Marketing Across Cultures: The Expansion of Ulker Food Company to Turkey - Case Study Example

Table of Contents Introduction 2 PEST Analysis 3 Expansion Strategy in Turkey 5 Recommended Marketing Expansion Strategy of the Company 7 Ethical Issues 9 Cross Cultural Marketing Recommendations 10 Bibliography 12 Marketing across Cultures Introduction The increasing international expansion of companies does bring benefits and risks for the companies. The risks are increased especially if the company plans to target a market which has a different culture. The challenges for the company going in a different culture are greater than other companies. In consideration to the increasing process of internationalisation and increasing importance of cross culture marketing, this report has been prepared. This report highlights the marketing practices of a UK based company planning to target Turkish market. It has been assumed that UK based company has been successful in UK market however, because of unplanned actions to expand to European markets have also brought significant challenges for the company in the past. Moreover, it has also assumed that UK based company is currently using the ingredients in its products which are prohibited by some religious groups in Turkey. Therefore, this report highlights the marketing strategies for this UK based company in consideration to the mentioned assumptions. PEST Analysis Political and Legal The political instability is high in Turkey as it is evident from the political conditions of state during 2007 and 2008. The triumph of Islamic-rooted Justice and Development Party (AKP) raised conflicts among political parties and the legislations of AKP such as headscarf in public universities have been further boosting the conflicts (Oxford Business Group, 2009). The instable political conditions do pose risks to the companies operating in Turkey. The food companies have to comply with the legislations related to Turkish food industry and these legislations are in harmony with EU Food Law and they are conducted by Ministry of Agriculture and Rural Affairs (MARA), therefore, European food companies wishing to start their business in Turkey, usually do not face strict legislations. Moreover, Decree Law of 560 about the production, consumption and inspection of foods also imply on companies (Alasalvar). Economic Turkey has faced various political challenges in 2008 especially the domestic political instability. Moreover, global financial recession also had a significant impact on Turkish economy. Various reforms have helped the Turkish government to improve the fundamentals however; various sectors will still take a few years to recover (Oxford Business Group, 2009). The food companies do not face difficulties in finding raw material especially the agricultural products and packaging material (State Planning Organisation, 2004). Social The large domestic market and the huge young population market appears to be the major attraction for food companies. The food industry of Turkey is becoming attractive for the international food companies. The demand of products made up of meat, poultry and fish has been increasing at a compound rate of 2.7% between 2003 and 2008 and the leading players in the Turkish market are Pinar Entegre Et ve Yem Sanayii AS, Aytac Dis Tic Yatirim San A.S. and Tat Konserve San A.S (Thompson, 2010). Technology The level of low research and technological development in Turkey reduces the attraction of its food industry. Most of the Small and Medium Enterprises are facing technology and capacity utilisation problems in Turkey. However, Turkey has significant room for investments but there is a need to enhance intellectual property rights to spur development in technology. Interestingly, Turkey is considered as the 11th largest economy in terms of number of internet users (Alasalvar). The PEST analysis shows that political factors, economic conditions, technological developments and infrastructure in Turkey is not very favourable for the businesses. However, a food business usually has more cushions to survive against such impacts. Moreover, the growing demand of youngsters and changing social trends actually make Turkey a good place to invest in. Expansion Strategy in Turkey Turkey market appears to be a very promising market with a population of 72 million and it is evident from the expansion strategies of Nestles and Yildiz in 2010 (Bizjournals, 2010). However, choosing the right expansion strategy is very important for the success of our company. Franchising and Licensing The first strategy which our company can adopt is Franchising and Licensing strategy. On the initial stage of business, this strategy is actually viable. The major benefit of this strategy is that company will have intellectual property rights, which will allow it not to lose its identity even in Turkish market. Second, this strategy will allow expansion in a relatively short period of time. Third, it will also allow our company to employ its capital investment in a cost-effective manner. Franchising and licensing strategy may reduce the chances of success of our company in Turkey because it may make it difficult for company to maintain its high quality level of support services. Second, the company will need a huge budget to establish its franchises in Turkey market. Third, the political instability may affect the company negatively and deteriorate its image internationally. Merger, Acquisition or Partnership Our company can also go for merger, acquisition or partnership strategy. This strategy will actually allow our company to reduce its risks by taking the help of a Turkey based company. For example, by partnering with one of the biggest food companies in Turkey, our marketing needs will reduce. Secondly, we will be able to bear capital expense. Third, the good image of Turkey based company will also attract customers for our company. On the other hand, merger or partnership does pose some greater risks for our company. The less compatibility of two companies in terms of management and business operations may create conflicts in the long run. This strategy may also reduce the recognition of our company in Turkey market. Moreover, bad word of mouth of other company may also threaten the image of our company. Recommended Marketing Expansion Strategy of the Company Since our company is planning to expand to Turkish market, therefore, according to Igor Ansoff Product-Market Growth Matrix, it is going to pursue Market development strategy, in which it will introduce the existing products in a new market (Turkey). Igor Ansoff Product-Market Growth Matrix Products Present New Markets Present New The recommended marketing strategy to the UK based company is to undergo a partnership with a Turkish food company. The selected Turkish company, with which the UK based company can make the partnership, is Ulker Food Company. Ulker Food Company is a Turkish company dealing in the food, drinks and dairy segments. It is a publically traded company and it seeking out expansion projects. In January 2010, news was released that Ulker was in talks with McCormick & Company, a US based company to expand its operations in Turkey. Ulker has been reaching similar successful deals with other companies such as Kellogg’s and Hero Swiss Food to diversify its brand portfolios (Bizjournals, 2010). For example, Ulker announced to build a black tea plant in cooperation with a German company LHS (Worldbulletin, 2010) and Ulker and Hero opened baby food jar company in Turkey (Flex News Food, 2009). Partnering with Ulker will appear as a major milestone for our company as it will allow us to continue our international business. Business expansion in Turkey by partnering with Ulker will also allow us to best position our company as; Ulker has a strong brand name. Ulker’s core businesses are cookies and chocolates, however, the company has been dealing with various other products and it is known as first cookie producer to employ the services of international experts (Ulker). The experience of Ulker in Turkish market and our distinct products will combine to offer what the Turkish people actually want. With the help of Ulker, our company will be also able to provide highest level of support to our distributors and resellers. Most importantly, Ulker does have its own marketing companies and strongly backed by logistics capability and extensive vehicle fleet (Ulker). This expansion strategy is also beneficial as it will help us to identify the needs of Turkish market. Being a European brand, we do not understand whether the ingredients we use in our products are acceptable to different religious groups in Turkey or not. Therefore, by partnering with a Turkish based company, we will be better able to avoid such problems. Going in partnership with Ulker will also allow our company to access local raw material at affordable prices. Ethical Issues Our company is going to face various legal and ethical problems whilst operating in Turkey. First, we should fulfil all the legislations related to food production, distribution etc. For example, the new regulation pertaining to a number of food products having genetically modified organisms (GMOs), have banned the import of these products and Agricultural Ministry of Turkey blocked the import of such products (Today’s Zaman, 2009). Since most of the legislations in Turkey are in harmony with European Legislations, which our company is already following, therefore, we will not find any problem in this regard. However, our company may face a few ethical problems. The major ethical issue will be the production of food with the ingredients which are forbidden in Turkey. It is quite possible that changing the ingredients may change the taste of the products. However, as most of the ingredients are prohibited in religious groups therefore, in the beginning to attract the consumers and to understand the market needs, showing an ethical behaviour to consumers is very important. As Muslims are very considerate about halal food, therefore, the company needs to build trust by labelling the right ingredients. For any company to be successful, thinking globally and acting locally is very important. Moreover, it will also show the ethical nature of the company. Turkey food regulation authority has also implemented some specific rules for animal products which are not compliant with European rules such as slaughterhouses have to employ veterinarians approved by MARA (EC Europe, 2006). As Muslims have specific rules to slaughter their animals therefore, it is the moral responsibility of the company to ensure that all such things will be considered very carefully. Cross Cultural Marketing Recommendations As analysed from PEST analysis, some religious groups are very dominant in Turkey and the state is also facing instability in political conditions. It means that a company planning to operate in Turkey will undergo the high impact of external factors. Moreover, as the company has been previously facing problems while expanding in other European countries because of not having planned strategies, therefore, it is important for the company to give more focus towards cross cultural market strategies. Following are some of the recommended cross cultural marketing strategies (Rugimbana & Nwankwo, 2003) for the company. Cross cultural marketing research It is recommended to the company that cross cultural marketing research should be conducted. As identified, the company is already facing problems in other European markets therefore, during the fulfilment of partnership procedures; the company should conduct marketing research. Secondary research data can be collected from Ulker as company has been operating in Turkey for years and primary data can be collected by conducting surveys. Ulker can also help our company to conduct surveys. Segmentation in cross cultural strategy It is also recommended to the company that while developing ethnic minority segmentation strategy in Turkey, religious groups should be considered. The majority of the community in Turkey is Muslim therefore, whilst segmenting the marketing, it will be important to consider religion so that product ingredients could be adjusted. Branding in cultural marketing Because of the uncertain macro conditions in Turkey, the company should consider the macro influence on branding. Since the origin of the company does play a very important role on success of a product in the other country, therefore, branding should be in consideration to the culture of Turkish people, otherwise, a huge difference between Turkish culture and perceived culture of our company through branding will create problems for our company. Cross cultural product issues It is also recommended to the company that while developing the 4P strategies, the product issues should be considered more seriously. The ingredients of the products should not include the components which are prohibited in Turkey because it may deteriorate the image of our company. However, if company during segmentation identifies a significant large group using the products have the prohibited ingredients then it can target that segment. Cross cultural communication strategies Ulker Food Company can be also helpful in cross cultural communication situations because Ulker will be in a better position to translate what is said, for example, Ulker can tone down the statements which will not be appropriate in Turkish culture. Bibliography Alasalvar, C. (n.d.) Turkish Food Industry & Food Chain Sustainability in Turkey. [Online] Available from: ftp://ftp.cordis.europa.eu/pub/food/docs/alasalvar-a.pdf [Accessed 14 June 2010]. Bizjournals. (2010) Arby’s expanding in Turkey. [Online] Available from: http://columbus.bizjournals.com/columbus/stories/2010/05/31/daily25.html [Accessed 15 June 2010]. EC Europe. (2010) Food safety, veterinary and phytosanitary policy. [Online] Available from: http://ec.europa.eu/enlargement/pdf/turkey/screening_reports/screening_report_12_tr_internet_en.pdf [Accessed 15 June 2010]. Flex News Food. (2009) Hero and Ulker Open New Baby Food Jar Factory in Turkey. [Online] Available from: http://www.flex-news-food.com/.../Food/.../hero-ulker-open-new-baby-food-jar-factory-turkey.html [Accessed 15 June 2010]. Oxford Business Group. (2009) Turkey. [Online] Available from: http://www.oxfordbusinessgroup.com/publication.asp?country=1 [Accessed 14 June 2010]. Rugimbana, R. & Nwankwo, S. (2003) Cross-cultural marketing. [Online] Available from: http://books.google.com.pk/books?id=nZVMX_T8D8YC&dq=cross+culture+marketing+strategies&source=gbs_navlinks_s [Accessed 14 June 2010]. State Planning Organisation. (2004) General Directorate for Economic Sectors and Coordination. [Online] Available from: http://ekutup.dpt.gov.tr/imalatsa/2004.pdf [Accessed 14 June 2010]. Today’s Zaman. (2009) Foods containing GMOs stopped at Turkish border. [Online] Available from: http://www.todayszaman.com/tz-web/news-192782-105-foods-containing-gmos-stopped-at-turkish-border.html [Accessed 15 June 2010]. Thompson, B. (2010) Meat, Fish and Poultry in Turkey to 2013. [Online] Available from: http://www.pr-inside.com/market-report-meat-fish-and-poultry-r1837539.htm [Accessed 14 June 2010]. Ulker. (2010) Investor Relations. [Online] Available from: http://www.ulker.com.tr/en/investor_relations.aspx [Accessed 15 June 2010]. Worldbulletin. (2010) Turkeys Ulker says to build black tea plant with German firm. [Online] Available from: http://www.worldbulletin.net/news_detail.php?id=55339 [Accessed 15 June 2010]. Read More