Turkey: The Five Forces Model

Topics: Investment, Agriculture, Foreign direct investment Pages: 7 (1566 words) Published: November 26, 2013

What a difference thirty years make! By the end of the 1970s, Turkey’s economy was characterised by soaring inflation and inward-looking policies aimed at insulating producers from foreign competition. And now as the global economic power is shifting,Turkey stands as one of the biggest beneficiaries to this change.

The success of the Turkish economy over the next 30 years will depend upon a variety of factors; one of them is the development of key centers of excellence centered on industries where Turkey can develop an international competitive advantage and succeed in attracting foreign direct investment (FDI) as well as exporting goods and expertise to its region and beyond.

Just as the Porter’s Five Forces Model, we present to you, yet another Five force Model customized to Turkey’s current position and projected capacities. After taking into consideration factors such as a young population, growing university education and consequent availability of skilled labor as well as Turkey’s movement towards higher-value industries, we out forth a set of five sectors that Turkey can concentrate to drastically boost their performance and salvage their current account deficit.

Turkey currently acts as a regional hub for the production, processing and export of foodstuffs to large European and Middle Eastern markets. Its agricultural diversity and amenable climate allow it to produce a sustainable supply chain of raw inputs for its processing industry, facilitating its status as a large net exporter of food and beverages. The Chart below shows that Turkey’s manufactured food and beverage export industry tripled in size over the last ten years and is now valued at over US$6.7 billion.

GRAPH: Value of Turkey's manufactures food export sector (In million US$)

Source: Turkish Statistical Office

FDI fostering a regional hub

Foreign investors could play an important role in fostering growth. The number of foreign companies investing in the Turkish food and beverage industry has increased from 257 in 2005 to 421 in 20096 and global brands have started to expand their operations in the country. Nestlé announced in March 2011 that it will add to its three major Turkish factories with a cereal factory in Bursa. The company has invested over US$140 million in the country over the past four years. There is much potential for foreign companies to continue to set up factories to benefit from these favourable growth dynamics, ultimately encouraging a regional production centre of excellence to develop.

Turkey is starting to lay the seeds for its climb up the agricultural value-chain. In February 2011, the government approved the country’s first agriculture “technopark”7. It aims to become one of the most competitive regions in global agriculture by pursuing high-technology R&D, greenhouse systems and seed and soil improvement. Such ambition has already attracted high profile companies. Monsanto, a multinational agricultural corporation, has several well-established facilities in Turkey where it is conducting trials to improve seed efficiency.

GRAPH: Crop yield in 2009

Source: Food and Agriculture Organization

Exporting new knowledge
Over the next thirty years, there is opportunity for foreign R&D-intensive companies to enter the Turkish market and for local companies to emerge, benefiting from Turkey’s increasingly educated population and from the favourable policy initiatives to foster innovation. A centre of excellence could be strengthened by the arrival of foreign high-technology firms. The establishment of a centre of excellence in agricultural R&D will help improve productivity in the local agricultural sector, providing a potential boost to other related centres of excellence such as food and beverage processing. Once the industry is more established, regions such as the Middle East and Africa could...
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