Analysis of Globalisation's Impact on Turkey: A PESTEL Perspective

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UGB005 CONTEMPORARY BUSINESS ISSUES IN A GLOBALISED ENVIRONMENT
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Contents
Introduction......................................................................................................................................4
Globalisation and its impact on Turkey...........................................................................................4
Critical analyses of PESTEL of Turkey..........................................................................................8
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
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Introduction
Globalisation represents national economies integration through investment, trade, technology,
labor migration, and culture and capital flow. Globalisation is driven by the government policies
which are designed for opening economies domestically as well as internationally for boosting
development in poorer countries and raising living standards for their people. In the western
world, multinational corporations have been benefited from these policies through the creation of
an international free market to the detriment of cultures, common people and smaller businesses.
In this essay, the description is about the business and economic impact of globalisation on
Turkey has been made and its current position has been explained concerning the economy of the
world.
Globalisation and its impact on Turkey
The term globalisation came right after the cold war and emerged as a new system of economy
and politics. Three fundamental factors have contributed to the rapid process of globalisation
which includes improvement in information technology, cheaper transportation and reduction in
wars numbers (Docquier and Rapoport, 2012). Cultural values are the most significant
inheritance of the country. Every individual is getting influenced day by day all over the world
due to globalisation. All the countries of the world have been affected due to the globalisation;
Turkey is one among them which have been highly affected by the policies of globalisation.
Turkey comes under the developing countries. Globalisation process of Turkey started at the
1980s. The strategic location of Turkey has influenced the globalisation process in Turkey. It
has impacted Turkey in different ways including language development, information diffusion,
and cultural exchange along with the worldwide financial and economic growth. Globalisation
has benefitted society as a whole with major advances of technologies while harming certain
groups (Van der Ploeg, J.D., 2012. ).
Turkey is a transcontinental country located in Western Asia with smaller portion on the Balkan
Peninsula in Southeast Europe. Turkey is a secular, democratic, constitutional republic, unitary
with a diverse heritage of culture. In 2018, the GDP in Turkey was 713.51 Billion US dollars.
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Figure1. GDP in Turkey in current prices from 2012 to 2022(in billion US dollars)
Source: Statista, 2019
Turkey offers gas and oil reserves transportation in the East-West direction economically with
the least and shortest economic route. Universal rules of globalisation are still ruled by Turkey.
Reduction in state effects of the economy, decrease in the inflation rate, less bureaucracy power,
privatisation of telecommunication day by day; Turkey has many special unions such as Black
Sea Economic Cooperation. Both positive and negative reactions are there due to globalisation
on Turkey. The integration of Turkey to globalisation has resulted in the emergence of new local
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responses from social life to issues of security (Hitt.et.al, 2012). Globalisation effects on the
Turkish economy-
 Reduce state bureaucracy
 Make convertible currency
 Boost export
 Private sector become an engine of economic growth
 Liberalisation of capital markets
 The opening the market for foreign direct investment
 Ensuring price stability and keeping down the inflation rate
 For increasing the economic competition, Public regulations got reduced
 Customisation of state-owned industrial and public enterprises
 Getting rid of domestic monopoly and quotas (Yigit, and Tarman, 2013)
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Figure2. KOF Globalisation Index-100 most globalised countries 2018
Source: Statista, 2019
In KOF globalisation index, Turkey comes under the top hundred countries which have been
considered as most globalised countries. This has attracted a lot of countries in the world and
companies to make an investment in Turkey and to start a new business. All this will make
growth in the economy of Turkey and will build in developing it a successful business country
(Zehir, 2012).
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Critical analyses of PESTEL of Turkey
A PESTEL analysis is an acronym for a tool which is used for identifying the macro forces
facing an organisation. In marketing, before any tactical plan or strategy can be implemented,
conduction of situational analysis is important, and PETSEL is a part of that and should be
repeated at regular stages for identifying changes in the macro environment.
Figure3. PESTEL Analysis
Source: By Author, 2019
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PESTEL
Political
Economic
Social
Technologi
cal
Legal

Political Factors- Turkey’s current political strength is that the government holds the policies of
liberalization. In the European Union, open trades between various countries are being allowed
by the liberal investment and trade policies which are supported by Turkey. Every year there is a
rise at the average rate of 10 % in the exports, and this will allow the industries for flourishing
with the exports produced in Turkey. Islamic extremist, Turkish militants having a link with Al-
Qaeda, Kurdish radicals are some of the reasons for causing terrorist attacks in Turkey which is
the most challenging issue in the current politics. The target of the terrorist can be these growing
business and bringing plants to Turkey. It is a great disadvantage for Turkey in doing business
(Buğra and Savaşkan, 2014).
Economic Factors- The foreign investment is coming at a high flow in Turkey from abroad
which is the current strength of the economy of Turkey. The economic growth of the country is
being driven by the speedy expansion of Turkey resulting from the huge investment. The
infrastructure of Turkey will be expanded with the use of foreign direct investment. This will
prove advantageous to bring the plant in turkey due to the potential growth in the Turkish
economy and by bringing the plant in Turkey is going to benefit the fashion and other companies
here. The government of Turkey is also planning to implement free trade agreements with the
intention of encouraging domestic and foreign investors, and this is going to improve the
competitiveness of the country. Prudent monetary and fiscal policies are the current strength of
Turkey.
Current account deficit is the current challenge of Turkey. The economic stability has been
delayed due to the decline in the current account. The quick rise has been seen in the import
market due to the outcome of sturdy Turkish lira and increased global prices of the commodity.
During global financial doubt times, more vulnerability is there is Turkey. Bringing plant into
Turkey can become disadvantageous as there can be financial crises in the country due to which
companies may need to relocate. Rigid labour markets are the future risks associated with
Turkey (Kayumi, 2014).
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Social factors- High level of unemployment and lack of a proper system of education are the
problems that Turkey has been suffering. One of the strength of the social system in turkey is
that it is having a good growing proportion of young people as more than half of the population
of Turkey is below the age of 30. The employment rate will get an increase due to the young
labor force capitalization.
High level of unemployment is a social challenge for Turkey. Several initiatives have been
undertaken by the the4 government of Turkey for implementing policies aimed at making
improvements in social benefits. The globalisation has affected the society and culture of
Turkey. Many employment opportunities are being developed in Turkey due to globalisation
which is making improvements in the employment rate. Ineffective social security system and
inadequate education system and infrastructures are the future social risks associated with
Turkey which can be improved with the globalisation only (Yuece, 2012).
Technological Factors- In comparison to the EU countries, technological advances are slowing
down in Turkey. Due to the liberalisation of the market, the telecommunication industry of
Turkey has been booming. The number of telephone subscribers of mobile has been increased.
Globalisation has fostered the culture of innovation by which the climate of research and
development is expected to improve, and governments are taking various initiatives towards
developing Turkey’s technological landscape. Globalisation has bought significant development
in the ICT sector and has become technological strength in the country. The government has
privatised telecommunication sector in turkey, and this has resulted in rapid expansion of the
ICT sector. Inadequate investment by public and the private sector in R&D is made in Turkey
this low expenditure on R&D is a current challenge for the country, and if this remains for the
long run, then it will erode the competitiveness of industries in Turkey. The government of
Turkey has encouraged foreign entities, research organisation and prominent universities for
improving the R&D by fostering the innovative culture. The number of skilled scientists has
been increased who have returned to Turkey for gaining the opportunities offered to them by the
prospects of joining European Union. Lack of innovation and a low number of patents are the
future risks of Turkey. The scientific prospects of the country are likely to hinder due to these
continuous trends (Hismanoglu, M., 2012).
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Figure4. Asian Infrastructure Investment Bank (AIIB) approved $600 million for the capacity
expansion project of Lake Tuz underground natural gas storage facility in 2018.
Sources: Daily Sabah Economy, 2018
Around $1.4 billion is approved by the Asian Infrastructure investment bank for Turkey related
projects in 2018, and currently, another $100 million investment is being evaluated in Turkey.
Legal factors- Comprehensive legal structure is the legal strength of Turkey. The judicial system
is made up of general courts which deal domestic cases; dealing of military cases by military
courts and more serious cases by the heavy court. Globalisation has made it easy for the business
entities to invest in Turkey; they need not make a long and lengthy registration process. It has
given freedom to operate, start and close business by the Turkish regulatory environment
(Tepetam, Y., 2014). On average, only six days will be taken to start a business in Turkey which
if compared to other countries will take around forty-three days to start a business there. Smooth
business growth has been driven by the robust framework for entities of business which has
created a successful business environment. Gaining business license requires relatively low
costs. The corporate tax rate of Turkey is comparatively low as compared to the other countries
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if the world. The reduction in the tax rates will stimulate the economic growth of the country.
Favourable laws for foreign investment are the prospects for Turkey.
Judicial inefficiencies are the major challenge in Turkey related to the legal issues as some
delays are there in the judicial system of Turkey due to which some issues can be caused. The
legal outcome has been affected because of the politically biased judges. By encouraging
investment of infrastructure, Turkey’s government is trying to make it an attractive destination
for business ventures. Through capital inflows, diffusion of technologies and positive external
abilities, foreign investment is contributing to the economic growth of the economy of the
country. But existing loopholes in the taxation system will be future risks for the Turkey
(Ulubeyli, and Kazanci, 2018).
Figure5: Turkey Government Spending
Source: Trading Economic, 2019
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Figure6. Spending by the Turkey government
Source: Trading Economics, 2019
Environment factors- Prosperous biodiversity is the environmental strength of Turkey. In
European countries, Turkey is ranked ninth on biodiversity and has affluent natural resources.
The country will develop at a great potential because of biodiversity (Agan.et.al, 2013).
High pollution level is the current challenge for Turkey which resists the other countries in
starting their business in Turkey. There are requirements for water treatment plants, solid waste
management, and wastewater treatment equipment. Increase in detergent effluents and
chemicals, a rise in air pollution especially in urban areas are the main reasons for the high level
of pollution in the country. The increasing the level of hazardous waste and rising emission
levels are the future risks in Turkey. All these environmental factors play an important role for
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