Market Analysis of Turkey - Coursework Example

Market analysis of Turkey Contents Contents 2 Introduction 4 Local business environment 5 Key trading partners 7 Trade agreements 7 National policies8 Protected industries 8 Legal environment 9 The social environment and cultural 15 Values and norms 15 Societal characteristics 15 Customs 16 Ethics 16 Ecological and environmental issues 17 Conclusion 18 Reference 20 Introduction An emerging market of a country is characterized with the features of developed market. Turkey is among the five largest emerging markets in the world. It is experiencing a rapid development in its industrial sectors. The market of turkey is considered as an emerging market. The country’s enormous market has a population of approximately 72 million. The entrepreneurial culture of Turkey boosted the country’s economy. It helped to developed different industrial sectors. Turkey has a well developed system of suppliers. The economic condition of Turkey attracts many foreign investors. It has the 17th largest GDP by purchasing power parity. The liberalized tariff rates are one of the most important reasons for its improvements. The foreign direct investments are also high here. The highly advantageous location of the state influences in business development. Turkey’s well developed infrastructure contributes a lot in the growth of the market. The present political stability of the country creates a positive impact on its emerging market. In this assignment the British multinational company Top shop is expanding its business in Turkey. The company is a retailer of fashion clothing; make up, shoes and accessories. Top shop is part Arcadia Group. The company has around 500 shops throughout the world. It was founded in1964 in Sheffield and controlled by Sir Philip Green. The major competitors of this brand are GAP, ZARA, MANGO, RIHANNA etc. ZARA is the biggest competitor of Top Shop. This UK based company Top Shop is experiencing market saturation. Therefore it is expanding its business in different location to extend its life cycle. The company wants to enter in the emerging market of Turkey because it is trying to diversifying its risk profile. It will get a new customer base in the Turkey’s market. This will help the company to build perception of scale. With the technological development of Turkey the firm will also experience many emerging and new technology. The emerging market of Turkey will provide many opportunities to Top Shop. Its brand will be recognized internationally. The government of Turkey has a huge contribution in supporting the developing market of the country. As A foreign company Top Shop will also receive some advantage from this. Local business environment Turkey was considered to be the 17th largest economy across the globe encompassing GDP of $766 billion. It has been stated by economists that Turkey is fastest growing economy and is expected to grow by 8% in coming years. The country is even aiming towards becoming tenth largest economy but this would require enhancing economic scenario. There is large number of companies operating in this region and this reflects strong governmental support. Significant upgrades have been observed in this economy in terms of information technology, physical infrastructures, energy and finance (Sekhar, 2009). The rapid growth of Turkish economy has even enabled the region to control inflation rates. It has also taken into consideration slow growth of export market. Turkey is focused towards developing expanded or new export markets in United States, Africa and Middle East. Competitiveness of Turkey is increased through transforming the region into a high technology base for manufacturing high and medium technology products. There exists certain potential drivers which can facilitate FDI growth and increased exports in Turkey such as innovation led productivity, higher capital for sectors that are knowledge intensive, increased production for higher and medium technology products, highly qualified and well educated workforce, and development of knowledge based economy (Duhaime, Stimpert, Chesley, 2012). There are 24 industrial sectors that enable Turkey to achieve set goals or objectives. However some major segments have been identified that has higher scope for growth in this region such as iron, automotive, electronic equipment, ceramics, chemicals and machinery. The key industry segments of Turkey are automotive industry, ship building exports, consumer electronics, home appliances, banking, textile, construction, machine industry etc. The footwear market of Turkey is also very famous. This industry is expected to witness a rapid growth within a period of time. The rapid industrialization of the country develops and improves its local business environment. The average tariff rate at Turkey is 2.7 percent. There exist high trade barriers for certain goods such as agricultural products. Domestics and foreign investors are treated equally in Turkey. This creates major opportunities for those firms which are entering into this new market (Onkvisit and Shaw, 2009). Though there are certain restrictions while trading in Turkey but maximum industrial sectors are open to new investors. Opportunities in the selected market are immense and current reforms have simplified process of establishing company in Turkey. These opportunities are permit requirements being reduced, presence of single registration form for a company and enabled firms to be registered through local commercial registry offices (Hokinson, Hitt, Duane and Harrison, 2007). The basic corporate tax in this region was also reduced significantly. There was 10% reduction in corporate tax and it proved to be a major opportunity for firms operating in Turkey. Industrial reforms took place when corporate tax was magnificently reduced (Wintzer, 2007). This attracted wide base of foreign investors and new companies secured their positions in Turkish markets. The recent market trend which has been observed in Turkey is aligned towards rapid growth in industrial sector. It can be stated that during last few years more firms has emerged in Turkish market and major reasons behind this is stability in economic conditions and favourable political conditions (Mcfarlin and Sweeney, 2008). The equity market of Turkey is at a stable condition and it is highly favourable for those companies who are new to the market segment. The business environment of Turkey poses certain restrictions to firms but in overall context encompass most appropriate conditions for start up business or business expansion. Key trading partners In today’s world globalization and international trade has a significant importance in the economic relation and the policies of the trade. Turkey is a developing country. Its well managed economic conditions help the country in its International trade and globalization. Turkey’s total volume of foreign trade has increased 500% in last five years. The biggest trading partner of this nation is EU (Kibaroglu, Scheumann, and Kramer, 2011). The country is linked with EU by Customer Union Agreement. Turkey’s number one export and import partner is EU. Turkey mainly export transport equipments, manufacturing goods and machinery to EU. The country has a trade relation with Russia, USA, Iraq and UAE. Its key trading partners in import are China, South Korea, and EU etc. Russia is one of its top trading partners. Trade agreements Turkey is signing and negotiating agreements for protecting and promoting different investments. The country made an agreement of Bilateral Investment Treaty (BIT). 81 countries participated in that agreement. The country’s free trade agreement with EU Customs Union is associated with the Free trade agreements of the country (Mehrotra and Singhal, 2000). Under this agreement Turkey’s commercial policies have to be allied with Common Commercial Policies of EU. The most important aspect of the trade policies of Turkey is the combination of the common custom tariff and preferential regimes of trade. In the agreements of free trade the goods are exchanged between the countries based on their preferences maintaining the rules of origin. In this agreement there are no barriers in implementing competition rules and commercial policies. The Free Trade Agreement of Turkey plays an important role in developing foreign trade. It6 ensures the advantage of the exporters. National policies The law and national policies of Turkey allows the free transfer of profits, royalties, fees and capital. The policies of the state implemented an easy process in the exchange of foreign currency. The nation has no restriction on foreign exchange. The Turkish policies related with Petroleum laws create difficulties for the foreign companies in transferring their profit (Heper and Sayari, 2013). The visionary and dynamic foreign policies of the country create a positive impact in the development of the nation. The most important asset of the country is its constructive, multi dimensional, responsible and realistic foreign policies. Protected industries Turkey liked to stabilize and protect its domestic economy and its domestic industries. It followed import substitution policy in context of industrial strategy until 1980s. During this period Turkey tried to protect its domestic industries from foreign competition by means of enacting high tariff and import restrictions (Heper and Sayari, 2013). However since 1984 import substitution policy was scrapped and a liberal import policy was adopted. The country by means of adopting liberal import policy tried to open its market to foreign companies. The country did so by gradually reducing import and custom duties. Import restrictions were also slowly abolished to assist foreign countries to freely compete with domestic industries (Odekon, 2005). However following the enactment of liberalization of industrial sector to allow the foreign companies to enter into the market, it was felt that there is a need to protect the domestic companies from unfair trade practices. Accordingly Turkey enacted its anti dumping laws to protect the domestic companies (Debroy and Chakraborty, 2007). Legal environment Over the years the business climate in Turkey has improved significantly with reduction in no. of formalities that are required in order to open a business. The procedures required to open a business in Turkey have been simplified. The simplification have been in respect of reduction of the no. of permits required to open a business, instituting a single company registration form, and enabling the companies to register through local commercial registry offices (Bureau of economic and business affairs, 2012). According to a report released by the heritage foundation in association with wall street journal in the index of economic freedom report which ranks different countries on the basis of several factors including law, Turkey ranks 73rd globally 34 among 43 European countries. Turkeys score of index of economic freedom over the years Turkeys economic freedom index in comparison to other countries (Source: The Heritage foundation, 2014) If one compares Turkey’s score in respect of the world average then it is found that Turkey’s score is greater than the world average but is less than other countries in the free economies and lesser than the regional average. However the heartening fact is the evidence from the diagram suggests that Turkey’s score has increased over the years. A World Bank report ranks turkey as 118 based on a score of 68.66. The report by the World Bank notes that starting a business in Turkey requires almost the same no. of procedures as with any other OECD countries (Arat, 2011). However in case of turkey it takes half the no. of days and costs which is 140% greater than other OECD countries. Rank of turkey among countries worldwide based on ease of doing business (Source: World bank, 2014) If the corruption index of different countries worldwide is considered then it is found that Turkey scores 45. If turkey’s score over the years is considered then it is found that its score has remained along the 45-50 level. In fact its score has decreased from the year 2013 when its score was 50 to 2014 when its score is 45. Countries in respect of corruption levels (source: Transparency international, 2014) Turkey as a country suffers from corruption, nepotism and cronyism in governance and daily life. There have been some anti corruption measures that has been adopted by the government but the progress is slow. This fact is evident from the slow change in the corruption score of Turkey. Ideally speaking the judicial system of Turkey is largely independent but the government can influence the judiciary financially or through appointments and promotion. Generally speaking property rights are enforced (Amineh, 2007). However the judiciary system is slow and the judges are not well trained to effectively handle commercial cases. Freedom from corruption (Source: The Heritage foundation, 2014.) Turkey is part of several other Islamic countries which follow the Ahi culture. In Ahi culture innovation is respected. The copyright and trademark concept entered the Turkish legal system in the year 1850 (Terterov and Rosenblatt, 2006). Since then the law has been suitably amended from time to time to count for newer developments in the field and to make to law more robust and accountable to the current generation. So, if considered in context of the legal system of other countries it can be said that Turkish legal system can be counted as one among those which protect intellectual and industrial rights. There are several other laws that are still in the pipeline and if those laws are successfully implemented then it can be said it will make the legal system of Turkey more effective. Turkey has taken part in several international conventions and is part of several international conventions that relates to the legal field. Another development that is of significance in this regard is the establishment of Turkish patent institute having financial and operational autonomy (Akinci, 2011). The social environment and cultural Turkey’s culture is made composed of an elegant combination of varieties of culture. It is deeply involved in the history of the country. The mixture of both Middle East and European culture creates a unique collection of cultural values. The society is characterized with the proud of the achievements of the ancestors and patriotic feelings (Faundez and Tan, 2010). The country is experiencing rapid modernization. But Turkey has not lost its traditional values which makes the place an attracting for foreign companies. Values and norms The intangible qualities which are accepted by the society are known as values. The most valuable thing in Turkish culture is family. It is an important part of the Turkish society. There are many family oriented businesses in this country. The concept of family influences various business of its country. The business values of Turkey do not permit taking phone call during the meeting or entering in the meeting room without permission (Ehteshami, 2007). The people of this country believe in Islam religion. The Western culture is unable to affect the values of Turkish Islamic culture. It is the basic pillar in forming the values rules of the society. Norms means the conditions required for establishing social relations between individuals and groups. In Turkey the religious factor plays an important role in establishing social relationships. Education and wealth determine the social status of the people. Societal characteristics The society of Turkey is divided into educated urban wealthy class, middle class of urban society, lower class of urban society, the landowner class of the large rural areas and common rural population. For entering into the urban educated class the Turkish people should have a minimum qualification of university education. Middle class and the upper class of the urban society are highly differentiated (Nadolski, 2008). The upper class of the urban society is characterized with many groups. The wealthy businessman, successful minister and physicians are considered important persons in the Turkish society. The westernized culture has a strong impact on the urban upper class. They are well acquainted with American and European life and have close connection with the foreign business. The middle class people of Turkey are involved in government jobs, medium size industries and business. The lower class people of the Turkish society are characterized with unskilled or semiskilled labours. Customs The Turkish person follows strong culture in their everyday activities. They shake their hands firmly when they meet each other. In social occasions Turkish people greed the person who walks in their way in anti clockwise direction. They normally greed’s each other by using the word Asalamu alaykum. The customs of giving gifts is not very popular in this country. Dinner and trips are the important customs in building relationships. Giving expensive sweets and candy as is gift is one of the customs of this country (Dincer and Hacioglu, 2013). The business entertainments of Turkey takes place in restaurants. The customs of Turkish hospitality is the host always pays for the meal. Ethics The ethical climate of Turkey related to its market is very complex. The business communities are facing various ethical problems. The measures of ethical judgments, scores of the Turkish managers significantly makes differences in respect to genders. The female Turkish managers have high ethical values than the male managers (Potter and Biukovic, 2011). Many politician of the country creates ethical violation in different businesses. The workforce of the industries is suffering from significant amount of absenteeism. Ecological and environmental issues The most important environmental issues of Turkey are water pollution increasing for dumping detergents and chemical, conservation of bio diversity, land degradation, air pollution, and greenhouse gases etc. The wildlife of the country is diversified in a large extent but presently it is threatened by the developments of different projects (Hefner, 2011). It has approximately 9000 plants and animals. But presently this number is decreasing for rapid industrialization, urbanization, tourism, etc. The country’s eco system is threatened dams and road constructions. 20% of the animals are facing the danger of extinction. This diversity creates a huge loss in the coastal areas of Turkey. Its Aegean and Mediterranean coastline are experiencing a serious pressure from waste water of domestic and industrial discharges. The forests of this country are also facing serious problems for its industrial developments (Hefner, 2011). Forest fragmentation and it’s over exploitation creates a strong impact on the air pollution and the climate change of the country. Air pollution is very predominant in the urban area of the country. There is a significant increase in the combustion of heating fuels in winters. The pollution caused by transport often causes health problems. The current changes in the norms of the Turkey’s environment caused a drastic drop in the export growth of the country. The climate change of this nation has increased its summer temperature. Moreover the power plant of coal fire will also increase the emission of CO2 in Turkey (Abazov, 2009). Its emission level of greenhouse gases is below the average level. If the nation continues this then after 15years the CO2 emersion will be doubled here. The country is planning to join European Union Emission Trading Scheme. The country is experiencing a high need for setting up water treatment plants. This will facilitate is using waste water and managing the waste soil. Sufficient water is not present in Turkey. Maximum water is consumed for agriculture. A major problem in agriculture is land degradation which is caused by overuse and inappropriate use of the land. Over fertilization and over gazing of the agricultural land are the main reasons behind this. 69% of the Turkey’s land is eroded for this. Marine pollution is also creating environmental hazarders in the country. Large amount of oil is shipped through the oceans of the country. Sometimes the oil tanker accidents release a large amount of oil in the ocean with hampers the balance of the marine water. No fossil energy is present in this country for supplying energy in this nation (Pamuk and Williamson, 2002). Turkey is using hydro electric power for generating energy. But the growth of hydro electric production created water starved which leads the country into a dispute with its neighbouring countries. The construction of dams on Tigris and Euphrates rivers threatens the supply of water in other countries. The country is encouraging wind power plant constructions. It aims to derive 2% of the country’s electricity through wind power (Kandiyoti, 2013). The country has also expanded its involvement in developing geothermal energy projects. Earthquake is very frequent in Turkey. It is a very serious environmental threat of the nation. Moreover the country also faces landslides, floods, forest fire etc which creates a major loss in its natural resources. Flood and landslides incur 10% and 25% of natural annual disaster of the Turkey. Conclusion The fashion company Top Shop wants to extend its market in Turkey. The market of this country is characterized with many attractive features which influences this British multinational company in setting up its business here. A detailed analysis of the Turkish market is done in this assignment which illustrates the present condition of the country for establishing business. The country has a high GDP growth and it is the one of the fastest growing economy of the world. The infrastructure and the technological development of the country create a positive impact on the establishment of the company Top Shop. The country has a high focus on its export markets. There are some important drivers in Turkish economy which leads in high production, innovation and increase in capital expenditure some sectors. These drivers facilitate the growth of FDI in Turkey. The country experiences a stable equity market which is a strong influential factor of business development. The emerging market of this country has various appropriate conditions for business expansion or starting up new business. The most important trading partner of Turkey is EU. 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