arcelik turkey work
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Arcelik TurkeyTRANSCRIPT
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Muhammad Setiawan [email protected]
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A G E N D ACompany ProfileCase BackgroundTheoretical ConceptAnalysisCase QuestionDiscussionTheoretical ConceptAnalysisQ & A Session
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T U R K E Y P R O F I L Ewww.lexicorient.com
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T U R K E Y P R O F I L EG D P 2007www.indexmundi.comhazelnut, fig, apricot, cherry, quince and pomegranate textiles and clothing tourism and banking TURKEYS BEST PERFORMANCE COMPANY ElectronicsArcelik, Vestel (Europe Top 3)ConstructionEnka, Tekfen, Ucgen Insaat (Top International Constructor)AutomotiveFiat (Tofas), Renault (Oyak), Hyundai (Ossan) (Top 6 in Europe)TURKISH NEW LIRA
AGRICULTURE8.9 %INDUSTRY30.8 %SERVICES59.3 %
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C A S E B A C K G R O U N DADVANCED ECONOMIESDEVELOPING ECONOMIESEMERGING MARKETSPost-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructure.USWestern EuropeJapanCanadaAustraliaNew ZealandLow-income countries that have not yet industrialized. They have low buying power, limited appeal to foreign firms, and limited participation in international business.AfricaFormer 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 AmericaInternational Business; Strategy, Management & New Realities. p. 265
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C A S E B A C K G R O U N Dwww.imf.orgTURKEY;sGDPEMERGING MARKETS
Chart1
150.225
155.61
164.171
188.029
135.543
173.195
176.571
189.416
205.539
199.154
204.888
153.523
184.829
239.822
300.087
340.263
367.33
GDP (in billion$)
Year
Sheet1
Asia Pacific34%
Western Europe24%
North America23%
Other19%
Sheet1
Sales Distribution of Household Appliances
Sheet2
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Turkeytahun19901991199219931994199519961997199819992000200120022003200420052006
GDP, current pricesgdp 150.225 155.610 164.171 188.029 135.543 173.195 176.571 189.416 205.539 199.154 204.888 153.523 184.829 239.822 300.087 340.263 367.330
YearUS dollars | Billionspercent change
1990
1991
1992
1993
1994
1995
1996tahungdp
19972000190
19982001300
1999 2000
2000 2001
2001 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006
Sheet3
yearGDP (in billion$)yearGDP (in billion$)
19901990150.2251990150.225
19911991155.611991155.61
19921992164.1711992164.171
19931993188.0291993188.029
19941994135.5431994135.543
19951995173.1951995173.195
19961996176.5711996176.571
19971997189.4161997189.416
19981998205.5391998205.539
19991999199.1541999199.154
20002000204.8882000204.888
20012001153.5232001153.523
20022002184.8292002184.829
20032003239.8222003239.822
20042004300.0872004300.087
20052005340.2632005340.263
20062006367.332006367.33
year90919293949596979899^00^01^02^03^04^05^06
GDP (in billion$)150.225155.61164.171188.029135.543173.195176.571189.416205.539199.154204.888153.523184.829239.822300.087340.263367.33
Sheet3
GDP (in billion$)
Year
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T U R K E Y P R O F I L ELift IronCLIP 1
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C O M P A N Y P R O F I L EOriginsEstablishmentOwnershipBusiness LineProductMarket AreaSubsidiariesKOC Group [Family Business Conglomerate]Appliance Manufacturer [White Goods Business]> 100 productsAC, Dishwasher, Washing Machines, Cooking Appliances, and Refrigerator BrandsBeko, Altus, and ArcelikTurkey, Europe (UK, Italy, Czech, Spain, Germany, Romania, Hungary)Blomberg, Grundig, Elektra Bregenz, Tirolia, Leisure, Flavel, and Arctic
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C O M P A N Y S U B S I D I A R I E S B R A N D S
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C O M P A N Y S U B S I D I A R I E S P R O D U C T S
- C A S E B A C K G R O U N D Turkey is an emerging market Relatively low saturation level Purchasing power is low (outside big 4 cities) 50% are younger population (
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C A S E B A C K G R O U N D
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I N D U S T R I A L P R O F I L EIn ADVANCE ECONOMIES, household appliance industry is mature and saturatedIn EMERGING MARKETS, household appliance industry is difficult to charge premium prices and increase profit margina. Innovation is costly Frequent change production methods- Regular re-training factory workersb. Low spending power of buyer
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I N D U S T R I A L P R O F I L EB S HElectroluxG EHaierMerloniNationalWhirlpoolThe COMPETITOR:TODAY, Merger & Acquisition is the strategy to be Worldwide It caused: only 5 companies control >70% market in Europe (from 400 companies)ARCELIK: Acquired more than 7 companies in EUROPEDishwasherRefrigerators and Vacuum CleanersChina (Low Price)High Technology InvolvementHome LaundryNational
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I N D U S T R I A L P R O F I L EStandardization the material, parts, and components1Automated manufacturing process 2Arcelik 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 state3Arcelik: Build plant in Russia and Western Europe.Whirlpool: Build plant in China
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I N D U S T R I A L P R O F I L EHome appliances are commoditiesProduct life-span is 10 15 years the lifecycle is slow Value lower prices create lower profit marginIn advance economies country, market are saturatedDifferent market, different country, different cultureAppliance manufacture & world market share reporter
Chart1
0.34
0.24
0.23
0.19
Sales Distribution of Household Appliances
Sheet1
Asia Pacific34%
Western Europe24%
North America23%
Other19%
Sheet1
Sales Distribution of Household Appliances
Sheet2
Sheet3
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I N D U S T R I A L P R O F I L EDifferent market, different country, different culturein INDIA: Low Pricein CHINA + LATIN AMERICA: Ample Features but Low Spending Powerin EUROPE: Strict Environmental RulesDifficult to suit the local marketDifficult to charge average price in every countryHard Factors tooling, factory layout, procurement, and design do not provide long-term competitive edge
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I N D U S T R I A L P R O F I L E
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I N D U S T R I A L P R O F I L EEmphasize in Dynamic S O F T FactorsMerger and AcquisitionFind Global OpportunitiesComparative AdvantageBenefited from Regional Economic IntegrationErin 1CLIP 2
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A R C E L I KSUCCESS FACTORSProduce product in lower-income countries1Modernize the operations and Double the capacity2Establish Distribution Centers throughout Europe3Cooperated with IT Companies to build World IT System4THREATSArceliks brands are largely unknown outside Europe1
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A R C E L I Ks success factorsProduce product in lower-income countries1 Manufacturing plant in Turkey and Eastern Europe (Russia) Arceliks produce appliances less expensively than otherModernize the operations and Double the capacity2 Additional investment to build factory in Russia and adapt new production system technology Established sales subsidiaries in Czech, Hungary, and Italy
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A R C E L I Ks success factorsEstablish Distribution Centers throughout Europe31.700 unparalleled distribution network (Beko) and 1.700 non-exclusively agents 530 authorized service shopsCooperated with IT Companies to build World IT System4CISCO builds Virtual Networked Organization OnlineEstablish after-sales service networkCOMPETITIVE ADVANTAGE
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A R C E L I Ks success factorsCOMPARATIVE ADVANTAGEConcept that helps answer the question of all nations can gain and sustain national economic superiorityCOMPETITIVE ADVANTAGEConcept that helps explain how individual firms can gain and sustain distinctive competence vis--vis competitors
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A R C E L I KTHREATSArceliks brands are largely unknown outside Europe1Brand becomes barrier to entry and threats for short-term successMerger and AcquisitionGlobal Distribution Network- Tailor the meet customer needs in respective country
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A R C E L I KTo sustain continuous growthTo become a leading global household companyImprove operational efficiencyIncrease investment in high-growth marketsFocus in emerging market [Eastern Europe, Asia, and LA]Lowering operating manufacturing costLeveraging low-cost manufacturing platforms and ITProduce product that appeal to foreign markets
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CASE QUESTIONCase QuestionOrbitalCLIP 3
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CASE QUESTIONArcelik has been very active in Western Europe,Do you expect Arceliks prospect to be better in EM & DE than Advanced Economies ?1-In what ways, are EM and DE attractive to Arcelik?-How can firm reap benefits from such market in order to maximize performance?-
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CASE QUESTION (number 1)Do you expect Arceliks prospect to be better in EM & DE than Advanced Economies ?-Prospect Arcelik in emerging market and developing market than advanced market
DIMENSIONAdvanced MarketEmerging MarketDeveloping MarketPopulation (% of the word)146224Approximate average per capita income (US dollars; PPP basis)33.75013.2506.450Trade volumeHighLowHigh Education levelHighModerateLowTrade barriersMinimalRapidly liberalizingModerate to highIndustryHighly developedRapidly improvingPoorInward FDIHighModerate to highLowEconomic or political systemCapitalistRapidly transitioning to capitalismAuthoritarian, socialist, or communistCountry riskLowVariableModerate to high
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CASE QUESTION (number 1)-In what ways, are EM and DE attractive to Arcelik?Emerging and developing market are attractive than advance marketReasonHigh populationFast-growing marketsUrbanization is increasing low-cost labor (ideal bases for locating manufacture)Industry rapidly increasing
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CASE QUESTION (number 1)-How can firm reap benefits from such market in order to maximize performance?Reap benefits from such markets
Advance MarketEmerging and Developing MarketPopulationWell educateIncome per capita high can gain a high profit marginLow-labor costIncome per capita rapidly increase should be adjusting price and cost little gain profit margin
Industry SaturatedOpen up to be growth as the way as technology improvement
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CASE QUESTIONArcelik is keen on entering EM and DE,What type of risk that they challenge in EM?2-What management do to identify the most promising market?-How should firm adapt the product?-
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CASE QUESTION (number 2)-What type of risk that they challenge in EM?Political Instability Corruption, Collusion, Nepotism Week Legal FrameworkWeek Intellectual Property Protection No laws enforcement
Bureaucracy, Red Tape, and Lack or Transparency Burdensome Administrative rules Excessive requirements for licensePartner Availability and Qualifications characterized by inadequate legal & political frameworkDominance of Family Conglomerates Highly diversified Control the majority of economic activit (half the revenue in korea) government protection and support superior market knowledge Less Reliable (business env.)
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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 contactMarketing 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
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CASE QUESTION (number 2)-Per-Capita Income as an Indicator of Market PotentialMiddle Class as an Indicator of Market Potential
Use of a Comprehensive Index to measure market potentialGDP are indicator of purchasing power of customerSize and growth rate of middle class serve a signal of dynamic market economyMarket Size (all population)-Commercial InfrastructureMarket growth rate (GDP)-Economic FreedomMarket intensity-Market ReceptivityMarket consumption capacity-Country RiskWhat management do to identify the most promising market?
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CASE QUESTION (number 2)-How should firm adapt the product?Merge and acquisition with other company in emerging marketCollaboration technology, knowledge (product and market), share distribution channels, etc.
Produce potential product base on customer wantsPurchasing power in emerging market is relative low
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CASE QUESTIONArcelik may be better poised to cater economic development of EM and DE,In what ways Arcelik skillfully fulfill its CSR ?3-Suggest specific approaches of CSR-CATERING TO ECONOMIC DEVELOPMENT NEEDS OF EMERGING MARKETS AND DEVELOPING ECONOMIESLeading 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 ProjectMicrofinance to Facilitate Entrepreneurship
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CASE QUESTION (number 3)-In what ways Arcelik skillfully fulfill its CSR?FOSTERING ECONOMIC DEVELOPMENT WITH PROFITABLE PROJECTSFirms serve low income countries with inexpensive, specifically-designed products and services and community involvement.IN OTHER WAYSFirms create jobs and contribute to development.Investments generates tax to improve living standard.Transferring technology and know howDevelop community-oriented social programs.
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CASE QUESTION (number 3)-In what ways Arcelik skillfully fulfill its CSR?Microfinance to Facilitate EntrepreneurshipMicrofinance, 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.
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CASE QUESTION (number 3)-Suggest specific approaches of CSRARCELIKS CORPORATE SOCIAL RESPONSIBILITY IN EMERGING MARKETFOSTERING ECONOMIC DEVELOPMENT W/ PROFITABLE PROJECTSFirm 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 ENTREPRENEURSHIPFirm offer financial services that provide installment purchase for its customer.
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REFERENCESREFERENCESCavusgil, et.al. International BusinessGardner, et.al. Organization Design and Dynamicswww.lexicorient.comwww.imf.org www.indexmundi.comwww.arcelik.comwww.turkivz.com
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closingThank you