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Question:

• Differences in finance and banking systems between that country and home country and how these may affect your business and what countermeasures you may need?

• Any difference in legal systems between that country and home country and how these may affect your business and what countermeasures you may need?

 

 

Answer:

Introduction:

In the contemporary business situation, before establishing a new business relationship in the existing market or enlarging the business into new market, it is very important to understand the environment to analyze whether it is suitable to for conducting the business or not. Business firms try to expand their operations to the foreign country for mitigating internal risks, diversify the product line, increase business scale and to cope with the domestic competition. Suppose an automobile company from UK market is trying to develop export relationship with Turkey. In this report, the researcher has discussed the range of factors that may provide influence on the business expansion strategy of the export company. 

Cultures of Turkey and their implications for business:

In the recent years, culture has become one of the central point to conduct business in the international market (Kaufmann et al. 2004); (Burns, 2007). Language is plays another crucial role in doing business in the international market. Even though English is an international language, still many businesses like to make business deal in pre-dominating native language.

The culture of Turkey includes some heterogeneous and a heavily diverse set of elements that has been drives especially from the Eastern Mediterranean region, South Eastern Europe and Central Asian traditions. The official language in Turkey is Turkish. No language other than Turkish taught to the domestic citizen as a mother language (Grint, 2008). So, before expanding business in Turkey, it is very important to acquire much ability to communicate in Turkish language. It will help them to avoid ethnic minorities to use their language. Religious view in the host country is another component and a very sensitive issue that needs to be taken into account by the exporting company. The religious view of Turkey is Islam as 95% of total populations are registered as Muslim. In order to avoid religious conflict, the export company needs to understand the basic theme of Islamic religion. Islamic view places huge prominence on the ethical value of human life. They always prefer ethically desirable form of business and the modes of transaction. Given the nature of Islamic ethical codes, it would be desirable to focus on some specific principle of business and act accordingly (Henson, 2009). Friday is normally observed as the public holiday in Turkey and the company exporting there needs to consider this religious factor.    

 

Political and economic systems of Turkey and their implications for business:

Political system:

Political system of a country is a center for designing its economic and legal system. A country can be democratic or government centric or may be a collective society (Reynolds et al. 2004). Generally, democratic country is one government provides less interference on the firm’s activities. On the other hand, government centric economy is one where government encourages personal profits and acts for fulfilling the social needs in certain cases. The way to do business in an economy depends on the form of government.

The current strength of the political system of Turkey is their liberalized government policy. Turkey is the supporter of liberal investment and trade policy that allows open or free trade among the countries (Scott, 2010). The political system in Turkey declined a custom union agreement in 1996 that allows many international business firms to expand freely and successfully in the Turkey market. The number of exporter rising at the rate of 15% every year and this allows the automobile company to flourish with their products in Turkey planet. However, one of the major challenge in Turkey is the increasing rate of terrorist attacks that has been occur in the country due to their Islamic extremist and Turkish militants that are generally linked with Al-Qaeda. This is a political disadvantage for doing business with Turkey as they may also be targeted by the terrorists.    

Economic system:

Before launching business in Turkey, it is important for the exporting company to know the economic system of the country. There are mainly three types of economic systems that attempts to allocate economic resource efficiently and they are commercialized economy, command economy and mixed economy (Marquis & Huston, 2009). The commercialized or market economy is dominated by the private ownerships and command economy is one where resource allocation depends on the government directives (Poon, 2000). Finally, mixed economy is a combination of the market and command economy where both forces act simultaneously to allocate economic resource.

The economic system in Turkey characterized by mixed economic system that exhibits the feature of both market and command economy. In this economy, there are both private and public enterprises. However, it is the government who decides which sector can be opened up under private ownership and to what extent. Hence, the private ownership firms are bounded by the rules and regulations set by the government of the country. The ultimate purpose of government intervention is to bring benefits to the overall economy instead of certain section of the society (Rettab et al. 2009); (Nicolescu, 2011). The management team of the company should have an idea about the trends and economic environment of Turkey. The view of local government about the foreign exporter or the complementary to the foreign business decides how the government of Turkey will frame business opportunities for the exporter company, the regulatory laws and trade barriers.

Nature of business systems in the chosen country that affect business operations:

Business organization:

Turkey is the sixteen largest economy in the world and sixth largest economy in Europe. Hence, it is high growth market for the investors as well as for export companies. According to the recent record, the growing population, its strategic location between Asia and Europe makes the country very attractive for the investor and business exporter to make their business activities in this region (Maitland, 2004). Presently it is responsible for 80% of the world’s import and 17th largest country in terms of PPP (Purchasing Power Parity). The economy is driven predominately and has extended enough space for the growth of automobile industry (Kennerley & Neely, 2003). The key imported products in Turkey are chemical vessels, ships, automobile parts, home appliance and consumer electronics.       

 

Leadership:

One of the biggest issues in facing international business executive is to build a global leadership pipeline. It has been reported that, the leadership strategy followed by the UK economy is different from that of in Turkey. The market leaders in Turkey have a very strong focus and skill set on their operational activities. The leadership strategy in Turkey provides strong focus on the operational process, hands-on management and managing the individual performance (EIU, 2010); (Palmer & Hartley, 2006). Hence, to succeed in this first growing country, the exporting company needs to collect market data quickly and actively. If they define their market strategy clearly, they can hire, manage and train their individual quickly.     

Human Resource Management:

As suggested by Baron (2010), the HRM practitioners are basically used as a guide for the HR functions to support sustainability in the business context. It outlines the business approach for maintaining the labor standard and other specific aspect of sustainability such as employer branding, employee volunteering and so on. The HRM activities in Turkey differs from the UK economy in terms of several grounds such as new HR skills requirements for sustainable HR practice, the minimum acceptability of HRM in different organizations etc. However, both businesses and society believes in delivering greater shareholder’s value and strong organizational performance over time. 

Change Management Principles:

As the impact of globalization, the organizational change management has become permanent features of the business activities throughout the globe. In the new market situation, innovative technology, huge capital flow and investment demand and vast new market has becomes less predictable (Cherunilam, 2010). Thus, to meet these challenges, firms are becoming more sophisticated day by day. Business organizations in both the economy are coped up with the change management principle. The change management in the host country takes place via clear top-down directions. The change management principle in Turkey is basically culture centric where they believes that organizational culture is the basis for implementation of successful change management (Kogg & Mont, 2012). Further, they also believe to involve each employee at each level of the business planning. Thus, the export company should focus on drawing emotional energy from the cultural aspect instead of changing this. It will help them to enhance their export market in Turkey.  

Differences in finance and banking systems between these countries and their implications for business:

The finance and banking system in Turkey is primarily characterized by Islamic Banking that believes Islam as its backbone. For them ethical philosopher and objectives plays a major role in their function. The banking system in Turkey differentiates their customers according to their religious views (Fries et al. 2003); (Bellia & Pilato, 2012). It provides major importance to the Islamic customer and less on the others. It might create barriers for the export company to hold equity in these banks and make sufficient transaction if needed. The Islamic banking system also carried out operations like insurance, trading etc, which are also lies beyond the typical field of commercial banking. In addition to that, majority of the banks and other financial institute are chattered and regulated by the state of Turkey government. Banks in UK economy are not permitted enough to engage insurance and securities with Turley. So the export company cannot apply for credit standard to continue its business with Turkey.

 

Legal systems of Turkey and their implications for business:

The legal systems are considered as an important element that affects international business expansion. The automobile company is establishing their business relationship with Turkey and thereby the legal system of Turkey has a huge impact upon the export company. In general, the legal system of for most of the countries combines three main kinds of legal system, namely, civil law, common law and religious law. civil law is based upon the detailed set of law that constitutes a code on how the law will be applied, the common law based on the tradition and the religious law based on the religious guideline (Hamilton & Webster, 2012); (Jackson, 2010). Among these laws, the religious law provides direct impact on the business environment. As mentioned bin above, the religious view of Turkey is Islamic and thus the impact of religious law on business can be observed in terms of Islamic law. It believes on morality of the human life rather than commercial activities (Schaffer & Schaffer, 2012). With the concept of Islamic law, the business will be directly impacted in terms of interest. Many banks are offers lease back on assets or sale buyback or charge a large up front free. If the export company wants to borrow money from the bank, it can do that by selling its product at fixed price to the bank. So, the company has to comply with the Islamic law and find creative way to do business with Turkey.

Ethical matter of Turkey that may affect the business strategy:

The automobile company in UK market which in turn tries to adopt the responsibility of trade in Turkey by an ethical manner that incorporates their business standard, market and sales expansion, labor condition of their industry and their payment process (Worthington & Britton, 2006); (Ward et al. 2005). The ethical consideration of the export company also includes respecting the Islamic view, removing the incidents of child labor, minimizing the gender discrimination and developing a fair trade that will help them to establish a strong and profitable relationship with Turkey. If the export company fails to meet the international labor law and the local legislation of the host country, it might hamper their global business expansion strategy. Thus, it is important for the company to imply the orders and code of conducts to be present and prevent discomforting situation.

Conclusion:

The current study focuses on the business environment of Turkey and its situational analysis regarding a particular automobile export company. The study comprises a details analysis about the economic, social, cultural and financial aspect that affects the business expansion strategy of the export company. Even though, Turkey presents long-term opportunities and excellent intermediate for the automobile firms, it also includes a range of challenges on the international firms, such as complex bureaucracy, political and economic instability, occasional civil demonstration, cultural imbalance and judicial system. Hence, before conducting business in this economy, it is crucial to understand the basic fundamentals of the economy through different economic situation to ensure progress of the business.

 

References:

Baron, D. (2010), Business and its environment, (1st ed.) Upper Saddle River, N.J.: Prentice Hall

Bellia, C. & Pilato, M. (2012). Features on structural policies in regional development of the European Union and their main effects, 12(5) pp.8--9

Burns, P. (2007). Entrepreneurship and small business. 1st ed. Basingstoke [England]: Palgrave.

Cherunilam, F. (2010), Elements of business environment, (1st ed), Mumbai [India]: Himalaya Pub. House

EIU, E. (2010). Global microscope on the microfinance business environment 2010: An index and study by the Economist Intelligence Unit

Fries, S., Lysenko, T. & Polanec, S. (2003). The 2002 business environment and enterprise performance survey: results from a survey of 6,100 firms.

Grint, K. (2008). Leadership, management and command. Basingstoke, Hampshire: Palgrave Macmillan.

Hamilton, L. & Webster, P. (2012), The international business environment. (1st ed.) Oxford: Oxford University Press.

Henson, A. (2009). Albania's business environment. London: GMB.

Jackson, P. (2010). Web 2.0 Knowledge Technologies and the Enterprise. (1st ed.) Burlington: Elsevier Science.

Kaufmann, D., Hellman, J., Jones, G. & Schankerman, M. (2004). Measuring governance, corruption, and state capture: How firms and bureaucrats shape the business environment in transition economies.World Bank Policy Research Working Paper, (2312).

Kennerley, M. &  Neely, A. (2003). Measuring performance in a changing business environment. International Journal of Operations & Production Management, 23 (2), 213--229.

Kogg, B. & Mont, O. (2012) Environmental and social responsibility in supply chains: The practise of choice and inter-organisational management, Ecological Economics, 83, pp.154--163

Maitland, I. 2004. The business environment. Oxford: Made Simple Books.

Marquis, B. & Huston, C. (2009). Leadership roles and management functions in nursing. Philadelphia: Wolters Kluwer Health/Lippincott Williams & Wilkins.

Nicolescu, C. (2011). Perceptions of Entrepreneurs Regarding Romanian Business Environment in 2010,  Revista de management comparat international/review of international comparative management, 12(6), pp.479—489

Palmer, A. & Hartley, B. (2006). The business environment. Maidenhead: McGraw-Hill Education.

Poon, S. (2000). Business environment and internet commerce benefit-a small business perspective. European Journal of Information Systems, 9 (2), 72--81.

 

Rettab, B., Brik, A. & Mellahi, K. (2009) A study of management perceptions of the impact of corporate social responsibility on organisational performance in emerging economies: the case of Dubai, Journal of Business Ethics, 89(3), pp.371--390

Reynolds, J., Cuthbertson, C. &  Bell, R. (2004). Retail strategy. Amsterdam: Elsevier Butterworth-Heinemann.

Schaffer, R. & Schaffer, R. (2012), International business law and its environment, (1st ed.) Mason, OH: South-Western Cengage Learning.

Scott, S. (2010). Globally competitive business environment-2003 to 2011 reports| Policies| BIS, Department for Business, Innovation and Skills (BIS), 1 Victoria Street, London, SW1H 0ET, Telephone 020 7215 5000, 2(1), pp. 52-56

Ward, P., Duray, R., Keong Leong, G. & Sum, C. (2005). Business environment, operations strategy, and performance: an empirical study of Singapore manufacturers. Journal of operations Management, 13 (2), pp. 99--115.

Worthington, I. & Britton, C. (2006). The business environment. Harlow: Financial Times Prentice Hall.

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