Koc Holding: Arc elik White Goods
Situation analysis: Koc Holding ("Koc ") is an industrial conglomerate in Turkey. Its
largest subsidiary, Arc elik, is the main manufacturer and market leader of so-called white
goods (major kitchen appliances) in Turkey. Koc will likely experience an increase in
foreign competition, as Turkish tariffs on white goods (protecting the local market) will
be phased out in 1996. In its turn, Koc is interested in expanding abroad, as the Turkish
market for white goods is getting saturated.
Problem identification: As any company, Koc is interested in growing its sales. Given
its existing international experience and the potential increase in foreign competition in
its home market, Koc has three options for growth: 1) Attack the Western European
markets; 2) Expand in the emerging markets; and 3) Keep growing domestically,
defending itself against foreign competition. As I believe that going international is
instrumental 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 listed
the main reasons for Koc &s competitive advantage in Turkey, and to what extent these
advantages are transferable to the Western European markets or the emerging markets.
Except for the low price advantage, the situation as pictured in Exhibit I looks
unfavorable for Koc in Western Europe. In my opinion, the main reason (and most
weighing factor in Exhibit I) for not further expanding in Western Europe relates to the
extremely strong presence of appliances manufacturers in Germany and Italy.
Companies like Siemens, Bosch, AEG and Candy have long established their brands in
the Western European appliances market and any newcomer will be confronted with local
customers 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
largest subsidiary, Arc elik, is the main manufacturer and market leader of so-called white
goods (major kitchen appliances) in Turkey. Koc will likely experience an increase in
foreign competition, as Turkish tariffs on white goods (protecting the local market) will
be phased out in 1996. In its turn, Koc is interested in expanding abroad, as the Turkish
market for white goods is getting saturated.
Problem identification: As any company, Koc is interested in growing its sales. Given
its existing international experience and the potential increase in foreign competition in
its home market, Koc has three options for growth: 1) Attack the Western European
markets; 2) Expand in the emerging markets; and 3) Keep growing domestically,
defending itself against foreign competition. As I believe that going international is
instrumental 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 listed
the main reasons for Koc &s competitive advantage in Turkey, and to what extent these
advantages are transferable to the Western European markets or the emerging markets.
Except for the low price advantage, the situation as pictured in Exhibit I looks
unfavorable for Koc in Western Europe. In my opinion, the main reason (and most
weighing factor in Exhibit I) for not further expanding in Western Europe relates to the
extremely strong presence of appliances manufacturers in Germany and Italy.
Companies like Siemens, Bosch, AEG and Candy have long established their brands in
the Western European appliances market and any newcomer will be confronted with local
customers 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