Transcript COMPETITIVENESS OF TURKISH CONTRACTORS IN …

CE 726-COURSE SLIDES ON
“INTERNATIONALISATION”
FALL, 2009
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Why does a nation achieve international success in a particular
industry? (Porter’s diamond model)
Factor conditions: The nation’s position in factors of production
(skilled labour, natural resources etc.) to compete in a given
industry.
Demand conditions: The nature of home demand for industry’s
product/service.
Related and supporting industries: The presence or absence in
the nation of supplier industries and related industries that are
internationally competitive.
Firm strategy, structure and rivalry: The conditions in the nation
governing how companies are created, organised, managed and
nature of domestic rivalry.
+
Chance factor
Government factor
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DIAMOND FRAMEWORK
Firm structure,
strategy and
rivalry
Factor
conditions
Demand
conditions
Related and
supporting
industries
The determinants of national advantage (Porter, 1998)
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In Porter’s study, ten nations have been selected and the
industries in which the nation’s firms are internationally
successful were identified.
Diamond framework gives firms an insight into “how to
set strategy” in order to become more effective against
international competitors.
What is really explored is “the way in which a firm’s
proximate environment shapes its competitive advantage
over time”. Much is known about what competitive
advantage is and how particular actions create or destroy
it. Much less is known about why a company makes good
choices instead of bad choices in seeking basis for
competitive advantage.
Porter’s diamond framework aims to answer “why firms
from particular nations choose better strategies than
those from others for competing in particular industries.”
OTHER VIEWS


Dunning (1981) argues that firms try to exploit their existing resource
stock (ownership advantages) by internationalisation. Thus, sources
of competitive advantage for global firms are conceived to be the
resources from the home market.
Mathews (2006) puts forward that skills and knowledge gained as a
result of international activity can also be a source of competitive
advantage. Inward internationalisation can act as a starting point to
internationalisation as knowledge gained from foreign investors can
be used to upgrade current skills and help to improve initial, usually
technological, weaknesses. Likewise, outward internationalisation,
may lead to improvement of these skills and lessons learnt as a result
of international activity may result in further sources of competitive
advantage.
The question is whether ownership advantages and firm-specific
capabilities precede or succeed international activity ?
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DUNNING’S VIEW

“The eclectic theory of multinational advantage” cast by
Dunning (1981, 1988) is based on three types of advantages:
advantage derived from extending resources such as brands,
technology etc. (ownership advantage-O), advantage due to
integration of resources worldwide with different costs in
different locations (location advantage-L), advantages derived
through internalization of activities that would otherwise be
dispersed between various firms (internalization advantage-I).
In the 1990s, OLI framework is revised to accommodate
developments such as international partnerships and
appearance of number of firms from emerging economies within
the global arena.
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MATHEWS VIEW

Mathews (2006) argues that in order to make sense of emerging economy
multinationals’ success in the global economy, an alternative framework is
necessary. These firms’ international expansion is driven by resource linkage,
leverage and learning (LLL). In order to explain the concept of “resource
linkage”, he argues that the firms from emerging economy multinationals is
focused not on their own advantages, but on the advantages that can be
acquired externally, thus, global orientation becomes a source of advantage.
Thus, joint ventures and other forms of collaborative partnership are seen as
principal vehicles for reducing risks and gaining competitive advantage. After
firms access resources through linkage with external firms, ways are sought to
leverage resources. Repeated processes of linkage and leverage may result in
organisational learning to perform operations more effectively. LLL framework
may explain how initial weaknesses may be turned into core competencies
with organisational learning as a result of repeated resource linkage and
leverage and finally, how the firms with limited resources can succeed in the
global market.
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CRITICISMS TO PORTER

Dunning (1993) claims that the importance of
multinational enterprises is underestimated in
the diamond framework. Strategies are
products of a learning process, thus,
companies learn from their international
activities as well as their home market
conditions. To eliminate this shortcoming, the
multi-national activity is defined as the 3rd
exogenous variable and Dunning-Porter
framework is formulated.
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INTERNATIONALISATION OF TURKISH
CONSTRUCTION SERVICES
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THE VALUE OF WORKS REPORTED BY
THE TCA MEMBER COMPANIES IS
MORE THAN 130 BILLION $
THEY ARE OPERATING IN MORE THAN
70 COUNTRIES
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TURKISH CONTRACTORS
1972 - 2008
70 Ülke - Toplam Yurtdışı İş Hacmi 130 Milyar ABD $
23,6
24
19,5
20
15,9
16
9,8
12
6,5
8
3,5
4
1,7
0
2002
2003
2004
2005
2006
2007
Türk Yurtdışı Müteahhitlik Hizmetleri (Milyar ABD $)
2008
INTERNATIONALISATION OF TURKISH
CONSTRUCTION SERVICES (1970s)
STARTED IN MID 1970S

MAJOR REASONS ARE;
INTERNAL FORCES: LOW CONSTRUCTION
DEMAND IN DOMESTIC MARKET.
EXTERNAL OPPORTUNITIES: RAPID RISE IN
OIL PRICES CREATED ATTRACTIVE
MARKETS (NORTH AFRICA, MIDDLE EAST).

MOST ATTRACTIVE MARKETS ARE: LIBYA,
S. ARABIA AND IRAQ.

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INTERNATIONALISATION OF TURKISH
CONSTRUCTION SERVICES (1980s)
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1984: NATURAL GAS AGREEMENT SIGNED
BETWEEN TURKEY AND RUSSIA.
MOST ATTRACTIVE MARKETS : RUSSIAN
FEDERATION AND INDEPENDENT
REPUBLICS.
1998: BIG ECONOMIC CRISES IN RUSSIAN
FEDERATION: CONSTRUCTION ACTIVITIES
SUSPENDED.
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INTERNATIONALISATION OF TURKISH
CONSTRUCTION SERVICES (1990s)


MOST ATTRACTIVE MARKETS:
RUSSIAN FEDERATION, A
DIVERSIFICATION IN MARKETS ,
FALL IN SAUDI ARABIA, IRAQ.
1998: BIG ECONOMIC CRISES IN
RUSSIAN FEDERATION:
CONSTRUCTION ACTIVITIES
SUSPENDED.
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INTERNATIONALISATION OF TURKISH
CONSTRUCTION SERVICES (early 2000s)


A SHIFT IN MARKETS: RUSSIAN FEDERATION
(19%), TURKMENISTAN (15%), KAZAKHISTAN
(11%), AFGHANISTAN (6%) , NEW MARKETS SUCH
AS IRELAND, QATAR, INDIA,OMAN ETC.
A SHIFT IN SERVICES: IN PREVIOUS YEARS,
HOUSING (40%-25%), IN 2000s, 25% INDUSTRIAL
PLANT, 23% ROADS, BRIDGES, TUNNELS, 11%
PETR. PLANTS, 7% ADM. BUILDINGS, 5% TRADE
CENTERS, 4% CULT./SOCIAL FACILITIES, 2%
HOUSING
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2008 STATISTICS
Türk Müteahhitler Tarafından Üstlenilen İşlerin Bölgesel Dağılımı
(2008)
Avrupa ; 6,30%
Afrika ; 15,80%
Orta Doğu ;
27,80%
Asya ; 0,70%
Diğer ; 0,30%
BDT ; 49,10%
MÜTEAHHİTLİK FİRMALARIMIZIN 2008 YILINDA ÜSTLENDİKLERİ
PROJELERİN BÖLGELERE / ÜLKELERE GÖRE DAĞILIMI
Bölge / Ülke
Proje Sayısı
Toplam Proje Bedeli ($)
Pay
BDT Ülkeleri
275
11.630.261.430
49,10%
Türkmenistan
97
5.375.902.770
22,70%
Rusya
78
3.387.864.932
14,30%
Azerbaycan
24
1.088.282.553
4,60%
Kazakistan
27
688.564.354
2,90%
Ukrayna
15
680.186.231
2,90%
Gürcistan
11
252.956.004
1,10%
Moldova
3
62.286.000
0,30%
Belarus
4
39.778.972
0,20%
Özbekistan
13
20.217.274
0,10%
Kırgızistan
2
18.013.599
0,10%
Tacikistan
1
16.208.741
0,10%
133
6.578.604.393
27,80%
BAE
26
3.069.010.489
13,00%
Irak
72
1.436.001.931
6,10%
S.Arabistan
14
893.410.100
3,80%
Katar
6
651.799.498
2,80%
Ürdün
4
403.326.647
1,70%
İran
2
102.718.222
0,40%
Suriye
4
14.411.446
0,10%
Yemen
1
5.388.000
0,00%
İsrail
4
2.538.060
0,00%
Orta Doğu Ülkeleri
Afrika Ülkeleri
60
3.748.521.968
15,80%
Libya
36
2.065.280.207
8,70%
Sudan
1
850.000.000
3,60%
Cezayir
14
510.082.035
2,20%
Etiyopya
2
208.299.906
0,90%
Tunus
4
112.075.959
0,50%
Gine
1
1.637.150
0,00%
Cibuti
2
1.146.711
0,00%
Avrupa Ülkeleri
68
1.490.685.210
6,30%
Romanya
42
480.627.242
2,00%
Bulgaristan
5
446.784.045
1,90%
Makedonya
9
306.446.683
1,30%
İrlanda
1
242.083.311
1,00%
Arnavutluk
2
10.790.715
0,00%
Fransa
8
2.682.634
0,00%
Almanya
1
1.270.580
0,00%
Asya Ülkeleri
21
174.640.375
0,70%
Afganistan
19
171.509.111
0,70%
Pakistan
2
3.131.264
0,00%
Diğer Ülkeler
5
62.518.000
0,30%
ABD
2
44.000.000
0,20%
KKTC
3
18.518.000
0,10%
TYPE OF PROJECTS (2008)
Alt Sektörler
Askeri Tesis
0,6%
1.210.156.624
5,1%
420.546.267
1,8%
Konut
3.915.507.428
16,5%
Sosyal-Kültürel Tesis
2.565.405.800
10,8%
Ticaret Merkezi
2.075.713.530
8,8%
347.274.113
1,5%
Havalimanı
1.551.771.358
6,6%
Karayolu/Tünel/Köprü
2.164.743.234
9,1%
Liman
1.019.781.485
4,3%
48.987.981
0,2%
Enerji
1.591.080.251
6,7%
Fabrika
1.498.408.417
6,3%
İletişim
224.036.440
0,9%
Santral
1.414.601.300
6,0%
Baraj
689.679.613
2,9%
Sulama Sistemleri
856.324.642
3,6%
Atık Su
16.005.791
0,1%
İçme Suyu
52.970.209
0,2%
Şehir Altyapısı
1.748.537.166
7,4%
Eleman Temini
44.312.949
0,2%
Diğer
99.082.798
0,4%
İdari Bina
Turistik Tesis
ULAŞIM
Depo-Ambar
ENDÜSTRİ
SU İŞLERİ
ALTYAPI
DİĞER
Pay
130.303.980
Hastane
YAPI
Proje Bedeli ($)
REASONS OF
INTERNATIONALISATION
RECESSION IN THE DOMESTIC CONSTRUCTION
MARKET

AS A DIVERSIFICATION STRATEGY FOR RISK
REDUCTION

STABILISATION OF CASH FLOWS (US $ EARNINGS )
CONCLUSION: UNFAVOURABLE DOMESTIC MARKET
CONDITIONS MOTIVATE TURKISH CONTRACTORS
RATHER THAN HIGH PROFITABILITY IN
INTERNATIONAL MARKETS. THEY AIM TO
DECREASE SENSITIVITY TO DOMESTIC MARKET UP
AND DOWNS.

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WHY INTERNATIONALISATION ACCELARETED
AFTER 2000?
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2001 crises: Low domestic construction
volume, “abnormally low tenders”-very
competitive domestic market
Learning from foreign partners during 1985 2000 in the domestic market (project
management, relations with international
finance organisations etc.)
Attractive markets: Rich countries (due to rise
in oil prices) which are also geographically
and culturally close toTurkey
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MAJOR STRENGTHS
RANKING OF TEN LISTED STRENGTHS:
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CULTURAL, LINGUAL AND RELIGIOUS FAMILIARITY
GOOD REFERENCES\CLIENT RELATIONS
HIGH RISK TAKING ABILITY
LOW LABOUR COSTS
RAPID CONSTRUCTION
AVAILABILITY OF SKILLED HUMAN RESOURCES
HIGH QUALITY OF SERVICES
MANAGERIAL CAPABILITY, GOOD PLANNING
FINANCIAL STRENGTH
GOVERNMENT RELATIONS
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COMPETITIVE STRATEGY
LOW COST ADVANTAGE AS A RESULT OF;
1.
LOW COST OF LABOUR
2.
CHEAP AND QUALITY MATERIAL FROM
TURKEY
3.
LOWER TRANSPORATATION COSTS DUE TO
GEOGRAPHICAL PROXIMITY
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MARKET STRATEGY
FOCUS MARKETS WHERE ;
1.
LOW COST ADVANTAGE CAN BE ACHIEVED
2.
BEING FIRST ENTRANTS ADVANTAGE CAN BE USED
3.
CULTURAL AND LINGUAL FAMILIARITY GIVE THEM
MAJOR COMPARATIVE ADVANTAGE
4.
CONDITIONS RESEMBLE TURKEY SO THAT THEY
GAIN ADVANTAGE BECAUSE OF THEIR HOME
EXPERIENCE (DEALING WITH BUREAUCRACY, RISKTAKING, ADAPTATION TO INSTABILITY ETC.)
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MAJOR WEAKNESSES: FINANCIAL RESOURCES
GOVERNMENT SUPPORT
STRATEGIC PROBLEMS:

OVER-DEPENDENCE ON A SINGLE MARKET

DEPENDENCE ON LOW COST ADVANTAGE
WHICH CAN BE EASILY IMITATED

LOW LEVEL OF DIFFERENTIATION