Assessing Turkish International Business Opportunity - Case Study Example

Name: Course: Date: Professor: Assessing Turkish international business opportunity Introduction According to history, Turkey is located along the middle- Asian countries and was initially a monarchy state, under the Ottoman Empire leadership. It is claimed that starting in the late 17th century the ottoman empire started to lose its supremacy both economically and militarily especially to the already powerful superpowers in both Europe and Russia. Through out the 19th century, Tutar and Tansel (2001, p.89), asserts that the Ottoman Empire had faced so many military defeats that the nationalists started waging an uprising against the emperor leadership. He further states that after the WWI, some heavy treaties signed under the emperor’s leadership further weakened the Ottoman Empire (p.91). This facilitated the uprising insurgence of the nationalists under the leadership of the one Mustafa Kemal Ataturk. The persistent resistance waged by the defiant nationalist bore the Independent Turkish Republic, which replaced the priory existing Ottoman Empire. Tutar and Tansel (2001, p.112).observes that initially the nationalists had been so visionary with the desire to bring about an aver haul across all domain cutting across economic, cultural and social to embrace the western style. The challenge came in following their geo-location, the fragile neighborhood, and the overall global trends at the time forcing them to hang on to the old ottoman policies although they still hoped to transform later to follow their ideal western modernization route. He further asserts that being located in an authoritarian neighborhood, with countries like Iraq, Iran, the former Soviet Union, amidst others; the Turkish government had to retain strong military defense budgets (p.113) Another issue according to Tutar and Tansel was that the high ranking generals were so influential on most of the local and international policies following their contribution to the liberation of their republic (2001, p.62). Some of these challenges have slowed down the transformation and liberalization of the Turkish republic. This research paper seeks to establish the international business opportunities available in turkey by interpreting the country’s political, an economical structures as well as discussing its cultural attitudes; with the focus being the last three decades. Cultural, Political and economic prospects of the Turkish republic Yeldan, (2001, p. 56) observes that for the last three decades, Turkey- a country that has been struggling to stabilize economically and politically- has had several military coups co-currently taking place after every ten years. It is argued that after the collapse of the Ottoman Empire, the state was disintegrated into tribal groupings in the rural areas, this explaining the reason behind the numerous military coups that have rocked the country’s political and economic stability. This has greatly affected the political stability which has stalled the country’s development in terms of economic and structural development. In spite of the many attempts to have a democratic form of governance, there have been consecutive failures to maintain the trends following the populist dominance by the consecutive governments, without exception. However, Yeldan, (2001, p. 59), observes that for several decades the parliamentary democracy has not been significantly affected by the many military coups that have taken place. This political instability has significantly affected the country’s economic stability with every aspect of economic improvement being compromised by either a change in government or the populist aspect of it to appease the electorates. Consequently the country has found itself in an ever deepening debt pit that is crippling its economic stability and independence. Yeldan, observes that the Turkish government has experienced a double digit inflation rates in the last three decades (2001, p.65). Citing these serious economic inconsistencies he observes that the inflation has been triggered by two factors which are the demand and the cost –oriented factors (2001, p. 67). Scholarly, it has been established that public sector, monetary aggregation, exchange rates, inflation inertia as well as the external factors, are the leading contributors to the country’s economic quagmire. To be more precise, he points out that the over reliance on imported raw materials, coupled with huge budget deficits amidst heavy foreign borrowing as well as the changes occurring in the exchange rates are the biggest contributors towards the inflation in Turkey(2001, p. 73). Önis (1998, p. 80) states that the Banking system has been a huge contributor to the failures associated with the banking sector, thus creating uncertainties in the macroeconomic sector. These banking weaknesses have been overly exploited by the government, following its encouragement to borrow from foreign institutions and finance her projects. This, Önis points out that it lead to the emergence of the banks being part of the government’s treasury, thus incurring heavy losses in the process with most banks closing down following bankruptcy declaration (1998, p. 81). Consequently, the general public lost confidence and faith in their local banks and could not save with them. The central bank was mandated with the responsibility of regulating the lending rates as well as the interest rates to check the rate of inflation. However, this did not control the situation as on several occasions the rate of inflation kept getting higher. Alper and Önis, (2002, p.9) point out that at some point, the government tried to reduce the borrowing rates by regulating the interest rates; the latter proved highly catastrophic as investors both foreign and local, took the opportunity to reap huge benefits from the banking sector- on money borrowed from external sources- and the repercussions proved to be very negative. Scholars have also related the economic inflation with the coalition government’s budget deficit. Research has revealed that public investment in Turkey dropped significantly from 9.5 percent of the total GDP in the 80s to 5.3 percent of the GDP in the mid and late 90s. On the flip side, it has been noted that the gross tax revenue has in the same period increased periodically from 16 percent of the total GDP to 19.5 percent of the GDP within the period stipulated formerly. These figure leads to the induction that following the huge Turkish foreign debts, the state is not in a position to finance her self thus, resulting in continuous foreign debts amidst the escalating interest rates. One clear thing according to Alper and Önis is that public deficits, a weak financial system, consistence inflation populist policies and continuous public debts are the strong indicators used to interpret the economic trends and the causes of the previous inconsistencies in the economic and political structure(2002, p.13). Amidst all these economic and structural chaos, the most outrageous concern according to Aruoba,(2001, p. 22) is that neither of the consecutive governments nor the opposition group has raised a figure or dared change the populist expenditure thing of the government. In as much as the governments have been trying to liaise with the international community on matters governance and government expenditure, seeking help from the IMF and the world bank, shows her strong desire to establish economic stability. The main challenge however according to Aruoba, has been the populist policy which on many occasions has seen the government spending most of its borrowed money of projects that are off the budget just to please the demands of the voters (2001, p. 39). Not a single government both democratically elected or coalition government or attained through military coup has had enough courage to implement the strictly budget government expenditure that is necessary to stabilize the Turkish republic economy (p. 42). Any change related to the latter was countered with serious defeat during the following election. He observes that most of the budget deficits were as a result of pleasing the masses rather that doing what was necessary (p.47) This kind of attitude and the public state of indifference has contributed greatly towards the Turkish economic slump. However, one strong attempt that is noteworthy is the desire of the Turkish republic through her government, to liaise with the international community. This according to Önis, has been very clear through institutions like IMF, World Bank as well as other international organizations that have shifted interest in Turkey (1998, p. 89) Turkish republic’s desire to join the EU shows her strong desire to enjoin and integrate with the global community. The latter can be perceived to be an indicator that the Turkish republic is a country open to the international community, and is ready to work with them in its quest to achieve the much desired economic stability as well as the western form of democracy and economic success. Being part of the EU community will give her the opportunity to attract more investors within the region to come and explore the possible opportunities as well as widen her market and sources of the raw materials to make her more industrialized. Noteworthy according to Denizer, (1997, P.15) is that of late there has been the emergence of the relevant economic institutions and legal framework which had priory been conspicuously missing in the governance system of the Turkish Republic. These organizations are projected to bring about accountability as well as lift the face of the Turkish republic to a point that investors will start streaming in the country. According to Denizer, following her strong desire to be acknowledged as a full member of the EU, a lot of positive changes are taking place within the Turkish republic as well as her relations with the international community (1997, P.17) Following the strict reforms imposed by the EU specifically in governance, democracy and human rights before the talks could commence, Morgan. (2001, P. 3) asserts that the latter being the current administration’s priority, has triggered reforms that are being packaged through parliament in compliance with the EU standards. This focus to achieve her ultimate goal has seen the country stimulate political and legal reforms as well as efforts to democratize process. Turkey has developed many diplomatic relations with a good number of countries. This has been evident citing the many consulates it has opened in many countries especially the EU member states and the Middle East states. These international relations interpret into business opportunities. Looking at the history of the Turkish republic and her tendency to import most of the raw materials from other countries, I would consider her trading relation with most of her trading partners as that which has competitive advantage. This indicates as Morgan states each of these countries being at different technological level and having varied economic resource, will have the tendency to compete as they market what they produce in large quantities as they import what they produce in low quantity or don’t produce at all, (2001, P. 7) Again Senses (1988, P.31) points out the Turkish republic as a historically agricultural country, with the sector being in a position to contribute about 15 percent of the country’s GDP. These facts prove that the country could be a force to reckon with in as far as agricultural raw materials are concerned. This being the case, it could give Turkey the absolute advantage in terms of export to her trading partners who do not produce agricultural products. On the contrary, Turkey could use the agricultural raw materials to produce products that will give her the competitive advantage over other competitors in the global markets. Tobb, (2001.P. 7)points out that with the Turkish republic being in a desperate position to be absorbed as a fully fledged member of the EU, this desperation could lead her to a state of getting exploited by the EU member states that she is trying to lobby. From this point of view, it will expose her to such exploitation as she gives those trading partners absolute advantage just to win their support. In the long run, they will stand to gain much as she has little or nothing to gain from such a relationship. Considering the Heckscher Ohlin’s theory of trade, it apparently becomes clear that in the international trade, each country will export what it produces in large scale as they import what the require and do not produce. With this consideration, the Turkish republic shall be most involved in the export of the commodities they have in plenty to their trading partners as they import what they do not produce from their trading partners. The same trading pattern is repeated across the rest of their trading partners. Weaver, (2008, P. 20)asserts that with most of the EU members being more politically and economically stable than the Turkish republic, the new trade theory displays some fallacy that could exist when some developing countries are trying to compete with the already developed countries. The theory proves that most of the developed countries have a tendency to trade with equally developed partners as opposed to the developing countries. In the long run this could disadvantage the developing countries that fall under that particular trading block, with mostly, the developed countries reaping more benefits in the partnership than the developing countries. Critically looking at the Turkish republic’s political and economic standings much requires to be done in order to empower her to compete with other emerging economies within the region. To achieve that, there is great need to the organizations within the country to come up strategies that are going to give them, some competitive advantage. According to Altan‐Olcay and Özlem (2011, p. 42) this can be achieved through restructuring the existing non effective management teams and replacing them with management teams that are result oriented and positive enough to transform the country’s economy positively. This new restructuring, will as well allow the organizations to be more dynamic in terms of innovations as well as increasing their production amid the tight competition that already exist in the international market. Altan‐Olcay and Özlem argues that with the current almost cut-throat type of competition in the international market, only those organization that will restructure and have consistency will an advantage in the international market (2011, p. 48). Additionally, it is empirically crucial to consider the demand of the product that Turkey is producing. This way she will be in a position to master her trade target, and distinguish those that should be prioritized and those given less priority. By studying the demand condition, the organizations and firms within the Turkish republic will be compelled to improve the quality of their products, as well as technologically innovating their products in order to satisfy the growing demand for quality products in the international market. This way, they will also have the competitive advantage over their competing partners as well as get the opportunity to improve their economy. Priory, it has emerged that the political arena and the business field in the Turkish republic have had many differences over many issues. These differences have mostly emerged as a result of having varied and diverse ideas. Altay and Atli (2011, p 122) observes that if the technocrats and the government were to work closely giving and seeking consultations where necessary, much deemed would be achieved in Turkey both politically and economically. This change of attitude would ensure timely consultation and response on various trading and market needs; as a result the country would harness enough information internally to make it noteworthy in the larger international market where sharing ideas and information is so significant. Altay and Atli points out that this type of consultation and sharing of information can be extended across the relevant supporting industries (2011, p 127). This can be achieved through workshops and other likeminded forums which would ensure that through such information shearing forums exchanging ideas continuously will result into more creative and innovative products that will have a competitive advantage in the global market. The other most important of the porter’s diamond model for the competitive advantage of nations according to Bugra, and Ayse (2003, p. 455) is the factor conditions. This he argues, can immensely impact upon the competitive advantage. They further point out that with the production of the raw material coming short of being a competitive advantage following their exhaustive nature; adding that specialized factors involving serious and sustainable investments can offer a firm or an organization a highly competitive advantage due to its nature of restricted duplication(2003, p. 463). They also observe that with enough labor, infrastructure and capital, a country’s economy is bound to be transformed positively with proper management of the available resources (2003, p. 465). All this should be done both at the local level and at international level. Apart from the organizational responsibilities, the government also has a role to play, in ensuring the success of the above mentioned strategies. Bugra, and Ayse (1994, p.34) cites that the government of Turkey acts as a catalyst in encouraging and coming up with regulations that would keep the companies focused towards achieving their competitive objectives. They further argues that the government must be aggressive in facilitating and stimulating early demands for products that are innovatively made encourage specialized factors to increase quality and improve international competitive advantage, enforce anti-trust regulations as well as minimizing organizational cooperation so as to increase competitive rivalry both within the country and in the global market (1994, p.43) . Currently Kirişçi, and Kemal (2009, p.29) observes that the Turkish republic has been originally operating from an ethnocentric position, following the great influence of the army officers who believed they played a very vital role in the independence of the Turkish republic. With their power and influence, Kirişçi, and Kemal add that they have been controlling both the international and the local policies thus sub-dividing the country into small sub-tribes; thus the numerous military coups that have rocked the country, causing both political and economic instability (2009, p.49) This way, it was easy to have control over the local organizations, although the long term effects have been very detrimental. As the country is trying to regain it political and economic transformation as they embrace democracy and economic growth, much is being done to achieve the latter as well as comply with the EU standards. Of late following the trends mentioned priory, the trends are changing and the country is moving towards a more global approach without losing the local market. According to Bugra, and Ayse, the current government is trying to push the organization to embrace both the polycentrism as well as a much global approach of geocentrism (1994, p.48) This way, the country is in a better position to regulate the operations of the multinational companies’ operating within its country, as they regulate them to respond to their growing local demands as opposed to just diversification of productions. The challenge of the latter is that, with such limitations on the production area and the focus on the local preference, their is the tendency for the smaller companies to duplicate the facilities in order to gain the market advantage over the multinational companies. Another added advantage of the polycentric approach the Turkish republic has taken, is that it limit the sharing of ideas as each of the operating firm or organization operates independent of the other. Conclusion With the Turkish government having attained her independence with its fore father dreaming of pushing the country towards the western form of democracy and economic growth decades later, much has not been achieved. This is because of the divisiveness that appeared following the post independent war veterans who held on to their conservative ideas of populism, which has time and again rocked the stability of the country. with the consecutive governments desire to stabilize the country in their quest to achieve the fully fledged EU membership, the desire for stability both politically and economically overshadows their previous political turmoil’s following the numerous coups that have taken place almost in a period of ten years. Having struggled with weak banking systems which have failed regularly, and the heavy foreign borrowing with the ever escalating interest rates, the Turkish government ought to have learnt from its previous mistakes so as to align their political, cultural and economic strategies in order to compete in the global market. With such stability and her strong agricultural background, the Turkish government might soon be the next biggest investment destination across the Asian region. Recommendations Weaver, (2008, P. 25) asserts that the polycentric approach should be more focused on the firms which would not be much affected by the regulations of the host country. On the flip side to bring a balanced equation across the competitive market, the Turkish government is also keen and should actually be more focused on embracing the geocentric approach of trading. This wider outlook of the larger organizations will ensure that the Turkish republic gets a more international appeal as well as give her the chance to enter the larger global market. This approach further ensures that firms respond to both international as well as the local demands as they try to blend their unique innovativeness and enriching their competence amid the great opportunities of sharing the ideas across the wider global arena. Apart from the governmental approach the local people should have a change of attitude, where by they embrace a more international approach as opposed to their usual populist approach, which has rocked the country’s economic and political capability into great turmoil. This way it will be much easier for the country to move towards her agenda of attaining full d3emocratic governance as well as transforming the economy of the country to be in a position to compete with other developing economies in the region. References Alper, E., Önis, Z. 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