1. IntroductionThis report is for CATEXHAUST Gmbh (CG) which is not only a Germany manufacture company but also is the second largest supplier to VAG Group ( Volkswagen, Audi, SEAT&SKODA) in Europe to measure whether it can enter Turkey market or not after VW announced that they would build up a manufacturing plant in Turkey. 2. Evaluation of Turkey
2.1Turkey is a great developing country which has the world’s 15th largest GDP-PPP and 17th largest nominal GDP. Its GDP and population has increasing continuously from 2008-2011(chart1.1 and 1.2 below)
Chart 1.2Data sources: OECD. StatExtractsIt can be seen that Turkey has done a well job in economic development and society building. In addition, the increasing population means potential customers in Turkey is rising. Moving attention to the car industry in Turkey, it has a large number of sales in normal cars. The sales grew 64% in the first 4 months of 2012 and a total of 259,182 units were sold during the period, up from 157,982 in the same period last year.
(Automotive Distributors Association (ODD), 2012). That can be seem that Turkey has a quickly development in car industry in addition to the increasing sales shows demands for cars in Turkey is raising up in the last few years. Moreover, the increasing sales declare that the supply is less than demand. As a result, it is potential for CG to enter Turkey market because there is existing demands and good economic development trend in the country. 2.2
As the information clearly showed there are more than 200 suppliers supplying to 17main car producers (TOP 4 car producers: Ford Otosan (US); Oyak-Renault (France; passenger cars only); Tofas, a joint-venture between Fiat (Italy) and the Koc Holding conglomerate; and Toyota (Japan) in Turkey (TurkishAutomotive Industry Report, 2010) so that it is competitive for CG to supply other car manufactures as a foreign supplier in Turkey. Only if CG have a strong advantage comparing with the local supplier, for instance, do well on cost reduction or better transportation, can the main car producers be likely to choose CG as a supplier. 2.3
Thought car production in EU decreased in 2010, comparing with data in 2009. (as chart1.3 below) It is still potential to export to EU. The decline of EU production only indicates EU is not the only main market for the manufacturer. However, the demand would expand when CG as an international supplier to export to EU instead of being a local supplier. More important fact is that profit would rise after improving the customer demand.
Chart 1.3Data source: EU economic report July 2011 ACEA2.4As the GDP, population and car production data about Turkey indicates the country is developing in such a moderate speed. The potential sales to Turkey market may improve gradually in the next 3 to 5 years. 2.5
Thought I didn’t use any sources from a Turkish Development Agency in the report, I think it is reliable in a way. The information which comes from the agency is nearly the same as data in government internet. This can be regarded as easily to get data when entering to Turkey market. However, it is better to use the government information because of its authority. 3. Recommendations on proceeding
3.1Since the situations which have been analysis above, the suggestion about the proceeding mode is Joint Venture which is more conservative comparing with acquisition in such a moderate developing speed in economic and great performance in car industry. Firstly, the company can benefits from the local partners knowledge of the host country’s competitive conditions, culture, language, political systems and business systems. (Hill. C.W.L. 2010) It can help the enter company adjust to a new market more quickly and less obstruction comparing with the acquisition mode. Secondly, risk can be shared to local partner especially entering a first enter market.
Otherwise, CG has to take a high risk if they choose a greenfield plant or acquisition because of unknown situations. Thirdly, political and policies in many countries take joint venture as a prior entrance mode. Eventually, since vehicle industry has become a main industry in Turkey, there must be good performance from the whole industry chain that CG would have a lot of competitors and hard to enter the market If it choose greenfield or acquisition. 3.2
On the other hand, less risk means CG would lose profits when choosing joint venture mode. In addition, management for mixing two companies can lead to conflicts and battles if there objectives are changed or difference. Base on the advantages and disadvantages above, joint venture is the best choice after balancing the risk and the profit earning. 4. Some culture guidelines for operating in Turkey
4.1There have culture differences between Turkey and German. Culture shared norms based on value, attitudes and beliefs. (Daniels. J. D, Radebaugh. L. H,& Sullivan. D.P, 2011 ) There are 99.8% of Turkish are Muslim so that Turkish usually don’t work on Ramadan (usually in June and July) and they never eat pork. While German is a multi-religious country, there are 34%Protestant, 34% Roman Catholic, 3.7% Muslim, and 28.3% unaffiliated or other.
The values in Turkey are family and polychronic time, they focus on family style and like to hang up with different things in a same time. (Jodie R. Gorrill, M.A. 2009) However, Germanys’ values are individual and concentration on facts and facts. The culture differences would make some troubles communicating or negotiating between two countries. (Jodie R. Gorrill, M.A. 2009) 4.2
After looking up Turkey and German on www.geert-hofstede.com (as the chart 4.1 below), German gets a high point in IDV (Individualism), MAS (Masculinity / Femininity) and UAI (Uncertainty avoidance). That indicates Germanys are high individual and have a high risky concept about their work or life. Comparing with German, Turkey gets a high point in PDI (Power distance) and UAI. It seems that Turkish are more powerful when they making some decision while Germany would like to decide after useful discussion.
Chart 4.1Data source: http://geert-hofstede.com/germany.html4.3Understanding the culture differences in two countries can escape the gaps when doing some negotiating. For example, it is usually for Turkish to disturb meeting because they accept to manage so many things in the same time. Moreover, do not discuss personal matters during business negotiations, as this is considered to deviate from the task at hand by Germany. 5. Conclusion
Though it is critical reasonable for CG to invest in Turkey. It has more advantages than disadvantages entering the market. It is really useful to find out a local partner to cooperate with CG. More specifically, culture differences would be a barrier and expand some more like management problem which CG might be consider when involving to Turkey market.
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