1 prof. dr. yeşim toduk november 25, 2011 facilitating fdi flow to turkey by understanding turkish...

1Prof. Dr. Yeşim Toduk November 25, 2011

Facilitating FDI flow to Turkey by understanding Turkish Culture

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FDI: Theory and Practice

CULTURES & FIRMS

BEHAVIOR PATTERNS


Factors Relevant to Selecting Locations for FDI

Cultures and Investor’s perceptions as a person


Internationalization Behavior of Firms

• Key issue in internationalization of firms is the need to understand and adapt to cultural characteristics of host country.

• Along with cultural differences in language, business practices, market structures, legal and political systems, level of economical development, human resources availability.

• There is also PSYCHICDISTANCE.


Internationalization Behavior of Firms

• There is also a psychological barrier towards some markets by the decision maker(s) which is only the perceptions, not REAL. It is called in the literature as Psychic Distance.

• It is believed that, it has preconditioning of cultural distance roots. Key reasons for Turkey’s underperformance of attracting FDI was lack of information and poor perceptionse.Eliminating this psychic distance is based on personal visits to country, starting exports, learning through experience, meeting of similar professionals with similar backgrounds, who understand their culture, builds trust as a person and advisor.

• Hofstede’s work -related values based framework for national culture will be used in comparing the Turkish culture (host country) with the countries the investment is sought after.


What is Work-Related Values Based Framework Culture?

A system of values and norms that are shared among a group of people and that when taken together constitute a design for living.

Hofstede


Understanding National Cultures

Five dimensions of National Culture:1- Power Distance2- Individualism/Collectivism3- Masculinity/Feminity4- Uncertainty Avoidance5- Long/Short Term Orientation


Power DistancePDI that is the extent to which the less powerful powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. This represents inequality (more versus less), but defined from below, not from above. It suggests that a society's level of inequality is endorsed by the followers as much as by the leaders.Power and inequlity are extremely fundamental facts that will be aware that 'all societies are unequal, but some are more unequal than others‘

Large Power DistanceEmployees afraid of bossesDepend on their bossesLarge emotional distance

Small Power DistanceApproach and challenge bossesBosses consult with staffSmall emotional distance


Individualism/Collectivism

IndividualismInterests of the individual outweigh the interests of the groupIndividual is independentOne must look after himself/herself

Collectivism, that is the degree to which individuals are inte-grated into groups. On the individualist side, societies in which the ties between individuals are loose, everyone is expected to look after him/herself and his/her immediate family. We find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families, which continue protecting them in exchange for unquestioning loyalty. The word 'collectivism' refers to the group, not to the state. The issue addressed regarding all societies in the world.In collective cultures, people are supposed to look after them in exchange for loyalty and in individualistic cultures they look after only themselves and the immediate family.

CollectivismInterests of the group outweigh the interests of the individualGroup is one’s identityGroup=protection


Masculinity/Femininity

FemininitySocial gender roles overlapMen and women are both modest & concerned with quality of lifeLittle difference between gendersEmphasize relationships, concern for others, and the overall quality of life

MasculinitySocial gender roles are definedMen are assertive & toughWomen are modest & concerned with quality of lifeHigh difference between the gendersAchievement of visible and symbolic organizational rewards

Femininity, refers to the distribution of roles between the genders. Women's values differ less among societies than men's values,men's values from one country to another .The assertive pole has been called 'masculine' and the modest, caring pole 'feminine'. The women in feminine countries have the same modest, caring values as the men; in the masculine countries they are somewhat assertive and competitive, but not as much as the men.


Uncertainty AvoidanceUncertainty avoidance deals with with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth.People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, who are more phlegmatic and contemplative are more tolerant of opinions and relativist.

Strong UncertainityEmployees in high uncertainty-avoidance cultures tend to stay with their organizations (Japan, Greece, and Portugal)

Weak UncertainityThose from low uncertainty-avoidance nations are more mobile (United States, Singapore, and Denmark)


Long/Short Term Orientation

Short Term OrientationValues associated are respect for tradition, fulfilling social obligations, and protecting one's 'face'. Personal steadiness and stabilityReciprocation of greetings, favors, and gifts

Long Term OrientationValues associated are thrift and perseveranceOrdering relationships by status and observing this orderHaving a sense of shame

Long-Term Orientation is the fifth dimension of was found in a study among students in 23 countries around the using a questionnaire designed by Chinese scholars .It can be said to deal with Virtue regardless of Truth. Both the positively and the negatively rated values of this dimension are found in the teachings of Confucius, however, the dimension also applies to countries without a Confucian heritage.


Hofstede Value Dimension Scores

Power Distance Index Individualism Masculinity Uncertainty Avoidance Long Term OrientationTurkey 66 37 45 85China 80 20 66 40 118Germany 35 67 66 40 118Hong Kong 68 25 57 29 96India 77 48 56 40 61Italy 52 80 66 70Japan 54 46 95 92 80SouthKorea 60 18 39 85 75Spain 54 48 39 80United Kingdom 35 89 66 35 25United States 40 91 62 46 29Arab World 80 38 52 68


Power Distance and Uncertainty Avoidance

4*UK

*USA

1 *Hong Kong *China *India

*Germany

3

*Arab World *Italy *Spain *Turkey *South Korea *Japan 2

Unc

erta

inty

Avo

idan

ce

High

Low Power Distance High

Low


Individualism and Power Distance

4 1 *South Korea *China *Hong Kong *Arab World *Turkey *Japan *India *Spain

*Germany *UK *USA3

*Italy

2

Indi

vidu

alis

m

High

Low Power Distance High

Low


Hofstede Cultural Dimensions


Hofstede Cultural Dimensions for Turkey


Hofstede Cultural DimensionsTurkey vs. European Countries


Hofstede Cultural DimensionsTurkey vs. France


Hofstede Cultural DimensionsTurkey vs. Germany


Hofstede Cultural DimensionsTurkey vs. Italy


Hofstede Cultural DimensionsTurkey vs. Spain


Hofstede Cultural DimensionsTurkey vs. United Kingdom


Hofstede Culture DimensionsTurkey vs. Asian Countries


Hofstede Cultural DimensionsTurkey vs. China


Hofstede Cultural DimensionsTurkey vs. Hong Kong


Hofstede Cultural DimensionsTurkey vs. India


Hofstede Cultural DimensionsTurkey vs. Japan


Hofstede Cultural DimensionsTurkey vs. South Korea


Hofstede Cultural DimensionsTurkey vs. Arab World

Arab World


Hofstede Cultural DimensionsTurkey vs. United States


Hofstede Cultural DimensionsTurkey vs. Canada


Hofstede Cultural DimensionsTurkey vs. World Average


Target Company Selection Process

Reactive ApproachProactive Approach


Reactive Approach• If Foreign Investor(s) acts helpful but reactively answering the general

interest of investors and multipliers.• Typical approaches used with passive market selection are inquiries from

foreign firms increasing their commitment to Turkey or through contacts established by indirect media used by Foreign Investor(s) in order to attract the attention of foreign prospects (customers):

• Participation of business conferences, investment exhibitions, investment missions, trade missions, taking part in directories,

• Use of media – general PR campaign, specific industry catalogues, brochures, factsheets, newsletters,

• Foreign Investor(s) Website, other state websites


Proactive Approach

• Foreign Investor(s) is active in initiating the selection of foreign markets to open offices, and the further industry and customer segmentation of these markets. Proactive approach is more systematic and formalized, Foreign Investor(s) representatives with international experience and access to international market information (ie- using internet to access potential investors’ web sites, previous investors network, exporters network, other resources- social media?) have KPI targets to reach.

• Focused Marketing; ie. Industry Targeting and Segmenting, Company Targeting and Approaching, focused calling-mailing

• Critical meetings – Cultural Factors (whom to meet?), presenting right material at the right level. Connecting and networking for RESULTS

• Systematic follow ups, REPORTING


Proactive Approach

• Industry Targeting :– Segmenting the sector

• Company Targeting : – Identification of potential investors:

• Size, performance of company, R&D intensity, exports to Turkey• Active FDI investors (Yes/No?)• Explicit international or globalization strategy (yes/no?)• Accurate contact details – right level of decision makers, the staff –ie. Talk

to CEO Assistant, Turkey Region belongs to MENA? CEE?Europe?


Proactive Approach

• Company Targeting (continued): – Relationship building with target company executives (Regional VP).

• Bring the business relation into the trusted advisory role• Positively influence the psychic barriers to Turkey• PEOPLE make decisions• Presentation – Competitive advantages of investing in Turkey and how

Foreign Investor(s) assists and facilitates. • Send related materials regularly ie. Corporate Governance regulations• Organizing networking events: sector conferences, national celebrations• Using existing investors as Ambassadors


Worldwide FDI Flows

40Prof. Dr. Yeşim Toduk November 25, 2011 40

Trained by multinationals over several decades

Resilient to economic crisis

Consumer and corporate unlevered, yet liquidity issuesLow-leverage in the economy

Bridge between East & WestRussia’s access to South

Strategic position for trade and logistics

75m people, 28 years of avg. age, ongoing urbanizationYoung and growing population

150 years of market economy with 70% in SMEsEntrepreneurial corporate culture

350% USD GDP growth in the last 20 yearsResilient to economic crisisResilient to economic crisis

Structural reforms in last 9 years with guidance from IMF and EUImproved macro fundamentals

6th in Europe, 17th globally; poised to become 4th in Europe and 10th globally

Largest economy in the region with strong long-term growth

Trained by multinationals over several decadesWorld-class management talentWorld-class management talent

Strengths of Turkey


Large and Growing Economy


World-Class Management Talent


References

1) www.geert-hofstede.com

1 prof. dr. yeşim toduk november 25, 2011 facilitating fdi flow to turkey by understanding turkish...

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