Doing Business in Emerging Global Markets - Free Essay Example

Doing Business in Emerging Global Markets Title: Upon leaving University, you join a business consultancy and are asked to investigate the risks of one of your clients expanding their business and investing in an Emerging/Growing market outside of Europe or North America. Introduction: This report will be looking to analysis the risk of one of my clients business and investment in an automotive manufacturing company in the emerging market of Turkey. This essay will be looking at the risk and benefits of taking such action. After this analysis the report will have a discussion point, putting forward reasons why my client has reason to worry about starting a business in Turkey and reasons for approving such action. The finale part of the report will be a conclusion outlining my recommendations for the client. Method: The way in which this report will generate information will be through secondary data already publically available online, such as the UK trade and In vestment website and various similar websites. In the risk analysis, the report will be using SWOT analysis, which stands for strength, weaknesses, opportunities and threats for the automotive manufacturing company. To analysis the risk of Turkey, the report will be using PESTLE analysis, which stands for political, economic, social, technological, legal and environment. SWOT analysis of the automotive industry Strengths: Emerging countries such as China, Brazil and India offer incredible sales potential as vehicle ownership rates in these countries are still be well behind those in developed countries, E.G. US, UK and Germany (KPMG 2013). It is predicted that by 2020 China will be responsible for nearly one third of new vehicle sales worldwide. There is evidence that shows Chinas demand for automotive vehicle will grow by 7.4% by 2020, while India demand will increase by 11% in the same period (KPMG 2013). Weaknesses Opportunities Threats PESTLE analysis: Polit ical: After the protest of 2013 there are growing worries within the AK party about Recep Tayyip Erdogans (Turkish prime minister) authoritarian on turkish people (The Economist 2013). Also on March 13th 2014 there was violent unrest in at least 32 towns and cities across the country showing a lack of political control of the population (BBC News 2014). There is currently outrage in turkey since a recording emerged which allegedly features the prime minister and his son discussing how to hide large sums of cash (BBC News 2014). A Possible political strength of Turkey is that it is a supporter of the liberal trade and investment policy, which allow open trade between different countries in the EU, allowing Turkish firms the chance to get bigger and more successful in the global economy (UK Essay N/A). Economic: Turkish growth slowed down to just 3% in 2013, meanwhile in America the Federal Reserve plans to reduce quantitative easing, thus putting pressure on countries which nee d capital flow(The Economist 2013). Turkey is exposed to this as it has a low saving rate, a large current account deficit of 6 to 8 percent of GDP and a high dependency on Foreign Direct Investment (The Economist 2013). However even after the financial crisis Turkeyrecorded the 9th highest growth rate globally in FDI inflows (export.gov 2013). In Turkeys favour with a large domestic market of 74 million people, Turkey is a massive springboard to the markets of Central Asia the Middle East, while also being the 18th biggest economy in the world and the 7th biggest in Europe (UK Trade and Investment 2013). Turkey has been investing heavily in improving its infrastructure in recent years, with a t new airport currently being built l costing a reported à ¢Ã¢â‚¬Å¡Ã‚ ¬22bn, but there is also a $3bn bridge being constructed across the Bosphorus strait, while the Galata region is getting a brand new port complex worth around $700m (World Finance 2013). Social: Turkey has a labour f orce of about 25 million, of which many are young and well educated, with a median average age of Turkey being about 28, but also Labour productivity growth averaged 4.4% annually between 2002 and 2009 (RBS 2010). Turkey sends the largest number of students among all European countries, around 12,000 each year, to U.S. colleges and universities (export.gov 2013). Turkeyà ¢Ã¢â€š ¬Ã¢â€ž ¢s population is expected to become the largest in Europe, overtaking Germany (RBS 2010). Turkey currently has a high level of unemployment at 9.2% which means that it is very rationale for a business to set up there, as a firm will have a large amount of people to employ, and if they are unskilled workers, they can be trained (World Bank 2014). Turkey also has a growing life expectancy as over the last 20 years it has risen from 66 years to 75years (The World Bank 2014). Technological: Turkey is ranked in the top 20 countries for research and development spending and second only to China in ter ms of RD expenditure growth, Turkey achieved an average annual growth rate of 15.7 percent for RD expenditures between the years 2006 and 2011 (TUBITAK 2010). Turkey provides investment incentives for firms with tax exemptions and cuts as well as financial support to improve the technological competitiveness for important industries (TUBITAK 2010). Turkey spent $11.1 billion on RD in 2012 figures, equal to 0.92 percent of the countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s GDP for the same year, by 2023 RD expenditure in Turkey is expected to account for 3 percent of the countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s GDP (Turkish Statistical institute 2014). Legal: Turkey is a civil law jurisdiction based on the Swiss, French and Italian model. The Turkish government are strict when it comes to law and order, they will enforce the law if need be, it allows companies to have a fair trial if any form of disruption were to come up such as trade union issues. However, there are judges who are politically biased and this can have an effect on any legal challenge and outcome (The Law Society 2014). Environmental References BBC News (2014) Turkeys Mass Protest: Two dead after teenagers funeral [online] available from https://www.bbc.co.uk/news/world-europe-26555745 [17 March 2014] BBC News (2014) Turkeys PM Erdogan faces corruption claim [online] available from https://www.bbc.co.uk/news/world-europe-26348852 [17 march 2014] export.gov (2013) Doing Business in Turkey [online] available from https://export.gov/turkey/doingbusinessinturkey/index.asp [17 March 2014] KPMG (2013)Global Automotive Retail Market: From selling cars on the spot to centrally managing the retail grid [online] available from https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/global-automotive-retail-market-study-part1.pdf [14 March 2014] JISC InfoNet (2014) PESTLE and SWOT analysis [online] available from https://www.jiscinfonet.ac.uk/tools/pestle-swot/ [14 March 2014] RBS ( 2010) Doing Business in Turkey [online] available from https://www.rbsbank.com.tr/docs/gbm/countrysites/Turkey/tr/Doing business in Turkey.pdf [17 March 2014] The Economist (2013) Erdogans Dilemma. The World in 2014 30 October, 53 The Law Society (2014) Turkey [online] available from https://international.lawsociety.org.uk/ip/europe/582/profile [17 March 2014] The World Bank (2014) Life Expectancy at birth, total (years) [online] available from https://data.worldbank.org/indicator/SP.DYN.LE00.IN?page=4 [17 March 2014] The World Bank (2014) Unemployment total [online] available from https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS [17 March 2014] TUBITAK (2010) Science, Technology and Innovation in Turkey [online] available from https://www.tubitak.gov.tr/tubitak_content_files/BTYPD/arsiv/STI_in_Turkey_2010.pdf [17 March 2014] Turkish Statistical institute (2014) Statistics on Research and Development activities [online] available from https://www.turkstat.go v.tr/UstMenu.do?metod=temelist [17 March 2014] UK Essay (N/A) PESTLE Analysis for Turkey [online] available from https://www.ukessays.com/essays/international-relations/pestle-analysis-for-turkey.php [17 March 2014] UK Trade Investment (2013) Doing Business in Turkey [online] available from https://www.ukti.gov.uk/export/countries/europe/southerneurope/turkey/doingbusiness.html [17 March 2014] World Finance (2013) Turkey aiming for huge new infrastructure developments [online] available from https://www.worldfinance.com/infrastructure-investment/government-policy/turkey-aiming-for-huge-new-infrastructure-developments [17 March 2014] 1