Doing Business in Turkey - Case Study Example

Running header: New Product Idea (Task 3) Student’s name: Name of institution: Instructor’s name: Course code: Date of submission: Table of Contents Terms of reference……………………………………………………………………….. 3 Choice and justification of country………………………………………………………. 4 Characteristics that the company is seeking……………………………………………… 5 How the country fulfills business needs…………………………………………………. 5 Macro and micro environments (PEST & SWOT)………………………………………. 6 Conclusion………………………………………………………………………………... 10 Bibliography……………………………………………………………………………… 11 Doing Business in the Middle East (Turkey) Terms of reference This report is presented to the Board of Directors of Global Ventures Plc with the sole of aim informing it about the country that has been chosen to deal with the production of sportswear in a selected country. These sports wears will range from sports shoes, sports jerseys, shorts, t-shirts and jumpers among others (Nikebiz.com 2011). The country that has been chosen for this business venture is Turkey, which is in the Middle East. Production will entail the actual manufacturing of the sportswear so that they can be distributed to the people. Turkey has been chosen among all the other countries in the Middle East because of it has a lot of essential and desirable characteristics that make it appropriate for operating a sportswear production business. Some of these essential characteristics include the fact Turkey has citizens who have modest and high purchasing powers (Hakimian & Jeffrey 2004). Turkey also has the appropriate technologies that can allow the production of sportswear (Henry & Robert 2001). Another essential characteristic in Turkey is the availability of both skilled and technical laborers who can be appointed to produce the desired sportswear (Richards & Waterbury 2008). One major desirable characteristic of Turkey as the selected country for the production of sportswear is the fact that it has a fairly large number of sports enthusiasts who can also double up as ready market for the sportswear that is intended to be produced in the country (Noland & Howard 2007). The macro and microeconomic stability of the country is also very high (World Bank 2005). The steady and stable economy if Turkey is therefore very good for this new business idea (Kaminski & Ng 2006). The production of sportswear in Turkey is therefore likely to thrive because of the favorable business conditions available in the country presently. Choice and justification of country As seen above, the Middle East country that has been chosen for this new business venture is Turkey. This is because of the many essential and desirable characteristics that the country possesses which make it very appropriate for setting up a sportswear production business. Turkey’s citizens have modest and high purchasing powers and will be able to purchase these sports wears (Hakimian & Jeffrey 2004). Turkey was also chosen because it has the appropriate technologies that can allow the production of sportswear (Henry & Robert 2001). The availability of both skilled and technical laborers who can be appointed to produce the desired sportswear also makes Turkey an appropriate country for this business venture (Richards & Waterbury 2008). The country also has a fairly large number of sports enthusiasts who will provide ready market for the sportswear that will be produced in the country (Noland & Howard 2007). The macro and microeconomic stability of the country is also very high thus the steady and stable economy if Turkey is therefore very good for this new business idea (World Bank 2005). According to a report by the World Bank on Turkey Labor Market Study (2005), there have been a lot of structural changes in the economy of Turkey that have led to improved productivity in the services and manufacturing sectors. The same report also shows that the unit costs of labor in Turkey are relatively low compared to other countries. These factors have made the country to be a favorable destination for many businesses such as this one that is intended to be set up there (World Bank 2005). Characteristics that the company is seeking Global Ventures Plc is looking for a country whose citizens have modest and high purchasing powers. The company is also looking for a country which has the appropriate technologies that can allow the production of sportswear. Global Ventures Plc is interested in a country with skilled and technical laborers who can be able to work on the industry. The country that the company is seeking is one that has a fairly large number of sports enthusiasts who will provide ready market for the sportswear that will be produced in the country. The macro and microeconomic stability of the country should also be very high so as to provide a steady and stable economy that is good for business (Kaminski & Ng 2006). How the country fulfills business needs Turkey was chosen because it fulfills the business needs in a number of ways. According to the Turkey labor market report of the World Bank (2005), the country’s growth in terms of productivity has been quite remarkable and consistent over the past two decades. This is seen in the Gross Domestic Product (GDP) growth over 1981 to 2003 which has been an average of around 4%. This has made Turkey one of the fastest growing nations. The only other two nations that have been growing at a faster rate than Turkey are Korea and Ireland. Turkey has the 15th largest GDP in the world (World Bank 2005). It is also one of the founding members of the Organization for Economic Co-operation and Development (OECD). The country forms one of the G-20 great economies of the world (Kaminski & Ng 2006). The high levels of inflation that affected the country in the early years of this 21st century have been brought under control by the launch of the new currency on January 1st 2005, which is known as the Turkish lira (World Bank 2005). Turkey has been able to take advantage of the opportunities provided to it by the global markets (Kaminski & Ng 2006). This suggests that there are three elements that are in place which are critical to business. These are well functioning sports industry, competitive and contestable domestic markets that welcome external competition and macroeconomic stability (World Bank 2005). Turkey fulfills business needs by having well developed and functional backbone services. These backbone services determine the speed and ease at which goods move across national and international border, and are therefore crucial for the trade of goods. Examples of these well developed and functional backbone services include banking, transportation, insurance and telecommunications among other business services that are necessary for any business to thrive (Kaminski & Ng 2006). Factors in both macro and micro environments relevant to the industry (PEST & SWOT) The factors in the macro and micro environments that are relevant to the sports industry in Turkey will be reviewed under the following sections: Political, Economic, Sociological and Technological. This section will also conduct a SWOT analysis which will outline the strengths, weaknesses, opportunities and threats that the Global Venture Plc Company has which will determine the performance of the business. 1. Political environment The political stability and other issues relating to government regulation and policy of Turkey have been issues under research by numerous scholars for many years now (Richards & Waterbury 2008). Turkey is a democracy under parliamentary representation. There has always been a strong tradition of secularism that has been developed in the country ever since it was founded as a republic in 1923. The legal framework of Turkey is governed by the country’s constitution. It is the same constitution that identifies the country as a unitary state that is centralized and it also outlines the main principles that guide the government. Turkey has achieved a high level of political stability over the years due to a number of factors. One of these factors is the fact that Turkey has a good history of foreign relations. This arises from the fact that it is one of the founding members of the United Nations (1945), the Organization for Economic Co-operation and Development (1961), the G-20 major economies (1999), the Organization of Black Sea Economic Cooperation (1992), the Economic Cooperation Organization (1985), the Organization for Security and Co-operation in Europe (1973) and the Organization of Islamic Cooperation (1969) among others. This shows that the country has achieved a high level of political stability which makes it favorable for business. The country has also been able to maintain high levels of security through its armed forces which comprises of the Air Force, Navy and Army, with the Turkish armed forces being the second largest armed forces to stand in NATO. This makes the country the strongest in terms of military power in the Middle East. Most of the political regulations and policy of Turkey create a favorable business environment (Richards & Waterbury 2008). 2. Economic environment Setting up the new business in a new country requires a very favorable economic environment so that the business can be profitable. The impact of fiscal and monetary policies in a country can be difficult to predict in an economy like Turkey’s. The country’s economic environment is favorable because it has a low GDP PPP which is at par with the minimum wage of Turkey. This is necessary as it enables businesses to be able to maintain a skilled labor force at reasonable costs. The tax laws are highly rationalized and they are made simple so as to encourage investors to start businesses that are likely to thrive in Turkey. Macro economically, the country has been able to boost its trade activities through integrating itself into Pan-European markets. Turkey and other countries such as Poland, Estonia, Slovenia, Slovak Republic, Czech Republic and Hungary have proven to perform exceptionally well in producer driven networks and economies as a result of taking part on global division of labor that is based on the fragmentation of production. This is one sign of success of the economy of Turkey. The prices of raw materials are also considerably fair in the country and this is as a result of the fair policies and regulations on importation and exportation (World Bank 2005). Even though the economy of Turkey has been affected by inflation and employment generation hit a low for some time, the government of Turkey through some of its organs such as the Central Bank of Turkey has been managed to deal with the problems of inflation through various strategies such as through the launch of the new Turkish lira. 3. Sociological environment The Turkish society has very rich and diverse cultures which blend various elements of Western cultures, Islamic cultures and Greco-Roman cultures. This means that the Turkish society provides a good environment for various businesses to thrive. The population of Turkey stood at 67,803,927 according to the last official population census carried out in the country in 2000. Nearly three quarters of this population lives in cities and towns. This means that the society has readily available and affordable skilled labor to work in such a sector. The need for skilled labor is one of the most crucial social requirements for any business to thrive. The high population makes the demand for jobs to be high (World Bank 2005). This gives Global Ventures Plc a competitive advantage because of the availability of affordable labor. Turkish is the official language in the country and a great percentage of the population is fully literate and understands English. This goes a long way in eliminating or reducing language barriers in trade. The Turkish society is a sporting society. Sports are very popular in the country with the most popular of them all being association football. Volleyball and basketball are also mainstream sports in Turkey. Other common sports loved by the Turkish people include wrestling, weightlifting and motorsports. The country is well developed when it comes to these sports and this provides the sports sector with a lot of business advantages (Nikebiz.com 2011). 4. Technological environment Technological advancements in Turkey can be seen through various factors such as transportation and communication networks. The country boasts of one of the best developed rail and air transport systems which make it very good for business. This is because of the speed and affordability of using these services. The country also enjoys a reliable supply of electricity and other alternative forms of energy for its industries. All these factors attract foreign investors to invest in the country (World Bank 2005). SWOT analysis This section will focus on the opportunities and threats that face the Global Venture Plc Company as it seeks to invest in Turkey. The strengths and weaknesses will not be discussed because this is a hypothetical company. For example the country is very economically and politically stable and this provides the Global Ventures Plc a suitable environment to thrive. i. Opportunities The company has a lot of opportunities of thriving in Turkey. These opportunities come from the fact that the country provides a good economic, social, technological and political environment that is favorable for any country to thrive. The fact that the society also loves sports and sporting activities is also a great opportunity for this business to be successful in Turkey. ii. Threats Some of the few threats that the Global Ventures Plc is bound to face is competition from other similar businesses that produce sportswear (Kaminski & Ng 2006). Conclusion In conclusion, Global Ventures Plc is very likely to thrive in Turkey if all the factors mentioned in this report are taken into account. The facts that have been stated in this report are reasons why I believe that Turkey is one of the most suitable countries in the Middle East that a sportswear production business can thrive. Many factors such as political, social, economical and technological factors in Turkey are seen to work in support of this business venture and ensure that it thrives if these factors are taken into serious consideration. References Hakimian, H & Jeffrey, N 2004, Trade policy and economic integration in the Middle East and north Africa: economic boundaries in flux, Routledge, New York. Henry, C & Robert, S 2001, Globalization and the politics of development in the Middle East, Cambridge University Press, Cambridge. Kaminski, B & Ng, F 2006, Turkey's evolving trade integration into Pan-European markets, World Bank, New York. Retrieved from, http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/05/03/000016406_20060503112446/Rendered/PDF/wps3908.pdf Nikebiz.com 2011, NIKE, INC. http://nikeinc.com/ Noland, M & Howard, P 2007, The Arab economies in a changing world, Peterson Institute for International Economics, Washington, D.C. Richards, A & Waterbury, J 2008, A political economy of the Middle East, Westview Press, Boulder, Colorado. World Bank 2005, Turkey labor market study, World Bank, New York. Retrieved from, http://siteresources.worldbank.org/INTTURKEY/Resources/361616-1144320150009/Labor_C2.pdf Read More