Source: Author
After the comparison of the two countries in accordance to Hofstede it is clear that both countries have a different culture. Before Köppl enters the Turkish market they have to have a clear understanding of the Turkish culture.
2.2. Macro environment
The environmental influences of Turkey can be analysed in a PESTL analysis to get an overview of the opportunities for Köppl machinery. PESTL is the abbreviation of Political, Economical, Social, Technological and Legal factors.
The following table shows the PESTL analysis for Turkey based on the important factors for Köppl to enter the market.
Source: Author
The cultural overview showed already differences between the home country – Germany, of Köppl, and Turkey. Now the PESTL analysis table shows the important macroeconomic factors.
In Turkey relations have to build up before you can start doing business. It is a little bit like China.
With the cultural and macro economical analysis I covered the general issues. However, also important are language and body language. If you speak the language of the country you want to do business with, you already made one, big, successful step. Already a few sentences are helpful, and shows that you are really willing to do business with them.
You also should be aware of foreign body language. For example a smiling Chinese is not always happy. There, smiling is used to cover uncertainty and embaressment.
2.3. Micro environment
“The five forces framework helps to analyse the sources of competition within the sector. It will help to understand the market situation and how to handle it in the future”.
The Framework of five forces is based on:
Competitive Rivalry
Buyers
Suppliers
Potential Entrants
Substitutes
2.3.1. Competitive Rivalry
There are over 150 companies who are producing agricultural machinery in Turkey. Many of them also export their products. It is a large market in Turkey and has a high concentration. The following table shows some competitors with their strengths and weaknesses.
2.3.2. Buyers
“Organization buyers, however, do not always seek to maximize the benefits for the organisation; sometimes they seek to maximise benefits for themselves. In addition, relationships are between people, and buyers consider personal relationships skills as one important aspect of purchases … Purchase decisions are made by people.”.
The Behavior Choice Theory was developed to understand buyer behavior. The following figure shows the different stages, Köppl has to take care of.
1. Identify Situation
Degree of company orientation
Degree of self-orientation
2. Evaluate personal relevance
Formal reward system
Informal and social reward system
Intrinsic rewards
3. Asses action alternatives
and requirements
4. Choose behavior strategy
Defensive: Process-orientated,
Minimise threats
Offensive: Result-orientated
Maximise gain
Source: Dwyer & Tanner (2001) p. 104
Not only organizational buyers are the target group of Köppl. They also sell individual consumer. The general separation of business to business and business to consumer works in worldwide. It is depending on the target market of the company. Köppl is targeting both markets.
In Turkey buyer behavior is different to the German manners. Here, business takes time, and body language is a important factor. Meetings mostly very emotional and private small talk is very common.
Another important issue is pricing in foreign countries. Köppl has to decide, whether they prefer to have a high profit or a high market share. General based pricing is one of the most important factor to be successful in a foreign country. Pricing can be influenced by the following factors:
- Shipping costs
- Insurance
- Tariffs
- Longer channels of distribution
- Greater number of intermediaries
The following graph provides the most important information about pricing.
Source: Author (information adopted from lecture notes)
Additionally to the pricing conditions of payment are also important. In Turkey it is common to pay the first half of the price after signing the contract, and the second half after the delivery.
To attract buyers company needs promotion. Usually at the beginning the promotion cost are higher, because they need to build up a reputation.
The Principles of creating effective advertising are the same as in the domestic marketplace. The marketer must determine what the customer is really buying – that is, the customer’s motivation.
Köppl’s advertisement has to suit the local market requirements and regulations. Also traditional and moral factors are important to analyse before they plan their advertising strategy.
2.3.3. Suppliers
Köppl machinery will enter the Turkish market through an agent. This means they don’t have to take care about suppliers. Usually they would need suppliers for :
- Telecommunication Equipment
- Logistics (Distribution Channels)
- Administrative tasks (Stationery, Advertising)
2.3.4. Potential Entrants
Köppl machinery uses four different market entry methods – Exporting, Agents, Distributors and Freight Forwarder. To build up a trade market with Turkey they planned to use an agent to collect the relevant market knowledge.
The following table shows some possible market entry methods:
Source: Author (adopted from Paliwoda & Thomas (1998) p.127)
Based on the cultural differences between Turkey and Germany an agent is the best solution to build up business relations and to be successful. Satisfied customers have to give a good reputation to Köppl. That is the best advertising they can get in Turkey.
An agent can also help to overcome legal barriers of entry. Especially Turkey has strict regulations for their imports as the author mentioned during the PESTL analysis. To find an agent can be difficult, not every agent is good for your business. The best way to find an agent is by consulting trade directories. Afterwards the agent should be analysed. The reputation and the financial situation of the candidate are the most important factors. The distributor’s existing product lines showed be analysed according to the four dimensions:
- Competitiveness
- Compatibility
- Complementary nature
- Quality
The distributor will be not a good choice if they already sell similar products, or the all over reputation is weak.
Turkey has one advantage for exporting and importing with them: This is the Custom’s Union with the European Union. So there aren’t any customs tariffs.
2.3.5. Substitutes
“Usually substitutes reduce demand for a particular class of products or services”. In this particular case there are no substitutes. Agricultural machinery is needed to help to work to save time and costs. However a possible substitute would be a cow, to cut the grass.
3. Portfolio Matrix
To make sure Köppl picked the right market they created a Directional Policy Matrix according to the ‘Multinational Market Portfolios in Global Strategy’ from Richard O. Kiefer (Czinkota & Ronkainen 2001 p.474). The portfolio shows how attractive the relevant market is and the competitive strength of the company in that market.
The following table shows the relevant indicators, which are covered in the analysis above, to create the portfolio matrix.
Source: Johnson & Scholes 2002 p.288
After analysing according to the Indicators Köppl sees Turkey as a perfect country to invest in an grow the market, as the matrix shows.
Country Attractiveness
High Medium LOW
High
Medium
Low
Company’s
Compatibility
With each Country
Source: Johnson & Scholes (2002) p. 289
4. Organisational Structures
The organisational structure doesn’t indicate where the authority for decision making and controls is. There are different structure types. One of them is decentralisation. In a decentralised system control is relatively loose and simple. The flows between the headquarter and the subsidiaries are mostly financial. Another form is centralisation. There the headquarters make strategic decisions and control is very tight.
It is very common to have a mixture of both structures within a firm. This form can be called coordinated decentralisation, and means that the overall strategy is developed by the headquarter and subsidiaries are free to achieve it within the established range.
There are also different types of the management structure in subsidiaries. The two most common types are ethnocentric and polycentric.
4.1. Ethnocentric
People from the home country manage the business aboard. This is suitable for companies who want to have a tight control over the office operations aboard.
A company, which is closely related to its country of origin, is call ethnocentric.
The following table shows the advantages and disadvantages of ethnocentric management.
4.2. Polycentric
Polycentric means when individuals from the host country manage the operations aboard. Suits perfectly for companies who want to give the foreign office power in decision making. Generally a polycentric company is based in a few countries with no clear home country, but with no local market image in each country. The following table shows the advantages and disadvantages of polycentric management.
4.3. Examples for Ethnocentric and Polycentric Companies
Many companies enter foreign market with an ethnocentric or polycentric management. It also happens often that the type of management changes after a while, depending on the foreign country.
There are several reason to change the management type.
For example: - costs
- market failure
- try to raise market shares
- separation of power
One famous case is Kentucky Fried Chicken (KFC) in Japan. The successful US strategy didn’t work out. The food menu didn’t match with the interests of the Japanese and the to build the large restaurants KFC had to move outside the city centres. The KFC management in Japan made strategic decision without consulting the US headquarter. They change the menu, and started offering fried fish and the made the portion smaller.
- Extra costs a necessary for de-standardisation policies to fit in a country and its culture.
The following table shows further examples of companies and their type of their management.
5. Conclusion
Where would the industrialised world be without globalisation? – Do we really want to know? In the early nineteen eighties companies had to learn that the world is one large market – as they ignored national differences. During these days they presumed marketing meant giving the customer what they say they want rather than trying to understand exactly what he would like.
Cultural understanding is one of the most important factors if a company wants to act international. Köppl has had to understand the Turkish culture before they were able to do business successfully
The decision for a polycentric or ethnocentric management has to be made carefully, because it may be the key reason to be successful in a foreign country.
6. Bibliography
Books
Brassington, Frances & Pettitt Stephen (2003) Principles of Marketing, 3rd edition. Pearson Education Limited: Harlow.
Cateora, Philip R. & Graham, John L (2002) International Marketing, International Edition, McGraw-Hill: New York.
Czinkota, Michale R. & Ronkainen Ilkka A. (2001) International Marketing, 6th edition. Hartcourt Colleg Publisher: Troy.
Dwyer F. Robert & Tanner, John F. (2001) Business Marketing, 2nd edition. McGraw-Hill: New York.
Ferraro, Gary P. (1998) The Cultural Dimension of International Business, Prentice Hall.
Hofstede, Geert (1997) Cultures and Organizations, Software of the Mind, McGraw-Hill: New York.
Johnson, Gerry & Scholes, Kevan (2002) Exploring Corporate Strategy, 6th edition. Pearson Education Limited: Harlow
Mead, Richard (2000) International Management, 2nd edition. Blackwell Publisher Ltd.: Oxford
Paliwoda, Stanley J. & Thomas, Michael J. (1998) International Marketing, 3rd edition. Butterworth & Heinemann: Oxford.
Internet
(21.04.2004)
file:///C:/Windows/Temporary%20Internet%20Files/Content.IE5/AV4TUJMF/256,1,Folie 1 (21.04.2004)
file:///C:/Windows/Temporary%20Internet%20Files/Content.IE5/K56VKP6F/256,1,Folie 1 (21.04.2004)
(21.04.2004)
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7. Appendix
Further Information of Köppl agriculture machinery:
- founded over 100 years ago
- family owned enterprise
- own production - high quality
- own design and development
- good reputation
- well experience staff
- own patents
- high quality management and control
- cooperate identity – red logo (all products are red as well)
Some pictures of the different products:
Multicultural Behaviour and Global Business Environments p. 61
International Management p.4
Johnson & Scholes (2002) p.112
Dwyer & Tanner (2001) p. 100
Czinkota & Ronkainen (2001) p.628
Johnson, G. & Scholes, K. (2002) Exploring Corporate Strategy – Text and Cases. 6th Edition. Harlow: Pearson Education Limited, p 115
