TURKEY – COUNTRY OVERVIEW AND ANALYSIS OF HOTEL INDUSTRY MANAGEMENT CONSULTANCY ESB BUSINESS SCHOOL REUTLINGEN UNIVERSITY June 29, 2011 1
Jan 17, 2015
TURKEY – COUNTRY OVERVIEW AND ANALYSIS OF HOTEL INDUSTRY
MANAGEMENT CONSULTANCYESB BUSINESS SCHOOLREUTLINGEN UNIVERSITYJune 29, 2011
1
Project Team
MARINA KRAVTSOVA UMASHANKAR SASE ABHIJEET SINGHAL TANUJ SETH
Mat-Nr. 711556 Mat-Nr. 711614 Mat-Nr. 711570 Mat-Nr. 711553
2
3
Management Summary
1. Turkey is the birthplace of many great cultures and is a synthesis of east and west, geographically bridging Europe and Asia.
2. Turkey is an investment hub with access to huge market both domestic and international, supported by large working age population.
3. Turkey is a republic based on secular, democratic, and pluralistic principles.4. Turkey has the divisions of power in constitution: judicial, legislative, and executive.5. Turkey is rising economic power moving towards innovation driven economy and has robust infrastructure
to support the growth.6. Services contribute two-third of GDP and among services the tourism has a prominent role and is an
important revenue generator for the country's economy.7. Most of the tourists 'arrivals are from neighboring European countries and CIS countries.8. Non resident Turkish citizens spend 75% more than other foreign nationals arriving in Turkey.9. Hotels have more than 80% of the operational bed capacity among other forms of accommodation.10. Most of the tourists prefers high end accommodation (5-4-3) stars for their stay in Turkey..11. All major international hotel chains are presently doing business in Turkey..12. Overall analysis of the tourism and hospitality sector in Turkey paints a rosy picture for future growth with
strong government support present.13. The Government of Turkey provides with a quick and easy procedural structure at a fairly low cost for starting
a new business in Hospitality sector.14. Turkey Hotel industry is more of labour intensive market, with lower cost of labour and highly skilled labour.15. Hotel industry in Turkey have two dimensions of entry: Ownership of Assets and Control over Marketing and
Operations with each having its own strategic advantages
Agenda
COUNTRY OVERVIEW
HOSPITALITY SECTOR ANALYSIS
ENTRY OPTIONS IN HOTEL INDUSTRY
4
Agenda
COUNTRY OVERVIEW
MARKET POTENTIAL
DEMOGRAPHY
GOVERNMENT AND POLITICS
ECONOMY
HOSPITALITY SECTOR ANALYSIS
ENTRY OPTIONS IN HOTEL INDUSTRY
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW
GEOGRAPHY
MARKET POTENTIAL 5
6
Turkey enjoys a special location at the crossroads between East and West, overlapping Europe and Asia geographically and culturally
1. The center of an economic and political area known as “EURASIA”.
2. Meeting point of three regions of the world, Europe, the former Soviet Union and the Middle East..
3. The proximity to the Balkans, the rest of Europe and to the growing emerging markets in Central Asia, the Middle East and North Africa creates unique business opportunities.
ECONOMIC & POLITICAL IMPORTANCE
Source: 1. CIA World factbook 2.The Foreign Economic Relations Board of Turkey (DEİK)
REPUBLIC OF TURKEY
1. Generally divided into seven regions -- the Black Sea region, the Marmara region, the Aegean, the Mediterranean, Central Anatolia, the East Anatolian and Southeast Anatolia regions
2. Located 97% in Asia and 3% in East Thrace in Europe.
3. Ranks 37 in the world by geographic area .
4. Total Area : 783,562 sq km.
GEOGRAPHY STATISTICS
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
7
Turkey has become an investment destination which offers the diverse market opportunities
1.The Foreign Economic Relations Board of Turkey (DEİK), 2. The Global Competitiveness Report 2009-2010
REGIONAL INVESTMENT HUB1
1. The international image of Turkey as an investment destination is generally shaped by both domestic and export-oriented markets, that it offers.
2. The potential of these markets covers over 1 billion consumers, i. A large and growing domestic market (approx. 79 Mn.), ii. High-income European markets (approx. 600 Mn.), iii. Emerging Russia, Caucasia and Central Asia markets (approx. 250 Mn.), iv. Diverse and expanding Middle East and North Africa markets (approx. 160 Mn.).
3. Turkey has the experience of more than 7000 foreign capital establishments, including over 100 of the Fortune Top 500 companies.
4. It is also the regional base for companies like Coca-Cola, Procter & Gamble and Phillip Morris, as well as international investment institutions like the World Bank Group, International Finance Corporation.
INDICATORS2
1.Domestic market size index : 152.Foreign market size index : 25
MARKET SIZE COMPETITIVE ADVANTAGE
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
8
Turkey is on the verge of entering a ‘golden demographic period’ with one of the largest populations in the Middle East and Eastern Europe
1. Population: 79 million approx. (July 2011 est.)2. Country comparison to the world: 17 3. Growth rate : 1.21 % per annum
MEDIAN AGE
Total: 28.5 years
Male: 28.1 years
Female: 28.8 years (2011 est.)
PEOPLE
URBANISATION
1. Urban population: 70% of total population (2010)2. Rate of urbanization: 1.7% annual rate of change (2010-15 est.)3. Major cities - population: Ankara (capital) 3.9 Mn.; Istanbul 10.4 Mn.; Izmir 2.7 Mn.; Bursa 1.6Mn.; Adana 1.4 Mn. (2009)
AGE STRUCTURE
Source: CIA World factbook
WORKING AGE POPULATION
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
9
1. CORRUPTION PERCEPTIONS INDEX 2010 by Transparency International i. Rank 56 out of 179 countries ii. Best regional rank in Eastern Europe and Middle East .
2. CREDIT RATING:i. Moody’s rating : Ba2ii. Fitch rating : BB+
Turkey is a republic based on secular and democratic principles with diversified foreign relations and gives a positive outlook for future
FOREIGN POLICY AND RELATIONS1
GOVERNMENT1
1. Republican parliamentary democracy2. Developed a strong tradition of secularism.3. Ideology: Conservatism and economic liberalism
LEGAL SYSTEM1
1. Civil law system based on various European legal systems, notably the Swiss civil code.
2. Turkey's constitution governs the legal framework of the country. It sets out the main principles of government and establishes Turkey as a unitary centralized state.
1. Founding member of the UN, the OECD , the OIC, the OSCE and the G-20 economies 2. Elected as a non-permanent member of the United Nations Security Council.
(October 17, 2008)3. Turkey has been in formal accession negotiations with the EU since 20054. Free Trade Agreements with EFTA and 14 countries, and 9 more are on the way.
INDICATORS2
1. The Foreign Economic Relations Board of Turkey (DEİK), 2.http://www.guardian.co.uk/news/datablog/2010/apr/30/credit-ratings-country-fitch-moodys-standard
POSITIVE OUTLOOK
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
10
Turkey's economy has evolved in last one century with the transition from Closed Economy till 1980 to Free Market Economy
1920 30 40 50 60 70 80 90 2000 2010
Assembly declares Turkey a republic
Turkey becomes secular
Women’s suffrage
Joins the UN
Joins NATO
Association agreement signed with EEC
Turkey applies for full EEC membership
Turkey enters EU customs union
EU partially freezes Turkey’s membership talks.
Turkish men are no longer regarded in law as head of the family
Source: BBC News, UK
FREE MARKET
ECONOMY
CLOSED ECONOMY
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
11
Turkey has a fast growing and robust economy but still has problems that need attention
1. Significant economic growth with an annual GDP growth rate of 6.8% between 2002-2008
2. The inflation rate fell to historic lows, reaching 6.4% in the past year
3. Unemployment is exceedingly high 12,4%
4. Turkey's high deficit reflects structural issues related to the country's trade composition, heavy dependence on imported energy, low external saving rates, and inadequate competitiveness
ECONOMIC SITUATION
Source: IMF, World Economic Outlook Database
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
200
400
600
800
1000
1200
GROSS DOMESTIC PRODUCT (PPP), BILLION US DOLLARS
(E) (E) (E)
2004 2005 2006 2007 2008 2009 2010 2011 2012 201302468
1012
INFLATION, AVERAGE CONSUMER PRICES, (PERCENT CHANGE)
(E) (E)(E)
12
Turkey is on the second stage of development and has efficiency-driven economy
0
5
10
Institutions
Macroeconomic en-vironment
Infrastructure
Health and primary education
Higher education and training
Goods market efficiency
Labor market efficiencyFinancial market development
Technological readiness
Market size
Business so-phistication
Innovation
Turkey Efficiency-driven economies
Factor driven
Efficiency driven
Innovation driven
1. Yet Turkey spends only 0.72% of its GDP on research and development
2. 40% of current exports are in the medium or high tech sector compared to 15% in the 1990‘s
3. With a high share of its work force in agriculture, overall productivity remains low
Source: The Global Competitiveness Report 2010-2011
DISTINCTIVE FEATURES STAGE OF DEVELOPMENT
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
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Turkey’s economy is largely dominated by modern industries and the service sector
8,8%
25,7%
65,5%
Agriculture
Industry
Services
GDP STRUCTURE IN 2010
Source: The Central Intelligence Agency, The World Fact Book Source: World Tourism Organization
1. Turkey's economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 30% of employment
1. Turkey’s T & T industry contributed 11.3 % to total GDP in 2008 and the expected average annual growth is 4.3% between 2009 and 2019
MAIN DRIVEN SECTORS GROWTH OF T&T SECTOR
2005 2006 2007 2008 2009 20100
5
10
15
20
25
TOURISM REVENUES IN 2005-2010 YEARS, BILLION US DOLLARS
GEOGRAPHY ECONOMYDEMOGRAPHY GOVERNMENT & POLITICSCOUNTRY OVERVIEW MARKET
POTENTIAL
Agenda
COUNTRY OVERVIEW
HOSPITALITY SECTOR ANALYSIS
ENTRY OPTIONS IN HOTEL INDUSTRY
OVERVIEW OF THE TOURISM SECTOR
KPI FOR HOSPITALITY
PORTOR DIAMOND
SWOT
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY 14
15
Turkey is amongst the top ten tourist destinations in the world and have become increasingly more popular in last two decades
France
USA
Spain
China
Italy
UK
Ukraine
Turkey
Germany
Mexico
0 25 50 75
INTERNATINOAL TOURIST DESTINATIONS - 2008 TOP 10
Tourist Inflow(mil)1990 1995 2000 2005 2006 2007 2008
05
1015202530
-1%
0%
1%
2%
3%
4%
TOURIST ARRIVALS – TURKEY V/S WORLD
Tourist Arrival (mil) Arrival - Turkey/World (%)
Source: UNWTO
Source: UNWTO
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
16
With increased tourism receipts, Turkey is improving its GDP with main contributors being large tourist and business centers
ANTALYA İSTANBUL MUĞLA İZMİR AYDIN OTHERS0123456789
TOURIST ARRIVAL BY MAIN TOURIST CENTRES (in mil)
2006 2007 2008
2002 2003 2004 2005 2006 2007 20080
5
10
15
20
25
0123456
TOURISM RECEIPTS & SHARE IN GDP (2002-2008)
TOURISM RECEIPTS Share in GDP (%)
Tour
ism R
ecei
pts(
Bn U
S$)
1. Important driver of turkey’s GDP2. Reducing unemployment3. Raising National GDP4. Improving country’s balance of payment
1. Antalya and Istanbul are the most important tourist and business centres
2. They contribute about 60% to the total international arrivals
TOURISM AND ITS POSITIVE EFFECT ON GDP MAIN TOURIST CENTRES - MAJOR CONTRIBUTORS
Source: Ministry of Culture & Tourism, Turkey Source: Ministry of Culture & Tourism, Turkey
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
17
Turkey receives most of its tourist arrivals from citizens hailing from Europe and CIS countries
GermanyRussia
UKBulgaria
NetherlandsIran
FranceGeorgiaUkraine
USA
0 500 1000 1500 2000 2500 3000 3500 4000 4500
TOURIST ARRIVAL BY NATIONALITY – TOP 10
2008 2007 2006
(In ‘000)MAJOR ARRIVALS - EURASIA
1. Large immigrant o f Turkish population in Germany catapults Germany to the top of list
2. Geographical bridge between Europe and Asia contributes to high influx from Europe and Asia
3. Y-o-y, growth for each nationality for last three years
4. Russia, Georgia, and the Ukraine are the fastest growing with CAGR of more than 20% eachSource: Ministry of Culture & Tourism, Turkey
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
18
Most of the leisure tourist arrivals occur during summer season resulting in high occupancy rates at hotels
JanMar
May JulSep
Nov0
1000
2000
3000
4000
0%
20%
40%
60%
80%
TOURIST ARRIVAL & OCCUPANCY RATES (2007)
2006 20072008 Occupancy rates
Tour
ist A
rriv
al (i
n '0
00s)
Occ
upan
cy R
ates
(%)
1. More than half of the arrival each year occur between May and September2. Leisure tourism is most active during the peak season ( May to September)3. Business and meeting demand peaks up during spring and autumn4. Occupancy rates differ during the whole year with tourist tour operators having
discount contracts in the lean season to compensate low business
TOURIST ARRIVAL PEAKS DURING SUMMER
56.3%
14.8%
11.5%
10.0%
7.4%
DISTRIBUTION OF PURPOSE
Leisure
Business
Visiting relatives and friends
Other
Accompanying persons
Source: Foreign Visitor Survey, 2007Source: Ministry of Culture and Tourism
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
19
Turkish citizens are spending much more than foreign nationals during each visit to Turkey
2002 2003 2004 2005 2006 2007 20080
5
10
15
20
25
30
0
200
400
600
800
1000
1200
1400
1600
AVERAGE EXPENDITURE PER VISITORS
Nr. Of Foreigner Nr. Of CitizensExpenditure by foreigners Expenditure by citizen
Visit
ors(
mil)
Expe
nditu
re p
er v
isito
r($)
CITIZENS SPEND MORE
1. Turkish citizens are spending more than 75% compare to other foreign nationals visiting turkey.
2. Both foreign tourists and Turkish citizens are growing at a rate of CAGR 13% and 12% over last 7 years respectively
3. Average expenditure person in 2008 is $ 708
Source: Ministry of Culture and Tourism
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
20
Food & beverages (F&B), accommodation and tourist packages payments are main expenses of the tourists
14%
26%
17%
8%
2%1%
17%
DISTRIBUTION OF INDIVIDUAL EXPENDITURE, 2007
F&B
AccommodationOthers
Transport
Sum of Package Tour
Tour Ser-vices
Health
MAXIMUM EXPENDITURE ON F&B
1. F&B constitutes the majority of the personal expenses
2. Total expenditure for accommodation was $2.6 Billion with a share of 14% in total travel revenue.
Source: Ministry of Culture and Tourism
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
21
Premium hotels have the largest bed capacity and are also preferred by international tourists for accommodation
Hotel
Holiday Villa
ge
Apart Hotel
Others0%
10%20%30%40%50%60%70%80%90%
100%
473.2 59.2
11.723.3
186 26.7 19.7 25.9
BED CAPACITY BY TYPE, 2008
Operational(in '000s) Under Investment ((in '000s)
34%
24%
19%
10%1%7%
4%
DISTRIBUTION OF ARRIVALS IN ACCOMODATION
4
3
2
Holliday Village
1
Others
5
HOTELS DOMINATE THE BED CAPACITY
1. Total Bed capacity in 2008 is 567,470 and total under construction bed capacity is 258,2872. Hotels account for 83% of operational bed capacity, followed by holiday villages with 10%3. 5-4-3 Stars hotels account for 38%, 31 % and 19% of operation hotel bed capacity because of high influx
of tourists in 5-4-3 stars hotels
Source: Ministry of Culture and Tourism Source: Ministry of Culture and Tourism
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
22
With regional development and growth of tourism, investment potential is growing in the hotel business
CITY
INVESTMENT POTENTIAL
LuxuryUpper Class
Mid Market Economy
Istanbul ü ü ü üKocaeli ü üEskisehir ü üDenizli ü üKonya ü üSamsun ü üTrabzon ü üDiyarbakir ü ü
DEMAND AND SUPPLY BALANCE IN 2010
Source: Ministry of Culture and Tourism Source: Colliers International Turkey
1. There is more supply than demand in major tourist attractions and large metropolitan areas 2. The major Anatolian cities, such as Bursa, Denizli, Gaziantep and Konya have relatively less developed
hotel market, even being industrial and commercial centers.3. A huge investment potential of hotel industry in available in smaller tourist attractions and
commercial centers for the niche markets
Denizli
Kocaeli
Izmir
Ankara
Istambul
800
690
1300
1600
4850
720
1380
2730
2080
6800DEMAND SUPPLY
POTENTIAL OF TIER II CITIES
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
23
Because of enormous potential, 10 out of 15 major international hotel chains are present in Turkey
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
1. Best western has 15 hotels and IHG group has 8 hotels in Turkey2. Present in large commercial and tourist centres with high-end hotels (5 stars)3. Management agreement and franchise routes for doing buisness
TOP HOTEL CHAINS
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Porter’s Diamond model shows that the hospitality sector in Turkey is a promising market with intense competition
• Favourable support from Government
• Tourism strategy 2023 in progress
• High oil prices, • Fluctuating forex,• Civil wars in
neighbouring countries
• High competition between industry rivals
• Professional management
• High Presence of global companies
• Availability of educated and skilled workforce
• Good infrastructure presence
• Demand is rising each year with high influx of international tourists
• Upcoming Business and meeting location
• Developed support industries with good transport facilities
• Evolved F&B places• Reputed health
services
FAVORABLE CONDITIONS FOR INDUSTRY TO GROW IN FUTURE
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
Factor Conditions
Firm strategy & rivalry
Government
Chance
Demand Conditions
Related Industry
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SWOT analysis also gives a positive picture of the hospitality sector with great future opportunities
• Average prices are lower than the neighboring countries, and there is stiff price competition among the many competitors in the Turkish market.
• Increasing input costs • Unrecorded transactions and tax avoidance
among smaller, less organized businesses in the sector.
• Availability of an excellent coastline, a wide range of natural attractions, unique historical and archaeological sites and a suitable climate.
• Know-how in the hospitality sector • Well-trained workforce • Strong government support behind the
industry
Strengths Weaknesses
Opportunities Threats
• Unutilized potential not only in coastal tourism but also in various other types of tourism including health & thermal resources, winter sports, golfing, yachting.
• Availability of young and knowledgeable workforce
• Further liberalization in aviation market • Istanbul 2010 European Capital of Culture
• Strengthening TL against other main currencies
• High level of special consumption tax on alcohol
• 3% tax on daily accommodation charges
OVERVIEW OF TOURISM SECTOR
PORTER DIAMOND SWOTINDUSTRY ANALYSIS KPI FOR
HOSPITALITY
Agenda
COUNTRY OVERVIEW
HOSPITALITY SECTOR ANALYSIS
ENTRY OPTIONS IN HOTEL INDUSTRY
STRATEGIC OPTIONS
COMPARATIVE ANALYSIS
PROCEDURE AND COST STRUCTURE
ENTRY DIMENSIONS
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE 26
Turkey is ranked 65th compared to 183 global economies for ease of doing a business as per the global economic practices
1
12
51
56
65
123
SINGAPORE
GEORGIA
BULGARIA
ROMANIA
TURKEY
RUSSIA
COMPARATIVE RANKINGS FOR BUSINESS PROCESSES IN TURKEY
1. The ease of doing business in Turkey is ranked 65 compared to other countries as per the economic practices applied
i. Turkey is ranked 63 in starting a new business in the country
ii. Turkey is ranked 137 with the practices followed in dealing with the construction permits
iii. It is ranked as 59 for protecting investors
iv. It is ranked 75 out of 183 economies globally for paying the taxes
Source: http://www.turkey-now.org/db/Docs/DoingBusiness2010.pdf
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE 27
28
Starting a business in Turkey requires 6 procedures, 6 days and costs 17.20% GNI (Gross National Income) per capita
1 2 3 4 5 60
1
2
3
4
5
6 18
16
14
12
10
8
6
TIM
E (D
AYS)
PRO
CED
URE
S
Execute and notarize articles of association, signature declaration of the managers, copies of each manager’s ID and commercial books
Deposit a percentage of capital to the account of Competition Authority
Deposit the initial capital in a bank and obtain the certificateof paid-in capital
File the incorporation notice form, commitment letter, andChamber registration statement at the Trade Registry Office
Have a notary certify the legal books
Follow up with the tax office on Commercial Registry’s notification
COST LINE
COST TO
COM
PLETE (%
of GN
I per capita)
Source:www.DoingBusiness2010.org
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE
29
Turkey has a lower labor cost compared to other major economies resulting in more labor intensive economy
A COMPARITIVE PRESENTATION OF COSTS OF INPUTS : COST OF CAPITAL VS COST OF LABOUR (in relation with USA economy Indexed at base 10)
COST OF CAPITAL INVESTMENT
RATIO OF CAPITAL TO LABOUR COST
COST OF LABOUR
GROSS FIXED CAPITAL FORMATION PRICE LEVEL
COST OF DEBT FINANCING
USA BRAZIL TURKEY
USA BRAZIL TURKEYUSA BRAZIL TURKEY
USA BRAZIL TURKEYUSA BRAZIL TURKEY
1. Turkey has less expensive labor than capital, as compared to the other major markets like USA
2. Capital utilization in Turkey is less compared to that of the USA and the Brazil
3. The major driving factor for Capital productivity in Turkey is due to more labor usage compared to capital investment
Source: World Development Indicators, Ministry of Culture and Tourism
US$ 385.5US$ 102
US$ 487.5
Net minimum Wage
Cost to Employer
Deduction (Insurance Fund, SSPP Tax)
COST OF LABOR TO EMPLOYER (per month)
1070 9 0
10 20 25 10 14.1 14.6
10 2.9 2.5
10 14 18
TURKEY – A LABOR INTENSIVE MARKET
Source: http://www.fedee.com/minwage.html
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE
30
TAX PAYED BY COMPANIES (% OF TOTAL PROFIT)
20.79%
0.40% 2.14% 1.90%
2.18%
17.04%
Profit Non Taxed: 55.5%
Profit Taxed: 44.5%
Tax rate in Turkey is 44.5% of the profit with major outflow from the company to Corporate Income Tax and Social Security Fund
TAX STRUCTURE IN TURKEY
1. In a year, any company in the Hotel Industry has to pay around 44.5% of its profit as Taxes
2. It is ranked at 75 globally in Tax payment structure which shows the easy and quick tax paying structure compared to many other emerging economies
3. Around 15 payments has to be done per annum for paying the tax
4. It requires around 223 hours per year of time to prepare and file the tax returns in Turkey
Environment Tax: 0.05%Transactional taxes
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE
Source: http://www.DoingBusiness.org
Social Security Contribution
Corporate Income Tax
Unemployment Insurance Fund
Fuel Tax and Vehicle Tax
Property Taxes
31
Physical ownership and control over marketing and operations are the two dimensions of the Turkey hotel market entry decision
CONTROL OVER MARKETS AND OPERATIONS
OWNERSHIP OF PHYSICAL FACILITIES
ENTRY IN HOTEL INDUSTRY IN TURKEY MEMBERSHIP IN A
FRANCHISE SYSTEM OR MARKETING
NETWORK
NO MEMBERSHIP IN A FRANCHISE SYSTEM
OR MARKETING NETWORK
1. Sole Ownership (independent ownership): owner/operator
2. Third party Management Company: No ownership
1. Chain Owned, Affiliated
2. Management Company, Affiliated
1. Chain Owned, Unaffiliated
2. Management Company, Unaffiliated
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE
Source: http://cqx.sagepub.com/
32
Different market entry options will have different levels of competitive risks with varied amount of resources required
RESOURCES REQUIRED
COMPETITIVE RISKS
COMPETITIVE RISKS
RESOURCES REQUIRED
BUSINESS OBJECTIVE
PRODUCT MARKET POSITIONING
SPEED O
F DEVELO
PMEN
T
QUICK
GRADUAL
SMAL NICHE DOMINANCE
Third Party Management Company
Chain Owned Affiliated, Management Company Affiliated: Cautious approach
Sole Ownership: Capture High Market share quickly, higher investment required
Chain Owned Unaffiliated, Management Company Unaffiliated
COMPARATIVE ANALYSIS
ENTRY DIMENSIONS
STRATEGIC OPTIONS
ENTRY OPTIONS IN HOTEL INDUSTRY
PROCEDURE AND COST STRUCTURE
THANK YOU FOR YOUR ATTENTIONQUESTIONS & ANSWERS???
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