Table of Contents
This study aims at evaluating the textile industry of Tukey and analyzes various internationalization strategies that can be adopted by Turkish textile industry to expand its operations across UK. The textile industry of Turkey is facing crisis while textile and apparel industry of UK provides several opportunities in terms of industry growth. This study uses a descriptive method of analysis to evaluate and choose among various methods of internationalization i.e. exporting, importing, franchising, joint ventures or strategic alliances. The study found that the declining value of Lira (Turkish currency) and anticipated sanctions on the country from Russia, Turkish textile industry needs further expansion into Europe and mainly UK that has most vibrant policies underway to expand textile and apparel industry in light of growing fashion industry. The study found that joint ventures can be the most aggressive and suitable policy for Turkish firms as the focus in textile industry has shifted from low cost suppliers to niche and quality suppliers with updated technology and thus, joint ventures can benefit textile industry from both countries.
There is an extensive literature available on internationalization process and its associated advantages and disadvantages (Mukti, Kota and Mersini, 2009). Internationalisation is a concept of doing business globally; however this term is specifically used for other countries doing business in Europe. According to Kauter, et al (2015) firms decide to internationalise to expand their business in different countries to obtain more profitability by capturing more profitable market. Andersen & Buvik (2002) observe many organisations to internationalise and adopted various strategies to match their economic, financial and strategic goals. Gaston-Breton & Martín (2011) further observes that internationalisation have been a general phenomenon due to globalisation and technological advancements. Not only firms internationalisation assist the firm to expand their business but enable them to attain profitability. (Keskin, Anil and Canel, 2012) highlights development of new and improved manufacturing techniques and process is also a significant advantage of internationalisation.
Expansion of organisation globally refers to their behaviour when they sell and distribute brands and products in different countries. (Anil and Cakir, 2010) observe the concept of internationalisation developed due to poor conditions of governments which were unable to provide significant investments and facilities for trade. According to Sakarya, et al (2007) organisations are inclined to expand their manufacturing in different countries due to cost effectiveness. Furthermore improved and cost effective material may also be obtained from other countries. After World War II western companies started to invest and trade in other countries; several technological advancement also expanded along with innovative manufacturing style and methods. Some were adapted by west and some were influenced by West. National economies now partially or completely rely on globalisation nowadays; where governments, suppliers, producers and consumers are concerned. Through globalisations firms have been encouraged to capture new opportunities by operation internationalising which is possible due to increased connection between countries.
Firms mainly enter into internationalisation to expand their target market, enhance productivity, and thus become leaders of the market. Papadopoulos & Martín (2011) observes firms to capture opportunities present outside their country and expand in terms of scope and value, by developing their business ideas, principles orientation and work nature. Bell & Van Scheer (2013) defines firms with such strategies to be developed into transactional firms. Mohr & Batsakis (2014) consider competitiveness of a firm to be based on development of transactional in nature, where internationalisation process assists in development through integration, knowledge of foreign market dynamics and acquisition.
Firm internationalisation can be described both on macroeconomic and microeconomic approach; where macroeconomic approach refers to broad aspects describing commercial elements, and microeconomic approach is concerned with the elements which are specific to the firm. Macroeconomic approach expands firm internationalisation in terms of change in capital and theory of labour division; however Westhead, et al (2002) observes microeconomic approach to be involved in product lifecycle theory. Apart significance of internationalization for corporate advantages, the most significant factor is the selection of entry mode and investment type like Acquisition and Greenfield and ownership preferences (Joint ventures and Wholly owned subsidiaries) which defines the success of international firms. Similarly, the industries that expand beyond borders in terms of sales like exports of merchandize need to evaluate their entry modes., investment types and ownership structure to successful continue their expansion (Tsai and Cheng, 2004; Kukeli, 2007).
Textile and apparel industry play significant role in economies of many countries, economies of some countries are even based on exports of textile and clothing products. Keane and Velde (2008) conducted a theoretical and qualitative paper on evaluating the role that textile and clothing industry plays in UK economy. The researchers suggested that in the short run, textile and clothing industry provides various economic and social benefits of increased incomes, jobs, especially for women, and foreign currency receipts as well as long term benefits of sustainable growth in industry. However, in UK, the textile industry has seen decline due to various reasons and specifically low level of attention by policy makers and local industries. Karaalp & Yilmaz (2013) observes more recent inclination of international clothing and textile. Turkey is also one of the significant exporters of clothing and textile. However Milašius & Mikučioniené (2014) observe turkey to be alarmed of losing its share in UK market. Although clothes and textile of Turkey are valued more in Turkey, however Milašius & Mikučioniené (2014) observe no significant change in quantity of demand. Karaalp & Yilmaz (2013) highlight low cost production and cheap products have affected market share of several clothing and textile industries. This indicates that consumers are more inclined towards low cost and low quality products, rather than high quality and high priced product of Turkey. This paper aims to compare the markets of UK and Turkey and suggest effective strategy of entry and investment to gain competitive advantage in UK market.
Internationalization has gained significant attention in recent years, specifically due to globalization. UK is a developed country with aware and conscious consumers. Industries of developing countries tend to capture potential markets for profitability. However there are several strategies available for market penetration and adaption of suitable strategy leads to success. On the other hand, inappropriate strategy may develop failure. Suitability of a strategy depends on various internal and external factors. Turkey’s clothing and textile industry already has an exposure in UK market through various sources such as exhibitions, direct material imports and other collaborations among entities. However, nearby countries such as Russia remained Turkey’s biggest market, importing around US $514 million worth textile and fabrics from Turkey (Volkmann, 2015). Due to the declining Lira (Turkish currency) and sanctions by Russia, it is assumed by several market expansion consultancy firms; UK is expected to be one of main beneficiaries and with continued declining state of textile and fabrics industry in UK, there is great advantage for Turkey to expand to UK. This paper, therefore, aims to investigate which strategies of entry and investment should be adapted by Turkish textile industry to have competitive advantage in UK.
The significance of this study lies in significance of textile industry for economies around the globe that is highlighted by many researchers (Cadot, Iacovone, Pierola, and Rauch, 2013; Ahmed and Kalim, 2013; Fletcher, 2009). Gardetti and Torres (2013) in their study found that in 2000 alone, the world consumers’ spent around U.S. $1 trillion on clothing out of which one-third industry was represented by West European countries, one-third by North America and one-quarter by Asian economies. The same figure rose to around £8.9 billion for UK alone in 2012. In UK industry, the manufacture textiles accounts for 59.5% of industry turnover, clothes account for around 29.6% of industry turnover and leather and related products account for 10.9% (The National Archive, 2014). The figure below presents the increase/decrease in output of textile industry from 1948 to 2013.
Figure 1: Textile and total manufacturing output since 1948
Source: ONS Index of Production (2015)
Moreover, the employment that textile sector provides accounts for over 26.5 million individuals according to statistics from the UNIDO (United Nations Industrial Development Organisation), Industrial Statistics Database (INDSTAT) (ILO, 2006 cited in Gardetti and Torres, 2013). While the significance of textile industry is obvious for major exporting countries like Turkey and Pakistan, countries like UK have face constant decline in their textile industry with more focus on imports from other countries. Since the late 1970s, the industry has experienced a steady decline in output with a decline of around 64.7% between 1979 and 2013 and employments decline by 90.1%, from 851,000 to 85,000 during the same period (The National Archives, 2014).
Based on the challenegs that UK economy faces in growth of textile and rising demand for fabrics and clothing industry, as well as the sanctions applied on Turkey from Russia and declining Lira highlights the significance of this study. The study therefore, evaluates the best strategies that can be adopted by Turkish textile industry to penetrate UK market and achieve increase trade in textile and clothing.
The main research objective is to develop an understanding of the market position of UK and which factors or strategies may enable successful penetration. Different entry and investment strategies shall be studied, analysing them critically according to the market of UK. The objective of the research can be summarised as follows:
- To understand current entry and investment strategy of Turkish textile industry.
- To understand market dynamics of UK.
- To compare the market dynamics of UK and Turkey.
- To recommend suitable strategy for entry and investment to Turkish Textile industry.
For the achievement of above research aim and objectives, following research question is suggested:
- What are the similarities and differences in market of Turkey and UK?
- What is the current strategy of Turkish textile and clothing industry to penetrate in Turkish market?
- Which is suitable entry and investment strategy to have competitive advantage in UK market?
The structure of this dissertation and its context are shown as follows:
Chapter One: Introduction – This chapter provides background the issue i.e. internationalization of Turkish firms in UK market as well as aims and objectives of the study. Moreover, the chapter also highlights specific research questions that are answered using primary and secondary research.
Chapter Two: Literature Review – This chapter presents critical analysis of previous studies conducted on similar issue of internationalization, various theories that create background for strategies of firms when expanding abroad. Moreover, previous literature on Turkish and UK textile industry is also included in the chapter.
Chapter Three: Research Methodology – This chapter presents details for research methods employed in this study along with details of sample and data collection. The chapter also presents various limitations associated with research method selected and ethical considerations in relation to the research which is conducted.
Chapter Four: Data Findings and Analysis – This chapter presents findings regarding economic and industry information of textile industry as well as external factors that need to be studied before recommending a strategy for Turkish textile industry. Based on the data analysis, various recommendations are presented to strategically enter UK market while maintaining increased market exposure.
Chapter Five: Conclusions and Recommendations – This chapter presents summary of findings from findings and secondary literature as well as recommendations based on limitations of this study for future researcher.
The concept of doing business globally is not a new concept; it can be traced back and can be distributed in three distinct eras. During first period from 1960-1980 Latin Americans used to invest in other areas of the world, while during 1980s-1990s mostly Asians were observed to invest, whereas from 1990s several developing countries involved in Foreign Direct Investment (FDI) (Alfaro, et al, 2004). Initially investments were only done in developing countries by rich countries, however with change in time and during the second era the aim of investment changed to achievement of economic and competent advantage, thus several investments were observed both in developing countries and developed countries. Blonigen (2005) and Bell, et al (2003) further observes engagement of different countries in FDI after recession period, however indicates several reasons for investment.
A firm may have aggressive or proactive and defensive or reactive approach towards FDI. This indicates that firms seek advantages from tax differentials, economies of scale, diversified market, diverse product information, overproduction or competition. Clegg & Wang (2004) further observes firms to be involved in FDI to acquire advantages from manipulation effects of governments. Not only the investing firms enjoys all the benefits, but some advantages are also associated with the countries which deal with foreign investors, such as, cultural distance, political stability, infrastructure, GDP, etc.
Furthermore there are both internal and external forces or advantages associated with foreign investment decisions. Alfaro, et al (2004) observes firms are externally motivated to invest in other countries when they observe dynamics related to labour market, market size of the host country, political and economic condition; whereas firms have desire to grow either by market size, or technology. This indicates that external motivational factors associated with investment are more locational. The market, resource or efficiency can be factors which encourage a firm to invest in a country. This indicates that firm are more likely in invest in a country which either have natural and physical resources, such as, raw material, minerals, etc. or cheap human resource, or have either diverse or potential market. Brenton, et al (1999) highlight firms to attain competitive position by capturing market, resource or labour from another country; on the other hand Chowdhury & Mavrotas (2006) observes this strategy to be also used to deteriorate position of the competitor.
In following section theories of internationalisation and drives of a firm to invest in global market shall be studied which may assist in observing desire of Turkish firm to invest in UK.
Age of the firm and desire of investment are observed to be directly related. According to Autio, et al (2000) some firms do internationalize from the initial level however mostly firms attain experience and market knowledge with passage of time. Simultaneously as firms require range of resources during their life cycle, they tend to seek valuable and unique resources from foreign countries. This indicates that desire to internationalise may depend on the age of the firm. Autio, et al (2000) considers entry time also to justify the desire of internationalisation of a firm. This indicates that firm internationalisation, their desire to internationalise and their attitude towards internationalisation depend on the strategies and objectives of a firm.
Decision of a firm to invest in another country depends on the size of the firm. Svetličič, et al (2007) observes larger firms to have unique product quality enabling to outstand beside its competitors. On the other hand Majocchi, et al (2005) and Bell, et al (2003) highlights high probability of a big organisation to invest in other countries. This phenomenon can be justified with the fact that huge organisations either have higher resources or require higher resources. Similarly equity investment method provides huge organisations an opportunity to expand globally. Svetličič, et al (2007) observes ownership advantage increases with the size of the organisation. Investment by a firm can be of various means, such as, capital investment, employee affiliation, division into parent and subsidiary and resources of the parent firm. This indicates that desire to invest depends directly on available capital, resources, employees and assets. Thus venture taken by a firm depends on the size of the firm. This indicates that the firm size of Turkish firm may define its desire to invest in UK.
Type of firm also explains probability of investing in any other country, such as; some firms have such processes which can be completed by suppliers of other countries. Svetličič, et al (2007) observes firm to achieve several advantages of investment on outsourcing its process rather than conducting the whole process in host country; however nature of investment may vary. Textile industry may be more concerned to reduce cost of manufacturing, however cement factory may require low cost raw material. This indicates that type of industry and its sub process specify desire of investment.
Development level of both; the firm and the host country may describe the reason or the desire of investment in another country. According to Cuervo-Cazurra (2011) desires of a firm from a developing country may vary from the desires of developed country, mainly due to difference in business objectives. Firms from Taiwan are observed to invest in developed countries to achieve market size and also to identify successful strategy; however after exploiting developed countries they approach to less developed countries.
Bianchi & Arnold (2004) and Bell, et al (2003) explains institutional theory, stating that organisation and its strategies are affected by its external environment, which constitutes economical, legal, political, social and environmental factors. A firm eager to gain economic benefits and lack of institutional support doesn’t effect its business is more likely to invest in LDC (less developing countries). On the other hand firms may invest in developed countries, when aims to achieve better political stability, protection on property rights and better working environments, however the market of DC are more competitive and mature than of LDC. This indicates that TMTs desire to invest in a country depends on its level of development. UK is a developed country and may provide better working environment, however high competition and resistance to entry.
Transaction cost theory and eclectic framework are two main approaches identified by scholars, where transaction cost theory supports internationalization. Investment by a firm to a country may depend on the approach selected for entry. A firm is more likely to avoid wholly owned subsidiary (WOS) when the cost of the resources present in a particular market is high, however eclectic framework provides choice of entry to the firm. This indicates that a firm may have different strategy for entry in a market, it can be either through acquisition, joint venture, etc.; however the decision may depend on environment and approach of the firm.
Firm’s decision for entry mode can be explained by Transactional cost theory, Resource Dependency Theory and Institutional theory. According to Bianchi & Arnold (2004) Dunning suggest integration of these three theories to explain the process of internationalization, where ownership advantages can be accessed by Resource Dependency Theory, location advantages can be explained through Institutional theory and benefits of internationalization can be obtained by Transactional Cost Theory. However a firm may decide its strategy to enter in a market according to the approach selected, thus a firm may enter through FDI, Joint venture or (WOS) wholly owned subsidiaries; develop Acquisition or Greenfield according to the approach selected.
Stability of business activities directly depends on the external environment present in the host country, such as, economical, legal, political, environmental and social. According to Bianchi & Arnold (2004) JV (Joint venture) is a flexible approach selected by the investing firm when risk is perceived to be high. Meyer, et al (2009) further highlights presence of high cultural differences asserts firms to choose JV as an entry strategy; however Delios & Henisz (2000) and Branstetter (2006) found no relation between cultural differences and entry strategy of Japanese firms while investing in Europe. Acquisition and Greenfield are observed to be appropriate strategies when culture is similar.
Transaction cost approach explains the entry or investment strategy of a firm for achievement or reduction of cost related advantages. According to Brouthers (2002) firms are more likely to develop WOS when there is high probability of performance monitoring, technology can be easily adjusted and rights are protected; however when specifications of firm asset are high JV is preferred. On the other hand Makino & Neupert (2000) observes firms to prefer WOS when the firm is intensive in R&D or may require complete control for the safety of propriety expertise. WOS is also preferred by technology intensive firms where else wise infrastructure doesn’t have the capability to protect the firm capital. Makino & Neupert (2000) highlight uncertain conditions may also lead to choice of WOS approach. Furthermore reputation of the country also affects the decision of selection of WOS, in case the country is well reputed WOS shall be developed.
Firms compete in the market due to several reasons; however unique or effective use of resources is considered to provide competitive advantage in the market. Doherty (2007) observes firms to internationalize to achieve resources from different locations. This indicates that resources are shared among partners while internationalizing. A firm from developing countries share their resources and abilities with the parent firm, on the other hand parent firm, which is usually from developed countries, provides access to the market and knowledge of the market.
Firms from developed countries may also work with partners in developing countries to obtain local market knowledge and opportunity to enter local market, while using their resources. On the other hand partners from developing countries achieve technical and strategic capabilities from parent partner. JV strategy is adopted when parent aims to capture valuable local resources, in case the economic condition of partner from developing country is weak; however if the economic condition of the partner from the developing country is strong and activity in the market is high, acquisition strategy is adapted. Harzing (2002) observes acquisition strategy to avoid local partners and their requirements of the resources.
Greenfield strategy is adapted by firms which have available resource in the form of technology. Görg (2000) considers parent firm to benefit from the stronger technological capacity of local firms by providing technical abilities; however firm size has significant effect on the decision of entry strategy. According to Makino & Neupert (2000) huge firms have higher capability of reducing cost and risk associated with investment, thus can also balance unfavorable circumstances.
According to Eclectic approach, firms select ownership which is most favorable to them. Whitelock (2002) observes this approach also be identified as OLI which refers to ownership, location and internationalization. According to Resource Based theory of the firm, firm analysis and select ownership approach which best suits them, further considering position of the host country, according to institutional theory while observing advantages of internationalizing (Transaction cost theory). However less experienced firms are more likely to select JV, due to its less risk capabilities (Makino & Neupert, 2000). On the other hand huge firms select WOS to achieve complete control over the market obtaining maximum profit.
Strategy adapted by firms to enter in a different market depends on several factors, such as, the possible perceived risk, possible available control or availability of resources and possible investment return planned. However entry modes can be classified into two categories; equity mode and non-equity mode. Equity mode refers WOS and JVs and non-equity mode refers to contracts and export. Whitelock (2002) considers import and export entry strategy to offer lowest possible risk, whereas acquisition offers maximum risk but maximum control and profit.
Import and export is the most common and old method of internationalizing, where foreign products are spread in other countries. Export can be direct or indirect; in direct method, firm market and distribute its product itself, whereas in indirect method, agents are appointed who are responsible for distribution and marketing of the product. In indirect method product is distributed as if it is a local product, thus is excluded from strategy of internationalizing.
Licensing also is a low risk strategy of an organization eager to spread its target market. Foreign firms obtain license from the international firm, along with product manufacturing authority and knowledge. The licensed firm can market, distribute and manufacture the product under the original trademark in an assigned territory but they have to pay some sort of license fees which may be according to the territory limit or sales. This method is more beneficial for the host country.
Franchising provides the international firm more authority and control; however the concept is similar to licensing. According to Doherty (2007) royalties and fees are paid by the franchisee to the franchiser, which enables them to use product trademark, system and format. The contract is usually for longer and broader. Franchiser may also provide management systems, equipment, operating methods, training, approval for site and other required support to the franchisee. Doherty (2007) observe franchising to be a low risk entry strategy which enables the international organization to expand globally; however franchisee can later provide competitive threat to the original company. Furthermore selection of wrong partner may assert negative impact on the trademark.
Joint venture is similar to licensing; however two companies, one from the host country and other an international company develop another company according to agreement, where the parent company holds an equity position, thus better control and access to the market. Meyer, et al (2009) considers JV to be commonly used for internationalization, due to its less risk, better control and less requirement of market knowledge.
A strategic alliance is a short term JV between international and local company mainly for the purpose of research and development of new product, rather than distribution of old product. Usually high tech or industrialized firms joint to make strategic alliance.
International firms also directly invest in a market; Dikova & Van (2007) considers this approach provide the international firm full control over the market and ownership. Direct investments can be done through Greenfield effect, where facilities are developed by the international company or investments can be done indirectly by developing an acquisition with a local firm. Harzing (2002) considers acquisition to provide easy access to the local market without complete knowledge of the complexities and dynamics of the local market. As risk associated in business can be better calculated in acquisition process, thus is safer than Greenfield investment. Greenfield investment is a type of OWS and provides full control over the market and business. Further despite of its complexities and cost has the ability to provide higher return than acquisition approach. Greenfield investment requires more time, cost and risk for developing new business, distribution and development of appropriate marketing strategy.
From the above discussion it is clear that there are several advantages associated with internationalization of a firm, such as, availability of resources and expansion of market, however drive of a firm to internationalize depends on age, size and type of the firm. According to Resource Based Theory firm may select ownership approach which is best suitable for then, whereas Institutional Theory observes position and condition of the country for penetration. Lastly according to Transactional Cost Theory firms are most likely to evaluate or calculate possible benefits of internationalizing.
Different strategies are available for entering into new market. Import and export is usually the initial entry strategy which is of least risk. Firms seeking complete control over the market and control over the operations of the subsidiary may enter a new market through WOS, however there are several threats associated with WOS. Firstly new market is most likely to have different dynamics which may be difficult for the parent firm to understand. JV is another entry strategy which is of relatively low risk, as market and resource handling is the responsibility of the firm situated in the local market. Licensing and Franchising are some other entry strategies are more entry strategies which are of low risk, less control, but provide less profit to the parent company. Thus every internationalization strategy has different level of risk, commitment and profitability.
This chapter presents the research methods and techniques used in this study to evaluate internationalization strategies for Turkish clothing industry to enter UK market. The chapter also presents previously used research methods on similar topic as well as the limitations of research method.
Evaluation of a subject area requires empirical, systematic and controlled method which may guide researcher at every step for successful achievement of the result. There are several research methods developed by scholars and researchers; however objectives and aim of the research are considered carefully to identify the complexities associated with the research. Careful selection of research methodology is suggested by Mitchell & Jolley (2012) which may be according to the research area.
This research aims to investigate the effectiveness of different entry and investment strategies to suggest an appropriate strategy for Turkish textile industry to capture market of UK. Every market has its own dynamics which are important to evaluate. Different strategies are compared and analysed to obtain a suitable entry and investment strategy for Turkish textile industry to penetrate in UK market.
Kumar (2008) defines two main research approaches in business management and social sciences subjects: Qualitative and Quantitative research approach. The approach selected for the research is qualitative. Both quantitative and qualitative approach of research has own advantages and disadvantages along with relevance. Quantitative approach provides statistical data which can be measured and calculated. Derivation of result is also convenient in quantitative approach; however this research is descriptive type and data from different reports and resources shall be collected. Thus qualitative approach is more relevant to this research. With the help of qualitative approach, attitudes, behaviours and personal trait of consumers is obtained. Critical evaluation of current strategy of Turkish textile industry is also done and comparison of Turkish market and UK market is conducted to understand the relevance of current strategy of Turkish textile industry in UK market.
Research type or design refers to “the overall strategy that you choose to integrate the different components of the study in a coherent and logical way, thereby, ensuring you will effectively address the research problem; it constitutes the blueprint for the collection, measurement, and analysis of data”. There are three main types of research in social sciences: exploratory, descriptive and explanatory (Mitchell & Jolley, 2012). The exploratory research involves research on subject area which is not clearly defined and data and information is collected to define the problem first. Descriptive research on the other hand, focuses on current and existing problem and issue and collect data and information to evaluate those issues. Lastly, the explanatory research type evaluates the relationship between variables for the study and explains how one variable affects the other by analyzing or manipulating the available or collected data and information. However evaluation of investment and entry strategy require describing of market dynamics against entry and investment strategies. Moreover, the study does not require manipulation of any data collected and just requires evaluation of collected secondary data regarding Turkish and UK textile industry and country trade dynamics. Thus descriptive research is suitable to carry this research, as it tends to describe accurate sketch of situations, people and persons against an opinion. Thus appropriate presentation of UK market against different internationalisation strategies may be possible.
There are three main types of descriptive methods that can be used for conducting studies: Case Study, Field Study, Laboratory experiment and Field experiment. The case study method refers to research method where “little knowledge is available regarding the sample firms or entities and focused study is conducted on that sample to obtain more information related to topic under study” (winter, 2010). The field study design refers to “research design where results obtained from investigation on certain fields can be generalized to larger population”. Field experiment and laboratory experiments are not valid for most of the studies in social sciences and economics as they require controlling involves variables along with data manipulation on field. The case study method is very advantageous for studies that involve variables or sample that is limited yet represent greater population. This study is therefore, a descriptive case study design where data and information collected is evaluated in light of previous theories and information collected from both economies.
The study is a descriptive research aimed at evaluating the internationalization strategies for Turkish textile firms and their expansion in UK. The sample for the case study method in this study therefore, includes UK and Turkey economy and data collected is regarding various economic variables including GDP (%), employment in industry, Industry production, exports and imports, total trade, FDI inflows, and Textile (% of manufacturing). These important variables are evaluated in terms of challenegs that both economies face in their respective countries and opportunities that other country provides in terms of internationalization.
Research is normally conducted using two main types of data, primary data and secondary data; where primary data is first hand data collected by the researcher and secondary data is the data collected by other resources or available data. This research requires analysis of Turkish market and UK market which is not possible to be evaluated single headedly. Thus only secondary data shall be collected through reports, research of other scholars, market evaluation reports, market evaluation by authentic sources, etc. to observe market dynamics of Turkey and UK and also to observe entry and investment strategy adapted by Turkish textile industry. The main website for data collection includes the database of World Bank where all economic and financial variables are available. Moreover, authentic sources for collection of reports on textile industry in Turkey and UK are also included like Statista and Trading Economies.
Apart from data from industry, work and research of other scholars is also accessed and evaluated to understand the concept of internationalisation including theories of Institutionalist approach, Transaction and Resource based approaches, and Eclectic approach. Market analysis of other countries is also done to understand effects of current entry and investment strategy on consumers. Primary resources is not required or related so no primary data is collected in current case.
The main variables included in the study to evaluate industry and economic side of Turkey and UK include variables of Textile (% of manufacturing), GDP growth, Employment in industry as percentage of total employment, Trade (% of GDP), FDI net inflows. The definition for each variable as presented by World Bank (2016) is presented below.
“Value added in manufacturing is the sum of gross output less the value of intermediate inputs used in production for industries classified in ISIC major division D. Textiles and clothing correspond to ISIC divisions 17-19” (World Bank database, 2016).
“Annual percentage growth rate of GDP at market prices based on constant local currency. Aggregates are based on constant 2005 U.S. dollars. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources” (World Bank database, 2016).
“Employment is defined as persons of working age who were engaged in any activity to produce goods or provide services for pay or profit, whether at work during the reference period or not at work due to temporary absence from a job, or to working-time arrangement” (World Bank database, 2016).
“Exports of goods and services represent the value of all goods and other market services provided to the rest of the world. They include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude compensation of employees and investment income (formerly called factor services) and transfer payments” (World Bank database, 2016).
“Foreign direct investment refers to direct investment equity flows in the reporting economy. It is the sum of equity capital, reinvestment of earnings, and other capital. Direct investment is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy” (World Bank database, 2016).
The study critically evaluates the internationalization strategies adopted by Turkish textile firms in the past and UK market analysis using quantitative economic data. However, there are few limitations associated with the research method selected. Firstly, the study is mostly based on mixture of secondary research and data as well as past studies. The selection bias element is presented in this study as selection of articles and studies is on researcher discretion and therefore, bias might exists in using conclusions from studies. For this purpose as many studies from authentic resources are included in this study as possible to avoid this limitation. Secondly, the study is descriptive in nature and evaluates various perspectives of economy; however, the policy framework for textile or trade industry is not included in this study due to limited scope and thus, can affect validity of results.
Validity and reliability are two significant factors that are evaluated for each research study for measuring the effectiveness and accuracy of study. Bordens (2006) define validity as “a research measure that evaluates the effectiveness of research methods in presenting useable results”. Validity is both internal and external and this study is highly valid for not only textile industry participants in UK and Turkey, but also for policy makers and fashion industry participants. The validity of this study is maintained by using as much concrete data on industry and economy as possible to cover for the low validity of reliance on secondary studies. The reliability factor refers to “consistency of results using similar data or information”. Since this study involves evaluation of internationalization strategies of Turkish firms on basis of variety of models and theories present, the reliability cannot be ensured as each researcher can evaluate the strategies of Turkish textile firms from different perspective or approach. Berg and Lune (2014) define generalizability as “the extent to which findings from a study can be generalized to larger population belonging to similar industry”. The generalizability of this study is limited to the case study countries i.e. UK and Turkey and data and analysis of this study are not applicable to other countries and thus, generalizability of this study is low.
This chapter presents findings gathered from economy of both UK and Turkey and various market statistics for both countries. Moreover, this chapter evaluates previous strategies of Turkish textile industry in expanding their base in other countries and finally recommend internationalization strategies for expansion in UK.
The global textile and apparel industry is a significant industry that constitutes a reasonable part of country GDP. The total market value of textile and apparel industry in 2011 was around $1.3 trillion with annual growth rate of over 6% (Data Monitor, 2012). There are two types of countries involved in business of textile i.e. exporting county and importing country. The main concentration of global textile exporting is in developing countries with largest textile-exporting countries including China, India, the U.S., Bangladesh, Vietnam, South Korea, Turkey, and Pakistan (World Trade Organization, 2012).
Figure below represents the global value chain for the textiles and apparel industry where more integration among firms is observed.
The flexibility of operating in a textile industry is visible from the value chain in figure where firms or countries shaving the required labour, cost, technology and other financing benefits can be both importers and exporters depending on perceived benefits for both (McNamara, 2008, p. 6-7). In the value chain of textile industry, it can observed that generally lower-income countries focus on factors related to low costs while developed countries are more focused on producing high-end fabrics or speciality apparel that are more relevant to fashion industry or high end consumers (McNamara, 2008, p. 6- 7). A study by Tao and Fu (2007) defined China, India and Turkey as main players in the textile industry with China leading all other exporters. The major advantages that developing countries gain on developed countries come in form of national resource endowments with cheaper labour and integrated industrial chains.
Figure below shows the labour costs in world’s textile and apparel industry recorded in 2014.
Labour Cost in Textile Industry (2014)
The chart show that developed countries still face extremely high costs in terms of labour endowments with Switzerland, Germany and Japan leading in labour costs while China, Indian, Vietnam, Pakistan and Bangladesh have lowest costs. The chart also shows that countries like Turkey have although low costs for labour endowments and is far below the costs of developed countries yet has greater costs compared to China and other competitors ITKIB (2010).
The industry is ruled by several regulations and policies created locally as well as globally which affects the industry significantly. For instance, recently, the elimination of the GATT’s Multi-Fibber Agreement of 1974 resulted in removal of quota based systems for textile imports that changed the dynamics of industry within months and small manufacturers like China and Vietnam captured most of the textile industry (Nordas, 2004, p. 13-16). Due to the sector size and nature of industry, the industry’s success, expansion or contraction is highly politicized due to political interference on low cost labour, manufacturing, and trading agreements. From 1974 to 2005, international bodies places a quota system in the textile industry on imports from one particular country and thus, low cost and efficient manufacturers like China, Turkey, Pakistan, faced challenges in capturing larger market shares. However, after the end of these quota systems in 2005, a monopoly has been formed by China in textile exports with major drops in prices for developed country consumers like UK and US. Similarly, Regional trade blocs and preferential trade agreements keep medalling in between free trade theories and protect smaller economies like Vietnam, Turkey, and India from being washed away in competition. From 1980 to 2000, there was a 5% decline in tariffs for developed countries and around 25% in developing. The overall dynamics of textile industry have shifted in past few decades with most of the developed countries like UK, Germany and US that mostly relied on internal supply of textile along with global players now rely solely on developing countries to supply textile products. This however, also increases opportunities for country like Turkey that are facing challenegs in form of declining currency value and political turmoil, to explore new markets in developed regions and expand their textile industry.
The textile industry of Turkey dates back to 16th and 17th century with Ottomans having textile as largest industry I the region. The development banks for textile industries and their promotion started during1930s with advent of Sümerbank under whose jurisdiction all textile firms united and operated. The labour force in Turkey was swiftly trained and educated under Sumer bank and private sector investment as well as SMEs was greatly supported by the government which led to Turkey being declared as one of the most advanced countries in achieving knowledge and technology in textile sector.
The timeline for evolution of Turkish textile industry is presented below
Figure: Timeline of evolution of Turkish Textile Industry
Source: Kaya (2014)
The cotton production in Turkey along with cotton-based textiles became trademark for the country and the government of Turkey further supported it by placing restrictions on textile import during 1970s.
During 1980s, the aggressive expanding policies in Turkey for textile sector made Turkey among the top exporters of the region with Pakistan as another leader. Table below presents the order of textiles and apparel products export (arranged by share in world export volume %).
|Country / region||1980||1990||2000||2004||Country / region||1980||1990||2000||2004|
|European Union (25)||–||–||36.5||36.6||European Union (25)||–||–||27.0||29.0|
|extra-EU (25) exports||–||–||11.2||12.5||extra-EU (25) exports||–||–||6.9||7.4|
|Hong Kong, China||1.7||2.1||0.8||0.4||Hong Kong, China||11.5||8.6||5.0||3.2|
The share of textile industry in total exports of the country was around 9.3% in 1990 which rose to 15% in 2005. In 2012, around $5.4 billion in exports were provided by the textiles industry in Turkey with formation of more unions and trade blocks in the country. The agreements with European Union already provide several benefits to the economy of Turkey and its textiles several global bodies like Small and Medium Enterprise Development Authority (SMEDA), Customs Union with the European Union (EU), British Chamber of commerce in Turkey (BCCT) and Turkish Clothing Manufacturers’ Association have resulted in high order technology and products used in manufacturing of textile and apparel products (Kaya, 2014). The number of exporters in turkey has reached around 9000 by 2012 and main facilities of production are located in Istanbul, Izmir, Denizli, Bursa, Kahramanmaraş and 18 Gaziantep (Kutluksaman, Mutlu, Saunders and Unluaslan, 2012).
The WTO’s removal of MFA agreements and removal of quota for textile firms led to major developments in Turkish markets. The main products of textile industry for Turkey includes Cotton textile products such as cotton, fibre, yarn and woven fabrics constitute while the main export items include synthetic yarns from monofilaments, cotton woven and knitted fabrics, synthetic filament yarns, and woven pile fabrics like velvet. The WTO agreement where benefitted countries like Turkey for their penetration into global markets, at the same time invited competitors like China to capture largest share and provide tough competition to countries like Pakistan, India, Turkey and Vietnam,. The graph below presents the textile industry in Turkey in percentage of total manufacturing. The data is used from 1970 to 2014 for Turkish economy using database of World Bank (2016).
Chart created by researcher using World Bank database (2016)
The graph shows that the textile industry in Turkey has been improving and showing growth since 1970s. however the peak period witnessed during 2004 and 2005 declined after 2008 when Chinese textile captured all major importing markets globally based on their natural endowments, technology and production capacity. In current scenario, countries like UK and Germany are now focusing on re-development of their textile industries in light of expansion of fashion and apparel industry which provides Turkey an opportunity to re-establish itself as major exporter to UK based on factors like market niche, fashion niche or quality products compared to its rivals. However, first, it is necessary to evaluate economic feasibility of Turkey for expanding its exports base.
Since 1970s and 1980s, Turkey has focused on economic liberalization followed by the liberalization standards introduced by Mustafa Kemal in Turkish economy and promoted transition from a statist model to a market-based economy or from an agriculture- and manufacturing-based economy to a more diversified economy with a large global services sector (Ministry of Economy, 2011). Moreover, the structural reforms in the country introduced by World Bank and IMF have further pushed economy of Turkey towards privatization of industries and open trade with related economies (European Commission, 2009). Since 2000s, the growth of Turkish economy has been phenomenal in terms of GDP, trade and employment (Emre and Bryant, 2011). Figures below present various economic indicators of Turkey with dataset containing data from 1970 to 2014.
Chart created by researcher using World Bank database
The GDP growth although shows ups and down but overall the GDP per capital has tripled during the last decade (World Bank database, 2016). The graph for total trade since 1970 shows phenomenal growth in Turkey with trade on constant rise compared to imports. The value for trade increased from 10.79 as percentage of GDP in 1970 to 59.92 in 2014 which shows how dependent Turkish economy is on trading activity and exports of textile.
Chart created by researcher using World Bank database
The graph for FDI inflows as net inflows and as percentage of GDP shows a high growth trend in FDI inflows for Turkey from 1970 to 2014. Inward FDI has increased more than tenfold from the previous decade, with $100 billion in FDI in the past eight years (Kaya, 2014).
Chart created by researcher using World Bank database
According to Emre and Bryant, (2011), during 2010-2011, Turkey was nominated as the 17th largest economy in the world with the 5th largest labour force among EU countries. Since 2003, the country has been constantly a favourite investor destination based on three most significant factors that differentiate Turkey from its competitors in Textile industry including: National competitiveness analysis and natural endowments. In national endowments, during 2011, Turkey was nominated as 47th most competitive country compared to its competitors like Pakistan, Bangladesh and Vietnam. However at the same time, countries like China and India gave Turkey a tougher competition in terms of technology and lower costs. Similarly, in terms of natural endowments, Turkey has most significant advantage of location where the country is located on strategic location at the crossroads of Europe, Asia, and the Middle East, enabling Turkey to act as a regional trade hub with easy access to the markets of its surrounding regions. Moreover, the long coastlines and sea access for trade and 70% of the world’s energy resources located to its south Turkey is one of the most viable option for countries located in Europe and Middle East.
While Middle-eastern region has insignificant growth or dependence on textile industry, European side of countries provide huge potential for Turkey’s textile industry which recently faced challenges in form of declining Lira (local currency), political turmoil and probable sanctions from its biggest textile importer, Russia. Turkey is already facing severe competition in terms of countries like China and India as well as Vietnam that have captured most of developed markets in UK and US as well as Japan. Moreover, the political and security challenegs have started arising at the southern border of Turkey with appearance of ISIS and other terrorists forces. At the same time, Russia’s imports of fabrics and apparel worth $514 million from Turkey faced sudden jerk with increasing tension between the countries. This also invites analysts and participants in Turkish economy to explore other options in nearby markets for market penetration. Although a number of importers from developed countries are available for Turkey to penetrate, however the strategic location of Turkey with European border and potential in UK market that is planning to expand its clothing and fashion industry, provide huge potential for Turkish textile industry. The analysis for UK economy and its potential is discussed in next section.
The economy of UK is among the fastest recovering economies among the developed countries based on the stringent economic policies and financial recovery of institutes which led to revival of various industries in the country including textile industry. Figure below shows the growth in GDP ratio of UK economy from 1970 and onwards.
The graph shows that economy of UK started recovering after 2010 with a sharp dip during 2008 and 2009. The recovery pf GDP ratio indicates positive prospects for the economy. Moreover, the chart for trade as percentage of GDP also indicates stable growth across the industries in UK.
The economic stability that UK shows and given the significance of textile sector in UK and declining state of textile exports for Turkey, it is pertinent to conduct empirical research on the issue and understand and evaluate various challenges that textile industries from Turkey faces in developed countries like UK that has highly developed fashion industry and where textile contributes around £5 billion to the economy (Allwood, Laursen, Rodríguez and Bocken, 2006).
UK textile industry is among the most well developed textile industries that remained economically successful until early 2000s when the textile industry started importing more compared to exports and thus, reliance of local or domestic markets shifted to international exporters. Before the shift in textile industry, in 2000 alone, the textile value or sales around the globe was recorded at US$1 trillion, out of which one third sales was represented by Western Europe, one third in North America and one quarter in Asia. Similarly, in 2000, the employment provided by clothing and textile sector was around 25 million jobs globally. In 2012, the clothing and textile sector represented around seven per cent of world exports and nearly all developed and developing countries are participants in the industry either for exporting or imparting or both. After removal of quota system, China is the biggest exporter of textile with over quarter production in the country and countries like UK started importing textile material from exporters like China and India instead of developing their local markets.
While countries like Germany, Italy and US remain major exporters of cotton and textile products from developed countries, UK significantly dropped its production which resulted in phenomenal drop in employment in textile sector of around 92% since 1997 till present. Figure below presents the textile production, in terms of percentage of total manufacturing in UK. Unlike Turkey, the textile production in UK is jaw dropping with drastic and consistent drop since 1970 till 2014. The major reasons attributed to this drop in production is the shift of focus of UK economy from clothing and textile manufacturing to other sectors of the economy specifically services and other manufacturing while removal of quota system paved way for countries like China to play monopolistic role in exporting materials to UK at low costs.
The significance of the study arises based on the limited number of studies and specifically empirical studies that evaluate the role of textile industry in economic development of developed countries. The major exporters and developers of textile industry includes Asian countries and African states like Nigeria however, countries located in West Europe like UK have seen decline in growth of industry. Moreover, since the late 1970s, the industry has experienced a steady decline in output with a decline of around 64.7% between 1979 and 2013 and employments decline by 90.1%, from 851,000 to 85,000 during the same period (The National Archives, 2014).
The export of textile and apparel from Turkey to UK is in several forms and includes textile fibres as well as their wastes which are in millions of dollars. The figure below presents the value of imports of textile fibres and their wastes from Turkey to the United Kingdom, annually between 2010 and 2014. The bar chart shows that the value of imports of fibres and their waste in UK increased from $17 million in 2010 to $24 million in 2014
Similarly, the chart below shows the total imports in UK regions by various countries categorized on basis of regions. The graph shows that highest value of imports in clothing and textile is obtained from Asia and Oceania ($11 billion), followed by Europe ($4 billion) and lowest from Latin America and Caribbean ($12 million).
Studies and reports by Volkmann (2015), Data Monitor (2012), and The National Archives (2014) indicates that UK’s shift in policy of decreasing its dependence on textile imports from China and investing in other partners and domestic industry. While two main threats present for Turkey includes nearby markets of Morocco and Tunisia (Volkmann, 2015), Turkey has brighter chances for entering UK market and capture majority share in textile industry based on the technical nature of high end fashion industry growth that is playing significant role in UK’s economy.
Among various options suggested in literature review, the Turkish firms have used the transaction cost approach where on basis of cost benefits, the country has been able to increase its exports to countries like Russia, UK, and US. However, recent shift in industry of apparel and textile in UK, the focus is shifted from quantity or costs based advantages to advanced technologies and quality materials (Allwood, Laursen, Rodríguez and Bocken, 2006). Around 50% of textile material that comes to UK is imported as textile products, a quarter as ‘intermediate products’ (mainly fabric and yarn) and the rest as fibre (imported or produced in the UK). Approximately two thirds of the imports of fibres, yarns and fabrics to the UK are man-made. Since the focus of China is mainly on product quantity and low costs, the Turkish textile firms should shift their focus from cost factor as the Lira is already declining and UK is focusing on increasing its domestic output. The best option for Turkey is to follow the eclectic model or approach in establishing its internationalization strategy and take advantage of its location benefits.
The presence of Turkey on the south coast of European countries provides it an edge over its rivals and thus, joint ventures should be pursued by the Turkish firms to gain market share in UK. The options exporting and importing although, initially provides increased sales for exporting country yet in present times with large number of competitors with no limitations from policy makers, makes it easy for new entrants or even old competitors to snatch the market share based on price. The declining state of textile industry in UK over past few decades is a huge potential for Turkish firms as the suffering textile firms in UK are open for collaborations and joint ventures with either domestic firms or international partners like turkey.
There are several advantages of pursuing joint venture approach in current situation and are listed below:
The textile and apparel industry in UK is mostly based on high end fashion and the growth of apparel industry predicts this chart to go up in terms of new technology and advancements in materials created. The textile industry of Turkey is considered as a modern and advanced industry compared to some of its counterparts such as India, Pakistan, and Bangladesh. Having a joint venture with local firms for textile production and supply can enhance the technological aspects for Turkish firms and provide reliable partners for UK importers and fashion industry that are focusing on niche markets instead of low cost materials from China. A recent development in this respect already occurred during 2014 with partnership between The British Chamber of Commerce in Turkey (BCCT) and Turkish Clothing Manufacturers’ Association (TGSD) who conducted several meetings and collaborations to bring together the he leading Turkish clothing manufacturers and UK’s leading fashion designers & clothing brands (BCCT, 2014). In the event various UK based fashion houses showed their interest in having collaborations with Turkish textile manufacturers based on their clothing production and new concepts and designs. Such events hint towards a strong need for advanced step for Turkish firms in terms of internationalization instead of relying on exporting.
While the UK is developing its textile industry, it is significant to note that unlike loosely held restrictions in economies of China, India, Vietnam, Pakistan and other exporting countries that is often ignored by US, Germany and Russia, does not work in UK. The Ethical Trading Initiative (ETI) formed in UK encourages all UK based companies to adopt their base code and implement it in their supply chains. Although there is low level of penalty for non-compliance, the apparel industry in UK is more aware and active in dealing with ethical issues and thus, most of the suppliers and exporters already have or will have to sign up to ETI program. Having joint venture with UK firms will provide Turkish firms to receive favourable terms with current market buyers and participants.
Unlike developed countries like US and Germany that have internal system to developed advanced set ups for textile industry, UK’s industry provides an upscale opportunity for Turkish firms which can only be utilized through strategic alliances or joint ventures. While US, Australia and Germany have comparatively less developing fashion industries, UK’s clothing and textile market is on the rise with expectation of highest supply and demand in the textile business that is seen in 20 years which is expected to reach billions in worth.
A study by US Fashion industry benchmark study (2015) shows list of countries that are expected to increase or decrease textile exports to UK in comping years after 2015. The chart shows that India and Vietnam are two most favourable countries for UK that can provide it cost and labour benefits and can thus, capture some share of China for UK exports. The chart provides a warning for countries like Pakistan and Turkey that have witnessed decrease in sales in previous few years to developed regions. However, at the same time political scenario in Turkey and cut off of some exports quota from Russia provides a huge potential for Turkey to penetrate other markets. Moreover,
One of the main challenges identified by Yip (2002) in internationalization is the development of major strategy for internationalization that is applicable globally however, at the same time maintaining a gap or flexibility according to the local business environment and challenges. Moreover, another challenge is associated with the difference that exists between global and international strategies. Researchers like Zou and Cavusgil (2002) identify three main differences in global and international strategy that is often misinterpreted. Firstly, the extent to which international chains or offices are linked to or are coordinated by central offices is very significant in identifying how businesses are either global or international. In case of global strategy, significant coordination between the activities of the center and those of subsidiaries is required while in case of international strategy, global offices work independently based on local requirements and set up. In case of Turkish textile industry, the manufacturing merchandize is prepared on basis of local strategy, however, the adoption of joint venture strategy in internationalization, Turkish textile industry can and upgrade and globalize its operations which can not only increase its market share in European countries but added cost benefits along with technological and management upgradation, can pave way for Turkish firms to other, far reached developed countries as well.
The adaption of products and services according to local preference or standardization is a major challenge and the strategies related to competitive forces and policies are independent in case of internationalization while dependent on globally adopted pattern in global strategies. The difference identified for international or global policies are major concerns for Turkish expansion in UK market and adoption of joint ventures can alleviate such challenges in way of Turkish firms.
Internationalisation is a concept of doing business globally; however this term is specifically used for other countries doing business in Europe. Firms decide to internationalise to expand their business in different countries to obtain more profitability by capturing more profitable market. Internationalisation has become a widely adopted phenomenon due to globalisation and technological advancements. Not only firms internationalisation assist the firm to expand their business but enable them to attain profitability. Development of new and improved manufacturing techniques and process is also a significant advantage of internationalisation. This study aims at evaluating the textile industry of Turkey, its strengths and weaknesses and various opportunities that are present in importing countries for further expansion and growth of Turkish textile industry. The main aim of this study was to determine an internationalization policy for Turkey to enter UK, the most appropriate country for investment in textiles sector. For this purpose a descriptive approach is used to evaluate the challenegs and opportunities in Turkish textile industry, the competitors in global markets and importing countries that are suitable for trade with Turkey. The data for Turkish economy and textile industry indicates that textile industry in Turkey has witnessed phenomenal growth over the past few years in terms of GDP growth, textile growth as percentage of total manufacturing and total FDI inflows. However, a recent turmoil in political conditions has created problems and challenges for textile industry of Turkey as the main importer of Turkish textile, i.e. Russia is imposing sanctions on Turkish trade. The location of Turkey highlights the significance of European countries as most cost efficient importer. The apparel and textile industry in UK is advanced and is being promoted as one of the most significant industries in Europe. Moreover, the textile industry in UK faced years of declination due to heavy imports from China and India on basis of low costs. However, the niche market of fashion apparels recently promoted in past decade in UK has shifted the local policies towards focusing on quality partners instead of low cost partners and thus, provides an opportunity for Turkish textile manufacturers to pursue more aggressive entry strategy instead of exporting like other countries. Therefore, this study suggests strategy of joint ventures for Turkish firms that can be based on technology sharing instead of cost factor.
Expansion of organisation globally refers to their behaviour when they sell and distribute brands and products in different countries. According to various researchers, organisations are inclined to expand their manufacturing in different countries due to cost effectiveness or for adoption of new technologies. Furthermore improved and cost effective material may also be obtained from other countries. Firms mainly enter into internationalisation to expand their target market, or enhance productivity and adopt new techniques. Papadopoulos & Martín (2011) observes firms to capture opportunities present outside their country and expand in terms of scope and value, by developing their business ideas, principles orientation and work nature. The main strategies selected by firms in internationalization process includes eclectic approach with focus on location, ownership or internationalization advantages, joint ventures, strategic alliances, mergers, exporting and importing, licensing and other transaction or resource based models. Turkey already has expanded in to various countries through simple exporting and importing strategies. However, the elimination of quota system and
Basic entrepreneurship rules are followed by most of TNCs due to their commercial nature. This indicates that firms that profit hunt are their main aim; however several challenges and threats are associated with internationalisation. For example to compete with domestic firms which are more likely to have better understanding of the nature and dynamics of the market (Kumar, et al, 1994). This indicate that product of a firm desiring to enter in another country must possess some qualities which may be able to dominate domestic firms. This quality can be economies of scale, marketing abilities, and possession of raw material, enhanced technology or less transaction cost. Textile industry in Turkey is known to be from the period of Ottoman period. Even in 16th century many advanced techniques were used in textile industry of Turkey (Milašius & Mikučioniené, 2014), even now in modern era clothing industry has accelerated to advancement and clothing is one of the significant exports of Turkey. Several textile SMEs exist in Turkey located in Aegean and Mamara regions. Among different qualities of cloth produced in Turkey, knitted and woven cloths are more significant, which have high demand for foreign export. Karaalp & Yilmaz (2013) reports textile industry to contribute 8.5 % of total exports, whereas clothing to contribute 11% of total exports of Turkey. Turkey export cloth and clothes to several other countries, however recent changes in economic and political turmoil that Turkey’s economy has to face in light of sanctions by Russia and declining currency over past year has led the textile industry into a dilemma of continuing through exporting or expanding its wings through internationalization strategies. The recommendations made in this study is based on the economic conditions of Turkey and UK as well as the new developments that are taking place in UK market and that is more relevant for qualitative inputs and niche market products instead of relying on cost based advantages. Thus, the strategy of joint venture is considered as the most appropriate strategy of expanding Turkish textile business in UK.
The study presents a comprehensive analysis of economic and textile industry analysis for both Turkey and UK which leads to the conclusion of forming joint venture in future. However, due to the limited scope of study, it is pertinent that future researcher focuses on evaluating various aspects of how joint venture can be pursued using actual textile companies from turkey and draw feasibility studies for those companies. Moreover, even for joint ventures financial and organizational analysis is required which can be pursued in future studies.
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