Global and International Business Context Assignment

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Running head: GLOBAL AND INTERNATIONAL BUSINESS CONTEXT1Global and International Business ContextNameInstitution
GLOBAL AND INTERNATIONAL BUSINESS CONTEXT2Global and International Business ContextTable of ContentsIntroduction...................................................................................................................................3Overview of Turkish Wine Industry............................................................................................3Part 1: Porter’s National Diamond Analysis.............................................................................41.1 Factor Condition................................................................................................................41.2 Demand conditions............................................................................................................71.3 Related and Supporting Industries..................................................................................81.4 Firm Strategy, Structure, and Rivalry..................................................................................91.5 Government......................................................................................................................101.6 Chance..............................................................................................................................11Part 2: Market Entry Strategy...................................................................................................122.1 Advantages of foreign direct investment......................................................................122.2 Disadvantages of foreign direct investment.................................................................132.3 Appropriateness...............................................................................................................142.4 Recommendation............................................................................................................15Part 3: Contemporary Management Issues............................................................................153.1 Corporate Social Responsibility:...................................................................................153.2 Corporate Governance...................................................................................................164.0 Conclusions..........................................................................................................................18References..................................................................................................................................18Introduction
GLOBAL AND INTERNATIONAL BUSINESS CONTEXT3This report aims to analyze and outline the overall competitiveness andinvestment prospective of the Turkish wine industry by using the varioustheoretical frameworks. The wine industry in Turkey has been reported to be veryfamous across the globe and further has a long history as a result of diversephysical, social and even human environmental reasons (Selli, Cabaroglu &Canbas, 2003, p. 587). It is worth noting that it might not be easy for a newcompany to enter and operate in the wine industry in Turkey because; numerouswell-established firms have a global competitive advantage. In Turkey, the wineindustry is considered one of the major industries in the economy thus createmassive job opportunities (Vrontis & Paliwoda, 2008, p. 145). Additionally, it hasbeen reported that wine grapes also grow well in Turkey’s natural environmentbecause the country has the most conducive climate, rainfall and temperature.Additionally, related industries including grape growing and transportation arewell developed hence favors wine industry (Rowe, 1989, p. 5).This reportseparates into three part which are Part 1, Part 2 and Part 3. Part 1 aims to applythe extended version of Porter’s National Diamond (PND) model to the Turkishwine industry. Part 2 will discuss the market entry strategy by using ForeignDirect Investment (FDI) in Turkey. Lastly, Part 3 will then discuss thecontemporary management issues.Overview of Turkish Wine IndustryTurkey is located in the continent of Asia, bordering the Mediterraneanand Black Sea (Worldatlas, 2015). The wine industry had an expected globalvalue of $303.6 billion in 2016, an increase of 17.9% since 2011 (Businesswire,
GLOBAL AND INTERNATIONAL BUSINESS CONTEXT42012). Further researched showed that the global wine market grew by 1.5% toreach a volume of 22,150.9 million liters in 2011 (Businesswire, 2012). Due to theincreases in excise tax rates and bans on the advertising and promotion of allalcoholic drinks which causing wine prices to rise, Turkish wine industry hasdeclined in growth over the past three years (Euromonitor, 2016). The factor ofincreasing in excise tax will directly affect the consumption of wine (Garcia et al.,2012, p. 286). It is possibly shown that people will switch to the cheaper winevarieties which they can afford instead of the expensive wine varieties(Euromonitor, 2016). However, there have 99.8% of people are Muslim in Turkey(CIA, 2016). Although winemaking has been a tradition for thousands of years inTurkey, the advertising and promotion through internet, television, and radio of allalcoholic drinks are prohibited by the TAPDK (Atalaysun, 2013). Due to theincreases in excise tax rates and bans on the advertising and promotion, it ispossible shown that Turkey Wine Industry is hard to succeed in.Part 1: Porter’s National Diamond AnalysisThe Porter’s National Diamond is the theory that assesses the competitiveadvantage of particular industries in different nations and enables you to figureout the comparative position of a nation in a global competition (Peng, 2014).1.1 Factor ConditionTurkey is the sixth largest grape growing country in the world with 505,000hectares of grape plantation, but only 3% of them is used for producing wine(Economist, 2016). The rest of them is used for the production of grapefruit
GLOBAL AND INTERNATIONAL BUSINESS CONTEXT5pectin and dried fruit pulp (Gumus, 2016). Grapes are the main natural resourcesof producing wine. Based on the research, it shows that the raw material ofproducing wine will not be hard to find. Turkey has 1200-1500 named grapevarieties of that 600-800 are genetically different (Wineofturkey, 2016). Besides,Turkey has 34 varieties of wine grape, with 22 native varieties. Based on theadvantages, it is possibly shown that Turkey has the potential of producing manydifferent types of wine products.Based on the Trading Economics (2015), Turkey had a population of 28.2million in 1960. The population of Turkey has been continuously growing upsince 2007 which is from 70.59 million and stood at 78.74 million in 2016 (shownin Diagram 1). According to the research, it is possibly shown that Turkey will notface the shortage of workers, despite this is not entirely accurate. However, theemployment rate in the agricultural industry is decreased by 27.7% which is 1988compared to 2014 (The World Bank, 2014). This research shows that peoplehard to find the labor in Turkey and the grapes price could be expensive.Diagram 1
GLOBAL AND INTERNATIONAL BUSINESS CONTEXT6According to McDermott (2005, p. 23), factor condition comprises offactors that the company uses in Turkey that is related to the resources to thefirm and might consist of the amount of natural resources, the innovative productdevelopers, and even the skilled labor that the company has in producing high-quality brands. These can comprise of factors associated with high advantageand are found in Turkey and are subsequently build upon buying the firm to amore advanced factor of competition (Ozkan, Fert & Karadeniz, 2007, p. 1500).Examples of factor conditions that the company will consider include thefollowing: vastly skilled personnel, linguistic capabilities of the labor force and richraw material. In establishing a wine company in Turkey, the above factors arecritical and will play a vital role regarding helping the wine industry to attaincompetitive advantage (Yemis, Bakkalbasi & Artik 2008, p. 154). The companymight decide to relocate its existing staffs and recruitment will be carried out inthe country. When entering, the Turkish market, the company must make use ofinformation and communication technologies to gain an overall competitiveadvantage in the wine industry (Bayramoglu & Gundogmus, 2008, p. 3).Companies willing to enter and operate in the Turkish wine industry must takeinto consideration the aspect of consumerism that will enable them to gaindiverse opportunities for all the foreign investors. It might be necessary for thecompany to use innovation and affordable wine options to adequately addresscompetition issues (Gumus & Gumus, 2008, p. 550).
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