INTERNATIONAL MARKETING ENVIRONMENT OF TURKEY The economy of Turkey is defined as an emerging market economy by the IMF and is largely

developed, making Turkey one of the world's newly industrialized countries. The country is among the world's leading producers of agricultural products; textiles; motor vehicles, ships and other transportation equipment; construction materials; consumer electronics and home appliances. In recent years, Turkey had a rapidly growing private sector, yet the state still plays a major role in industry, banking, transport, and communications. U.S. has classed Turkey as one of its 10 Big Emerging Markets. Additionally Turkey is Europe's seventh largest trading partner, while Europe is Turkey's main partner, accounting for around half its trade. Turkey offers a dynamic and challenging business environment in a rapidly changing marketplace. The country is enjoying a capitalist boom since 2001. In recent years, Turkey's market reforms, strong growth and economic and political stability have attracted greater amounts of Foreign Direct Investment (2003 was a banner year for FDI reaching $ 72 billion). The existence of more than 24 thousand foreign capital companies ensure a stable and reliable investment environment . Many foreign investors have a strong and leading position in the market.The Turkish financial sector is well developed in both technology and legal procedures. Turkish finance is primarily built upon universal banking system and related areas like insurance, leasing, factoring and stock brokerage. The country occupies a an important strategic position. As bridge between Europe and Asia, and the protector of the straits between the Black Sea and the Mediterranean, Turkey is often referred as the most important country in the region". International trade system Turkey offers a competitive tax system. Due to the liberal and secure investment environment major multinationals are the key players in the local economy. An increasing number of global companies are re-allocating their Eurasia business units in Istanbul. General Electric, 3M, P&G, Toyota, Pfizer, Johnson and Johnson, Microsoft, Kraft are only a fraction of leading global companies who have invested in Turkey and are key players in local market. In Turkey, taxes and other revenues constitutes 23%of GDP (2012 est.) Turkey, which is a member of 12 regional trade agreements, ranked 4th out of 125 countries in trade policy based on the latest Trade (MFN) Tariff Restrictiveness Index of 1.5 percent; 37th out of 125 countries in external environment based on its foreign market access (tariffs only, but including preferential rates); 57th out of 178 countries in institutional environment, in terms of the ease of Doing Business 2007 index; 34th out of 151 countries in trade facilitation in terms of the 2006 Logistics Performance Index and 72nd out of 160 countries in trade outcome. Turkey implements the import ban on the products of ten categories according to the environment, public safety, health, public morality or the relevant international conventions. The products include drugs, chemical weapons, fuel which is detrimental to health, weapons and ammunition, products which violate trademark right or whose names violate "the International Convention on Industrial Property". In 2009 Turkey issued several communiqus to set the minimum supervision prices for some products such as thermos bottle products, hand saws, liquid thermometers, footwear products, sesame, arc welding machines and color TV sets, and modify the supervision conditions of some products. The revised supervision system has made the related export procedures more complicated and resulted in adverse impacts on the export of the relevant Chinese products.

Economic environment

The country's population was 74.7 million people in 2011, nearly three-quarters of whom lived in towns and cities. Turkey has an average population density of 97 people per km. The Turkish population is very young.People within the 1564 age group constitute 67.4% of the total population; the 014 age group corresponds to 25.3%; while senior citizens aged 65 years or older make up 7.3%. Income distribution Turkey is a country with large and entrenched inequalities. Income differentials across regions and social groups are wide and persistent. When measured by the Gini coefficient, inequality in Turkey is close to the levels observed in some highly unequal countries such as Peru or Russia A significant share of total inequality in Turkey is explained by differences in endowments, geography and opportunities faced in the labor market (and specifically the emergence of growing wage differentials by educational attainment). The middle class in Turkey is growing. The income per capita in 2003 was roughly $3,300. Political and legal environment Turkey is strategically positioned at the crossroads of Europe, Asia and the Middle East. The Republic is a democratic, secular and social state governed by the rule of law. It has been a multi-party parliamentary democracy since 1947. Turkey's foreign policy is mostly focused on Western values and institutions. Turkey became a founding member of the Council of Europe in 1949, applied for associate membership of the EEC (predecessor of the European Union) in 1959 and became an associate member in 1963. After decades of political negotiations, Turkey applied for full membership of the EEC in 1987, became an associate member of the Western European Union in 1992, joined the EU Customs Union in 1995 and has been in formal accession negotiations with the EU since 2005.[67] An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication, and an emerging cadre of middle-class entrepreneurs is adding dynamism to the economy and expanding production beyond the traditional textiles and clothing sectors. The automotive, construction, and electronics industries, are rising in importance and have surpassed textiles within Turkey's export mix. After Turkey experienced a severe financial crisis in 2001, there were adopted financial and fiscal reforms as part of an IMF program. The reforms strengthened the country's economic fundamentals and ushered in an era of strong growth - averaging more than 6% annually until 2008. Global economic conditions and tighter fiscal policy caused GDP to contract in 2009, but Turkey's well-regulated financial markets and banking system helped the country weather the global financial crisis and GDP rebounded strongly to 8.2% in 2010, as exports returned to normal levels following the recession. Further economic and judicial reforms and prospective EU membership are expected to boost Turkey's attractiveness to foreign investors. However, Turkey's relatively high current account deficit, uncertainty related to monetary policy-making, and political turmoil within Turkey's neighborhood leave the economy vulnerable to destabilizing shifts in investor confidence.

Cultural environment There are many individual traits that are part of the Turkish culture. As a society, the Turkish have a respect for rank, education and authority. The boss is the ultimate decision maker. Older people are thought to be wise and are treated with respect. Turkey is also tolerant of various religions. Hospitality and generosity are very important to the Turkish culture. Hospitality should not be refused by anyone doing business in Turkey. Turks are used to handling simultaneous conversations so interruptions in meetings are very common. Business meetings do not require an appointment since business managers are hospitable towards drop-by meetings. Business lunches and dinners are common and reciprocity is important. Business relationships are important to the Turkish. Business partners might be expected to perform favors beyond what might exist in other countries business relationships.

Other than these universal rules, Turkey is unique in terms of local values. Speaking especially of global brands, those who respect and take into account local values are more likely to become one of us. Ramadan is a good example of when consumption of certain goods reach a peak and everyone is fighting to win the best of this period. However, it is such a fragile zone that you must avoid abusing/exploiting values and being perceived as irritating or insincere. Business environment As of 2003, state owned enterprises account for 1/3 of manufacturing . There was a decline in government owned manufactures to get to that level. Turkey is a member of a variety of international organizations including the United Nations and trades with a variety of countries. Turkey has adopted European Union rules on measurement, quality and tariffs, adapting some to its circumstances. There are some incentives to business including that customs and duties on the import of industrial products have been eliminated. Turkish is the predominant language, but there are several dialects. In different regions of Turkey, German and English are spoken. For business at the local level it will be important to communicate in Turkish. It will be important to have someone on the marketing and business team that speaks Turkish fluently in order to establish a local presence with a product. Verbal communication is more dominant than written expression in business in Turkey. A verbal agreement and handshake can seal a deal in Turkey. Doing Business 2013 data for Turkey: Eastern Europe & Central Asia Upper middle income 73,639,596 10,410

REGION INCOME CATEGORY POPULATION GNI PER CAPITA (US$)

DOING BUSINESS 2013 RANK 71

DOING BUSINESS 2012 RANK 68

CHANGE IN RANK -3

(out of 185 economies)

Hofstede Indicators applied to Turkey Power distance This dimension deals with the fact that all individuals in societies are not equal it expresses the attitude of the culture towards these inequalities amongst us. Power distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally. Turkey scores high on this dimension (score of 66) which means that the following characterises the Turkish style: Dependent, hierarchical, superiors often inaccessible and the ideal boss is a father figure. Power is centralized and managers rely on their bosses and on rules. Employees expect to be told what to do. Control is expected and attitude towards managers is formal. Communication is indirect and the information flow is selective. The same structure can be observed in the family unit, where the father is a kind of patriarch to whom others submit. Individualism The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether peoples self-image is defined in terms of I or We. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist societies people belong to in groups that take care of them in exchange for loyalty. Turkey, with a score of 37 is a collectivistic society. This means that the We is important, people belong to ingroups (families, clans or organisations) who look after each other in exchange for loyalty. Communication is indirect and the harmony of the group has to be maintained, open conflicts are avoided. The relationship has a moral base and this always has priority over task fulfillment. Time must be invested initially to establish a relationship of trust. Nepotism may be found more often. Feedback is always indirect, also in the business environment. Masculinity / Femininity A high score (masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner / best in field a value system that starts in school and continues throughout organisational behaviour. A low score (feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (masculine) or liking what you do (feminine). Turkey scores 45 and is in the middle of the scale but more on the feminine side. This means that the softer aspects of culture such as leveling with others, consensus, sympathy for the underdog are valued and encouraged. Conflicts are avoided in private and work life and consensus at the end is important. Leisure time is important for Turks, it is the time when the whole family, clan and friends come together to enjoy life. Status is shown, but this comes more out of the high PDI. Uncertainty avoidance The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the UAI score. Turkey scores 85 on this dimension and thus there is a huge need for laws and rules. In order to minimize anxiety, people make use of a lot of rituals. For foreigners they might seem religious, with the many references to Allah, but often they are just traditional social patterns, used in specific situations to ease tension. Long term orientation The long term orientation dimension is closely related to the teachings of Confucius and can be interpreted as dealing with societys search for virtue,the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view. 4