Muhammad Setiawan Kusmulyono

setiawan_kusmulyono@yahoo.com

A G E N D A

Company Profile Case Background Theoretical Concept Analysis Case Question Theoretical Concept Analysis Discussion Q & A Session

TURKEY

PROFILE

www.lexicorient.com

TURKEY

PROFILE

G D P
AGRICULTURE INDUSTRY SERVICES

2007

8.9 % 30.8 % 59.3 %

hazelnut, fig, apricot, cherry, quince and pomegranate

textiles and clothing tourism and banking

www.indexmundi.com

TURKEYS BEST PERFORMANCE COMPANY Electronics Construction Automotive Arcelik, Vestel (Europe Top 3) Enka, Tekfen, Ucgen Insaat (Top International Constructor)

Fiat (Tofas), Renault (Oyak), Hyundai (Ossan) (Top 6 in Europe)

TURKISH NEW LIRA

CASE BACKGROUND

ADVANCED ECONOMIES Post-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructure.
US Western Europe Japan Canada Australia New Zealand

DEVELOPING ECONOMIES Low-income countries that have not yet industrialized. They have low buying power, limited appeal to foreign firms, and limited participation in international business.
Africa

EMERGING MARKETS Former developing countries that develop their economies more dynamics. EM is transforming into market-driven by liberalizing trade and investment. More participation in international business and regional economic integration.
Asia and Latin America

International Business; Strategy, Management & New Realities. p. 265

CASE BACKGROUND

GDP (in billion$)

TURKEY;s
400 350 300 250 200 150 100 50 0 GDP (in billion$)

GDP

90

91

92

93

94

95

96

97

98

99

^00

^01

^02

^03

^04

^05

Year

^06

www.imf.org

EMERGING MARKETS

TURKEY

PROFILE

CLIP 1

Lift Iron

COMPANY

PROFILE

Origins Establishment Ownership Business Line KOC Group [Family Business Conglomerate] Beko, Altus, and Arcelik > 100 products
AC, Dishwasher, Washing Machines, Cooking Appliances, and Refrigerator

Appliance Manufacturer [White Goods Business]

Brands
Product

Market Area Subsidiaries

Turkey, Europe (UK, Italy, Czech, Spain, Germany, Romania, Hungary) Blomberg, Grundig, Elektra Bregenz, Tirolia, Leisure, Flavel, and Arctic

COMPANY

SUBSIDIARIES

BRANDS

COMPANY

SUBSIDIARIES

PRODUCTS

CASE BACKGROUND

internally
Turkey is an emerging market Relatively low saturation level Purchasing power is low (outside big 4 cities) 50% are younger population (<25 y.o.)

externally

Turkey is applying EU membership Trade barriers declined in 1980-90 (Turkish market was opened for outside competitors) Archeliks market share was threatened

Archelik Launched

Aggressive International Expansion

CASE BACKGROUND

INDUSTRIAL

PROFILE

In ADVANCE ECONOMIES, household appliance industry is mature and saturated

In EMERGING MARKETS, household appliance industry is difficult to charge premium prices and increase profit margin

a. Innovation is costly - Frequent change production methods - Regular re-training factory workers b. Low spending power of buyer

INDUSTRIAL

PROFILE

The COMPETITOR:

BSH
Electrolux Haier GE

Dishwasher Refrigerators and Vacuum Cleaners China (Low Price) High Technology Involvement Home Laundry

Whirlpool
Merloni National

TODAY, Merger & Acquisition is the strategy to be Worldwide National It caused: only 5 companies control >70% market in Europe (from 400 companies)

ARCELIK: Acquired more than 7 companies in EUROPE

INDUSTRIAL

PROFILE

1 2

Standardization the material, parts, and components Automated manufacturing process

Arcelik is categorized as HIGH TECHNICAL COMPLEXITY firms. It is operated in fully automated machine and programmed in advance.
Joan Woodward; Organizational Design and Dynamics; p. 241

Build manufacturing plant outside original state

Arcelik: Build plant in Russia and Western Europe.

Whirlpool: Build plant in China

INDUSTRIAL

PROFILE

Home appliances are commodities Value lower prices create lower profit margin Product life-span is 10 15 years the lifecycle is slow In advance economies country, market are saturated

Different market, different country, different culture

Sales Distribution of Household Appliances

19% 34% Asia Pacific Western Europe North America Other 24%

23%

Appliance manufacture & world market share reporter

INDUSTRIAL

PROFILE

Different market, different country, different culture in INDIA: Low Price in CHINA + LATIN AMERICA: Ample Features but Low Spending Power in EUROPE: Strict Environmental Rules

Difficult to suit the local market Difficult to charge average price in every country Hard Factors tooling, factory layout, procurement, and design do not provide long-term competitive edge

INDUSTRIAL

PROFILE

INDUSTRIAL

PROFILE

Emphasize in Dynamic S O F T Factors

Merger and Acquisition

Find Global Opportunities

Comparative Advantage

Benefited from Regional Economic Integration

CLIP 2

Erin 1

A R C E L I K

SUCCESS FACTORS 1 2 3 4
Produce product in lower-income countries Modernize the operations and Double the capacity Establish Distribution Centers throughout Europe Cooperated with IT Companies to build World IT System

THREATS 1
Arceliks brands are largely unknown outside Europe

A R C E L I Ks success factors

Produce product in lower-income countries

- Manufacturing plant in Turkey and Eastern Europe (Russia) - Arceliks produce appliances less expensively than other

Modernize the operations and Double the capacity

- Additional investment to build factory in Russia and adapt new production system technology - Established sales subsidiaries in Czech, Hungary, and Italy

A R C E L I Ks success factors

Establish Distribution Centers throughout Europe

1.700 unparalleled distribution network (Beko) and 1.700 non-exclusively agents 530 authorized service shops Establish after-sales service network

Cooperated with IT Companies to build World IT System

CISCO builds Virtual Networked Organization Online

COMPETITIVE ADVANTAGE

A R C E L I Ks success factors

COMPARATIVE ADVANTAGE

Concept that helps answer the question of all nations can gain and sustain national economic superiority
COMPETITIVE ADVANTAGE Concept that helps explain how individual firms can gain and sustain distinctive

competence vis--vis competitors

A R C E L I K

THREATS 1
Arceliks brands are largely unknown outside Europe
Brand becomes barrier to entry and threats for short-term success

Merger and Acquisition Global Distribution Network - Tailor the meet customer needs in respective country

A R C E L I K

To sustain continuous growth To become a leading global household company

Improve operational efficiency

Lowering operating manufacturing cost Leveraging low-cost manufacturing platforms and IT

Increase investment in high-growth markets

Focus in emerging market [Eastern Europe, Asia, and LA]

Produce product that appeal to foreign markets

CASE QUESTION

Case Question

CLIP 3

Orbital

CASE QUESTION
Arcelik has been very active in Western Europe,

Do you expect Arceliks prospect to be better in EM & DE than Advanced Economies ? In what ways, are EM and DE attractive to Arcelik? How can firm reap benefits from such market in order to maximize performance?

CASE QUESTION (number 1) Do you expect Arceliks prospect to be better in EM & DE than Advanced Economies ?

in emerging market and developing market than advanced market

Prospect Arcelik

DIMENSION
Population (% of the word) Approximate average per capita income (US dollars; PPP basis) Trade volume Education level Trade barriers

Advanced Market
14

Emerging Market
62

Developing Market
24

33.750 High High Minimal

13.250 Low Moderate Rapidly liberalizing

6.450 High Low Moderate to high

Industry
Inward FDI Economic or political system Country risk

Highly developed
High Capitalist Low

Rapidly improving
Moderate to high Rapidly transitioning to capitalism Variable

Poor
Low Authoritarian, socialist, or communist Moderate to high

CASE QUESTION (number 1) In what ways, are EM and DE attractive to Arcelik?

Emerging and developing market are attractive than advance market

Reason
High population Fast-growing markets Urbanization is increasing low-cost labor (ideal bases for locating manufacture) Industry rapidly increasing

CASE QUESTION (number 1) How can firm reap benefits from such market in order to maximize performance?

Reap benefits from such markets

Advance Market Well educate Income per capita high can gain a high profit margin Emerging and Developing Market Low-labor cost Income per capita rapidly increase should be adjusting price and cost little gain profit margin Open up to be growth as the way as technology improvement

Population

Industry

Saturated

CASE QUESTION

Arcelik is keen on entering EM and DE,

What type of risk that they challenge in EM? What management do to identify the most promising market? How should firm adapt the product?

CASE QUESTION (number 2) -

What type of risk that they challenge in EM? Political Instability Corruption, Collusion, Nepotism
Week Legal Framework

Less Reliable (business env.)

Week Intellectual Property Protection No laws enforcement

Bureaucracy, Red Tape, and Lack or Transparency Burdensome Administrative rules Excessive requirements for license Partner Availability and Qualifications characterized by inadequate legal & political framework Dominance of Family Conglomerates Highly diversified Control the majority of economic activit (half the revenue in korea) government protection and support superior market knowledge

CASE QUESTION (number 2) -

What management do to identify the most promising market?

Partnering with Family Conglomerates Reduce the risk, time, and capital requirement good relationship with government and other key local player target market opportunities more rapidly and effective overcome infrastructure-related hurdles leverage FCs resources and local contact Marketing to Governments in Emerging Market government buy enormous quantities of product usually emerging country have economic development plan (need to build or improve national infrastructure) Skillfully Challenge Emerging Market Competitors

CASE QUESTION (number 2) -

What management do to identify the most promising market?

Per-Capita Income as an Indicator of Market Potential

GDP are indicator of purchasing power of customer

Middle Class as an Indicator of Market Potential
Size and growth rate of middle class serve a signal of dynamic market economy

Use of a Comprehensive Index to measure market potential

-Market Size (all population) -Market growth rate (GDP) -Market intensity -Market consumption capacity -Commercial Infrastructure -Economic Freedom -Market Receptivity -Country Risk

CASE QUESTION (number 2) How should firm adapt the product?

Merge and acquisition with other company in emerging market Collaboration technology, knowledge (product and market), share distribution channels, etc. Produce potential product base on customer wants

Purchasing power in emerging market is relative low

CASE QUESTION
Arcelik may be better poised to cater economic development of EM and DE,

In what ways Arcelik skillfully fulfill its CSR ? Suggest specific approaches of CSR

CATERING TO ECONOMIC DEVELOPMENT NEEDS OF EMERGING MARKETS AND DEVELOPING ECONOMIES

Leading firms display good corporate social responsibility by engaging in activities that facilitate economic development in emerging market and developing economies. There are 2 (two) trends as form of CSR: Fostering Economic Development with Profitable Project Microfinance to Facilitate Entrepreneurship

CASE QUESTION (number 3) In what ways Arcelik skillfully fulfill its CSR?

FOSTERING ECONOMIC DEVELOPMENT WITH PROFITABLE PROJECTS

Firms serve low income countries with inexpensive, specifically-designed products and

services and community involvement.

IN OTHER WAYS Firms create jobs and contribute to development. Investments generates tax to improve living standard. Transferring technology and know how Develop community-oriented social programs.

CASE QUESTION (number 3) In what ways Arcelik skillfully fulfill its CSR?

Microfinance to Facilitate Entrepreneurship

Microfinance, emerging of financial institutions that serve emerging market entrepreneurs with small scale loans. By providing small loans, can help pull them out of poverty. Various organization now offer other forms of small scale financial services, including insurance and mortgage lending.

CASE QUESTION (number 3) Suggest specific approaches of CSR

ARCELIKS CORPORATE SOCIAL RESPONSIBILITY IN EMERGING MARKET

FOSTERING ECONOMIC DEVELOPMENT W/ PROFITABLE PROJECTS Firm creates product that meet local demand with lower price compared to its quality.

Firm enter the market and establish manufacturing/assembly plant.

Firm establish distribution centers throughout country. Firm boasts a strong after-sales service network with large number of authorized service shop.

MICROFINANCE TO FACILITATE ENTREPRENEURSHIP Firm offer financial services that provide installment purchase for its customer.

REFERENCES

REFERENCES
Cavusgil, et.al. International Business Gardner, et.al. Organization Design and Dynamics www.lexicorient.com www.imf.org www.indexmundi.com www.arcelik.com

www.turkivz.com

closing

Thank you