Franchising in Turkey: A Strategic Reference, 2007
ICON Group International, July 2007, Pages: 80
How to Strategically Evaluate Turkey
Perhaps the most efficient way of evaluating Turkey is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to franchising are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Turkey
This report provides a detailed overview of factors driving latent demand and accessibility for franchising in Turkey. Latent demand is largely driven by economic fundamentals specific to franchising. This topic is discussed in Chapter 2 using work carried out in Turkey on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for franchising in Turkey. I use the term “micro” since the discussion is focused specifically on franchising.
Chapter 3 deals with macro-accessibility and covers factors that go beyond franchising. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Turkey:
Openness to Trade in Turkey
Openness to Direct Investment in Turkey
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in Chapter 3, which is a general overview of investment and business conditions in Turkey. Chapter 3 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Turkey. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Turkey 1
1.3 Latent Demand and Accessibility in Turkey 3
2 FRANCHISING IN TURKEY 4
2.1 Latent Demand and Accessibility: Background 4
2.2 Latent Demand: Market Composition 4
2.3 Latent Demand: Market Data 4
2.4 Latent Demand: Leading Segments 5
2.4.1 Fast-Food, Casual Dining, and Coffee 6
2.4.2 Real-Estate 6
2.4.3 Child-Care and Education 6
2.4.4 Retailers, Textile, and Ready-To-Wear Brands 6
2.4.5 Services 6
2.5 Accessibility: Market Entry 7
2.6 Market Issues and Obstacles 7
2.6.1 Legal Issues 7
2.6.2 Financial Issues 8
3 MACRO-ACCESSIBILITY IN TURKEY 9
3.1 Executive Summary 9
3.2 Economic Fundamentals and Dynamics 9
3.2.1 Dynamic Markets 9
3.2.2 Government Intervention Risks 10
3.2.3 Balance of Payments Issues 10
3.2.4 Infrastructure Development 11
3.3 Political Risks 12
3.3.1 Economic Relationship with the United States 12
3.4 Political Risks 13
3.4.1 The Political System 13
3.5 Marketing Strategies 14
3.5.1 Distribution Channel Options 14
3.5.2 Agents and Distributors 14
3.5.3 Franchising Activities 14
3.5.4 Direct Marketing Options 16
3.5.5 Joint Ventures and Licensing Options 16
3.5.6 Creating a Sales Office 16
3.5.7 Selling Strategies 17
3.5.8 Advertising and Trade Promotion 17
3.5.9 Pricing Issues 18
3.5.10 Selling to the Government 18
3.5.11 Intellectual Property Risks 19
3.5.12 Hiring Local Counsel 20
3.5.13 Performing Due Diligence 20
3.6 Import and Export Regulation Risks 20
3.6.1 Tariffs, Non-Tariff Barriers, and Import Taxes 20
3.6.2 Valuations on Imports 20
3.6.3 Licenses Required for Imports 21
3.6.4 Controls on Exports 21
3.6.5 Documentation Required for Trade 21
3.6.6 Special Documentation 22
3.6.7 Entering Temporary Imports 22
3.6.8 Labeling Issues 23
3.6.9 Restrictions on Imports 23
3.6.10 Local Standards 23
3.6.11 Additional Trade Issues 24
3.6.12 Adherence to Free Trade Agreements 25
3.7 Investment Climate 25
3.7.1 Openness to Foreign Investment 25
3.7.2 Conversion and Transfer Policies 26
3.7.3 Expropriation and Compensation 26
3.7.4 Dispute Settlement 27
3.7.5 Performance Requirements and Incentives 27
3.7.6 Right to Private Ownership and Establishment 28
3.7.7 Intellectual Property Risks 29
3.8 Transparency of the Regulatory System 29
3.8.1 Capital Market Risks 30
3.8.2 Political Violence 31
3.8.3 Corruption 31
3.8.4 Bilateral Investment Agreements 32
3.8.5 OPIC and Other Investment Insurance 32
3.8.6 Labor 32
3.8.7 Free Trade Zones 33
3.8.8 Major Foreign Investments 33
3.9 Trade and Project Financing 33
3.9.1 The Banking System 33
3.9.2 Exchange Control Risks 34
3.9.3 General Financing Availability 34
3.9.4 How to Finance Exports and Methods of Payment 34
3.9.5 Types of Available Export Financing and Insurance 35
3.9.6 Project Financing Availability 35
3.9.7 Types of Projects Receiving Financial Support 35
3.9.8 Regional Financing 36
3.9.9 Small Business Support 36
3.9.10 Defense Offsets 36
3.9.11 Banks with Correspondent U.S. Banking Arrangements 36
3.10 Travel Risks 37
3.10.1 Local Business Practices 37
3.10.2 Travel Issues 37
3.10.3 Infrastructure for Conducting Business 38
3.10.4 Temporary Entry of Goods 40
3.10.5 Pricing Issues 40
3.10.6 Country Data 40
3.11 Key Contacts 41
3.11.1 U.S. Mission Trade-Related Personnel 41
3.11.2 United States Department of State 42
3.11.3 Contacts in Washington D.C 44
3.11.4 U.S.-Based Multipliers 45
3.11.5 Turkish Government Contacts 45
3.11.6 Chambers of Commerce 68
3.11.7 Market Research Firms 69
3.11.8 Major Commercial Banks 69
3.11.9 Exhibition Management Companies 71
4 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 72
4.1 Disclaimers & Safe Harbor 72
4.2 Icon Group International, Inc. User Agreement Provisions 73
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