EGE UNIVERSITY

FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES

BUSINESS ADMINISTRATION

GLOBAL MARKETING COURSE

TURKISH TEXTILE INDUSTRY

AND ITS COMPETITION POWER

Submitted to : Keti VENTURA

13080002898 Baris Istipliler

13080002866 Gamze Saba

Erasmus Student – Janina Werner

Erasmus Student – Julia Grün

Erasmus Student – Kim Noelle Rastert

2012

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Outline

1. Introduction to Textile Industry

1.1 Textile Industry in General

1.2 History of Textile Industry in Turkey

1.3 Geographic Concentration of Turkish Textile Sector

2. Competition in the Textile Industry Worldwide

2.1 General Information about Turkey’s Position in the Worldwide Textile Market

2.2 Porter’s Five Forces Framework

2.3 Porter’s Five Forces Framework In Regards to the Turkish Textile Industry

2.4 Competitive Advantages of the Turkish Textile Industry

2.5 German Textile Industry in Contrast to the Turkish One

2.5.1 Information about German Textile Industry

2.5.2 Comparison between Turkish and German Textile Industry

2.6 SWOT and PEST Analysis of the Turkish Textile Industry

2.6.1 Definition of SWOT-Analysis

2.6.2 SWOT-Analysis of the Turkish Textile Industry

2.6.3 Definition of PEST-Analysis and Application to Turkey

3. Practical Insights into Turkish Textile Industry – Interview with Emre Kızılgüneşler,

President of Aegean Region Committee of Garments Exportation

4. Future Outlook on Turkey’s Textile Industry

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1 Introduction to Textile Industry

1.1. Textile Industry in General

The textile industry emerged by the basic need of humans to “cover their bodies” (Güleryüz,

2011, p. 3). From an industrial point of view, it emerged in England after the industrial revolution.

The textile industry is primarily concerned with the production of yarn, and cloth and the

subsequent design or manufacture of clothing and their distribution. The raw materials used in production

may be natural, or synthetic using products of the chemical industry.

Mainly there are four sources for textile production: animal (wool, silk), plant (cotton, flax, jute),

mineral (asbestos, glass fibre), and synthetic (nylon, polyester, acrylic) materials. In the past, all textile

products were made by natural sources, but today most of the companies are using chemicals to create

textile products.

Products of the textile industry are found in every human’s everyday life. They include not only

clothing but also bed sheets, towels, bathrobe, blankets, voiles, carpets, gray cloth, weaves, and tents. This

shows that the textile industry is concerned with the production of a wide range of products.

1.2. History of the Textile Industry in Turkey

The history of textile production in Turkey origines from the Ottoman Empire period. Especially,

in the 16th

and 17th

centuries, it was at the peak period of its time. Ottoman Empire’s econonomy was

heavily relied on textile and it was at an advanced level.

Figure 1 : History of Textile Industry

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In the 20th

century, between 1923 and 1962, a great development has been made by Turkey. In

1933, all textile fabrics and small work places were gathered under the umbrella of Sumerbank. It was a

great power resource by helping education of new workers for the industry and investing for the industry.

After the establishment of Bursa Textile Research and Education Center, the sector has become more

powerful. In the 1990’s the share of textile industry in comparison to other sectors in the Turkish

economy extremely increased. By the help of export orientations, such as Agreement on Textile and

Clothing and joining Customs Union, Turkish textile industry started to play an important role.

Nowadays, Turkey is one of the big players in the industry. Turkey was the EU’s second largest supplier

of textiles and clothing, after China, with a 13.3% share of the EU import market in 2010, according to

data from Eurostat (Official Blog, TCP, 2011). We see some Turkish brands in the global market,

respected by many countries such like Mavi. On the other hand, there are so many Turkish producer for

the big global brands such as, Levis, H&M, Zara, or United Colours of Benetton.

Table 1 : Annual Textile Export of Turkey, General secreteriat of ITKIB (2012)

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Table 1 depicts that the export rate increased in 1997 after joining Customs Union with EU in

1996. Turkey reached $ 3.562.462 of export in 2003.

Table 2 : Leading Markets for Textile Export of Turkey, General secreteriat of ITKIB (2012)

According to WTO statistics for 2008, Turkey ranked the 7th country in the world with the share

of 3,8% and Eurostat statistics the 2nd

in the EU market share with the share of 17,5 %. As far as country

groups are concerned, Turkey exports 49% of textile products to EU countries. Second important group is

former USSR countries including Russian Federation, Ukraine, Uzbekistan with the market share of 14%.

On the country basis, the most important export markets for the Turkish textile industry are

Russian Federation, Italy, Germany, Romania and Poland.

1.3 Geographic Concentration of Turkish Textile Sector

When we analyze employment numbers, numbers of textile companies and export figures of

textile industry, there are basicly three areas that are leading Turkish textile industry: Marmara, Ege and

Cukurova region.

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Figure 2: Textile Concentrated Areas in Turkey

MARMARA :

Three big cities lead the textile industry in Marmara: Istanbul, Bursa and Tekirdağ. Marmara is

the leader in industrialization in Turkey so that one can imagine that it takes a big slice from the pie. This

region has 56% of the total textile employment in the country and 67 % of the total textile related

companies (Ministry of Labor and Social Security Statistics). Approximetely, 71% of the total textile

exports of Turkey is made by Marmara region (Turkstat).

EGE :

The most important cities in the region are Denizli and Izmir. This region has a focus on

production of home textiles, towels and bathrobes. Ege has a share of 12% of the textile employment and

11% of the total textile companies. 10% of the total textile exports is made by Ege.

ÇUKUROVA :

The most important cities for this region are Adana, Kahramanmaraş and Gaziantep. There are

also important companies in this region. For example, it has 12 of the textile companies that have ranked

in the top 500 firms in whole Turkey. This region observes higher growth in terms of the textile exports,

textile employment and textile related companies than any other (Kutluksaman, May 4, 2012, p. 18-20).

Cukurova region is the 7th largest cotton producer in the world.

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2 Competition in the Textile Industry Worldwide

2.1 General Information about Turkey’s Position in the Worldwide Textile Market

Turkey is the ninth largest supplier of textile and seventh largest supplier of clothes worldwide in

2011 (European Union excluded, see figure 1). Some developments over the last years improved Turkey’s

position in the worldwide textile market, for instance the customs union agreement in 1996 between the

European Union and Turkey and free trade agreements (FTA) with Hungary and Bulgaria. In the

domestic area, many local Turkish companies negotiate licensing contracts with companies abroad, in

order to compete globally (U.S. International Trade Commission 2004: 39-42).

2.2. Porter’s Five Forces Framework

A major task for managers is to analyze competitive forces in order to identify opportunities and

threats in their business’ industry. One approach to develop such an analysis is known as Porter’s Five

Forces model (see figure 4). It gives insights in the forces, which influence competition, supports the

analysis of competitors and helps in shaping the own strategy. Porter (1979: 2) argues: “The collective

strength of these forces determines the ultimate profit potential of an industry”. The stronger the forces,

Figure 3: Turkey’s rank among textile exporters worldwide according to their exports in 2011

World Trade Organization – International Trade and Market Access Data

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the more limited are companies in an industry to raise prices and earn higher profits. A threat in the

industry can be seen as the result of strong competitive forces, because they depress profits. Conversely, a

weak competitive force allows a company to earn greater profits and can be seen as an opportunity (Hill /

Gareth 2008: 42-43 and Porter 1979: 3).

The following part describes briefly the single threats: The threat of new entrants means, that

newcomers might face the following barriers: spending high efforts in overcoming customer loyalty to

other brands or companies, initial capital requirements, cost disadvantages independent of size and access

to distribution channels (Porter 1979:3-5). If bargaining power of suppliers is high, in case the product

is unique, the industry contains a small number of suppliers or the suppliers do not have to consider

competitive products in the market (Porter 1979: 5). The bargaining power of customers is high when

the buyers buy in large amounts or the product is a replaceable standard product (Porter 1979: 6). A

substitute product is threatening, because of its effect of limiting profits and growth of an industry

(Porter 1979: 7). The circumstances under which the intensity of rivalry between companies is high

when for instance industry growth is slow or fixed costs are high which leads companies to fight for a

strong price competition (Porter 1979: 7).

2.3 Porters Five Forces Framework In Regards To The Turkish Textile Industry

An industry analysis from 2007, which was about the competition between textile and apparel

manufactures, took place in Istanbul. It roughly gave insight in the evaluation of the Turkish textile

industry in the framework of Porter’s five forces model. The following paragraphs explain Porter’s five

forces in regards to the Turkish textile industry.

Figure 4: Porter’s Five Forces

Framework

Michael E. Porter (1979)

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The notice of entrants by established companies in the Istanbul apparel and textile manufacturing

industry is low. They do not seem to spend high attention towards the threat of new entrants, since the

number of competitors in the market is large. The biggest problem for new entrants might be the heavy

reliance on references and the strong and deep relationships between competitors and customers. Without

any company awareness among clients, it is difficult to build up customer loyalty. A possibility for

newcomers to overcome these threats is entering the market by bringing some kind of customer base and

knowledge along. Capital and investments to start up a new company do not need to be very high in this

industry, because a high percentage of production cost comes from low labor costs. Cost disadvantage

independent of size is for example the limited know-how in apparel manufacturing of new actors which

might lead to disadvantages compared with experienced companies. The access to distribution channels

might be a hindrance, because beginners do not have much experience in their customers’ wants and

needs (Ahlquist / Andreasson 2007: 27-31).

An evidence for a weak bargaining power of suppliers is indicated by the large population of

suppliers in the market. The customers are able to ask for best terms and even play suppliers off against

each other. The consequences are decreasing prices and similar prices among suppliers (Ahlquist /

Andreasson 2007: 31-32).

Since many manufacturers exist, customers are able to find alternative manufacturers when

needed. This situation is an indication for a strong existing bargaining power of customers in the

Turkish textile industry. To overcome this threat, manufacturers should seek for greater differentiation of

their products. The durations of contracts are very short and brought quantities are very high. These

circumstances add to a strong bargaining ability of customers (Ahlquist / Andreasson 2007: 32-33).

The barrier of substitute products can be seen as less strong, since it is difficult to substitute

clothes and other textiles. Some argue that there are possible substitutes, because of new trends. But

despite, the main argument remains: there is no substitute for apparel (Ahlquist / Andreasson 2007: 34).

The Turkish textile and apparel sector contains thousands of producers. Many of them are small

and medium sized businesses, family owned. Although the population of competitors is very large, the

high export rate indicates, that the competition force and intensity of rivalry between the companies is

low. Turkish producers of textiles and apparel have the characteristic to implement the same strategies

from their neighbors. This attitude might lower the competition between them. Some interviewees of the

industrial analysis regard competition from abroad as more dangerous than domestic competition

(Ahlquist / Andreasson 2007: 22, 35).

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About the competition in textile markets it can generally be said that the competition intensity is

high, because the characteristics of the markets, for example low required investments or low skilled

employees, set very low entry barriers. However, it can be indicated, as a special fact of the Turkish

textile industry, that the competition intensity in the Turkish textile market is lower than general, because

of strong relationships between companies and consumers. Many companies seem to have fix customers,

so they do not run fights with competitors to catch their consumers. For new entrants can be concluded

that an entry in this business is especially difficult initially. This is linked to the just mentioned strong, on

traditions based bonds between consumer and companies. Without an existing network, know-how and

contacts, entering in the Turkish textile industry might be very problematic. But once established solid

and trustful customer bonds and a focus on differentiation, the company might be able to position itself in

a stable environment.

2.4 Competitive Advantages of the Turkish Textile Industry

Turkey possesses several advantages in its production, mainly on the fields of production factors,

labor and technology, compared to competitive countries like China or India.

Turkey has two advantages in regards to the factors of production. First, the cotton from the

Aegean region is regarded as highly qualitative, which makes Turkey one of the leading cotton producers

in the world. The second advantage is about Turkey’s production in spun yarn, which ranks Turkey

among the six largest spun yarn manufacturing countries worldwide. In 2000, Turkey produced

approximately 5 percent of total world output in spun yarn with increasing outputs in the following years.

So Turkey possesses raw materials for textiles directly.

Turkey also possesses advantages in labor. Labor costs in Turkey are very low and employment

contracts are usually settled over one to six months, which makes the industry a very flexible one. Labor

cost in Turkey as a percentage of textile output was in 1997 nearly 10 percent. In India the figure was in

1998 10 percent, too. In other countries it was much higher, for instance in Italy (12 percent), in Portugal

(14 percent) and in the United States (17 percent).

The third basic factor of advantage lies in Turkeys advanced technology. The textile sector could

make an important step towards modernization since the implementation of the European Union-Turkey

customs union. Turkey imported a large number of textile and apparel machinery in the last years. As

results, Turkey has the largest capacity for the manufacturing of yearn, weaving and finishing in whole

Europe. Furthermore, because of long established Turkish-German commercial relationships, many

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employees in Turkish mills have worked in German factories and acquired additional knowledge (U.S.

International Trade Commission 2004: 36-38).

Turkey’s geographic location can be sees as an advantage, too. Turkey has a favorable location

between Europe and Asia which leads to lower transportation costs in comparison to what other countries

are able to offer. American merchants favor Turkey because Turkey is able to offer shorter lead times and

therefore faster shipping times than any of its competitors in Asia (Etkin / Helms / Turkkan / Morris

2000: 70 and U.S. International Trade Commission 2004: 42).

2.5 German Textile Industry

2.5.1 Information about German Textile Industry

The textile and clothes industry is the second largest consumer goods industry in Germany.

Nearly 120,000 people work in approximately 1,200 small and medium sized companies for this industry.

The export quota of German textile accounts 43 percent. Germany is ranked as 3rd

largest producers of

clothes in the European Union (Hauser 2010: 7). Germany’s exports of textile in 2011 to the world were

accounting for US $ 16,158.9 million and exports of clothes were US $ 19,645.8 million (see figure 3). In

2011 the textile industry could close its business year with a positive turnover of +7 percent. But this

year, the branch experienced a stagnant phase, as a result of the durable enduring financial and economic

struggles in Europe. One part of Germany’s textile industry has to be highlighted here: high technical

textiles. Memon and Zaman (2007: 120) explain technical textiles with the following definition:

“Technical textiles as defined as textile materials and products manufactured primary for their technical

performance and functional properties, rather than for their aesthetic and decorative it characteristics.”

In the sector of technical textiles, Germany is one of the leading sellers worldwide. Today, Germany’s

global share in this segment is about 45 percent. One reason for this development is a close cooperation

between the companies and textile research institutes. In recent years the German textile industry was

characterized by structural changes in their organization and production. Similar to Turkey, Germany had

great problems with the low price competition from Far East, too. Decreases in production and offshoring

(global outsourcing) marked the last years in this industry (Deutsche Bank Research 2011).

2.5.2. Comparison between Turkish and German Textile Industry

In contrary to Germany, where the car industry makes up an important part of the economy, the

textiles and clothing industry is one of the driving forces of the Turkish economy. Turkey’s textile and

clothing industry employs with about 750,000 people in more than 40,000 companies more workers than

Germany. Turkey’s textile made up 23 percent of its overall exports in 2001. Turkey exports nearly 70

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percent of its textile and apparel products, which is a higher number than Germany’s 43 percent (U.S.

International Trade Commission 2004: 36, Republic of Turkey, Minister of economy 2012: 1-3). In

comparison to German textile industry, Turkey’s textile industry does not target high technique textiles,

but the production of workaday clothes and home textiles. This is favored by Turkey’s abundance in raw

materials like cotton and synthetic, compared to Germany. In 2011 Turkey exported textiles of the total

value of US $ 10,772.4 million (see figure 3). The reason why Germany’s export sales are higher than

Turkey’s even though Turkey is considered more as a textile manufacturing country than Germany might

be because of the difference in prices between their focuses, mainly the price differences between high

textile products and regular woven and kitted goods (Republic of Turkey, Minister of economy 2012: 1-3,

Istanbul Textile and Apparel Exporter’s Associations 2012: 1).

Turkey displays a country, in which many foreign companies undertake investments and

partnerships. Nearly 249 mostly Western companies, like Hugo Boss or Levi Strauss, use Turkey’s

conditions to operate in this sector and establish their own textile and apparel productions. Domestic

apparel producers, on the other hand, concentrate on manufacturing non-branded goods and selling them

to retail chains, where they can be branded (Chowdhury 2009: 42, cited from State Planning Organization

(SPO) 2004, p.24). Germany is not regarded as a manufacturing location for foreign companies.

Production costs would be too high in Germany. Rather, foreign companies sell their productions to

Germans. Moreover, domestic German apparel and clothes manufactures concentrate on producing

clothes with strong brands for the upper market and for exclusive premium segments (Hauser 2010: 7).

2.6 SWOT and PEST Analysis of the Turkish Textile Industry

2.6.1 Definition of SWOT-Analysis

In order to analyze the current as well as the future state of a company or an industry, it is

necessary to do a system analysis. A well established tool for this is the so-called SWOT-Analysis. The

SWOT-Analysis is described as a strategic planning tool which evaluates the Strengths, Weaknesses,

Opportunities and Threats involved in a project, an idea, a business or an industry. A SWOT-Analysis

might create a series of strategic alternatives (Hill and Jones, 1992:14).

Its key purpose is to identify the strategies that will create a specific business model that will best

align an organization’s or industry’s resources and capabilities to the requirements of the environment in

which the firm operates. In other words, it is the foundation for evaluating the internal potential and

limitations and the probable opportunities and threats from the external

environment (Managementstudyguide.com, 2012). It is possible to take control over the internal factors,

but this is essentially impossible for the external factors.

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Figure 5: SWOT-Analysis; Own depiction (2012)

Strengths are the company’s resources and capabilities that can lead to a competitive advantage.

Weaknesses are resources and capabilities that the company does not possess but that are necessary, this is

resulting in a competitive disadvantage. Opportunities are conditions in the environment that allow a

company to take advantage of organizational strengths, overcome organizational weaknesses and

neutralize environmental threats. Threats are conditions in the environment that may stand in the way of

organizational competitiveness or the achievement of stockholder satisfaction (Harrison and John, 2004:

5-6).

The general idea is that strategies should be made to take advantage of internal strength and

opportunities arising from external environment, to overcome internal weakness and neutralize threats

found in external environment (Harrison and John, 2004:6).

TOWS matrix is the essential completing tool to SWOT-Analysis. It enhances deploying

strategies systemically considering the relations between Strengths, Weakness, Opportunities, and

Threats. The consequences of the internal and external factors can be replaced in a matrix called TOWS

Matrix is shown in table 3. TOWS matrix helps to systematically identify relationships between threats,

opportunities, weaknesses and strengths, and offers a structure for generating strategies on the basis of

these relationships (Weihrich, 1982:45-66).

External Analysis

Internal Analysis

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TOWS Matrix

External Opportunities (O) External Threats (T)

Internal Strengths (S)

SO

Strategies that uses strengths to

maximize opportunities.

ST

Strategies that uses strengths

to minimize threats.

Internal Weaknesses (W)

WO

Strategies that minimize

weaknesses by taking advantage

of opportunities.

WT

Strategies that minimize

weaknesses and avoid

threats.

Table 3: TOWS Matrix (Weihrich, 1982)

2.6.2 SWOT-Analysis of the Turkish Textile Industry

The following applies the just described theory of SWOT- Analysis to Turkey’s textile industry.

Strengths

Turkey offers richness in raw materials, since Turkey is ranked seventh in the word with a cotton

production of 375.000 tons (The General Secretariat of ITKIB, 2012). Another strength are its

competitive labor costs. The average labor cost in Europe is exactly 21,79 €, whereas the average costs in

Turkey are around 7,00 € (European Commission Eurostat, 2012). But Turkey still provides qualified and

well educated labor force. With 3.5 million students in tertiary education and approximately 600,000

graduates from universities per year, Turkey has a World-class engineering education (Invest in Turkey,

2012). All around Turkey one can find the term Turquality which describes the quality of products made

in Turkey (Invest in Turkey, 2012).

Weaknesses

One of the biggest weaknesses the industry faces is the informal black market sector which can be

found in every city on the bazaars. Lots of profits of brand companies get lost there and it creates a weak

image of Turkey as a selling point. On top of that it suffers from its inability to create a large number of

brands. Only a handful of brands are known outside of Turkey, for example Mavi.

High input and energy costs are another obstacle. In order to increase competitiveness of the

manufacturing industry, the infrastructure industries that supply inputs to the manufacturing industries

should improve productivity. Energy costs must be lowered and supply security ensured.

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Opportunities

A big opportunity for Turkey is its geographical location. Located between Europe and Asia its

position allows Turkey an easy distribution and short logistic periods to its main export countries, which

are especially Europe and Russia, due to the geographical proximity (The General Secretariat of ITKIB,

2012).

Another plus is the liberalization of Turkey and its trade policies in combination with the Turkish

government policies for industrial development and investment incentives. The Turkish Ministry of

Science, Industry and Technology planned to release policies for the “Improvement of Investment and

Business Environment”, “International Trade and Investments”, “Skills and Human Resources”,

“Technological Development of Companies”, etc (Republic of Turkey, 2012).

Threats

The industry expectations of danger would comprise economical and political uncertainty which

can occur for example when the government is changing from a conservative one to a liberal or the threats

can arise from the current and possible problems in Syria (International Property World, 2012). The

threats include as well even lower labor costs in low labor countries such as China, Bangladesh and India

with average labor cost of around 2,00 € (InChin Closer, 2012). The distance to the US-Market and the

growing Far East can cost the Textile Industry valuable market shares.

Having seen the strong and weak sides of the sector supported or hindered by opportunities and

threats, it is only right to address what can be done to improve the current situation with a future vision in

mind. The following TOWS Matrix provides a framework that presents a future vision regarding the

industry.

TOWS Matrix

External Opportunities (O)

1. Geographical location

2. Liberalization of Turkey

3. Government policies

4. Investment incentives

External Threats (T)

1. Economical and political

uncertainty

2. Low labor countries

3. Problems in Middle East

4. Distance to other markets

Internal Strengths (S)

1. Richness of raw material

2. Competitive labor costs

3. Qualified labor force

4. Quality of product

SO

1. Increase market share in

European and Russian markets.

2. Opening business

development and planning

ST

1. Making investments in China

and other low labor countries.

2. Opening new headquarters in

the US und Asia.

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department for new technologies.

3. Opening research and

development departments.

Internal Weaknesses (W)

1. Black market sector

2. Inability to create brands

3. High Input costs

WO

1. Create brands with high

quality.

2. Opening E-Businesses and

logistic departments.

3. Lobby for stricter anti-

plagiarism rules.

WT

Overcome weaknesses by making

them strengths (move towards SO-

Strategy)

1. Joint Ventures with Asian firms.

2. Reduce the threat of competitors

by making new investments in

high quality image .

Table 4: TOWS Matrix of Turkish Textile Industry; Own depiction (2012)

2.6.3 Definition of PEST-Analysis

The PEST-Analysis, also known as STEP-Analysis is, like the SWOT-Analysis, a strategic planning tool

which analysis the general external environment of a company/industry (Czinkota and Kotabe, 2001:57).

The PEST-Analysis is a useful tool for understanding market growth or decline, and as such the position,

potential and direction for a business. The PEST-Analysis refers to the Political, Economic, Socio-

cultural and Technological factors that influence an organization or industry, their strategies, structures

and means of operating (Senior and Fleming, 2006:16-17). Figure 6 illustrates the PEST factors that exist

as part of an organization’s environment. All, at some time, will have an impact upon the organization.

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Figure 6: PEST factors, Senior and Fleming (2006)

Political Factors

Turkey is a democratic, secular and social state governed by the rule of law. It has been a multi-

party parliamentary democracy since 1947. Legislative power is vested in the 550-member Turkish Grand

National Assembly (TBMM), whose members are elected for four-year terms by the votes of Turkish

citizens over the age of 18. The government of Turkey is pro-western and is actively working towards the

integration of Turkey into the European Union. They have implemented actions towards a major

economic reform which, as can be seen by the growing economy are working to improve the conditions in

the country. The government has been in office since the end of 2002 with its Prime Minister Recep

Erdoğan. Erdoğan is also chairman of the ruling conservative AP Party (International Property World,

2012). Turkey has a progressive tax system with individual tax rates from 15%-35% and a corporate tax

rate of 20% (International Property World, 2012). Right now Turkey is in a military conflict with Syria,

which can lead to political instability.

Economic factors

As already mentioned in the SWOT-Analysis the middle-income country’s biggest competition

are low labor countries like China, India and Bangladesh.

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Turkey’s unemployment was at 8.2% at the end of 2011, which is lower than the average EU

unemployment rate (10,0%) but it leaves space for improvement (European Commission Eurostat, 2012).

The average currency exchange rate in 2011 was 1€ = 2.33 TL, 1€ = 1.99 TL (2010) and 1€ = 2,16 TL

(2009). The current low value of TL makes it easy for Turkish firms to export (European Commission

Eurostat, 2012).

The GDP real growth rate was sinking to 8,5% in 2011 from 9% in 2010. The crisis hit Turkey

hard in 2009 with a growth rate of -4.8% (European Commission Eurostat, 2012). The high growth rate

right now boosts the domestic demand.

Socio-cultural factors

One of the social system strengths in Turkey is that they have growing proportion of young

population as they have more than half the population being aged below 30 (European Commission

Eurostat, 2012). This will allow Turkey to increase their employment rate by getting the most out of the

young labor force. Some of the most important social welfare schemes that the government has been

providing are unemployment insurance, medical insurance, insurance for work-related injuries, maternity

insurance and housing security. The system is financed primarily by contributions made by employers

and through the payroll deductions of employees. Turkey has historically shown weak performances on

various social parameters, mainly because of its policies on such matters. The human development index

(HDI) of Turkey is 0.704 and the country is ranked 92th among the 177 countries rated (International

Human Development Indicators, 2012).

Technological factors

Turkey has been slower in adopting technological advances than the EU countries, although

policy measures have been undertaken to expedite this. Total expenditure on R&D in 2006 as a

percentage of GDP was 0.6%, compared to 2.3% in the OECD countries (European Commission

Eurostat, 2012). Nevertheless, over the past decade, Turkey’s telecommunications industry has been

booming due to the liberalization of the market. The number of mobile telephone subscribers increased at

a CAGR of 22%, from approximately 23 million in 2002 to 62 million in 2007 (Trading Economics,

2012). However, the levels of patenting remain extremely low, despite a rapid increase in recent years.

The R&D climate is expected to improve, as the government has been taking several initiatives towards

developing the technological landscape of the country by encouraging foreign entities, prominent

universities and research organizations to foster a culture of innovation.

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3. Practical Insights into Turkish Textile Industry – Interview with

Emre Kızılgüneşler, President of Aegean Region Committee of

Garments Exportation

Interviewee: Emre Kızılgüneşler

- President of Aegean Region Committee of Garments Exportation

- Founder and current CEO of "Farbe Tekstil Turz. İnş. Enerji San. ve Tic. A.Ş."

Interviewer: Barış İştipliler

Duration: Approx. 30 Min

Location: Buca BEGOS 3. Bölge, Buca-Izmir

Date: 13.12.2012, 10.15 am

1. What are the core competitive advantages of Turkish textile (or specifically garment) industry

compared to global industries?

There is a powerful background which contains high investments of capital (machinery,

technology) and education which creates 3 generations. This foundation is so powerful that Turkey's 20 %

export comes from this industry.

Cotton- We are one of the rare countries which yield cotton and manufacture it from farm to the

shop. After China and Italy, Turkey is one of the best at this competition.

We have enough competency to produce every product.

We have the technology to be elastic and versatile. For instance; we can produce 300 from

product A today and the day after we can produce 300.000 product Z. And the other day, we can again

produce 100.000 from product A for example. We can react well.

We have so many people which are educated well.

2. Is the level of integration which was succeeded by Turkish firms enough according to you? What

should be done to encourage current domestic firms to operate multi- or internationally?

The fields of export, manufacturing and brand management are the things that are totally different

from each other in textile industry. It needs so much effort to produce a whole collection and sell it as a

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brand. For example, as Farbe Textile, when we tried to do this, we could produce only shirts and sweat-

shirts; so where are the other parts of a collection such as trousers, jeans, jackets, shoes, suits? You should

invest, according to me at least US-$ 20 million in it and still it is 50 % risk that you can bankrupt with

this investment.

People should not think so aggressively on this brand management issue and there should be a

well planned and segmented project to be conducted. Otherwise, it is so easy to create a logo and print

this to your products, there are so many brands which do this but I see them as "soap-foam" which will

not last for long. Therefore, manufacturing is the best thing I can do and I do it. I know how to produce,

how to sell but I am not so good at marketing (franchising) it.

There is only Italy which is capable to do and succeed in all of them, manufacturing, selling and

marketing together. Cotton, Damat, Sarar, LCW have the brand but they do not have manufacturing for

example; they have only their emergency production facilities which is used only to supply the needs of

collections, that cannot be purchased from market. They make collections by using their supply chains

and then they focus their efforts to market and sell them; they cannot lose their power to produce. Mavi is

the only brand which tries to do that, but personally, I am not sure about their success.

I see first Damat and then Sarar as the best Turkish firms that succeed brand management well all

around Europe.

3. In which segments do you think the adding value level is the highest? Or is there a niche that

should be exploited by Turkish firms in multi-national arena? Which sector most we operate and

export in? Which one is the most powerful and what is its credibility in national area?

I will give some facts to you to explain this issue. We have an index of value/kg in which the

jewelry has the biggest values of course. Then the garments come with US-$ 27.5. For instance, it is US-$

25.5 for defense and US-$ 18 for automotive which we are always "very proud" (!) of. Also, in textile,

from field to the shop, we add our own value and all our citizens create and earn from that value.

However in automotive, US-$ 15 of this value came out of Turkey as import; and they are assembled

together here.

Also when we evaluate it in respect of trade balance, we export US-$ 16 billion in a year and

import only US-$ 4 billion. That means we cover the trade deficit of Turkey; if we had five more

industries like garments in Turkey, there would not be any problem of trade deficit. Therefore, I think the

answer is clear.

21

4. Are there any endorsements or supports for Turkish SMEs to widen their knowledge about

global commerce and settling in the form of an inter- or multinational organization? Are they

efficient and effective enough?

I think that the Ministry of Economics is really effective in these politics. Turquality, for example,

is a program that offers much to producers. They provide them money for 50 % of their rental loans, give

extra credits to producers. They also give support when you try to open a new shop as a company for

example. In international area, Turkish government organizes fairs or invites VIP committees to the

country to create a good opportunity for the companies to sell their products or make agreements. There

are also, some education and consultancy events in the fields of sales management, marketing,

production, design for SMEs.

In general I appreciate the efforts of government and Ministry of Economics. I can evaluate them

as a well organized and managed company. However, now we have an export of garments in the level of

US-$ 16 billion and textile in US-$ 9 billion. Despite, we know that in places like Laleli, Merter,

Osmanbey there are still so many producers that export to Iraq, Russia, Iran, Syria without the overseeing

of authority. And with the addition of these numbers, our actual export level is about US-$ 32 billion.s

There is also a handicap for Turkish industry, the price of workforce. We pay 4-9 times more for

workforce in average when we compare it to our competitors like Bangladesh, China, Pakistan. In Italy it

is even more but they have an export level of over US-$ 60 billion. However, our strengths that we

mentioned before, maintain our position in global markets.

5. How would you evaluate textile industry in Turkey after 20 years in respect of globalization?

Also before 20 years, was it better or worse? Do you see any possible threats like import?

When I first entered to this sector in 1996, the people said me that the industry was collapsing and

asked if I am mad. However, I survived and performed well for about 17 years and now I think my

children can also continue to do this job. The development motive and the power of our industry are

capable to do this.

The biggest threat of Turkish textile and garments industry in the future is the branding which

cannot succeed. Right now, we do not have 100 brands in Turkey overall and to reach our goals, we do

not have any global brands.

22

6. Which role should be (necessarily) worn by Turkish countries to spread their activities to a

region (Europe, Balkans, etc) or to the world? (Innovative, image-holder, price/performance

monster, etc?)

Now, we do all of them. However by the time, we will develop into the way of extensive use of

branding and strategies of marketing as Italy does.

7. We know that Turkish garment and textile industry has developed over the last 30 years.

However we cannot hear the names of Turkish brands all over the world and Europe like Italians,

Americans or French brands. What do Turkish firms do wrong not to have the decent power of

competition in the garment industry and brand loyalty in the minds of customers globally? Is it

something that they can control or is it the conjuncture of the national economic dynamics?

We can think it as USA, Europe vs Turkey. The situation is of course important. This encourages

the firms of these countries and they courage to do things like Billabong, Roxy, Quicksilver with the help

of marketing.

8. What are your (or government's) current short-term and long-term plans to increase the

efficiency of Turkish textile industry around the world?

US-$ 500 Billion of export with five high quality global brands is the target of Turkey in 2023 as

you know. And for this aim, we will be reaching US-$ 52 billion of export with 1-2 global brands. There

are 7000 companies right now. However none of them is capable to do that.

However, it seems palatable when we look at Italy's current position in the market as we take

them as model for us. I see our future is good, with possible brand management projects and well invested

capitals.

23

4. Future Outlook on Turkey’s Textile Industry

Currently, the sector‘s main goals are to produce high value adding, original and high quality products

and to sell them at reasonable prices instead of just producing low cost goods. By this Turkey’s image

shall be changed from being a mass producer of ready wear to a creator of new designs, fashions and

quality labels turning out higher priced products. Therefore, importance must be given to R&D as well as

to cooperations between governmental institutions and universities. This trend has already started. Like

this young Turkish designers are emerging and product diversity can be found. One reason for this

positive trend are pattern design competitions organized by various institutions that foster the

development of young and innovative Turkish workforce in this industry (DEIK Foreign Economic

Relations Board, 2012).

Also Turkish government puts much emphasis on the future development of its textile sector. The

government targets for an annual textile sector export by 2023 which is the 100th anniversary of the

Turkish Republic of US-$ 85 billion (DEIK Foreign Economic Relations Board, 2012). As a figure of

comparison in 2010 it was US-$ 24 billion, in 2009 US-$ 21 billion and in 2008 and 2007 each US-$ 25

billion. This means that within 13 years (from 2010 to 2023) annual export of Turkey’s textile industry

shall be almost four times higher.

Taking the historic development, the current strengths, weaknesses, opportunities and threats in account

that were explained intensively in chapters one to three one can say that Turkey’s textile industry has

profitable and bright future ahead, especially if it uses its modern technology and high quality at low

wages in a beneficial way. Nevertheless, the industry is vulnerable because of the threatening imports of

textiles from even lower-cost countries from Asian region. Also one has to wonder how trade relations

with the main importers of Turkish textile products will develop in times of economic hardships and

crises.

24

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25

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26

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27

Apprentice of Tables:

Table 1: Annual Textile Export of Turkey

General secreteriat of ITKIB (2012)

Online: http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdf

Table 2: Leading Markets for Textile Export of Turkey

General secreteriat of ITKIB (2012)

Online: http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdf

Table 3: TOWS Matrix

Weihrich (1982): “The TOWS Matrix: A tool for situational analysis”, Long Range Planning, Vol. 15 No.

2

Table 4: TOWS Matrix of Turkish Textile Industry

Own depiction (2012)

Apprentice of figures:

Figure 1: History of Textile Industry

Turkey’s Textiles and Apparel Cluster Microeconomics of Competitiveness

ssshttp://www.isc.hbs.edu/pdf/Student_Projects/2012%20MOC%20Papers/MOC%20-

%20Turkey%20Textiles%20and%20Apparel%20Cluster.pdf

Figure 2: Textile Concentrated Areas in Turkey

Figure 3: Turkey’s rank among textile exporters worldwide according to their exports in 2011

World Trade Organization – International Trade and Market Access Data

http://www.wto.org/english/res_e/statis_e/statis_bis_e.htm?solution=WTO&path=/Dashboards/MAPS&fi

le=Map.wcdf&bookmarkState={%22impl%22:%22client%22,%22params%22:{%22langParam%22:%22

en%22}} (29.11.2012)

Figure 4: Porter’s Five Forces Framework

Michael E. Porter (1979): „How Competitive Forces Shape Strategy“, page 6, Harvard Business Review,

President and Fellows of Harvard College

Figure 5: SWOT-Analysis

Own depiction (2012)

Figure 6: PEST factors

Senior and Fleming (2006): “Organizational Change”, 3rd edition, London, Pearson Education.