International Management: Arcelik's Expansion Strategy Analysis Report

This report provides an executive summary and analysis of Arcelik, a Turkish home appliance manufacturer, and its international expansion strategy. It examines Arcelik's response to the 2001 economic crisis in Turkey, which prompted a shift towards global markets. The report details the company's competitive advantages, including cost leadership and differentiation strategies, and analyzes its aims and objectives for international growth. It covers market analysis, strategic options, and the challenges faced during global expansion, including the need for specific manufacturing instruments and effective communication. The report highlights the importance of emerging markets and the company's objectives to increase market share and brand recognition. Finally, it discusses the limitations and assumptions related to Arcelik's international business operations.

INTERNATIONAL MANAGEMENT
PRACTITIONER

EXECUTIVE SUMMARY
International business refers to the trade of products and services, technologies, capital
funds etc at global level. It includes transactions of goods and services across the border between
two or more countries. Arcelik is a household appliances production organization of Turkey. It is
the fifth biggest home appliance company of the world.
An organization can also choose strategies like cost leadership strategies and
differentiation. In cost leadership strategy, a company launches their goods and services at low
cost compared to competitors. They fix a cost which make their profit and attract consumers too.
This strategy increases organization profit and numbers of users. An organization who wants to
expand their business at global level face many challenges. It not an easy task to operate a local
business empire at international level. With the use of different strategies, a business can create a
unique market image that can earn profit.

TABLE OF CONTENTS
EXECUTIVE SUMMARY ............................................................................................................2
INTRODUCTION...........................................................................................................................1
a) Analysis of the 'Arcelik' organization.....................................................................................1
b) Aim and objectives ................................................................................................................3
c) Limitations or assumptions ....................................................................................................5
d) Secondary research to inform the analysis and recommendations.........................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
International business refers to the trade of products and services, technologies, capital
funds etc. at global level. It includes transactions of goods and services across the border
between two or more countries (Baim, 2017). Organization expands their business at
international level to earn more annual turnover. Arcelik is a household appliance production
organization of Turkey. It is the fifth biggest home appliance organization in the world. Report
will explain about organization analysis and report value. After this, it will describe about aim
and objectives of report or limitations. Report will discuss about research to inform the analysis
and subsequent recommendations.
a) Analysis of 'Arcelik'
Arcelik is a home appliance manufacturing organization of Turkey. This Company
engages with production and marketing of components, electronics durable goods and after sales
services. It produces kitchen item (accessories) refrigerators, washing machines, dishwashers
etc.
Arcelik is one of the Turkey's largest conglomerate company. Organization’s
headquarters is at Istanbul and its international sales or marketing offices in other countries lie in
Australia, Germany, France, Poland, and Spain. In 1955, it produces metal furniture and it was
the first organization to introduce washing machines, refrigerators (1960) in Turkish household.
After 1987, the Turkish government agreed to phased tariff program reduction with the
European community (Banfield, Kay and Royles, 2018). Imports of household appliances from
EC, ranged reduced to up to zero between 1992-1996. In 1970 or 1980, it had licensed
technology from General Electric and Bosch, but it was permitted to sell its products in their
home country, Turkey. The annual growth rate reflected rising levels of income among the youth
of country’s population.
In Turkey, divorce rate is increasing as well as the marriage rate in a year. Marriages and
divorces encourage new household formation and arise opportunities for organization to produce
and sell huge unit quantities in the local market.
Arcelik is the fourth largest home appliances organization of Europe. It is quite difficult
for new organizations to manage manufacturing, marketing and increasing productivity.
Organization overcame its market challenges and heavy investment in Research & Development
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to improve quality of their products. It supplies two brands in the market; first is Arcelik and
second is Beko. In the last four years’, organization has increased its turnover more than
previous profit.
Report is explaining Arcelik's International Expansion Strategy. This strategy came out
after the economic crisis of 2001 which hit Turkey (Dayan, Heisig and Matos, 2017). This crisis
had led to levels of unemployment and reduction of market demand. Turkey's economic crisis
proved that Arcelik was vulnerable and completely dependent on local market. Crisis in one
market won't be affected in other markets.
Organization needed a path to survive the 2001 economic crisis. One of the major factors
of manufacturing normally impacts the production, and labour decision. Organization was
encouraged to focus on international markets, it had opted itself as a specialist of research and
development who worked on the manufacture durable products or maintain their quality. Turkey
zero tariff agreement with European countries were finding their way to do business with those
countries. Organizational goals for the expansion into international markets has chosen large
number of options to help them. The organization had remade its international expansion strategy
at high unemployment time and in that situation, its key goal is to increase international growth.
Organization wanted to increase sales to maintain economies scale and increased
organization competitiveness price in international market. The main goal of an organization is
that it had been focused on increasing exports and international acquisition too. Recent goal of
company is to possess one of the most known global brand in its own market sector.
Organization is focused on the investment for producing or developing and qualitatively durable
products in capturing more market share (De Cieri, 2017).
Company's marketing strategy is that its brand Beko, organized an advertising campaign.
International markets try to find out better insulated solutions from pressurised situations like
interest rate, inflation, political affairs since they will apply across the world. Arcelik
International Expansion Strategy increases an organization annual profit and market share.
Initially, it operates its business in the home country but after the international expansion, it has
sub-organizations in other countries. In 2003, Koc Holding's portfolio consisted of investment
for an organization from Automotive to financial services. After this investment organization
activity in consumer durable product's contribution around 25% of holding company's. It
maintained market shares of around more than half in growing market. Between 2001 and 2003
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organization expanded its global presence and product availability. End of 2003 Turkey has
approximately 3% of world demands of household appliances and behind it the main reason of
2001 recession. Arcelik durable product market inexpensive plastic tub washing machine in Iraq
after 2003 war. In the present time organization have to make such expansion strategies which
reduce global business risk.
International expansion appears to be viable means of off-setting local market for
emerging countries and it is still predicated on investments in firm profit and development
internationalization process. The report contributes to information in the relevant area of global
expansion of organization from developed countries by correct use of quality, product branding,
innovation in competitive market.
Optional possible strategies are below-
Competitive advantages- It is one of the positive factors of products over competitors by the
best value offers to consumers. Organization increases value by lower price or increasing the
profits and services (Kolk and Rivera-Santos, 2018). This strategy competes the competition
market and satisfied customers. Sometimes, an organization looks for a package strategy to
capture the marker shares.
Cost leadership strategy- In this strategy, an organization decides that its product costs are less
than competitors to make more profits (De Cieri, 2017). This strategy works well when the
products and services are standardized. They can minimize costs to an organization to to the
consumers without profit and loss. Arcelik provides the best qualitative products at minimum
cost and makes high annual turnover compare to competitor.
Differentiation strategy- They include a unique feature to increase company’s products to sell
their goods and services which is not available in competitor's products. This uniqueness makes a
different market image and increase the revenue. Differentiation strategy encourages an
organization to develop their products and services and introduce the best qualitative goods.
Focus strategy- In this strategy, an organization focused on a single strategy at a time and make
a qualitative and quantitative analysis. This strategy is helpful in the best products production.
Arcelik focuses on competitive strategy to beat the competitors. Company offer best schemes to
customer to buy their products and increase the organization market value.
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b) Aim and objectives
The main aim of international expansion strategy of Arcelik that it was a response against
2001 economic crisis which hit Turkey’s economy. This crisis led to unemployment and
reduction in market demand. International strategy focuses on increasing business exports as
well as expanding business relations (Dayan, Heisig and Matos, 2017). This strategy reduces the
risk of inflation, high rate of interest, and export- import market rates. Business at international
level not only increases the turnover but it also provides a way to hire skilled man-power. A
good international business plan does not impact other businesses during crisis.
Expansion strategy increases the production level and economics of a company, that
means extra production; each production unit cost becomes lower and allowing organization to
make a high margin for per unit. The local markets in some cases found less support in the
growth targets that an organization set for themselves (Moore and Jennings, 2017). Other
products' entry in a home country means that organization would have to lower their products’
prices to maintain its local market share or expansion of its business in agreements with other
countries. Company wanted apparent results from new expansion strategy.
Another aim of expansion plan that business product has been recognized internationally
by industry achievements. International expansion open new market opportunities. Arcelik
expand its business in other countries France, Germany, United State etc. This decision of
internationalizing is to make fundamental effects on an organization’s internal or external
operations. Organization considers expanding their business in external country market during
launching of a new product or service. Arcelik home appliances launched its durable products in
foreign market to extend business in other countries and make more turnover.
Objective-
Emerging market- Emerging markets mean known to those markets that provide the healthiest
and promising business culture for producing products and services (Banfield, Kay and Royles,
2018). Arcelik wants to launch their products in other countries which provide a good market.
Economics such as European country, Germany, Spain started growing at a profitable pace to
extent business.
 Arcelik objects behind international expansion that it wants that its products made an
international position in the market. Consumer nature is demanding; they change their
taste frequently. Variation in the demand for household appliances across the home
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country encourage the organization to launch their product in international market which
related to income level and demographic.
 Organization realised that income level of other countries is much high than Turkey and
they can make more profit with market expansion. Durable household products increase
its market value and easily attract the customers because of the latest technologies use.
Organization can make more profit when it established business at huge level and build
international trade relations with other organization.
 International expansion strategy reduces the high business risk. Extent business without
making plan increase the chances of loss. Organization gets an idea about the
environmental culture of host countries and produce product according to their
requirements (Kolk and Rivera-Santos, 2018). Home appliances demand in Europe is
about 25% of world demand. Areclik has good business relations with European
Countries and 25% of household appliances demand in alone Europe increase its
turnover.
To analyse the current situation of Arcelik Home Appliances
 To interpret the past situation of Arcelik Home Appliances
 To find out strategic available options for Arcelik Home Appliances
c) Limitations or assumptions-
Arcelik is an international home appliance brand of Turkey. It expands its business
empire across the world to increase market shares and make more profit. But, it is not easy for it
to expand its business at global level. It faced some limitations in expanding business
organization in external market.
Lack of specific instruments- For business expansion, it is compulsory for an organization that
produces the best products and services in other host countries to accomplish this aim it has the
appropriate tools for manufacturer. It is not necessary that it found specific instruments for
production. This is one of the negative factor to operate business outside country. It is also not
possible that they can export their products to other country without any delay.
Lack of communication- Right decisions have been made at appropriate time as it is necessary
to run smooth organization. Also, discussion at international level is not easy every time (De
Cieri, 2017). Main business decision has been taken by organization’s head member but it is
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possible in local business but at global level, it is quite difficult. Moreover, it makes frequent
decisions according to business requirements that increase productivity and lack of
communication between management in order to increase the risk.
Time management- Business needs time management for production and development.
Management of time for every business activity reduces the chance of loss. Arcelik produces
home appliances across the world and if it continuously faces time mismanagement at global
level it may be unfair condition for its growth.
Difference between culture- Every country and organization have their own culture
environment. Arcelik has its own business culture. It has those employees who are familiar with
its domestic culture, but at international level it’s not possible that it finds same working
environment and employees (Dayan, Heisig and Matos, 2017). They face this problem during the
initial stage of business expansion. Firstly, it must learn other country’s culture and operate
businesses according to it.
Income level- Business at global level got influenced by their local people income level. If
earning of host countries is not enough much then it is not possible that an organization can earn
high turnover from the host country. Income level of people decides what kind of product can
make profit in market.
d) Secondary research to inform the analysis and recommendations-
Secondary data is the data that have been already collected by other sources and readily
available. This data is cheaper and more easily obtainable than the primary data. Secondary data
could be available at online websites, books and journals. Report data has been collected from
online websites. It is available on company’s online sites (Arçelik Sustainability Report, 2018.).
Arcelik official website has company’s background information, past or recent business
conditions.
Online resources are the most optimal secondary data in today's world. Books and journals is
another secondary data resources. To make this report, online and journals resources are very
helpful in finding data. Case study is also meaningful source for report forming (Banfield, Kay
and Royles, 2018). Organization’s brief information is available in case structure with
availability of data which is economical and save efforts or time. Case study data helps to
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improve an understanding of this organization problem. It provides a comparison between
primary available data and secondary research.
Arcelik’s home appliance company uses competitive strategy. In this strategy organization
provide their products and services in the market with best offers. They always try to attract
more customers and increase the profit compare to other organizations. They can offer free
schemes, get one buy one free offers etc., these kind offer attract the user towards products and
ready to buy them easily.
But, organization can also choose other strategies like cost leadership strategies and
differentiation. In cost leadership strategy, a company launches their goods and services at low
cost compare to competitor. They fix a cost which make their profit and attract consumers too.
This strategy increase organization profit and numbers of users. Cost leadership is the best
strategy to capture maximum market shares. It increases organizational value and customer
believe. Organization can grow at global level with the adoption of this strategy.
Differentiation strategy is the second option for an organization to attract more users. In this
strategy company has a uniqueness in its product which is not available in competitor goods and
services. Arcelik can use a different feature in durable products and launch them in local and
international market (Baim, 2017). These two strategies also beneficial for organization to
capture global market. It focusses on a single strategy and give the best to produce qualitative
goods and services that increase global value of organization. With the use of these strategies,
they can expand their business at international level. Organization always want to business
expansion or more turnover and use of correct strategy can fulfil it.
CONCLUSION
Above report focused on International Business Management and is based on an
organization who wanted to expand their business at global level that faced many challenges. It
is not an easy task to operate a local business empire at an international level. With the time,
Arcelik expanded business at global level. It produced durable products and kitchen items. It
operated its franchises in European Countries. It used few strategies like cost leadership, focus,
competitive and differentiation strategies, which made it different from competitors. Report
provided information about aim and objectives on why an organization wanted to expand their
business at an international level.
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REFERENCES
Books and Journals
Baim, S., 2017. The Future of Fracture Risk Assessment in the Management of
Osteoporosis. Journal of Clinical Densitometry, 20(3), pp.451-457.
Banfield, P., Kay, R. and Royles, D., 2018. Introduction to human resource management. Oxford
University Press.
Dayan, R., Heisig, P. and Matos, F., 2017. Knowledge management as a factor for the
formulation and implementation of organization strategy. Journal of Knowledge
Management, 21(2), pp.308-329.
De Cieri, H., 2017. International human resource management: from cross-cultural management
to managing a diverse workforce. Routledge.
Kolk, A. and Rivera-Santos, M., 2018. The state of research on Africa in business and
management: Insights from a systematic review of key international journals. Business &
Society, 57(3), pp.415-436.
Moore, L.F. and Jennings, P.D. eds., 2017. Human resource management on the Pacific Rim:
Institutions, practices, and attitudes (Vol. 60). Walter de Gruyter GmbH & Co KG.
Rees, G. and Smith, P. eds., 2017. Strategic human resource management: An international
perspective. Sage.
Serfaty, L., 2018. Management of patients with non‐alcoholic steatohepatitis (NASH) in real
life. Liver International, 38, pp.52-55.
Watterson, A. ed., 2017. Public health in practice. Macmillan International Higher Education.
Online
Arçelik Sustainability Report .2018. [Online]. Accessed through :
<http://www.arcelikas.com/UserFiles/file/SustainabilityReport2017.pdf>.
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