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International Business
Management Yrd. Doç. Dr. Aziz BAKAY
Project presented by Nasir Alev & Gonca Sonmez
Nasir AlevGonca SonmezBurak TekinElif Mete
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
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
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 ?
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