TURKEY: Target Country Cultural Analysis
The Republic of Turkey has a relatively short history as it achieved independence in 1923 from the fallen Ottoman Empire. As a country of 780,580 square kilometers, roughly the size of Texas, Turkey is home to about 76.8 million people. Located in the Middle East, Turkey is a predominantly Islamic nation, yet has remained politically secular throughout its brief existence.
Turkey became a sovereign state in 1923 upon the fall of the 600-year-old Ottoman Empire and a three-year war for independence led by Mustafa Kemal the “Father of the Turks”. During World War I the Ottoman Empire became a German ally, which only led to disaster for the expansive empire. Out of the ashes of the old Islamic empire arose the Republic of Turkey, which declared itself to be a secular nation which abolished religious rulings.
After WWI, Turkey focused on modernizing and westernizing the country with social, political, economic, and linguistic reforms. This “Kemalism” began to be known for promoting strong nationalism, statism, and western orientation.
During World War II, Turkey fought on the side of the Allies and became an original member of the United Nations. In 1947, the United States enacted the Truman Doctrine ensuring American intensions to guarantee security in Turkey and Greece after WWII and resulting communists rebellions. This resulted in heavy U.S. military and economic aid through the Marshall Plan. Turkey joined NATO in1952 and, though it has experienced some instability in government, is currently going through the accession process to become a member of the European Union.
III. Geographical setting
Turkey is considered a Eurasian nation, with the portion west of Bosporus geographically being part of Southeastern Europe and the portion to the east being part of Southwestern Asia. Turkey borders the Black Sea, the Mediterranean Sea and the Aegean Sea, bordering countries consisting of Bulgaria, Syria, Armenia, Georgia, Greece, Azerbaijan, Iraq, and Iran.
Turkey has a temperate climate; its summers are hot and dry, while the winters are mild and wet. In general, Turkey experiences a moderate climate in coastal areas and harsher weather in the interior.
Within Turkey the topography is diverse. Anatolia is a high central plateau and is surrounded by a narrow coastal plain. As you move eastward the plateau gets progressively more rugged as Turkey contains several mountain ranges. The lowest point in Turkey is the Mediterranean Sea, which sits at sea level, while the highest point, Mount Ararat, towers at 5,166 meters above sea level. Turkey’s topography also lends itself to being one of the more earthquake-prone countries of the world with severe earthquakes occurring being especially prevalent in northern Turkey.
Education is Turkey is mandatory for eight years with 97.6% of the population attending school and 87.4% of the country being literate. There is a significant difference in literacy rates between males and females in Turkey; for males literacy rates are 95.3% while female maintain a literacy rate of 79.6% (according to 2004 estimates). In 2006 it was determined that the school life expectancy for the entire population is eleven years (from primary to tertiary education), with males and females attending school for twelve years and eleven years, respectively. As of 2004, Turkey was expending 4% of the country’s GDP towards education, ranking them 102nd in the world.
Turkey has four levels of education: pre-school education, primary school education, secondary education, and higher education. Pre-school is not compulsory in Turkey; most pre-schools remain privately owned and are concentrated in highly populated cities. Primary school education is mandatory, starting at age six and lasting eight years. Turkey contains 34,656 elementary schools providing education to 10.85 million children. Secondary education provides four years of high school education (general, technical, and vocational). Between public and private institutions Turkey educates 3.39 million students at the secondary education level. Higher education is similar to that of the United States, with most universities providing four-year undergraduate programs, with some programs, such as medicine, lasting 6 years. Turkey also has institutions similar to community colleges that provide two-year programs.
C. Political system
The Republic of Turkey maintains a republican parliamentary democracy. Its national day of independence is celebrated on October 29th, as it received its independence from the former Ottoman Empire on October 29, 1923. Turkey’s constitution was written November 7, 1982 and has been amended 4 times, in 1987, 1995, 2001, and 2007.
Similar to the United States, Turkey has three branches of government: executive, legislative, and judiciary. The executive branch is comprised of the president (chief of state), the prime minister (head of government), and Council of Ministers, which is a cabinet appointed by the president based on the nomination of the prime minister. Presently, Abdullah GUL holds the position of president and Recep Tayyip ERDOGAN holds that of prime minister. Presidents are elected directly for a five-year term and may run for a second term. Suffrage in Turkey is universal at the age of eighteen.
The legislative branch, called the Grand National Assembly, contains 550 seats which are elected by popular vote for terms of four years. The judicial branch includes the Constitutional Court, High Court of Appeals, Court of Cassation, Council of State, Court of Accounts and other military courts.
Turkey’s current political structure is relatively new, with the constitution being written just twenty-seven years ago. While Turkey is a highly Islamic country, its government remains secular, at least in name. The constitution does not distinctly enumerate the powers given to the president, therefore with each new president the scope of his influence can change based on his personality and political power.
D. Legal system
Turkey operates under a civil law system which has been taken from several European continental legal systems. The judiciary is independent and as the nation is declared a secular country as of the 1982 constitution, it is not considered to be an Islamic-law country. The court system is designed to allow freedom of speech, expression, thought, assembly, and travel. It is set about to uphold the integrity of the constitution and maintain a secular, non-discriminating government.
On October 3, 2005 Turkey began the process of accession into the European Union. Upon admittance to the EU, trade and marketing barriers will be reduced drastically. They have already adopted the EU’s common external tariff (CCT) which resulted in lower duties to third party countries like the U.S.
E. Business customs and practices
As Turkey moves forward with its accession into the EU, which in 2005 was estimated to take up to fifteen years, doing business in Turkey will become much simpler, at least in terms of import regulations and tariffs. Already, Turkey has adopted many of the EU’s regulations in order to more easily transition into a member of the EU.
A. Religion and other belief systems
2. Prominent religions
b. Christian and Jewish
3. Membership of each religion
a. 99.8% Muslim (mostly Sunni)
b. .2% other
VI. Living conditions
1. Do most people own or rent?
2. Do most people live in one-family dwellings or with other families?
B. Recreation and sports
1. Popular recreational activities
2. Popular sports
E. Social security and Health care
A. Official language(s)
II. Economic Analysis
I. Introduction (Paige)
Turkey, formerly known as the Republic of Turkey, has an estimated population of 73.9 million (Political Risk Yearbook). The country’s growth rate is ranked at 100th in the world at 1. 312 %. Turkey’s birth rate is 18.66 births/ 1,000 population and the death rate is 6.1 deaths/1,000 population. Furthermore, the life expectancy is estimated at 72 years old.
While majority of the population is made up of 15 to 64 year olds, the median age is 27.7 years old. More specifically, there are about 33.4 million people under the age of 25 in Turkey (http://www.portal.euromonitor.com/Portal/ResultsList.aspx). These population trends represent a favorable result for our product, a laptop geared toward young people.
In addition, the majority of the population lives in urban areas. This is especially true for the younger population under 25. Furthermore, the sex ratio is 1.05 male/female(s) at birth. The country also has a migration rate of .56 migrants/1,000 population. Turkey’s population consists of 70-75 Turkish, and 18% Kurdish, while other minorities make up 7-12% of the Nation’s population.
III. Economic statistics and activity
A. Gross national product
Turkey’s economy mainly consists of their traditional industry, agriculture, as well as a modern mix of industry and textiles such as clothing. While agriculture maintains 25% of the labor force, the textiles and clothing sector accounts for one- third of industrial employment. In addition, services make up over 60% of Turkey’s GDP. Although the country’s economy is concentrated in agriculture, textiles, and services, the automobile and electronics industries are growing at an ever increasing pace. In fact, automobile and electronics exports have surpassed textiles in recent years. Recently, the country has been noticed for its rapidly growing IT sector. Moreover, Turkey ranks as eighth in the world for electronics growth.
In 2009, Turkey’s GDP was estimated at $ 794, 228 millions of US dollars. In addition, real GDP growth in 2009 was estimated at -6.5%, and is forecasted to grow to 3.7% in 2010. Turkey’s gross national income stands at $2,397.32 per person. The Largest income segment consists of the lower middle class. There is also an astounding 20% of the population below the poverty level. The overall income distribution is really skewed, as, the richest 10% make up 32.3% of the population.
E. Minerals and resources
2. Electricity production
3. Usage rates
4. Ports, airports, highways, canals
G. Communication systems (phone, internet, etc.)
3. Usage rates
H. Principal industries
1. Contribution of each industry as a proportion of the GNP
2. Ratio of private to publicly owned industries
I. Foreign investment
J. International trade statistics
1. Major exports
a. Dollar value
2. Major imports
a. Dollar value
3. Balance-of-payments situation
a. Surplus or deficit
b. Recent trends
4. Exchange rates
a. Current rate of exchange
K. Trade restrictions
3. Import taxes
M. Extent of economic activity not included in cash income activities (foreign aid, funds from immigrants living abroad, etc.)
N. Labor force
2. Unemployment rates
O. Inflation rates
IV. Developments in science and technology
A. Percentage of GNP invested in research and development
B. Technological skills of the labor force and general population
V. Channels of distribution (macro analysis)
1. Number of retailers
2. Typical size of retail outlets
3. Customary markup for various classes of goods
4. Methods of operation (cash/credit)
4. Other media (e.g., outdoor)
B. Coverage and reach of various media
III. Market Audit and Competitive Market Analysis
I. Analysis of relevant trends
Turkey, in its early years, was run predominantly as an Islamic nation. However, the country is increasingly becoming more and more secular. After the military coup of 1960 when “Kemalism” ran strong throughout Turkish policies, secularism and westernization have been major goals of the government (US Department of State). This remains true today as Turkey is one of the most westernized countries in the Middle East. The most recently adopted constitution calls for a purely secular government which has been and continues to be backed up by judicial rulings. In fact, in 2008 the courts decreased the funding by half of the AKP which was seen as an anti-secular political organization. Also, in 2009 the Constitutional Court shut down the DTP which was associated with a terrorist group (US Department of State).
In addition to promoting the westernization on secularization of society, the government and constitution of Turkey are making efforts to increase women’s rights. As Islam is the dominant religion in Turkey women are often abused, but the government continues to enact laws against battery and rape of women while increasing women’s rights by eliminating laws against abortion. The newest constitution included a clause allowing women to wear a traditional headscarf in universities; previously wearing headbands was banned in government and university institutions.
While government is making strides towards gender equality, the trend remains that women are still let prevalent in the workforce and education system. Females’ literacy rates, while they are increasing, are still significantly lower than that of males’. And though in rural, agricultural environments both men and women are employed equally, the labor force in urban areas is three times higher for men than for women (GMID).
Demographically, Turkey has an even balance of men and women, with the female population being slightly higher due to a higher life expectancy. The population overall is increasing at a steady rate of 1.2% to 1.3% each year. As of 2009 the population stood at 71,517,100. In the future Turkey will see a rapid aging process, and a large increase of the population over the age of sixty. There is also a large increase in the number of young people, ages twenty-five to forty (GMID).
Due to the increasing population, specifically in the number of young people, the demand should rise accordingly. For instance, Young adults currently account for the largest portion of Turkey’s gross income. This combined with their high willingness to spend is going to increase the demand for consumer products and luxury items, and should increase the demand for our product as well. The number of middle-aged adults is also steadily rising. This population group has two-fifths of the national income and because they tended to have children early are now “empty-nesters” with more disposable income (GMID). As these two population groups are ones which we would like to target, we see these trends as positively affecting our product.
Another relevant trend Turkey is experiencing is the growth of internet users. In 2004, internet users totaled 9,388,600 people. This number has grown rapidly to 27,775,300 users in 2009, ranking Turkey at 15 worldwide for internet users (GMID, CIA). The number of PCs and laptops owned in Turkey is also increasing. The compound annual growth rate (in volume) for the laptop market in Turkey from the years 2003-2008 was 46.4 and for the years 2008-2013 the CAGR is expected to be 19.9. This ranks Turkey as the ninth fastest growing laptop market in the world.
Technology is on the rise in Turkey as well. The telecommunications industry, specifically the mobile-phone sector, is quickly expanding and modernizing. Turkey has built a strong telecommunications infrastructure with both fiber optics and satellites options (CIA). This is a trend that is expected to occur in the IT sector as well as the demand for all types of computers increases.
Literacy rates are also increasing in Turkey, slowly but steadily. With such, the number of university students is also on the rise. In 2004, the number of university students was 1,410,000 and in 2009 that number grew to 1,887,100 (GMID). With these trends with expect to see the number of laptops demanded to grow as well.
Other trends expected to affect the laptop market as well as other markets include the migration from rural to urban centers and opening of markets to the world. While Turkey used to be focused inwardly, it is increasingly opening itself up to the world economy. Turkey’s pending ascension into the European Union is breaking down trade barriers such as tariffs and other duties and forcing even more westernization of the economy (US Department of State). Since opening Turkey to the world economy the country has also seen an increase in foreign direct investment. In 2000, the stock value of FDI grew to more than $180 million (CIA). This has helped Turkey realize an annual increase in their economy of 6% from 2002 to 2007 (US Department of State).
II. SWOT analysis of the product market
As the manufacturer and retailer of laptop computers in an emerging market such as Turkey, multiple internal and external factors exist that will contribute to the success or failure of our product. By completing a SWOT analysis, our company will be able to identify these factors in order to maximize our potential success.
After researching our target market’s problems and needs, we built a laptop that will hopefully simplify consumer’s lives while broadening their horizons. By finding out what the consumer’s demand we were able to adopt features for our product that also act as product strengths. Our main product strengths include portability, ease of use, energy efficiency, and an affordable price. These features are important because our target market is wide, ranging from higher education students to small business owners.
A major strength of our laptop is that it is easily portable. Thus, we came up with the name Küçücük, which means “tiny” in Turkish. Since our target market is often on the go, it is very important that the computer small enough to comfortably carry. Our laptop will feature a 10” screen, which is one of the smallest screens available in the market. In addition, the Küçücük will use an LCD screen, which are known to be lightweight and energy efficient. Our final product will only weigh about 1 kilogram, which is equal to 2.2 pounds. This is beats the competitive benchmark, as most “minibooks” weigh at least 1.15 kilograms. We definitely will use portability as one of our differentiation strategies when advertising.
In addition, our laptop is user friendly. The keypads will be made in English, as well as Turkish. There will also be a beginner’s software that comes with the laptop package for new users. The beginner’s software is a tutorial program targeted mostly for students that will show them basic instructions for use, as well as how to access the internet. We will also incorporate a Windows 7 operating system, as it is also user friendly and universally known.
Another strength of the Küçücük is that it is very energy efficient. Our LCD screen is more energy efficient than the LED screen, which is featured in most competitor’s brands. The LCD screen simply requires very little power from the battery. This, in turn, will enable our energy efficient lithium –ion battery to provide more battery life. We used the lithium-ion battery because it has one of the best energy-to-weight ratios, meaning it is power packed for its size, and it also maintains battery power when not in use. We will also use our energy effectiveness as a differentiation strategy in our advertising.
Affordability is another major strength of our product. The Küçücük is reasonably priced among our competitors. At $400, our laptop is high quality and is affordable to consumers in the low to middle price range. As Turkey’s per capita income is $12,000, we believe that this price will accommodate the middle class. The Küçücük is the perfect laptop for the university student or business person that is fairly price sensitive.
Despite our many strengths, there are also weaknesses that come along with starting a new business. Our biggest weakness is that Turkey Tech is a new company. Since we are a new company we do not have a loyal customer base, brand loyalty, or even brand recognition. Consumers do not know that we are a dependable and credible company with an excellent product. In order to incorporate our dependability and credibility we will have to focus heavily on advertising. Our advertising will focus on raising brand awareness, as well as the benefits of our product. Without creating efficient advertising consumers will not buy or even be knowledgeable about our product.
There are many opportunities in an emerging market like Turkey. These opportunities include high growth potential, communication possibilities, and educational and business possibilities.
The “Turkish IT market is expected to increase from around $6.4 billion in 2010 to $10 billion in 2014, making it one of the fastest growing in emerging Europe” (http://www.officialwire.com/). One of the factors contributing to this growth is the geographical location of Turkey. As a link between the Middle East, Asia and Europe, the country’s significant market size is accentuated by its position. Since consumers are drawn from other regions, Turkey has an excellent potential for growth. Like other IT vendors, we realize the possibilities in this market. This high growth potential is also because of industry developments. The Turkish government is also investing heavily in IT. The Turkish government is incorporating its information in a computerized data warehouse, where it can be centrally located. Turkey’s wireless infrastructure is also improving. Turk Telekom is the country’s telecommunication leader and is steadily improving internet access in Turkey.
Another opportunity for growth in the Turkish market is brought by communication developments. Today, the internet is used for communication at an increasing rate. With technology like Skype, family and friends are able to communicate via a web cam. People that live long distances from loved ones employ internet communication methods more than ever. Although our product does not have a built in web-cam, accessories such as these will be offered after breaking into the market.
Furthermore, small business owners and students alike are recognizing the importance of the internet in their daily lives. Turkish entrepreneurs are increasing as business people strive for higher incomes, job security, and independence. In fact, “private business accounts for about 50% of total economic activity and about 67% of manufacturing output” (Political Risk Yearbook). In addition, many of these business owners are using the internet for business operations. Furtermore, according to the Turkish Statistical Institute 88.8 % of business owners have internet access, and about 58.7% also have their own webpage. Although these percentages seem low in comparison to American Internet usage, these numbers are significant for this area in Europe. These figures are also expected to grow in 2010.
In addition to business owners, numbers of students are also growing in Turkey. As higher education is more widely appreciated in Turkey, more schools and universities are being built. In fact, “in the past two decades 24 new universities have been founded, and they now comprise the unified higher education system in Turkey, along with 53 state universities” (http://www.bc.edu/bc_org/avp/soe/cihe/newsletter/Number45/p11_Guruz.htm). With this growth in students and educational facilities, there are strong opportunities for laptop sales. Moreover, this increase in higher learning students will sustain our business and entrepreneurial laptop sales for the future.
There are also many threats in the Turkish market. These include political turmoil, strong competitors, and a low computer possession rate. Political turmoil in Turkey is mostly brought by religious differences. The two sides to this conflict are Turkey’s secular establishment consisting of the Kemalist military, and the AKP party a coalition supported by secretive Islamists. These problems center around a believed conspiracy to overthrow the country. Anyway, these political problems have the impact to decrease the value of the lira, and in turn, decrease purchasing power. Government intervention is also a possible risk, as our small business may struggle to survive in such an atmosphere. Although Turkey is trying to progress, it doesn’t help that bordering countries like Iran and Iraq are experiencing political mayhem as well.
Another threat brought by the Turkish market is simply the number of competitors in the market. Currently HP and Casper are market leaders in Turkey’s laptop industry and are viable substitutes. However, there are numerous other competitors in the market like Acer, Crea, Datron, Dell, Exper, Toshiba, MSI, Samsung, and many others. With established brands such as these, it will be hard for Küçücük to steal market share from others.
Furthermore, in 2007, only 39% of the Turkish people owned computers in their home (Political Risk Yearbook). Not only is this percentage low relative to America, it is also low for the European Union. In fact, Turkey was below the E.U. average in terms of both computers per household and internet access. In regards to this threat, we can only hope that Turk Telecom, the nation’s leading telecommunications provider, will continually spread internet access to the population. We also hope the Turkish people will begin investing more in computers and other technology.
III. Target market
The information technology market is steadily expanding in Turkey. With the advancement of infrastructure and communication networks, the Turkish people are equipped to progress in the electronic world. Moreover, it is the young Turkish generation that will be using this technology in the future. This is why Turkey Tech chose a young target market.
The target Market for our laptop, the Küçücük, will be young students as well as small business owners. With a total population of 73.9 million, people within the 15-64 age group represent 67% of the population. Although 15 to 64 is a wide category, we feel as though most laptop users will be somewhere within this range, especially in the lower half. In fact, “Turkey has a young and dynamic population that easily adapts to new technologies. More than half of our population is under the age of 24. In addition, the government is committed to research and development. We provide incentives
for the [IT] sector, which boasts links to well-known universities,” says Minister Yildirim, minister of transportation and communications (http://www.worldreport-ind.com/files/turkeytelecom.pdf). In addition, about 69 % of these young people live in urban areas. Cities are becoming more popular for those seeking a modernized way of life, something that villages cannot accommodate. There are also many universities located in urban areas. Currently there are 54 state universities in Turkey, and 23 private foundations. In 2007, 34.5% of students completed higher education (Political Risk Yearbook). The youth literacy rate in Turkey is also up to 95.5% (Political Risk Yearbook). These urban areas are also the centers of wireless communication, mostly enabled by Turk Telekom.
In addition, there are also many small business owners in Turkey. In fact, according to the Political Risk Yearbook, private business accounts for 50% of total economic activity.
On a more demographic basis, within our age category of 15 to 64 year olds, 25,896,326 are male and 25,327,403 are female. Ethnically, 70-75% of these people are Turkish, while 18% are Kurdish. Also, the average length of education is 12 years for males and 11 for females (CIA World Factbook).
All in all, we feel as though our product has the potential to really take off within our chosen target market. There is already significant growth of technology in Turkey, and will most likely expand as the government continues to focus on education.
IV. The product
A. Consumer needs it addresses
E. Usage situations
F. Innovativeness as perceived by the target market
F. Social aspects (e.g., observability)
G. Resistances to product acceptance
H. Competition’s product(s)
a. Brand name
Because we are positioning our product as energy-efficient and cost-efficient price is a big consideration for us. There were several factors we took into account when pricing our product, including competitors’ prices, quality, trade barriers, taxes, tariffs, etc.
First, as we will be selling in a foreign market, we looked at the relevant tariffs and taxes we would pay as an American company. We faced the decision of whether to export our final product into Turkey, export the materials to be assembled in Turkey, or simply producing in Turkey itself. Had we launched our product five years ago we would have faced much higher tariffs when importing, but since Turkey began EU negotiations in 2005 they have already begun to lower tariffs. This would be a big advantage to us if we decided to operate solely from the United States.
However, Turkey has a number of Free Trade Zones designed to increase the foreign investment and technology coming into the country. A FTZ is typically located near the center of the city center it is associated with and nearby local transportations systems such as railways, ports, or airports. Because production companies in an FTZ are exempt from both corporate and income taxes, it is ideal for us to operate out of one of the twenty free trade zones in Turkey (Investment in Turkey). If, per chance, we are denied a spot in an FTZ, by operating out of Turkey we will pay a corporate tax rate of only 20% compared to a tax rate of up to 40%. By doing all of our operations in Turkey we will be able to lower our prices to consumers.
We also looked extensively at the price of our biggest competitors in Turkey. We examined Dell, MSI, Casper, and HP whose comparable products cost $353.00, $699.99, $359.00, and $329.99, respectively. Our product, Küçücük, is priced at $400.00. It is less expensive than only one of our competitors, but we believe this price to be comparable because of the difference in features offered. A few value adding characteristics our product has over the competition are an antivirus protection program, more hard drive, and an LCD screen. In addition, we include more memory than Dell’s Mini 10 and include a CD/DVD drive which the Mini 10 does not have. These things allow us to price our product slightly higher than the competition and still maintain that we are offering a lower cost product.
i. Media mix
Other promotional methods
VIII.Points of difference with the competition
a. Sales volume
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