Koc Holding: Arc Elik White Goods

799 words - 3 pages

Situation analysis: Koc Holding ("Koc ") is an industrial conglomerate in Turkey. Itslargest subsidiary, Arc elik, is the main manufacturer and market leader of so-called whitegoods (major kitchen appliances) in Turkey. Koc will likely experience an increase inforeign competition, as Turkish tariffs on white goods (protecting the local market) willbe phased out in 1996. In its turn, Koc is interested in expanding abroad, as the Turkishmarket for white goods is getting saturated.Problem identification: As any company, Koc is interested in growing its sales. Givenits existing international experience and the potential increase in foreign competition inits home market, Koc has three options for growth: 1) Attack the Western Europeanmarkets; 2) Expand in the emerging markets; and 3) Keep growing domestically,defending itself against foreign competition. As I believe that going international isinstrumental to Koc &s growth, I will focus on the first two options. The question then is:Should Koc expand in the Western European or the emerging markets?Recommendation: My recommendation for Koc is option 2. In Exhibit I, I have listedthe main reasons for Koc &s competitive advantage in Turkey, and to what extent theseadvantages are transferable to the Western European markets or the emerging markets.Except for the low price advantage, the situation as pictured in Exhibit I looksunfavorable for Koc in Western Europe. In my opinion, the main reason (and mostweighing factor in Exhibit I) for not further expanding in Western Europe relates to theextremely strong presence of appliances manufacturers in Germany and Italy.Companies like Siemens, Bosch, AEG and Candy have long established their brands inthe Western European appliances market and any newcomer will be confronted with localcustomers unwilling to buy a refrigerator or dishwasher of a brand unknown to them,even if the price is substantially lower. This is partially due to the character of thisindustry: When it comes to daily used appliances, customers feel little need toexperiment or even price shop: A dishwasher must work, which is guaranteed by astrong brand from a well-known manufacturer with good services and warranty contracts.What helped Koc achieve a leading market position in Turkey (recognizable brands andan exclusive distribution and service network), works against it in those markets where anequally strong company has established its brands. This is the very reason that the onlyWestern European country in which Koc has achieved relevant market penetration (8%)is the U.K., where no domestic brands dominate the market (the other reason may be thatthe greatest amount of Turkish people, apart from Turkey, resides in London). This isalso the reason why Koc has been so successful in...

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