkey has emphasized a lot on bridging this cultural group as a part of a negotiation for their acceptance within the European Union. Since then, a lot of employees recruited by foreign companies are working as expatriates in the Turkish division of the companies (ING, 2009). They have been working with local employees and till date, the initiative to bridge the cultural gaps between Turkey and foreign companies has proven to be successful. Figure 1: Cultural comparison between UK and Turkey (Source: Geert-Hofstede, 2014) The Republic of Turkey is going through a transitional phase. This translation has been largely possible due to the advent of globalization and the country’s acceptance of the regulations set by the European Union. There has been a significant increase in the inflow of foreign investment over the past few years precisely because of the expansion of various international businesses in this part of the world. This has facilitated a cultural fusion between the western culture and the culture that prevails in Turkey. In addition, a considerable number of employees as well as middle executives are highly educated and most of them have pursued their education overseas. This has helped them to adapt themselves to the western culture and mannerism with much ease (ING, 2009). Despite all these facts, a certain scepticism remains regarding the effectiveness with which two different cultures might intermingle. This implies that, issues of cultural conflicts may arise when people belonging from two different cultures start working with each other. This fact can be justified by the significant differences that are evident between the cultural dimensions of these two countries. The fact that remains of much concern is the rate of corruption and bribery that prevails in the country. Corruption and bribery is widely spread in the private as well as public sector in Turkey. As far as the corruption in the private sector is concerned, they happen largely because of the strict governmental regulations that are imposed only to create opportunities of corruption. Such incidents have the propensity to hinder development of business. Over the past few years, various public sector employees have been charged for their involvement in corruption and bribery. All these facts speak for the lack of transparency that exists within the country’s economic infrastructure. Nonetheless, the government has enacted various rules and legislation in order to curb such malicious practices. In 2010, the Government of Turkey introduced the national anti-corruption strategy, however since then; reports have been published regarding the frail enforcement of this policy (Business Anti-Corruption Portal, 2014). Assessment of business opportunities in Turkey Income level evaluation According to the World Bank data, Turkey is regarded as having a majority of upper middle income population (The World Bank, 2014). As far as richest population is concerned, merely 10% of the Turkish population lives with more than TRY 75,000 a year which is nearly equivalent to earning $35,000 less taxes. More than 70% of the Turkish households live with $18000 a year which is nearly $1500 per month. This is the middle class population of Turkey. The rest constitutes the lower middle class and the poorer class whose disposable income is less than $10,000 and $5,000 a year respectively (Econoscale, 2014). Demography The demographical factors that defines the growth experienced by Turkey includes, the Urban Population which was 71.5% of the overall population in 2011 and since then, it has been increasing 2.4% annually (Indexmundi, 2014b). The estimated growth rate of population has been 1.14% in 2014. Istanbul has been recognized as the city with the highest population followed by Ankara (the capital of Turkey). As far as the literacy rate is concerned, 97.1% of the male above the age of 15 can read and write and on the other hand, 90.35 of the female above the age of 15 can read and write (Indexmundi, 2014b). In the academic year 2013-14, a total of 5,472,521 students enrolled for higher education in universities, out of which, there were 2,977,211 undergraduate students, 265,895 students who enrolled for master’s degree and 67,157 students who enrolled for doctorate degree (Turkish Statistical Institute, 2014). Consumer buying pattern The lifestyle of a majority of the Turkish population reflects the lifestyle that is followed in the western countries. The advent of information technology and social media has made people more aware about the presence of global and local brands and the difference between then in terms of price and quality (Boland, 2011). Consumers in Turkey have been more inclined towards purchasing international brands largely due to the presence of foreign companies. Another reason behind such propensity is the increasing purchasing power parity of the Turkish population (Euro Monitor, 2014). The rising disposable income of the Turkish population has enhanced their affordability of branded products. Table 1: Purchasing power of parity of Turkey (as a % of GDP) Year Purchasing power parity for GDP (%) 2010 46 2011 49 2012 49 2013 50 (Source: OECD, 2014) Demand for international products and services The slow but gradual growth of the Turkish economy has increased the demand for internal products and services. As mentioned above, the rising disposable income and purchasing power parity of the Turkish population has driven this demand for foreign goods and services to an all time high. Moreover, due to the advent of globalization, the Turkish population have become aware of the Western lifestyle which in turn prompts them to buy international products and avail their services. Given the fact that the Turkish administration is slowly but gradually moving towards being accepted within the European Union, a thrust has been created where Turkish regulations are gradually adapting the legislations enacted in Europe. Expansion of business for international companies in the Turkish territory has become relatively easier. Buying and selling of international products have become easy now more than ever before. Due to the stability shown by the Turkish economy, the government has been successful in attracting considerable amount of foreign direct investment (Export.gov, 2014a). All these developments combined have increased the demand for intentional products and services. Success stories of international companies in Turkey Nestle has experienced a considerable proportion of success since its entry in The Turkish market in 1909. After opening the sales office, the company built the first chocolate factory in the year 1927. Following that the company has been witnessed many a times making ground breaking achievements and has been considered a spearhead of innovation in the food manufacturing industry. Over the course of the last 80 to 90 years, Nestle has had a noteworthy contribution in the development of the Turkish economy and has accounted for the employment of nearly five thousand Turkish employees (Turkey Contact Point, 2011a). Microsoft epitomized another success story when it added a feather to its name after making an entry in the Turkish economy in the year 1993. The entry of Microsoft in Turkish economy was triggered by a shared division of 6 employees who wanted to bring profound technological developments in the country. Since then, the employee base of Microsoft’s Turkish division has increased to 300 (Turkey Contact Point, 2011b). Microsoft has experienced a lot of success after its expansion in Turkey as it served as the base for all countries in Africa and the Middle East. ExxonMobil and Chevron Corporation are also amongst other international companies which have enjoyed significant success after expanding their respective businesses in Turkey (Export. Gov, 2014b). Conclusion and Recommendation The recent political tensions in Turkey are a cause of concern for many local as well as international companies. However, the political uprising that is taking place in Turkey as a result of the instable scenario is bound to bring about a profound transformation in the political infrastructure of the country. This is a transitional phase for the Turkish economy where the political tensions are momentary hiccups in the pathway towards a better future. Keeping aside the political tensions, the political infrastructure in Turkey largely favours the establishment of local as well as international business. The government encourages foreign investors to invest in the Turkish economy and their legislations have been formed in such a way that welcomes such investment. The economy of Turkey has exhibited a stable performance over the past few years. The demography of Turkey which constitutes a considerable proportion of urban population with upper middle income households and highly educated civilians provides ample opportunities for the British supermarket company to expand their business and hire talented employees at a relatively low cost. The increasing purchasing power parity as well as disposable income of Turkish households also provides the British International Supermarket chain which a huge base of potential customers. However, given the fact that there is a significant difference between the cultural dimensions of these two countries, the British Supermarket must adopt an appropriate market entry strategy in order to ensure that the business expansion is done without any hassle. The company should look to enter into the Turkish market through foreign direct investment strategy given that the governmental legislations are in favour of such investments. The British Supermarket should endeavour to enter through a joint venture with one of the famous supermarket chains based in Turkey. This will enable the managers of the British company to ensure that the expatriates are able to work in an environment that is harmonized with the knowledge input from the local employees. A joint venture strategy like this will enable the British supermarket to learn about the Turkish culture and ensure that there is no cultural conflict between the employees. In addition to that, the presence of managers from Turkey will also allow the British managers to understand and accept the Turkish Governmental legislations in a better manner. In that way, they will be able to ensure that the business development procedures are in the right track. A joint venture strategy will also allow the British supermarket manager to target the existing customer base of their partner company as well as target a new base of customers by implementing advanced marketing strategies. If all the above mentioned recommendations are executed properly, then the British Supermarket will also be able to add its name among the companies who have experienced considerable success by their expansion in the Turkish market. Reference List Boland, V., 2011. Consumer habits: Wealth leads to a boom in spending at the mall. [online] Available at: [Accessed 1 November 2014].   Business Anti-Corruption Portal, 2014. Business Corruption in Turkey. 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