Koc Holding Case Study

CASE 2: Koc Holding

1) Why has Arcelik succeeded in Turkey?

A: There are several reasons that made Arcelik succeeded in Turkey. First reason is that the Turkey's gross national product increased from 1990 to 1996 except 1994. The Turkish government stimulated consumer demand and increased public investment in 1991. So the consumer's purchasing power continued increased. Second reason is that through the incorporation of just-in-time and flexible manufacturing systems, Arcelik reduced raw material and labor costs, thereby increasing the productivity. And Arcelik product often has high quality and low price. Third reason is that Arcelik invested heavily in R&D which helped Arcelik to keep its innovative of products. Fourth reason is that in the area of human resources, the work force was highly educated and many Arcelik managers had attended business schools in North America and Europe. Fifth reason is that the Arcelik's after-sales service is pretty good. With the average white good appliance in use for 12 years, the quality and availability of after-sales service was important to Turkish consumers in influencing other brand purchase decisions.

2) Why is Bosch entering the Turkish market? Is Bosch's entry a threat?

A: Because the economic development in Turkish is well and the consumer purchasing power increase which make domestic demand of white goods strong. And after 1996, the import tariffs cut to zero which made Bosch can compete better in Turkish market. Arcelik's principal white goods competitor was Peg Profilo which has been sold to Bosch-Siemens of Germany in 1995. From Exhibit 2 and 5, we can see that the Arcelik's sales increased from 1995 to 1996 and the market share of each product in 1996 was almost the same as in 1995. Therefore, Bosch's entry is not a bit threat. However, Profilo would become more competitive in washing machines and dishwashers (in which the firm had not invested in new production technology) as a result of the acquisition.

3) Why is Arcelik pursuing international markets? Does this make sense? Why?

A: From Exhibit 5, we can see that Koc was the only one company that had Turkish market share more than 50% in white goods in 1995 and 1996. And the competition of white goods in Turkish market became more and more aggressive since Bosch and Siemens had entered Turkish market. And Exhibit 4 shows that the Arcelik capacity was not fully utilized, which means Arcelik has the ability to produce products for the foreign markets. So as long as Arcelik can keep or even increase the market share in Turkish market, it is make sense for Arcelik pursuing international markets.

4) Which overseas markets should