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Arçelik Company: Case Study Term Paper

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Updated: Sep 13th, 2021

Introduction

Koç was incorporated in Turkey and is currently a household name but unfortunately is not known beyond Turkey despite her international business presence. The Koc is pronounced “coach” and is a sir name of the founding businessman. Koc is a name that several most prominent companies in turkey are using either as subsidiaries, associates or agents. The group of companies was founded by Vehbi Koç who was the first indigenous Turkish businessman to venture into national and international business which earned him international and national prominence. The subsidiaries, associates and other component companies are doing a variety of businesses which includes automotive (the Tofas unit, Turkey’s largest car manufacturer), supermarkets, appliances, and energy, as well as banking, construction, food production, and hospitality. (Nakkastepe and Azizbey Sok 2003).

The founder, Vehbi Koç, in Ankara where most of the business were owned by Greeks, Jews, and Armenians. They were successful traders and businessmen, occupations which were discouraged for Moslem Turks. Still, the minorities lived comfortably and many were rich, while Turks lived more modest lives as hodja (priests), civil servants, wardens, farmers, and grocers argues Nakkastepe and Azizbey Sok ( 2003).

Arçelik leading manufacturer of household appliances and other durables was founded in 1955 for the purposes of producing, marketing and offering after-sales services for the same. ‘’With 11.000 employees worldwide, 8 production plants, 15 sales and marketing companies worldwide and with its 9 brands (Arçelik, Beko, Altus, Blomberg, Elektra Bregenz, Arctic, Leisure, Flavel and Arstil), Arçelik A. Provides products and services to its consumers in more than 100 countries. As one of the leading companies of Koç Group, Arçelik A.., provides consumers with 75 million products in global market, collects international awards in various criteria with its innovations, high technology, design and production plants. Arçelik A.., operating with the synergy of Koç Holding’s vision of being a global player, targets an annual turnover of 3.5 billion Euro for 2006.’’

Past International Business Involvement

Acerlik is in the production, marketing and distribution of household appliances in Europe. This has been made possible because of “Exclusive Beko Shop” system. The Beko shop system was an innovative idea from Arcelik to market their products and has worked well in Turkey and other parts of the world. The company has 15 excusive shops across Europe , they contain branded products from the company the London Beko shop which is a partner has over thirteen products including refrigerator, washing machine, dishwasher oven and many others. Like other systems there is trainings representatives and their staff on the after sale service and on marketing in international markets. In the UK the company has many branches with trained staff but a few canters for after sale service. The Beko system has stabiles prices of the same products in which sales and after-sales services are offered. For any product to attract a huge market price stability is very vital and should not be ignored unless it is an essential commodity. Price elasticity affects demand for products. Now that their exclusive shops are keeping the prices constant the chances are that products demand goes up.

As these shops continue to assist in growth for products in the international markets and being in control of their share in Turkey, the company looks forward with a bright future. In their website they have written as “The Company has started to spread rapidly its “Exclusive Beko Shop” system through which only Beko branded products are provided for consumers, in international markets, especially in Eastern Europe, Baltic and Commonwealth independent State (CIS) countries. Recently, Arçelik A.. has opened the biggest “Exclusive Beko Shop” in Serbia-Montenegro in its capital Belgrad. Accordingly, in the context of this unique system in Eastern Europe, the Company has increased the number of its stores in Serbia-Montenegro to 13. This Exclusive Beko Shop, which is 1000 metersquare, has been opened by the collaboration between Arçelik A.. and Eltim d.o.o., one of the biggest importer in Serbia- Montenegro. Turkey’s Ambassador to Serbia-Montenegro Mr Hasan Servet Öktem, President of Durable Goods and Construction Group of Koç Holding Mr Dr Bülent Bulgurlu, Arçelik A..’s General Manager Aka Gündüz Özdemir and Eltim d.o.o.’s General Manager Jovan Ilic have attended the opening ceremony” end of quotation.

The recent opening of Beko shop in some parts of east Europe like the Serbia-Montenegro the president of the was quoted in his speech ‘’As operating for 5 years in Serbia-Montenegro, Arçelik A.. Continues to strengthen its position in this market approximately by growing 137% per annum. Beko, having nearly 400 different products in its portfolio altering from white goods to electronics, keeps expanding its product range in parallel with the changes in consumers’ needs. While providing 266 different products to Serbia-Montenegro market, Beko has achieved a total sales volume of 180 thousand units’’. Form the underlying quotation the company is performing so well and making huge returns from her international activities. If the company is growing at the rate of 137%, then that is a wonderful rate and it is hard for other companies to reach them. In my own opinion the company is using Beko shops as a strategy for growth and marketing her products, unlike her competitors. This strategy is inline with the founding member principles of success which stated “Product of good-quality, strong sales force and effective after-sales service in global markets as well”.

Background for main countries in which Arcelik Company is involved

I will begin with an extract from the presidents speech when opening Serbia-Montenegro Beko shop ‘’“Exclusive Beko Shop System” indicates that the Company has achieved the spreading of the principle of success, which was stated by the late Vehbi Koç as Through improving its position in international markets via “exclusive Beko Shop System”, Arçelik A.. targets to increase the exclusive shops’ number from 100 to 200 until the end of this year. As continuing its rapid growth with its vision as “To possess one of the ten most preferred global brands in its sector by the year 2010”, Arçelik A.. Has reached 9% of market share with its own branded products due to an independent research association, GFK’s report, covering Europe, Russia and Turkey. Arçelik A..aims to grow by more than 20% in 2006 with its own branded products in international household appliances market”. In short what is being passed was that the company was trading in most countries in the world and they are looking for ways of opening up other markets where there they not reached.

The company is operating in very many countries. I will start with Turkey being the home. Turkey is the motherland of Acerlik and it is where the Beko shop system began.

From a quote obtained in their website under resililice and efficiency “Today, Arçelik is able to administer the entire enterprise backup infrastructure based on standardized policies using just two IT administrators. This showcase solution is primarily designed for data protection; however, backing up data could also be considered as the last line of defense in case of any data loss. So, Arçelik implemented its first step towards a disaster recovery solution. With our recent purchase of the NetBackup Vault Option, we are now forming a sound disaster recovery plan with varying levels of availability.” The solution will also remain the bedrock of the company’s backup for years to come, too, according to Ertugrul. “Arçelik recently acquired Blomberg of Germany; Elektra Bregenz, a Brandt-owned company in Austria; and its brand Tirolia. Subsequently, we acquired two cooker brands in the UK—Leisure and Flavel—as well as Romania’s largest white goods manufacturer, Arctic. Through these acquisitions, Arçelik now operates multiple production plants and manages six new brands across Europe. As the company expands, we can seamlessly integrate our standardized approach to backup into these lines of business.” From this statement we learn that the company is operating in various countries through mergers and acquisition. In the UK the company has acquired Leisure and Flavel. The United Kingdom is a country with people of high purchasing power thus investing in it, makes Acerlik have a high returning investment. Secondly the United Kingdom is a gate way to commonwealth countries and most of the countries in the commonwealth imitate or rather accept the UK goods because of the colonial relationship. The company, Leisure and Flavel, acquired in the UK for the production of white goods was incorporated and operates fully in the country.

Germany: Acerlik acquired Blomberg of Germany; company with its origin in the Germany. Germany is among the industrialized countries of the world. The acquisition of blomberg makes them enter into the market crucial and a country with citizens of high purchasing power.

Romania is one of the Eastern Europe countries that are doing very well. The acquisition the countries Arctic that is white goods manufacturer extends the companies wings to an imaginable level. They have also acquired campanies in Australia and Norway.

SWOT Analysis of Arcelik White Goods

In analyzing the Strengths, weaknesses, strategies, threats and opportunities for Acerlik-white goods in the United Kingdom one needs to understand how they operate in that country. Acerlik Company is a World leading company for household products. The company is founded in sound financial position, strong brands recognition in the world, leader in innovation and the best in after sale service. Its brands are known since in the United Kingdom and its Beko shop system is one of the best in London

Acerlik has much strength, weaknesses, opportunities, threats as they operate in the United Kingdom. One of the strengths of the company is that they have strong brand recognition in United Kingdom and over 58 brands in their Beko shop system and have a production plant for some of products and its after sale makes them ahead of others. Most people prefer or refer Acerlik brands as their own because they used it for many years and the company is still in the race for innovation. They maintain high standards in production of their brands through the use of newly innovations. It takes a short period to produce massive quantities of their products. Its product are of high quality, giving the company high value. They managed has captured the world market through United kingdom Beko shop since London is a destination for many people as compared to Istanbul. Through the UK they made strategic alliances with many companies in various countries for the distribution of their products. There is no any other company with such reputation; this is a strength that many companies do not have.

The social responsibility of Acerlik in the UK is shown when making their advertisement of their products, the advice on the environment, after sale services meaning they are performing very well in social responsibility. The company considers integrity in its operations regarding social responsibility. We have come up with policies that help keeping their products in use with right quantity and meeting international standards.

The company has a huge production and well educated and experience human resource. Because of her human resource, production has been redefined and better qualities are been produced now. Their industry produces their products with aid new technology and the distribution is helped by Beko shop system. The company agreed with drinks producers to supply them with cooling equipments this strength is of greater value. The company integrates easily with other Koc members because of the new technology in communication. Their operations are easily monitored from Istanbul with easy. Sound financial position which can enable them to acquire any company without much strain to its financial resources a strength worth to mention. Being a member of a group with enormous resources, Arcelik may merge, acquire or takeover any competitor in UK. This is advantage against their competitors who include; Samsung, LG, Kenlon and many others. In production, the company uses economies of scale to reduce the cost of production and make a saving. This can also be seen reflected in the financial statement of the Company; it shows that the UK Beko shop is generating huge financial resources.

The company having so many strengths, it also has weaknesses. One of the weaknesses is in terms of quality of production. The company is producing in large quantities which at times may be very difficult to monitor the production quality. There are small scale competitors who have poached their workers and are producing very competitive brands, thus endangering the strength of Acerlik in the UK.

Importation taxes have also been increased in various countries( to protect their local industries) making the company have a higher cost of production in terms of the high price of materials imported or transfer cost been charged a higher tax rate. This becomes a very crucial weakness. The company has a weak customer loyalty because of the brand image and un known nature of the parent company. Her brands which has been in the market for decades has started losing loyalty from many people and they are trying to adapt change. This leaves their competitors at advantageous as they are able to sell their new brands to the new market and attract Acerlik’s share. The company should engage in production of new products that will replace the old products that the people are trying to change. This will enable them acquire the larger market share as they are among the largest companies in the household goods in the whole world.

This company has many opportunities; they market their products without fear. Since there is room for expansion, and being a leader in the products in Europe it goes without saying that they are likely to increase their share. It has also an advantage of growing the line of products and acquisition of better human resources since London is away to commonwealth states.

Another opportunity available is the ability to acquire any company in through its financial resources. If you look at the financial statement of this company you could realize that the company has huge financial resources which can assist them to acquire any company without borrowing from banks. The other opportunity for the company is the ability to produce a product which can be acceptable in the Muslim world. There origin being in the Muslim country, Muslim in UK will wish to be associated with its products. This will give companies in the Muslim world a major challenge.

The company can also diversify to other activities that are related groups objectives because of unlimited financial positions they boast. The company can enter into advertisement, construction of stadiums like emirates and even the production of mobile phones, motor vehicles and many others. The company also can increase its market share through sponsoring HIV/AIDS advertisements and programs, purchase and own a premier league club which is struggling to add to themselves value. The increase in the market will enable her acquire more resources as compared to other companies in the same industry in the UK.

There exist several threats for the Acerlik Company which are both internally and externally. These can emanate from the financial position to operations. In complying with accounting standards, the company finds themselves in a difficult position when the mother company is using different accounting standards and in UK different standard are in use. This segment market does not recognize accounting standards from the mother country when reporting in UK. For the company to have uniformity they should also lobby in various accounting governing bodies in various countries where they operate to adopt international accounting standards. The mother company should lobby for convergence towards accounting standards in turkey.

The company should come up with strategies that will enable them maintain and acquire another market share if they have to be on the front. They should have knowledge on the prevalence of the market abroad and forecast change of regulations in various countries if they have to expand their market. Another strategy the company should adopt is the acquisition of small companies in the UK and increases the Beko shops to remain competitive.

Possible future of Acerlik

Many lessons are learnt from the case of Acerlik white products. A company with such a humble beginning and privately owned but under huge political influence can not allow her products to go under because of competition; the mother company that is Koc holding can intervene in case of failure and provides direction for the products. But the performance of the white in the market so far is above competitors’ average and can only loose the market if there is failure to take note of the competition. Africa is having un tapped market for white products and the company should move fast to ensure that their products remains international arena as the best by investing in plants producing white products in Africa.

There are many implication of marketing regarding the case of white products. In the international arena we can consider the Chinese products white are cheap and of almost equal quality. Unlike The products from Acerlik most of the Chinese companies are selling at subsidized or at break even point so as to enter into the world market. this gives Acerlik a hard time in coming up with a strategy to market their products. Chinese companies like Acerlik are enjoying huge financial support from their owners and government interventions making have a high competitive.

The company should also produce other white products that are not in the market currently. This will call for hiring the human resources especially those in the production. In anutshell the future of international market for Acerlik products will depend on the strategies applied I production and marketing. The current strategy is being understudy by competitors and it is a matter of time before a competitor comes up with strategy that is out doing the Beko shop system. They should also think of satellite shops like Apple incorporated for their products, Amazon publishers for their books, Dell incorporated for their computers and many other companies operating online stores.

Conclusion and recommendations

The company should come up with strategies that will enable them maintain and acquire another market share if they have to be on the front. They should have knowledge on the prevalence of the market abroad and forecast change of regulations in various countries if they have to expand their market. Another strategy the company should adopt is the acquisition of small companies in the African continent and some parts of South America and Asia to enable the company stand tall in the world stage and give the Japanese and Americas companies a run for their money.

Strategic alliances with the suppliers and distributors apart from Beko shops abroad are a very crucial strategy for the company for its growth. The company should give the abroad distributors incentives which are above what is offered by competitors so that its products will remain in the market as a leader. They should also open industries in strategic countries so that their products can be cheap and some parts of the world.

Acerlik Company should try to be listed in the various stock exchanges especially in those countries where they have industries so that the people to have confidence in the company that is being viewed as their own. The company also should sell their shares in various parts of the world like in African where there is a huge market like in Nigeria, South Africa, Kenya and some parts of North Africa.

References

Koç Holding A.S. – Company Profile, Information, Business Description, History, Background Information on Koç Holding A.S. Nakkastepe, Azizbey Sok. No. 1, Kuzguncuk 81207 Istanbul Turkey.

“Koc Holding and Turk Telekom Plan Joint BTC Bid,” EuropeMedia, 2002.

Maksoud, Judy, A Shareholder Deal Signed by Statoil and Turkey’s KOC Holding in Late November,” Offshore, 2001, p. 12.

“Three Contenders Prepare for Bulgarian Telecoms Monopoly Bid,” EuropeMedia, 2002.

Turkey: Local Koc Conglomerate Sells 15.2% of Turkish Goodyear,” IPR Strategic Business Information Database, 2002.

Turkey’s (Used) Car Trick,” Economist, 1996, p. 69.

Turkey: Tofas Reveals New Fiat Models,” IPR Strategic Business Information Database, 2002.

Peter de A ( Man,F.A. J. Van den Bosch ); Perspectives on Strategy: Contributions of Michael E Porter; Springer, 1997.

Williamson D: Strategic Management and Business Analysis; Elsevier, 2003.

Harvard Business School; Strategy: Create and Implement best Strategy for your business, 2003.

Stahl M and Grigsby D; Strategic Management, Blackwell Pub, 1997.

David F.R; Strategic Management, Routledge, 2001.

Stefan S, R. Burritt R; An Introduction to Corporate Environmental Management, Greenleaf Pub, 2003.

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