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  • 1. EGE UNIVERSITYFACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES BUSINESS ADMINISTRATION GLOBAL MARKETING COURSE TURKISH TEXTILE INDUSTRY AND ITS COMPETITION POWER Submitted to : Keti VENTURA 13080002898 Baris Istipliler 13080002866 Gamze Saba Erasmus Student – Janina Werner Erasmus Student – Julia Grün Erasmus Student – Kim Noelle Rastert 2012
  • 2. Outline1. Introduction to Textile Industry 1.1 Textile Industry in General 1.2 History of Textile Industry in Turkey 1.3 Geographic Concentration of Turkish Textile Sector2. Competition in the Textile Industry Worldwide 2.1 General Information about Turkey’s Position in the Worldwide Textile Market 2.2 Porter’s Five Forces Framework 2.3 Porter’s Five Forces Framework In Regards to the Turkish Textile Industry 2.4 Competitive Advantages of the Turkish Textile Industry 2.5 German Textile Industry in Contrast to the Turkish One 2.5.1 Information about German Textile Industry 2.5.2 Comparison between Turkish and German Textile Industry 2.6 SWOT and PEST Analysis of the Turkish Textile Industry 2.6.1 Definition of SWOT-Analysis 2.6.2 SWOT-Analysis of the Turkish Textile Industry 2.6.3 Definition of PEST-Analysis and Application to Turkey3. Practical Insights into Turkish Textile Industry – Interview with Emre Kızılgüneşler, President of Aegean Region Committee of Garments Exportation4. Future Outlook on Turkey’s Textile Industry 2
  • 3. 1 Introduction to Textile Industry 1.1. Textile Industry in General The textile industry emerged by the basic need of humans to “cover their bodies” (Güleryüz,2011, p. 3). From an industrial point of view, it emerged in England after the industrial revolution. The textile industry is primarily concerned with the production of yarn, and cloth and thesubsequent design or manufacture of clothing and their distribution. The raw materials used in productionmay be natural, or synthetic using products of the chemical industry. Mainly there are four sources for textile production: animal (wool, silk), plant (cotton, flax, jute),mineral (asbestos, glass fibre), and synthetic (nylon, polyester, acrylic) materials. In the past, all textileproducts were made by natural sources, but today most of the companies are using chemicals to createtextile products. Products of the textile industry are found in every human’s everyday life. They include not onlyclothing but also bed sheets, towels, bathrobe, blankets, voiles, carpets, gray cloth, weaves, and tents. Thisshows that the textile industry is concerned with the production of a wide range of products. 1.2. History of the Textile Industry in Turkey The history of textile production in Turkey origines from the Ottoman Empire period. Especially,in the 16th and 17th centuries, it was at the peak period of its time. Ottoman Empire’s econonomy washeavily relied on textile and it was at an advanced level. Figure 1 : History of Textile Industry 3
  • 4. In the 20th century, between 1923 and 1962, a great development has been made by Turkey. In1933, all textile fabrics and small work places were gathered under the umbrella of Sumerbank. It was agreat power resource by helping education of new workers for the industry and investing for the industry.After the establishment of Bursa Textile Research and Education Center, the sector has become morepowerful. In the 1990’s the share of textile industry in comparison to other sectors in the Turkisheconomy extremely increased. By the help of export orientations, such as Agreement on Textile andClothing and joining Customs Union, Turkish textile industry started to play an important role.Nowadays, Turkey is one of the big players in the industry. Turkey was the EU’s second largest supplierof textiles and clothing, after China, with a 13.3% share of the EU import market in 2010, according todata from Eurostat (Official Blog, TCP, 2011). We see some Turkish brands in the global market,respected by many countries such like Mavi. On the other hand, there are so many Turkish producer forthe big global brands such as, Levis, H&M, Zara, or United Colours of Benetton. Table 1 : Annual Textile Export of Turkey, General secreteriat of ITKIB (2012) 4
  • 5. Table 1 depicts that the export rate increased in 1997 after joining Customs Union with EU in1996. Turkey reached $ 3.562.462 of export in 2003. Table 2 : Leading Markets for Textile Export of Turkey, General secreteriat of ITKIB (2012) According to WTO statistics for 2008, Turkey ranked the 7th country in the world with the shareof 3,8% and Eurostat statistics the 2nd in the EU market share with the share of 17,5 %. As far as countrygroups are concerned, Turkey exports 49% of textile products to EU countries. Second important group isformer USSR countries including Russian Federation, Ukraine, Uzbekistan with the market share of 14%. On the country basis, the most important export markets for the Turkish textile industry areRussian Federation, Italy, Germany, Romania and Poland. 1.3 Geographic Concentration of Turkish Textile Sector When we analyze employment numbers, numbers of textile companies and export figures oftextile industry, there are basicly three areas that are leading Turkish textile industry: Marmara, Ege andCukurova region. 5
  • 6. Figure 2: Textile Concentrated Areas in Turkey MARMARA : Three big cities lead the textile industry in Marmara: Istanbul, Bursa and Tekirdağ. Marmara isthe leader in industrialization in Turkey so that one can imagine that it takes a big slice from the pie. Thisregion has 56% of the total textile employment in the country and 67 % of the total textile relatedcompanies (Ministry of Labor and Social Security Statistics). Approximetely, 71% of the total textileexports of Turkey is made by Marmara region (Turkstat). EGE : The most important cities in the region are Denizli and Izmir. This region has a focus onproduction of home textiles, towels and bathrobes. Ege has a share of 12% of the textile employment and11% of the total textile companies. 10% of the total textile exports is made by Ege. ÇUKUROVA : The most important cities for this region are Adana, Kahramanmaraş and Gaziantep. There arealso important companies in this region. For example, it has 12 of the textile companies that have rankedin the top 500 firms in whole Turkey. This region observes higher growth in terms of the textile exports,textile employment and textile related companies than any other (Kutluksaman, May 4, 2012, p. 18-20).Cukurova region is the 7th largest cotton producer in the world. 6
  • 7. 2 Competition in the Textile Industry Worldwide 2.1 General Information about Turkey’s Position in the Worldwide Textile Market Turkey is the ninth largest supplier of textile and seventh largest supplier of clothes worldwide in2011 (European Union excluded, see figure 1). Some developments over the last years improved Turkey’sposition in the worldwide textile market, for instance the customs union agreement in 1996 between theEuropean Union and Turkey and free trade agreements (FTA) with Hungary and Bulgaria. In thedomestic area, many local Turkish companies negotiate licensing contracts with companies abroad, inorder to compete globally (U.S. International Trade Commission 2004: 39-42). Figure 3: Turkey’s rank among textile exporters worldwide according to their exports in 2011 World Trade Organization – International Trade and Market Access Data 2.2. Porter’s Five Forces Framework A major task for managers is to analyze competitive forces in order to identify opportunities andthreats in their business’ industry. One approach to develop such an analysis is known as Porter’s FiveForces model (see figure 4). It gives insights in the forces, which influence competition, supports theanalysis of competitors and helps in shaping the own strategy. Porter (1979: 2) argues: “The collectivestrength of these forces determines the ultimate profit potential of an industry”. The stronger the forces, 7
  • 8. the more limited are companies in an industry to raise prices and earn higher profits. A threat in theindustry can be seen as the result of strong competitive forces, because they depress profits. Conversely, aweak competitive force allows a company to earn greater profits and can be seen as an opportunity (Hill /Gareth 2008: 42-43 and Porter 1979: 3). Figure 4: Porter’s Five Forces Framework Michael E. Porter (1979) The following part describes briefly the single threats: The threat of new entrants means, thatnewcomers might face the following barriers: spending high efforts in overcoming customer loyalty toother brands or companies, initial capital requirements, cost disadvantages independent of size and accessto distribution channels (Porter 1979:3-5). If bargaining power of suppliers is high, in case the productis unique, the industry contains a small number of suppliers or the suppliers do not have to considercompetitive products in the market (Porter 1979: 5). The bargaining power of customers is high whenthe buyers buy in large amounts or the product is a replaceable standard product (Porter 1979: 6). Asubstitute product is threatening, because of its effect of limiting profits and growth of an industry(Porter 1979: 7). The circumstances under which the intensity of rivalry between companies is highwhen for instance industry growth is slow or fixed costs are high which leads companies to fight for astrong price competition (Porter 1979: 7). 2.3 Porters Five Forces Framework In Regards To The Turkish Textile Industry An industry analysis from 2007, which was about the competition between textile and apparelmanufactures, took place in Istanbul. It roughly gave insight in the evaluation of the Turkish textileindustry in the framework of Porter’s five forces model. The following paragraphs explain Porter’s fiveforces in regards to the Turkish textile industry. 8
  • 9. The notice of entrants by established companies in the Istanbul apparel and textile manufacturingindustry is low. They do not seem to spend high attention towards the threat of new entrants, since thenumber of competitors in the market is large. The biggest problem for new entrants might be the heavyreliance on references and the strong and deep relationships between competitors and customers. Withoutany company awareness among clients, it is difficult to build up customer loyalty. A possibility fornewcomers to overcome these threats is entering the market by bringing some kind of customer base andknowledge along. Capital and investments to start up a new company do not need to be very high in thisindustry, because a high percentage of production cost comes from low labor costs. Cost disadvantageindependent of size is for example the limited know-how in apparel manufacturing of new actors whichmight lead to disadvantages compared with experienced companies. The access to distribution channelsmight be a hindrance, because beginners do not have much experience in their customers’ wants andneeds (Ahlquist / Andreasson 2007: 27-31). An evidence for a weak bargaining power of suppliers is indicated by the large population ofsuppliers in the market. The customers are able to ask for best terms and even play suppliers off againsteach other. The consequences are decreasing prices and similar prices among suppliers (Ahlquist /Andreasson 2007: 31-32). Since many manufacturers exist, customers are able to find alternative manufacturers whenneeded. This situation is an indication for a strong existing bargaining power of customers in theTurkish textile industry. To overcome this threat, manufacturers should seek for greater differentiation oftheir products. The durations of contracts are very short and brought quantities are very high. Thesecircumstances add to a strong bargaining ability of customers (Ahlquist / Andreasson 2007: 32-33). The barrier of substitute products can be seen as less strong, since it is difficult to substituteclothes and other textiles. Some argue that there are possible substitutes, because of new trends. Butdespite, the main argument remains: there is no substitute for apparel (Ahlquist / Andreasson 2007: 34). The Turkish textile and apparel sector contains thousands of producers. Many of them are smalland medium sized businesses, family owned. Although the population of competitors is very large, thehigh export rate indicates, that the competition force and intensity of rivalry between the companies islow. Turkish producers of textiles and apparel have the characteristic to implement the same strategiesfrom their neighbors. This attitude might lower the competition between them. Some interviewees of theindustrial analysis regard competition from abroad as more dangerous than domestic competition(Ahlquist / Andreasson 2007: 22, 35). 9
  • 10. About the competition in textile markets it can generally be said that the competition intensity ishigh, because the characteristics of the markets, for example low required investments or low skilledemployees, set very low entry barriers. However, it can be indicated, as a special fact of the Turkishtextile industry, that the competition intensity in the Turkish textile market is lower than general, becauseof strong relationships between companies and consumers. Many companies seem to have fix customers,so they do not run fights with competitors to catch their consumers. For new entrants can be concludedthat an entry in this business is especially difficult initially. This is linked to the just mentioned strong, ontraditions based bonds between consumer and companies. Without an existing network, know-how andcontacts, entering in the Turkish textile industry might be very problematic. But once established solidand trustful customer bonds and a focus on differentiation, the company might be able to position itself ina stable environment. 2.4 Competitive Advantages of the Turkish Textile Industry Turkey possesses several advantages in its production, mainly on the fields of production factors,labor and technology, compared to competitive countries like China or India. Turkey has two advantages in regards to the factors of production. First, the cotton from theAegean region is regarded as highly qualitative, which makes Turkey one of the leading cotton producersin the world. The second advantage is about Turkey’s production in spun yarn, which ranks Turkeyamong the six largest spun yarn manufacturing countries worldwide. In 2000, Turkey producedapproximately 5 percent of total world output in spun yarn with increasing outputs in the following years.So Turkey possesses raw materials for textiles directly. Turkey also possesses advantages in labor. Labor costs in Turkey are very low and employmentcontracts are usually settled over one to six months, which makes the industry a very flexible one. Laborcost in Turkey as a percentage of textile output was in 1997 nearly 10 percent. In India the figure was in1998 10 percent, too. In other countries it was much higher, for instance in Italy (12 percent), in Portugal(14 percent) and in the United States (17 percent). The third basic factor of advantage lies in Turkeys advanced technology. The textile sector couldmake an important step towards modernization since the implementation of the European Union-Turkeycustoms union. Turkey imported a large number of textile and apparel machinery in the last years. Asresults, Turkey has the largest capacity for the manufacturing of yearn, weaving and finishing in wholeEurope. Furthermore, because of long established Turkish-German commercial relationships, many 10
  • 11. employees in Turkish mills have worked in German factories and acquired additional knowledge (U.S.International Trade Commission 2004: 36-38). Turkey’s geographic location can be sees as an advantage, too. Turkey has a favorable locationbetween Europe and Asia which leads to lower transportation costs in comparison to what other countriesare able to offer. American merchants favor Turkey because Turkey is able to offer shorter lead times andtherefore faster shipping times than any of its competitors in Asia (Etkin / Helms / Turkkan / Morris2000: 70 and U.S. International Trade Commission 2004: 42). 2.5 German Textile Industry 2.5.1 Information about German Textile Industry The textile and clothes industry is the second largest consumer goods industry in Germany.Nearly 120,000 people work in approximately 1,200 small and medium sized companies for this industry.The export quota of German textile accounts 43 percent. Germany is ranked as 3rd largest producers ofclothes in the European Union (Hauser 2010: 7). Germany’s exports of textile in 2011 to the world wereaccounting for US $ 16,158.9 million and exports of clothes were US $ 19,645.8 million (see figure 3). In2011 the textile industry could close its business year with a positive turnover of +7 percent. But thisyear, the branch experienced a stagnant phase, as a result of the durable enduring financial and economicstruggles in Europe. One part of Germany’s textile industry has to be highlighted here: high technicaltextiles. Memon and Zaman (2007: 120) explain technical textiles with the following definition:“Technical textiles as defined as textile materials and products manufactured primary for their technicalperformance and functional properties, rather than for their aesthetic and decorative it characteristics.”In the sector of technical textiles, Germany is one of the leading sellers worldwide. Today, Germany’sglobal share in this segment is about 45 percent. One reason for this development is a close cooperationbetween the companies and textile research institutes. In recent years the German textile industry wascharacterized by structural changes in their organization and production. Similar to Turkey, Germany hadgreat problems with the low price competition from Far East, too. Decreases in production and offshoring(global outsourcing) marked the last years in this industry (Deutsche Bank Research 2011). 2.5.2. Comparison between Turkish and German Textile Industry In contrary to Germany, where the car industry makes up an important part of the economy, thetextiles and clothing industry is one of the driving forces of the Turkish economy. Turkey’s textile andclothing industry employs with about 750,000 people in more than 40,000 companies more workers thanGermany. Turkey’s textile made up 23 percent of its overall exports in 2001. Turkey exports nearly 70 11
  • 12. percent of its textile and apparel products, which is a higher number than Germany’s 43 percent (U.S.International Trade Commission 2004: 36, Republic of Turkey, Minister of economy 2012: 1-3). Incomparison to German textile industry, Turkey’s textile industry does not target high technique textiles,but the production of workaday clothes and home textiles. This is favored by Turkey’s abundance in rawmaterials like cotton and synthetic, compared to Germany. In 2011 Turkey exported textiles of the totalvalue of US $ 10,772.4 million (see figure 3). The reason why Germany’s export sales are higher thanTurkey’s even though Turkey is considered more as a textile manufacturing country than Germany mightbe because of the difference in prices between their focuses, mainly the price differences between hightextile products and regular woven and kitted goods (Republic of Turkey, Minister of economy 2012: 1-3,Istanbul Textile and Apparel Exporter’s Associations 2012: 1). Turkey displays a country, in which many foreign companies undertake investments andpartnerships. Nearly 249 mostly Western companies, like Hugo Boss or Levi Strauss, use Turkey’sconditions to operate in this sector and establish their own textile and apparel productions. Domesticapparel producers, on the other hand, concentrate on manufacturing non-branded goods and selling themto retail chains, where they can be branded (Chowdhury 2009: 42, cited from State Planning Organization(SPO) 2004, p.24). Germany is not regarded as a manufacturing location for foreign companies.Production costs would be too high in Germany. Rather, foreign companies sell their productions toGermans. Moreover, domestic German apparel and clothes manufactures concentrate on producingclothes with strong brands for the upper market and for exclusive premium segments (Hauser 2010: 7). 2.6 SWOT and PEST Analysis of the Turkish Textile Industry 2.6.1 Definition of SWOT-Analysis In order to analyze the current as well as the future state of a company or an industry, it isnecessary to do a system analysis. A well established tool for this is the so-called SWOT-Analysis. TheSWOT-Analysis is described as a strategic planning tool which evaluates the Strengths, Weaknesses,Opportunities and Threats involved in a project, an idea, a business or an industry. A SWOT-Analysismight create a series of strategic alternatives (Hill and Jones, 1992:14). Its key purpose is to identify the strategies that will create a specific business model that will bestalign an organization’s or industry’s resources and capabilities to the requirements of the environment inwhich the firm operates. In other words, it is the foundation for evaluating the internal potential andlimitations and the probable opportunities and threats from the externalenvironment (Managementstudyguide.com, 2012). It is possible to take control over the internal factors,but this is essentially impossible for the external factors. 12
  • 13. Internal Analysis External Analysis Figure 5: SWOT-Analysis; Own depiction (2012) Strengths are the company’s resources and capabilities that can lead to a competitive advantage.Weaknesses are resources and capabilities that the company does not possess but that are necessary, this isresulting in a competitive disadvantage. Opportunities are conditions in the environment that allow acompany to take advantage of organizational strengths, overcome organizational weaknesses andneutralize environmental threats. Threats are conditions in the environment that may stand in the way oforganizational competitiveness or the achievement of stockholder satisfaction (Harrison and John, 2004:5-6). The general idea is that strategies should be made to take advantage of internal strength andopportunities arising from external environment, to overcome internal weakness and neutralize threatsfound in external environment (Harrison and John, 2004:6). TOWS matrix is the essential completing tool to SWOT-Analysis. It enhances deployingstrategies systemically considering the relations between Strengths, Weakness, Opportunities, andThreats. The consequences of the internal and external factors can be replaced in a matrix called TOWSMatrix is shown in table 3. TOWS matrix helps to systematically identify relationships between threats,opportunities, weaknesses and strengths, and offers a structure for generating strategies on the basis ofthese relationships (Weihrich, 1982:45-66). 13
  • 14. External Opportunities (O) External Threats (T)TOWS MatrixInternal Strengths (S) SO ST Strategies that uses strengths to Strategies that uses strengths maximize opportunities. to minimize threats.Internal Weaknesses (W) WO WT Strategies that minimize Strategies that minimize weaknesses by taking advantage weaknesses and avoid of opportunities. threats. Table 3: TOWS Matrix (Weihrich, 1982) 2.6.2 SWOT-Analysis of the Turkish Textile Industry The following applies the just described theory of SWOT- Analysis to Turkey’s textile industry. Strengths Turkey offers richness in raw materials, since Turkey is ranked seventh in the word with a cottonproduction of 375.000 tons (The General Secretariat of ITKIB, 2012). Another strength are itscompetitive labor costs. The average labor cost in Europe is exactly 21,79 €, whereas the average costs inTurkey are around 7,00 € (European Commission Eurostat, 2012). But Turkey still provides qualified andwell educated labor force. With 3.5 million students in tertiary education and approximately 600,000graduates from universities per year, Turkey has a World-class engineering education (Invest in Turkey,2012). All around Turkey one can find the term Turquality which describes the quality of products madein Turkey (Invest in Turkey, 2012). Weaknesses One of the biggest weaknesses the industry faces is the informal black market sector which can befound in every city on the bazaars. Lots of profits of brand companies get lost there and it creates a weakimage of Turkey as a selling point. On top of that it suffers from its inability to create a large number ofbrands. Only a handful of brands are known outside of Turkey, for example Mavi. High input and energy costs are another obstacle. In order to increase competitiveness of themanufacturing industry, the infrastructure industries that supply inputs to the manufacturing industriesshould improve productivity. Energy costs must be lowered and supply security ensured. 14
  • 15. Opportunities A big opportunity for Turkey is its geographical location. Located between Europe and Asia itsposition allows Turkey an easy distribution and short logistic periods to its main export countries, whichare especially Europe and Russia, due to the geographical proximity (The General Secretariat of ITKIB,2012). Another plus is the liberalization of Turkey and its trade policies in combination with the Turkishgovernment policies for industrial development and investment incentives. The Turkish Ministry ofScience, Industry and Technology planned to release policies for the “Improvement of Investment andBusiness Environment”, “International Trade and Investments”, “Skills and Human Resources”,“Technological Development of Companies”, etc (Republic of Turkey, 2012). Threats The industry expectations of danger would comprise economical and political uncertainty whichcan occur for example when the government is changing from a conservative one to a liberal or the threatscan arise from the current and possible problems in Syria (International Property World, 2012). Thethreats include as well even lower labor costs in low labor countries such as China, Bangladesh and Indiawith average labor cost of around 2,00 € (InChin Closer, 2012). The distance to the US-Market and thegrowing Far East can cost the Textile Industry valuable market shares. Having seen the strong and weak sides of the sector supported or hindered by opportunities andthreats, it is only right to address what can be done to improve the current situation with a future vision inmind. The following TOWS Matrix provides a framework that presents a future vision regarding theindustry. External Opportunities (O) External Threats (T) 1. Geographical location 1. Economical and political TOWS Matrix 2. Liberalization of Turkey uncertainty 3. Government policies 2. Low labor countries 4. Investment incentives 3. Problems in Middle East 4. Distance to other marketsInternal Strengths (S) SO ST1. Richness of raw material 1. Increase market share in 1. Making investments in China2. Competitive labor costs European and Russian markets. and other low labor countries.3. Qualified labor force 2. Opening business 2. Opening new headquarters in4. Quality of product development and planning the US und Asia. 15
  • 16. department for new technologies. 3. Opening research and development departments.Internal Weaknesses (W) WO WT1. Black market sector 1. Create brands with high Overcome weaknesses by making2. Inability to create brands quality. them strengths (move towards SO-3. High Input costs 2. Opening E-Businesses and Strategy) logistic departments. 1. Joint Ventures with Asian firms. 3. Lobby for stricter anti- 2. Reduce the threat of competitors plagiarism rules. by making new investments in high quality image . Table 4: TOWS Matrix of Turkish Textile Industry; Own depiction (2012) 2.6.3 Definition of PEST-AnalysisThe PEST-Analysis, also known as STEP-Analysis is, like the SWOT-Analysis, a strategic planning toolwhich analysis the general external environment of a company/industry (Czinkota and Kotabe, 2001:57).The PEST-Analysis is a useful tool for understanding market growth or decline, and as such the position,potential and direction for a business. The PEST-Analysis refers to the Political, Economic, Socio-cultural and Technological factors that influence an organization or industry, their strategies, structuresand means of operating (Senior and Fleming, 2006:16-17). Figure 6 illustrates the PEST factors that existas part of an organization’s environment. All, at some time, will have an impact upon the organization. 16
  • 17. Figure 6: PEST factors, Senior and Fleming (2006) Political Factors Turkey is a democratic, secular and social state governed by the rule of law. It has been a multi-party parliamentary democracy since 1947. Legislative power is vested in the 550-member Turkish GrandNational Assembly (TBMM), whose members are elected for four-year terms by the votes of Turkishcitizens over the age of 18. The government of Turkey is pro-western and is actively working towards theintegration of Turkey into the European Union. They have implemented actions towards a majoreconomic reform which, as can be seen by the growing economy are working to improve the conditions inthe country. The government has been in office since the end of 2002 with its Prime Minister RecepErdoğan. Erdoğan is also chairman of the ruling conservative AP Party (International Property World,2012). Turkey has a progressive tax system with individual tax rates from 15%-35% and a corporate taxrate of 20% (International Property World, 2012). Right now Turkey is in a military conflict with Syria,which can lead to political instability. Economic factors As already mentioned in the SWOT-Analysis the middle-income country’s biggest competitionare low labor countries like China, India and Bangladesh. 17
  • 18. Turkey’s unemployment was at 8.2% at the end of 2011, which is lower than the average EUunemployment rate (10,0%) but it leaves space for improvement (European Commission Eurostat, 2012).The average currency exchange rate in 2011 was 1€ = 2.33 TL, 1€ = 1.99 TL (2010) and 1€ = 2,16 TL(2009). The current low value of TL makes it easy for Turkish firms to export (European CommissionEurostat, 2012). The GDP real growth rate was sinking to 8,5% in 2011 from 9% in 2010. The crisis hit Turkeyhard in 2009 with a growth rate of -4.8% (European Commission Eurostat, 2012). The high growth rateright now boosts the domestic demand. Socio-cultural factors One of the social system strengths in Turkey is that they have growing proportion of youngpopulation as they have more than half the population being aged below 30 (European CommissionEurostat, 2012). This will allow Turkey to increase their employment rate by getting the most out of theyoung labor force. Some of the most important social welfare schemes that the government has beenproviding are unemployment insurance, medical insurance, insurance for work-related injuries, maternityinsurance and housing security. The system is financed primarily by contributions made by employersand through the payroll deductions of employees. Turkey has historically shown weak performances onvarious social parameters, mainly because of its policies on such matters. The human development index(HDI) of Turkey is 0.704 and the country is ranked 92th among the 177 countries rated (InternationalHuman Development Indicators, 2012). Technological factors Turkey has been slower in adopting technological advances than the EU countries, althoughpolicy measures have been undertaken to expedite this. Total expenditure on R&D in 2006 as apercentage of GDP was 0.6%, compared to 2.3% in the OECD countries (European CommissionEurostat, 2012). Nevertheless, over the past decade, Turkey’s telecommunications industry has beenbooming due to the liberalization of the market. The number of mobile telephone subscribers increased ata CAGR of 22%, from approximately 23 million in 2002 to 62 million in 2007 (Trading Economics,2012). However, the levels of patenting remain extremely low, despite a rapid increase in recent years.The R&D climate is expected to improve, as the government has been taking several initiatives towardsdeveloping the technological landscape of the country by encouraging foreign entities, prominentuniversities and research organizations to foster a culture of innovation. 18
  • 19. 3. Practical Insights into Turkish Textile Industry – Interview with Emre Kızılgüneşler, President of Aegean Region Committee of Garments ExportationInterviewee: Emre Kızılgüneşler - President of Aegean Region Committee of Garments Exportation - Founder and current CEO of "Farbe Tekstil Turz. İnş. Enerji San. ve Tic. A.Ş."Interviewer: Barış İştiplilerDuration: Approx. 30 MinLocation: Buca BEGOS 3. Bölge, Buca-IzmirDate: 13.12.2012, 10.15 am1. What are the core competitive advantages of Turkish textile (or specifically garment) industrycompared to global industries? There is a powerful background which contains high investments of capital (machinery,technology) and education which creates 3 generations. This foundation is so powerful that Turkeys 20 %export comes from this industry. Cotton- We are one of the rare countries which yield cotton and manufacture it from farm to theshop. After China and Italy, Turkey is one of the best at this competition.We have enough competency to produce every product. We have the technology to be elastic and versatile. For instance; we can produce 300 fromproduct A today and the day after we can produce 300.000 product Z. And the other day, we can againproduce 100.000 from product A for example. We can react well.We have so many people which are educated well.2. Is the level of integration which was succeeded by Turkish firms enough according to you? Whatshould be done to encourage current domestic firms to operate multi- or internationally? The fields of export, manufacturing and brand management are the things that are totally differentfrom each other in textile industry. It needs so much effort to produce a whole collection and sell it as a 19
  • 20. brand. For example, as Farbe Textile, when we tried to do this, we could produce only shirts and sweat-shirts; so where are the other parts of a collection such as trousers, jeans, jackets, shoes, suits? You shouldinvest, according to me at least US-$ 20 million in it and still it is 50 % risk that you can bankrupt withthis investment. People should not think so aggressively on this brand management issue and there should be awell planned and segmented project to be conducted. Otherwise, it is so easy to create a logo and printthis to your products, there are so many brands which do this but I see them as "soap-foam" which willnot last for long. Therefore, manufacturing is the best thing I can do and I do it. I know how to produce,how to sell but I am not so good at marketing (franchising) it. There is only Italy which is capable to do and succeed in all of them, manufacturing, selling andmarketing together. Cotton, Damat, Sarar, LCW have the brand but they do not have manufacturing forexample; they have only their emergency production facilities which is used only to supply the needs ofcollections, that cannot be purchased from market. They make collections by using their supply chainsand then they focus their efforts to market and sell them; they cannot lose their power to produce. Mavi isthe only brand which tries to do that, but personally, I am not sure about their success. I see first Damat and then Sarar as the best Turkish firms that succeed brand management well allaround Europe.3. In which segments do you think the adding value level is the highest? Or is there a niche thatshould be exploited by Turkish firms in multi-national arena? Which sector most we operate andexport in? Which one is the most powerful and what is its credibility in national area? I will give some facts to you to explain this issue. We have an index of value/kg in which thejewelry has the biggest values of course. Then the garments come with US-$ 27.5. For instance, it is US-$25.5 for defense and US-$ 18 for automotive which we are always "very proud" (!) of. Also, in textile,from field to the shop, we add our own value and all our citizens create and earn from that value.However in automotive, US-$ 15 of this value came out of Turkey as import; and they are assembledtogether here. Also when we evaluate it in respect of trade balance, we export US-$ 16 billion in a year andimport only US-$ 4 billion. That means we cover the trade deficit of Turkey; if we had five moreindustries like garments in Turkey, there would not be any problem of trade deficit. Therefore, I think theanswer is clear. 20
  • 21. 4. Are there any endorsements or supports for Turkish SMEs to widen their knowledge aboutglobal commerce and settling in the form of an inter- or multinational organization? Are theyefficient and effective enough? I think that the Ministry of Economics is really effective in these politics. Turquality, for example,is a program that offers much to producers. They provide them money for 50 % of their rental loans, giveextra credits to producers. They also give support when you try to open a new shop as a company forexample. In international area, Turkish government organizes fairs or invites VIP committees to thecountry to create a good opportunity for the companies to sell their products or make agreements. Thereare also, some education and consultancy events in the fields of sales management, marketing,production, design for SMEs. In general I appreciate the efforts of government and Ministry of Economics. I can evaluate themas a well organized and managed company. However, now we have an export of garments in the level ofUS-$ 16 billion and textile in US-$ 9 billion. Despite, we know that in places like Laleli, Merter,Osmanbey there are still so many producers that export to Iraq, Russia, Iran, Syria without the overseeingof authority. And with the addition of these numbers, our actual export level is about US-$ 32 billion.s There is also a handicap for Turkish industry, the price of workforce. We pay 4-9 times more forworkforce in average when we compare it to our competitors like Bangladesh, China, Pakistan. In Italy itis even more but they have an export level of over US-$ 60 billion. However, our strengths that wementioned before, maintain our position in global markets.5. How would you evaluate textile industry in Turkey after 20 years in respect of globalization?Also before 20 years, was it better or worse? Do you see any possible threats like import? When I first entered to this sector in 1996, the people said me that the industry was collapsing andasked if I am mad. However, I survived and performed well for about 17 years and now I think mychildren can also continue to do this job. The development motive and the power of our industry arecapable to do this. The biggest threat of Turkish textile and garments industry in the future is the branding whichcannot succeed. Right now, we do not have 100 brands in Turkey overall and to reach our goals, we donot have any global brands. 21
  • 22. 6. Which role should be (necessarily) worn by Turkish countries to spread their activities to aregion (Europe, Balkans, etc) or to the world? (Innovative, image-holder, price/performancemonster, etc?) Now, we do all of them. However by the time, we will develop into the way of extensive use ofbranding and strategies of marketing as Italy does.7. We know that Turkish garment and textile industry has developed over the last 30 years.However we cannot hear the names of Turkish brands all over the world and Europe like Italians,Americans or French brands. What do Turkish firms do wrong not to have the decent power ofcompetition in the garment industry and brand loyalty in the minds of customers globally? Is itsomething that they can control or is it the conjuncture of the national economic dynamics? We can think it as USA, Europe vs Turkey. The situation is of course important. This encouragesthe firms of these countries and they courage to do things like Billabong, Roxy, Quicksilver with the helpof marketing.8. What are your (or governments) current short-term and long-term plans to increase theefficiency of Turkish textile industry around the world? US-$ 500 Billion of export with five high quality global brands is the target of Turkey in 2023 asyou know. And for this aim, we will be reaching US-$ 52 billion of export with 1-2 global brands. Thereare 7000 companies right now. However none of them is capable to do that. However, it seems palatable when we look at Italys current position in the market as we takethem as model for us. I see our future is good, with possible brand management projects and well investedcapitals. 22
  • 23. 4. Future Outlook on Turkey’s Textile IndustryCurrently, the sector‘s main goals are to produce high value adding, original and high quality productsand to sell them at reasonable prices instead of just producing low cost goods. By this Turkey’s imageshall be changed from being a mass producer of ready wear to a creator of new designs, fashions andquality labels turning out higher priced products. Therefore, importance must be given to R&D as well asto cooperations between governmental institutions and universities. This trend has already started. Likethis young Turkish designers are emerging and product diversity can be found. One reason for thispositive trend are pattern design competitions organized by various institutions that foster thedevelopment of young and innovative Turkish workforce in this industry (DEIK Foreign EconomicRelations Board, 2012).Also Turkish government puts much emphasis on the future development of its textile sector. Thegovernment targets for an annual textile sector export by 2023 which is the 100th anniversary of theTurkish Republic of US-$ 85 billion (DEIK Foreign Economic Relations Board, 2012). As a figure ofcomparison in 2010 it was US-$ 24 billion, in 2009 US-$ 21 billion and in 2008 and 2007 each US-$ 25billion. This means that within 13 years (from 2010 to 2023) annual export of Turkey’s textile industryshall be almost four times higher.Taking the historic development, the current strengths, weaknesses, opportunities and threats in accountthat were explained intensively in chapters one to three one can say that Turkey’s textile industry hasprofitable and bright future ahead, especially if it uses its modern technology and high quality at lowwages in a beneficial way. Nevertheless, the industry is vulnerable because of the threatening imports oftextiles from even lower-cost countries from Asian region. Also one has to wonder how trade relationswith the main importers of Turkish textile products will develop in times of economic hardships andcrises. 23
  • 24. References- CHOWDHURY, D. N. (2009): “The Determinants of Knowledge Transfer in Turkish Textile andApparel Industry”http://pearl.plymouth.ac.uk:8080/bitstream/handle/10026.1/327/Determinants%20of%20knowledge%20transfer%20in%20Turkish%20textile%20and%20apparel%20industry.pdf?sequence=4(06.11. 2012)-CZINKOTA, M. and KOTABE, M. (2001): “Marketing Management”, 2nd edition, USA, South-WesternCollege Publishing.- DEIK FOREIGN ECONOMIC RELATIONS BOARD (2012): “Turkish Business Outlook2012”, http://canerel.com/tr/publish/Turkish_Business_Outlook_2012.pdf (01.12.2012)- DEUTSCHE BANK RESEARCH (2011): Textil-/Bekleidungsindustrie: Innovationen undInternationalisierung als Erfolgsfaktoren, Aktuelle Themen 519, 6th of November 2012https://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000275049.pdf(25.11.2012)- ETKIN, L.P. and HELMS, M.M. and TURKKAN, U. and MORRIS, D.J. (2000): "The economicemergence of Turkey", European Business Review, Vol. 12 Iss.: 2: 64 – 75.- EUROPEAN COMMISSION EUROSTAT (2012):http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-HA-11-001-03/EN/KS-HA-11-001-03-EN.PDFhttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&language=de&pcode=teilm020&tableSelection=1&pluginhttp://epp.eurostat.ec.europa.eu/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tps00010&language=de (08.12.2012)- GESAMTVERBAND DER DEUTSCHEN TEXTIL- UND MODEINDUSTRIE (2009):„Konjunkturberichte“, http://www.textil-mode.de/deutsch/Themen/Konjunktur-Statistik/K291.htm(25.11.2012)- GESAMTVERBAND DER DEUTSCHEN TEXTIL- UND MODEINDUSTRIE e.V. (2011): „Zahlenzur Textil- und Bekleidungsindustrie“, Berlin, http://www.textil-bekleidung.de/uploads/media/Zahlen_zur_TuBI_Statistik_2011.pdf (01.12.2012)- GESAMTVERBAND DER DEUTSCHEN TEXTIL- UND MODEINDUSTRIE (2012):„Konjunkturbericht Oktober 2012“, http://www.textil-mode.de/app/so.asp?o=/_obj/D38C527A-03FA-41F1-8663-BF54B58EEF82/outline/2012-10_Konjunkturbericht.pdf (01.12.2012)- GÜLERYÜZ, Ö. (2011), “Küresel Gelişmeler Işığında Türkiye’de Tekstil Sektörü Ve Geleceği”,http://eprints.sdu.edu.tr/879/1/TS00936.pdf; (28.11.2012) 24
  • 25. - HARRISON, J. and JOHN, C. (2004): “Foundations in Strategic Management”, 3rd edition, USA,South-Western College Publishing.- HAUSER, J. (2010): “Support to Export Promotion and Investment Attraction in the Republic ofMoldova - Export Marketing Survey: German Market for Textile and Clothing”, The European Union’sTacis Programme for Moldova,http://www.miepo.md/public/files/Publicatii/Market_Survey_Textile_Germany_en.pdf (06.11.2012)- HILL, C. and JONES, G. (1992): “Strategic Management – An Integrated Approach”, 2nd Edition,Boston, Houghton Mifflin Company.- HILL, C.W.L. and JONES; G.R. (2008): “Strategic Management – An integrated approach”, SouthWestern Cengage Learning, 9th edition, Mason.- INCHIN CLOSER (2012):http://inchincloser.com/2010/11/10/indias-manufacturing-labour-costs-above-chinas-in-2010/(19.12.2012)- INTERNATIONAL HUMAN DEVELOPMENT INDICATORS (2012):http://hdrstats.undp.org/en/countries/profiles/TUR.html (13.12.2012)- INTERNATIONAL PROPERTY WORLD (2012):http://www.internationalpropertyworld.com/investment-property-turkey/political_factors_turkey.htm (13.12.2012)- INVEST IN TURKEY (2012):http://www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/DemographyAndLaborForces.aspx (08.12.2012)- ISTANBUL TEXTILE AND APPAREL EXPORTER’S ASSOCIATIONS (2012): “Turkish TextileIndustry”, http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdf (27.11.2012)- KUTLOKSAMAN, M., and MUTLU, I., and SAUNDERS, J., and UNLUASLAN, E. (2012):“Turkey’s Textiles and Apparel Cluster Microeconomics of Competitiveness”,http://www.isc.hbs.edu/pdf/Student_Projects/2012%20MOC%20Papers/MOC%20-%20Turkey%20Textiles%20and%20Apparel%20Cluster.pdf, (04.05.2012)- MEMON, N.A. and ZAMAN, N. (2007): “Pakistan lags behind in Technical Textiles”, Journal ofManagement and Social Sciences. Vol. 3, Iss. 2,: 120-127- OFFICIAL BLOG, TCP (2011): “Textile and Apparel Trade and Production Trends in Turkey”,http://blog.tcp.gov.tr/?p=4125 and http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdf,- PORTER, M. E. (1979): “How Competitive Forces Shape Strategy”, Harvard Business Review,Presidents and Fellows of Harvard College: 137-145, http://prolog.univie.ac.at/teaching/LVAs/KFK-LM/WS07/Porter.pdf (25.11.2012) 25
  • 26. - REPUBLIC OF TURKEY, MINISTER OF ECONOMY (2012): “ClothingOnline“, http://www.tcp.gov.tr/english/sectors/sectoringpdf/hg-clothing_2012.pdf (25.11.2012)- REPUBLIC OF TURKEY, MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY(2012): http://www.sanayi.gov.tr/Files/Documents/TurkiyeSanayiStratejisiIngilizce.pdf(08.1202012)- SENIOR, B. and FLEMING, J. (2006): “Organizational Change”, 3rd edition, London, PearsonEducation.- STATE PLANNING ORGANIZATION (SPO) (2004): “A General Outlook General Directorate forEconomic Sectors and Coordination”, The Republic of Turkey, Prime Ministry, State PlanningOrganization, Sector Profiles of Turkish Industry, Industry Department, February, Ankara.- THE GENERAL SECRETATRIAT OF ITKIB (2012):http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdf (08.12.2012)- TRADING ECONOMICS (2012): http://www.tradingeconomics.com/turkey/research-and-development-expenditure-percent-of-gdp-wb-data.html (08.12.2012)- U.S. INTERNATIONAL TRADE COMMISSION, OFFICE OF INDUSTRIES, OFFICE OFECONOMIES (2004): “Textiles and Apparel: Assessment of the Competitiveness of Certain ForeignSuppliers to the U.S. Market”, Vol. 1, Washington D.C.: L-34-L 45- WEIHRICH, H. (1982): “The TOWS Matrix: A tool for situational analysis”, Long RangePlanning, Vol. 15 No. 2 26
  • 27. Apprentice of Tables:Table 1: Annual Textile Export of TurkeyGeneral secreteriat of ITKIB (2012)Online: http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdfTable 2: Leading Markets for Textile Export of TurkeyGeneral secreteriat of ITKIB (2012)Online: http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdfTable 3: TOWS MatrixWeihrich (1982): “The TOWS Matrix: A tool for situational analysis”, Long Range Planning, Vol. 15 No.2Table 4: TOWS Matrix of Turkish Textile IndustryOwn depiction (2012)Apprentice of figures:Figure 1: History of Textile IndustryTurkey’s Textiles and Apparel Cluster Microeconomics of Competitivenessssshttp://www.isc.hbs.edu/pdf/Student_Projects/2012%20MOC%20Papers/MOC%20-%20Turkey%20Textiles%20and%20Apparel%20Cluster.pdfFigure 2: Textile Concentrated Areas in TurkeyFigure 3: Turkey’s rank among textile exporters worldwide according to their exports in 2011World Trade Organization – International Trade and Market Access Datahttp://www.wto.org/english/res_e/statis_e/statis_bis_e.htm?solution=WTO&path=/Dashboards/MAPS&file=Map.wcdf&bookmarkState={%22impl%22:%22client%22,%22params%22:{%22langParam%22:%22en%22}} (29.11.2012)Figure 4: Porter’s Five Forces FrameworkMichael E. Porter (1979): „How Competitive Forces Shape Strategy“, page 6, Harvard Business Review,President and Fellows of Harvard CollegeFigure 5: SWOT-AnalysisOwn depiction (2012)Figure 6: PEST factorsSenior and Fleming (2006): “Organizational Change”, 3rd edition, London, Pearson Education. 27