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Turkell: the Only Turk on Wall Street

By heve_papillon Nov 08, 2006 1204 Words
1.How can Turkell position for the 21st century? Can it afford to take a leadership role in introducing 3g, the third Generation of mobile phone systems?

Although expensive, Turkell needs to take a leadership position on the new 3-G technology. Otherwise, they will be giving away the market to the first company that does introduce 3-G in Turkey. While it is a different system, NTT DoCoMo has already introduced 3-G in Japan and the technology is very impressive. Over the phone, digital and video pictures can be sent and received. This has become extremely popular in Japan and is starting to catch on in the United States. Unfortunately, due to the investment required, Turkell does not believe the expected revenues warrant such an investment. At the time of the case writing, there was no indication that they were moving to adopt the 3-G technology. Thus, students should be encouraged to research and investigate the pros and cons of moving into 3-G technology.

2.How can Turkell reduce its economic risk if the Turkish lira remains unstable?

This is a question that many Turkish business leaders asked about their own companies during the four and one months that the case writer spent in Istanbul while on sabbatical. The economic crisis of Turkey was undermining all businesses. Unfortunately, the case does not go into much detail, but a weak political system coupled with political corruption is at the heart of Turkey's problems. For years, there had been political stalemate with very little being accomplished. One Prime Minister had legislation enacted in the 1970s that allowed almost anyone to set up a bank. Thus many banks became the personal "piggy bank" of numerous individuals. When these banks crashed in 2000, the Turkish government had to take over 22 banks. The Turkish government also runs a huge deficit each year. There are numerous social welfare programs, but insufficient funds to cover them.

Thus there is nothing a single company can do to stabilize the Turkish lira. Individually employees need to support political candidates who are grounded in economics and understand the importance of a stable currency. On the other hand, Turkell can reduce its own economic risk by its expansion efforts into other countries as it is already doing. In that way, they have a portfolio of countries and not all their investment is tied up in Turkey. Other large Turkish companies appear to be doing the same thing by diversifying outside of Turkey.

3.What are the strengths and weaknesses of Turkell?

Turkell has a number of strengths. The primary strength was the ability to recognize an opportunity and to be the first mobile communications company in Turkey. Turkell was committed to innovative new products, and a workforce that is young, energetic, and highly educated. The company boasts a staff with an average age of 28 and over 80 percent of them are university educated. Turkell's commitment to quality and innovation has earned it the prominent ISO 9001 award in 1999 and the "Best New Service" award for its cutting edge GPRSLand service package in 2002. The company became the first Turkish company listed on the NYSE, further enhancing its global reputation.

Another significant strength is Turkell's marketing prowess. Its unique logo and emblem as illustrated by the "snabbit" is visibly seen throughout Turkey. It is on kiosks, billboards, sporting events stadiums, etc. There are numerous Turkell commercials on T.V. All of this is designed to retain and build loyalty.

Turkell has grabbed 60 percent of the Turkish mobile phone market since its 1994 inception. The company has grown from a mere 63,500 subscribers to over 16 million in a few short years. The good news is that the market penetration of mobile phones in Turkey is only 34 percent, compared to neighboring countries such as Italy (92 percent) and France (82 percent). The bad news is that other firms also notice these trends and the competition is becoming intense. Turkell has reacted aggressively by taking stakes in numerous mobile phone operators outside the Turkish borders in hopes of expanding its customer base.

In terms of weaknesses, the road ahead will be filled with many perils for Turkell. Working against the company is a burdensome 66% tax bracket they operate within. The instability of the Turkish economy and weakness of the Turkish lira against the US dollar are concerns for all businesses in the region. Turkell not only must battle companies such as France's Orange, Norway's Vodafone, and Telecom Italia, but their greatest competition may turn out to be in their own country. Aycell, a government owned and operated company, has begun to undercut prices and offer services at lower than cost. The Turkish government is also able to cover all loses that Aycell experiences making for a rather unfair playing field. On the technological front, the rapidly evolving mobile communications infrastructures is at a very pricy fork in the road. The era of 3G technology has begun and Turkell finds itself at 2.5G. The costs decide the fate of the company. Also working against the company is the competitive price structure. With a very depressed economy. Turks are extremely price sensitive and will switch vendors if the price is lower.

4.What are the available threats and opportunities for Turkell?

A major threat is the entry of large European vendors that might be able to undercut Turkell's price structure. Therefore, Turkell has been smart by diversifying into East European countries where mobile phone penetration is very low and where Turkell can spread out the economic risk. According to CNN's business homepage, by the end of 2002, the Turkish economy was rated as one of the riskiest of developing countries.

5.What type of marketing campaigns should Turkell engage in to increase the average monthly minutes used by its subscribers? What type of market segmentation should it try? How can the Turkish mobile phone user be encouraged to spend more time on the mobile phone? Would educational campaigns be helpful?

These are questions that plague personnel at Turkell because they do not know the answer regarding how to increase usage. With the economic crisis, Turks are very price sensitive and their usage probably dropped dramatically after 2000 because they could not afford to use their phones as much as they had previously. These are questions that Turkell asked the case writer. They would like to know the answer and if any students came up with any ideas, they wanted to hear them. The creation of the Cell family was one Turkell attempt at market segmentation. Turkey is a large country about the size of Texas, but it is not so large that one company would have difficulty providing complete service or coverage. Thus except for the price, there may not be a lot of difference between the four competitors.

There are only three ways that Turkell can differentiate itself: 1) price, 2) service coverage and/or 3) new technology such as 3G with video and picture. The Cell family, while being very attractive and perhaps can attract customers, is probably not going to be a main differentiator that keeps customers.

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