European Business & Global Markets: The Market Opportunities for the Expansion of Business - Coursework Example

 The Market Opportunities for the Expansion of Your Business into One or More Countries That Have Applied For EU Membership but Have to Join Introduction International expansion presents several opportunities for a business. It empowers a business to take advantage of the potential market present in the new country. However, a number of factors require consideration before the process of business expansion commences. The company needs to identify the market opportunity in the new market before expanding to know its potential for survival in this market. The report analyzes the opportunities for market expansion of a UK based logistic business into Turkey. Market Opportunity for Expansion of the Logistic Business into Turkey Turkey has applied for entry into the European Union, and negotiations on its inclusion are currently ongoing. The opportunity for expansion of the logistic business into Turkey would depend on analysis of its Turkey’s past, present and future business operations (HURD, 2012). The economy of Turkey decreased sharply in the spring of 2014 with a 1.7 percent year on year decline in GPD growth witnessed by the third quarter. Further, the private domestic demand of Turkey softened in the course of 2014 and barely contributed to yearly growth. Weak spending by consumers exhibited a reflection of decelerating household borrowing, which was due to measures that were micro-prudential and hikes in interest rates. In the first half of the year, tight financial conditions pushed business investments into negative growth territories, and this continued until the third quarter. Improvement of net exports helped to offset slow domestic demand (Turco & Maggioni, 2012). Other than monetary tightening, low import of non-monetary gold and competitive exchange rate at the beginning of the year aided net exports. Shrinking of the Iraq and Russian exports affected the overall performance of export, and the annual GDP would have massively improved. In the winter of 2013-2014, the central bank had to tighten monetary policy due to the intense downward pressure on Turkey’s financial market (Kirkulak & Erdem, 2014). The monetary policy allowed the currency of the country to recover, and the risk premium of assets declined enabling the central bank to reduce the one-week rate of repo gradually to 8.25 percent by July of 2014. In the remainder of 2014, the central bank desisted from the extra cut with headline inflation balancing around nine percent. In January 2015, there was a loosening of monetary conditions by the central bank. It did this by reducing the one-week repo rate to 7.75% due to inflation data that were improving and pressure from the president of Turkey. In the recent past, the central bank has made further cuts on the interest rates to improve the inflation outlook (Dedeoğlu & Kaya, 2013). These materialize in the recent appreciation of the lira, lower prices of oil and present economic slack. The international price competitiveness of Turkey reduced due to the appreciation of lira by 6.1 percent in real effective terms in 2014. Turkey’s exports affected by decreased rates in energy that tend to subdue growth in many of its traditional markets especially Russia and the Middle East. In addition, the country’s imports will be stimulated by trade terms improvements. Therefore, there is a projection of a decrease in the net exports contributions to the growth of GDP in 2015 (Barreto, 2012). The country’s expenditure on private consumption is probably going to recover from the slowness recently witnessed. Low energy prices will boost purchasing power and food prices that are stabilizing whereas wages continue to rise at a rate of ten percent annually. Even though 2014’s macro-prudential measures will go on restraining household borrowing, the present easing of monetary policy should provide consumption with some stimulus. Turkey’s business fixed investment has been weak for quite a while, but given the improvements in consumer demand and lower rates of interest and costs of production. There is a projection that gross fixed capital formation will undergo a moderate increase presenting a market opportunity for the expansion of the business. Based on oil prices stimulus and easy monetary policy, estimations put Turkey’s annual GDP as 3.7 percent in the year 2015, and 4.0 percent in 2016. However, monetary policy of U.S. normalizes the possibility of a renewed sell-off in the financial assets of Turkey(Lo Turco & Maggioni, 2014). These would need strengthening of the monetary policy of Turkey with repercussions that are not positive for private domestic demand. Another potential risk is the geopolitical situation in the Middle East and Russia that keeps on worsening. In addition, there are estimations that the employment growth of Turkey is estimated to run below output growth, expressing a reduction trend in growth rate for the productivity of labor. Projections put the annual average unemployment at 10.5 percent for both 2015 and 2016; this is for the force of labor aged between fifteen years to sixty-four years. Estimation based on the notion that the labor force will experience a slight increase below the four percent trend rate of growth of latest years (Perlin, Dufour & Brooks, 2013). There is an estimation that the annual average consumer price inflation is projected to fall by almost three percent to approximately six percent this year presenting an excellent market opportunity for expansion of the logistics company. The large current account deficit of Turkey contracted to an estimation of six percent of GDP in 2014 mostly assisted by the small imports of non-monetary gold. In 2015, the undergoing oil price drop will decrease the deficit to less than four percent of GDP (Wu & Chen, 2014). In the following year, the firming of the oil price and strengthening of domestic demand that is continuing should give rise to a modest widening of the deficit on the current account. In Turkey, public finance remains to be sustainable and stable. The central government recorded a deficit in the budget of 1.3 percent of GDP in 2014. These show an increase of 0.1 percent from the previous year, though lower than the original and reviewed official targets of 1.9 percent and 1.4 percent in that order. Privatization revenues have played an essential role in the realization of better plans than estimated. The deficit of the general government should decline this year and the following year in line with the firm growth in GDP and tax revenues that are accelerating. Conclusion In conclusion, from the results of the report, it is evident that Turkey presents a potential market for the expansion of the UK based logistic business. Analysis of the Turkey’s business market results to new exploitable opportunities that the business can utilize. The Central Bank of Turkey has equally played a critical role in ensuring that the country’s business market is favorable for investment. References Barreto, I. (2012). A Behavioral Theory of Market Expansion Based on the Opportunity Prospects Rule. Organization Science, 23(4), 1008-1023. Dedeoğlu, D., & Kaya, H. (2013). Energy use, exports, imports and GDP: New evidence from the OECD countries. Energy Policy, 57, 469-476. HURD, D. (2012). 1989: The Missed Opportunity. JCMS: Journal Of Common Market Studies, 50, 49-52. Kirkulak, B., & Erdem, S. (2014). Market value chain efficiency in Turkey: application of DEA to the pre- and post-2001 financial crisis. Euromed Journal Of Business, 9(1), 2-17. Lo Turco, A., & Maggioni, D. (2014). Imports, Exports and the Firm Product Scope: Evidence From Turkey. The World Economy, n/a-n/a. doi:10.1111/twec.12201 Perlin, M., Dufour, A., & Brooks, C. (2013). The determinants of a cross market arbitrage opportunity: theory and evidence for the European bond market. Annals Of Finance, 10(3), 457-480. Turco, A., & Maggioni, D. (2012). On the Role of Imports in Enhancing Manufacturing Exports. The World Economy, 36(1), 93-120. Wu, J., & Chen, X. (2014). Home country institutional environments and foreign expansion of emerging market firms. International Business Review, 23(5), 862-872. Read More