International Business

Management Yrd. Doç. Dr. Aziz BAKAY

Project presented by Nasir Alev & Gonca Sonmez

Nasir AlevGonca SonmezBurak TekinElif Mete

???What could I do with 1 € ???

Assumption

Based on

Interviews & surveys

School materials

Other sources (Internet, books, scientific articles...)

Table of contents1. Company profile

a. First approach: « Why this sector? »b. First approach: « Why should our company operate in Turkey? »

2. Global Edge Analysisa. « What’s Global Edge ? »b. Analysis of the Situation in Turkey regarding different financial aspects:

b.1. Economic situationb.2. Trade&investment

3. Country scoresa. Table of country scoresb. . Freedom comparisons Graphs & datas

4. 4 C model & Hosftede studya. 4 types of riskb. Hosftede Analysis

5. Mode of entrya. « Which strategy does EasyJet have to choose? »b. Nature,motives & types of Foreign Direct Investmentc. Nature of Collaborative venture d. Considering some Factors when choosing a foreign market

strategy6. Conclusion

1.Company profileName

EasyJetHeadquarter

Europe, Luton, Great BritainNumber of destination

600 routes, 30 countries Number of employees

8,000 people Passengers/year

Last year 60’000 passengers

Mission,vision & value

Mission:” To provide our customes with safe, good value. To effect & to offer a consistent and reliable service”.

Vision: “To achieve this we will develop our people & establish lasting relationships with our suppliers”.

Safety: We never compromise on safety.

Simplicity: We cut out the things that don’t matter to keep us lean and make it easy.

One team: Together we’ll always find a way

Integrity: We stand by our word and do what we say.

Passion: We have a passion for our customers, our people and the work we do.

Pioneering: We challenge to find new ways to make travel easy and affordable.

Financial crisis

Number of passengers using flights in europe(2014)

References: http://www.planetoscope.com/Avion

ZOOM

Variation of the net income in the best airlines in Europe(2014)

References: http://www.planetoscope.com/Avion

Turkish Airlines

Lufthansa

British Airways

Air France

KLM

Virgin Atlantic

Aegean

Low-cost Companies

Swiss Airlines

the ranking of the busiest airports in the world(2014)

References:http://www.actualitix.com

References:http://www.actualitix.com

Number of passenger per destination in 2014 (Low-cost companies)

2. GlobalEdge Analysis:

a.   « What’s Global Edge ? »( references:http://globaledge.msu.edu) • It’s a comprehensive research tool for academics, students and

businesspeople• GlobalEdge provides resources to efficiently research for any

international business question you may have.Turkey’s Strengths Turkey’s Weaknesses

• Public finances under control

• Elastic banking sector

• Demographic vitality (young people & workforce)

• Bridge between Europe & Asia

• Insufficient domestic savings, hard to keep money

• Recurrent political tensions( oil prices,machinery,...)

• Geopolitical situation put by the Syrian and Iraq conflict (racism, people’re scared)

b.1. Economic situation:

• Snapshot of Turkey’s economy in comparison to UK economy.

• Export rank is higher than the databased.

• Exports (80%),FDI (85%) closer to 100% = strong economy.

• Unemployment & inflation should be equal to 0:

-> Unemployement( 57%)

High potential to hire

-> Inflation (80%)

Really bad situation

references:http://globaledge.msu.edu

b. Analysis of the Situation in Turkey regarding different financial aspects :

b.2. Trade & investment:

Trade statistics

Exporter rank

Importer

rank

Total export& import ($)

Trade Balance

Turkey 30/123 20/123 Export:152,536,596Import:236,544,494,245

Rank: 118/223(-84,007,841,649)

United Kingdom

11/123 5/123 Export:481,225,753,722Import:689,137,011,264

Rank: 122/123(-207,911,257,542)

UK, in 4. place in the top 10 Export Partners of Turkey

references:http://globaledge.msu.edu

3. Country scores:

a. Table of country scores:Freedom status Freedom

scores(0-100)Legal environment (0-30)

Political environment

Economic environment

Turkey Not free 24 24 27 14

UK Free 65 9 9 6

b. Freedom comparisons Graph & data:

2. Government Spending freedom

1. Business freedom

References: www.heritage.org

3.Investment freedom

4. Overall Freedom Score

Cross-cultural risk:- Cultural difference :(effraid of low prices, new transportation...)

- Taking decisions (vacation,value of money)

-CEO: Stelios Haji-Ioannou : « experiences during the flights »

-Negotiation with turkish company (turkish airlines)

Country risk:-Nocif political system( opinions, strengh ideas…)

-Laws & regulations: access to other countries, passport…

-Protectionism: proctects their own companies (turkish airlines, pegasus) => nationalistic

-Corruption: high level

-Redtape: Lot of paperwork to do => take lot of time

Currency risk:

- Foreign taxation: tariffs & quotas

-Currency exposure: high fluctuation of the oil price

Commercial risk : -Weak partner: Pegasus airlines, onurair… Turkish airlines best partner but hard to reach

-Operational problems: Take time to do the opearation

-Competitive intensity: turkish airlines (best in europe); pegasus( cheap prices) , Onurair, sun express…

4 types of risks

4. 4 C model & Hosftede study:

References: http://www.businessbee.com/resources/marketing/4cs-marketing-model-good-business/

a. 4 types of risk:1. Cross-cultural risk:In the 90s, people takes plan experiences ( good meals, smoking allowed, comfortable seats)

Elite class(= people who has lot of money) & CEO saw a big opportunity

? « Fourty years ago, passengers were allowed to smoke, take apero, sleep on their seats: They explained their experience. But now, taking plane is becoming a banal transport and doesn’t have to explain their experiences anymore. » Stelios Haji-Ioannou

New market segment opportunities

1)Middle class: money value2) Young people: going from A to B ; want adventures3) Business travellers: companies want to pay less costs

What is the risk for Turkey?• Old thoughts (stay in the 90s) • Turkish people thinks : « it’s

cheap so low quality »

2. Country risk:

• Protectionism: Problem Turkey protect their companies (Turkish Airlines, OnurAir…) : Lot of redtape of foreign companies (Nationalistic)

• Law & regulations: Passports issues ((Visa, Schengen space)

• Political & economical situation in Turkey: Really instable (European countries like BUT European people not very much) e.g. GEZI Park; recognition ofArmenian Genocide, Human rights…

• Corruption:

• Corruption by topic: Oil & Gas: Wealth stays in the hands of politicians and industry insiders Problem: (High demand, so play with the Prices)

Corruption perception index (2014)

Control of corruption & reinforcement

RANK: 64/175 RANK: 100/175

SCORE: 45 SCORE: 58%

References:www.Transparency.org

3. Currency risk:

• Foreign taxation: Tariffs &Quotas to foreign company (in short-time)

Problem: « If they don’t respect? » High level of taxation & Turkey does everything in this way. (redtape, short-time,auditing…)

• Currency exposure: The Turkish economy, which recorded a growth of 4% of GDP in 2013, remains robust, with growth of 4.3% in 2014.

Situation was bad but stay instable (even the GDP growth a little bit)

4. Commercial risk:• Weak partner: Pegasus airlines, onurair Bad brand image Turkish Airlines: The best partner but difficult to reach ( negociation

• Operational problems: Take time to do the opearation with turkish companies

• Competitive intensity: turkish airlines (best in europe); pegasus( cheap prices) , Onurair, sun express

pattern, its brand image, decision making style)

b. Hofstede study : Analysis the comparison between UK & Turkey

1 2 3

References: http://geert-hofstede.com

5.Foreign market entry strategies:

a. « Which strategy does EasyJet have to choose? »

There are 4 differents strategies :

• foreign direct investment(fdi)• Collaborative ventures• Licensing• Franchising

1) Foreign direct investment

Vs

2) Collaborative ventures

1) foreign direct investment (FDI) = establishing a presence in the foreign market by investing capital and securing ownership.

2) Collaborative venture = Investments abroad, but in partnership with another company.

b.Nature,motives & types of Foreign Direct Investment:

• Nature of FDI: « It’s a complex,risk, expensive strategy & involves a complete establisment of the manufacturing plants, marketing staffs & other facilities abroad. »

• Target countries : both advanced economies and emerging markets.

• Motives for FDI :1)Market seeking motives2) Resources or assets seeking motives3)Efficiency seeking motives

Market seeking motives

• Gain access to new markets or opportunities

• Follow key customers

• Compete with key rivals in their own markets

New segment(young,business travellers, money values,adventure seeking

Lot of britain here !!

Survey: « britain wants more flights to Turkey »

Challenge: compete directly with Turkish Airlines & pegagus. ( TA: 1ist n top of the best flight in Europe & Pegasus : the cheapest flight in Turkey)

For EasyJet, Market seeking motives

Problems with FDI:• No access to

knowledge• No advantage

from government (incentives,less taxs,quotas…)

Geographic segmentation:

EuropeDemographicsegmentation

Young people

Students

Business travellers(companies (26-

55 years)

Psychographic

segmentation

Behavioural segmentation

Care about money (values)

Flexibility (time), adventure seeking,

comfortable

References: http://www.easyjet.com

« Which types of FDI? »

Greenfield investment Mergers Acquisitions

Definitions Firm invests to build a new manufacturing, marketing, or administrative facility, as opposed to acquiring existing facilities

Special type of acquisition in which two firms join to form a new, larger company

Direct investment in or purchase of an existing company or facility

Nature of ownership

Wholly owned direct investment Equity joint venture Wholly owned direct investment

Government Incentives

Give no help Gives no help Help when the company is in bad situation

The nature of ownership are important ! Depends on how the company wants to retain the control? (equity

participation, wholly owned direct invest., equity joint venture) Greenfield Invest. & Acquisition = have the monopole of the control Merger = more than a deal (association of 2 firms)

Equity joint venture

Project-base joint venture

consortium Cross-licensing agreement

Defintions formed when no one party has all the assets needed to exploit an opportunity.

-limited timetable.-No new legal entity-Collaborate devolpment of new product,techno.-Coorperation

-type of project-based-Association of businesses-the purpose of engaging in a joint venture-Create common project(s)

-Project based(nonequity venture)-each partner agrees to access licensed technology/knowledge developed by the other based on special terms/rules

Advantages -better control about the futur-transfer knowledge between partners-common goals

-Simple management structure-take advantages(strengh,opport.)

disadvantages -Complex management structure-Coordination between partners-political,econ. risk

-Knowledge transfer may be less-Conflict harder to resolve-divisin of costs and benefits may strain relatinship

c. Nature of Collaborative ventures:

Benefits of Collaborative ventures• access to new markets and distribution networks• increased capacity• sharing of risks and costs with a partner• access to greater resources, including specialised staff,

technology and finance

Risks of Collaborative ventures• the objectives of the venture not totally clear and communicated

to everyone involved• the partners have different objectives for the joint venture• there is an imbalance in levels of expertise, investment or assets

brought into the venture by the different partners• different cultures and management styles result in poor

integration and co-operation• the partners don't provide sufficient leadership and support in the

early stages

d.Considering some Factors when choosing a foreign market strategy:Foreign direct

investment (FDI)Goals and objectives :reach turkish people & beeing competitive

Degree of control : high degree of control, make their own decision,operations…

The firm’s financial, organizational, and technological resources and capabilities: build their own offices, secret to reduce costs, oils suppliers, machinery, receive no help from governement, from partners

The types of risk: Higher her( high competition, establishement could be hard, country is not with us (nationalistic)…

Condition in target country: turkey instability political,economical systems

Competition: high level of competiion

Strategy places: How you get in the country? It’s Really important ! Higher risk: reach people: have one chance (because of the culture) & no support comes from competitors

characteristic product: Innovative product, starting with flight inside turkey and going after europe

Collaborative ventures

Goals and objectives : Find partners (& reach turkish people)

Degree of control :Deal with the partner(s), Easyjet doesn’t want to loose their image

The firm’s financial, organizational, and technological resources and capabilities: share with the partners, it’s easier, receive helps from country, from partner(s)

The types of risk : less than Fdi: dealing with turkish company

Condition in target country: turkey instability political,economical system

Competition: Level of competition is less

Strategy places: How you get in the country? It’s Really important ! Higher risk: reach people: have one chance (because of the culture) BUT receive from turkish partners

characteristic product: Innovative product, starting with flight inside turkey and going after europe

So, for many different reasons we should choose Collaborative venture:

Find partner(s) in Turkey & will start to deal with it(or them)

EasyJet doesn’t want to loose their Brand image & retain the control of the business

Company has to hold at least 51% of the shares in order to retains the control.

6. Conclusion:

« Why we should’nt choose FDI? » Risks: High level of competition Government incentives(tarriffs,quotas…) Culture: cross-cultural, strategy places,..

« Why we should choose Collaborative venture? »Even « finding a partner » can be hard (because of risk) there are more adv. Than disadv. Governement incentives : helps companies Less competition (if Turkish airlines) Strategy places easier to put (e.g. partner helps you with introducing the companythrough advertising)

Easyjet has to choose which routes they want to use: => From Turkey/Europe to Europe/Turkey ( Taking risk=> FDI)=>Inside Turkey (less risk)

If EasyJet would come in Turkey, would you want to fly with them ?

Thank you for your attentionand

Have a nice flight !

References:

=>Webography:

http://www.planetoscope.com/Avionhttp://www.actualitix.comhttp://globaledge.msu.eduwww.Transparency.orghttp://geert-hofstede.comhttp://www.businessbee.com/resources/marketing/4cs-marketing-model-good-business/: http://www.easyjet.comhttp://owl.english.purdue.edu/owl/resource/560/01/ http://www.library.cornell.edu/resrch/citmanage/apa

=>Scientific articles: http://www.air-journal.fr/2013-11-14-easyjet-cree-un-nuage-de-cendres-artificiel-589764.htmlhttp://www.lemonde.fr/economie/article/2014/11/18/ryanair-et-easyjet-des-compagnies-low-cost-championnes-d-europe-des-benefices_4525542_3234.html