Valeri's Turkey Trip Story
Valerie Hansard Duhl
EMBA 11 International Trip
May 15-21, 2010
Prior to the trip I had a range of emotions and thoughts. When the trip location was announced I was a little disappointed because I had thought we were going to China and I wanted to see the country where my brother spent a year teaching English at a University.
However, my disappointment passed when I shared the news with my husband. He told me one of his exchange student friends from high school was from Istanbul and owned a company there. The fact that I had a local resource made the trip much more intriguing because I could get personalized insight and possibly a tour. Because Angie had asked for contacts for any companies we knew about in Istanbul, I immediately emailed her the information about his company and his contact information.
I was also interested in Turkey because it was an opportunity to visit another Muslim country. I had previously travelled to Egypt and enjoyed visiting the mosques, seeing the beautiful carpets, and especially listening to the calls of prayer.
The fact that Turkey is a Muslim country led to my consternation leading up to the trip however. When the State Department issued the Travel Alert, I was one of the individuals requesting additional planning and security to ensure our safety. In retrospect the worries were unfounded. At the time though, I imagined our group being of a size that would make our presence obvious. I had imagined a garrulous group drinking too much at local bars and drawing attention to the fact that we were American. During the trip though, the dynamics of the group were that smaller groups clustered to go to dinner or out at night and I felt our presence was generally ignored.
Walking down Istiklal Caddesi though, there were multiple large gatherings of individuals listening to speakers and on one occasion one evening there were many people shouting. That was the only time I was nervous walking about the city.
If in the unlikely event a future country the department visits is in the midst of an anti-American security alert, I would recommend discussing that the group naturally disperses into smaller groups and is not as obvious or important to the locals as one may assume. I sincerely appreciate the department’s pre-trip efforts to ensure our safety. Knowing there were contingency plans increased my confidence in the department. As in any crisis situation, addressing potential risks thoroughly and early is essential.
Sunday, May 16, 2010
On the drive from the airport to the hotel, I was impressed with the esplanade along the Bosporus Strait. Families were picnicking on blankets and at picnic tables, children played on beautiful playgrounds that appeared to be spaced every 1000 feet or so, and individuals exercised on outdoor exercise equipment. To see so many people enjoying the temperate weather on such a beautiful esplanade was extremely fulfilling. In large cities, public parks are such an asset. It was great to see families using Istanbul’s parks so fully. The other first impression I had of the environment was the buildings. The landscape was filled with 6 story square buildings, mostly apartments. Some were built into wall remnants of 5th century forts. In some parts of Istanbul, a cluster of tall 40 story buildings breaks the sea of 6 story apartment buildings. These buildings are modern and all architecturally unique, unless they’re part of an identical pair. The mix of old and new architecture is different from what I see on a daily basis and I enjoyed the juxtaposition.
After arrival to the hotel, I called my husband’s friend. He picked me up after a quick shower and we went to get lunch. His apartment was 5 minutes from the hotel and we dropped off his car there. Across the street there was an old bomb making factory that has since been turned into an art gallery. He explained his office is about a 5 minute walk from his apartment on Taskim Square. My group visited his office later in the trip. He enjoys living in the Taskim district and being within walking distance of so many restaurants, bars, and businesses.
He took me to a penthouse restaurant in a fancy boutique hotel that overlooked the Bosporus. I had lamb, chicken, and beef kebabs over eggplant aubergine and drank Turkey’s most popular beer, Efes. We were the only customers in the restaurant because it was the middle of the afternoon but it was a beautiful setting with all windows open, the cool breeze blowing off water, and sheer white fabric hung on the ceiling and wall billowing quietly. I could tell this restaurant was frequented by Istanbul’s rich, hip crowd and its atmosphere and food could compete with any trendy metropolitan restaurant.
He then took me to another restaurant. We walked along the cobbled streets between the tall 6 story buildings in narrow alleys. There were multitudes of outdoor cafes with tiny restaurant tables. He explained that the Taskim district has really turned itself around. Formerly, it was filled with drugs and prostitutes but it is now vibrant and a hip part of the city. He explained that the government was privatizing a lot of its holdings and one of the privatizations was a beverage company that made a beer that he called Monopoly beer because it was the government’s beer monopoly. He said it was only available at one restaurant anymore so we went there to have some.
Our next stop was for Turkish Coffee. Customers sit in the alley on little stools. Stools are transferred from table to table and people will sit next to strangers. The Turkish Coffee/Tea experience does not take very long because the cups are small. He explained how the coffee is finely ground and boiled twice. The grinds encoat your mouth. He also explained that Turkish people usually use one sugar cube but he drinks it black. As you can see form the photo, he smokes cigarettes. Lots of people in Turkey smoke on the streets.
As we walked along Istiklal Caddesi, we passed his high school. He explained it was 500 years old and 20 acres. His father and grandfather went there as well. During the week, when we went out at night, we would often pass the high school. It was a good landmark.
He also showed me a catholic church, Santa Maria Latin Catholic Church. It was below the street grade level, had an open courtyard before its entrance, and you walked down into the courtyard from the street elevation. No interior photos were allowed but it’s always interesting to see old churches and their stained glass windows. The building was made of block. I pulled a photo off the internet to supplement mine which was not very illustrative of its unique entry.
The last stop we made was to purchase an instrument for my husband. I like to purchase local instruments when traveling and my friend explained that handmade cymbals were unique to Turkey. All the great rock bands used Agean cymbals and he named a number of them. We went into a few music stores to try to get a deal on a cymbal which would be easy to pack. They each had a unique tone and were hand hammered flat. Ultimately, I decided on a Kirmizigul which is the same manufacturer, but the brand name seemed more Turkish.
That evening we had a great dinner at the Conrad and learned about the role Turkey will have in piping oil from Russia to Europe. The information contained within Dr. Ozdora’s presentation tied in nicely to the business efforts of a later presentation given by Borusan. Borusan manufactures pipe and is a leading steel manufacturer in Europe with an annual capacity of 925,000 tons of steel pipe. As natural resources such as oil become scarcer, resource suppliers as well as transit corridors become more important in ability of nations to provide for their citizens and sustain themselves economically. The oil pipeline being constructed through Turkey provides a great foundation of power. In the short-run it is an asset for its manufacturers such as Borusan as well as the employment of its citizens.
Monday, May 17, 2010
The first company presentation held was Deloitte Turkey. We learned about Mergers and Acquisitions from Ms. Basak Vardar. The immediate cultural experience I learned was that even though Turkey is a Muslim country there are women who have high level positions in the business world. Ms. Vardar for example is a Partner at Deloitte. In fact, one of our classmates asked that specific question about women in the workplace in Turkey and she responded in a way that made it seem like women in upper positions was not abnormal.
The privatization lesson I had earlier from my friend tied in nicely to this presentation. We learned that many additional national holdings are being privatized and accounts for 30-35% of the volume of acquisitions. In 2010, government holdings available for privatization include Ferry, Gas Distribution, Lottery, Highways, Bosporus Bridge, Cement, Telecom, Ports, and Sugar.
With respect to Mergers and Acquisitions (M&A), I learned were that foreign investors account for 2/3 of the M&A deal volume with respect to value because they’re interested in Turkey’s low cost base, geographic expansion, and expected growth potential. Interestingly, Turkish investors account for 55% of the quantity of the M&A deals. The main sectors are Financial Services, Energy and Telecom, but other M&A sectors include Retail, Iron/Steel, Food & Beverage, Media, Cement, Infrastructure, Tobacco, IT, Textiles, Mining, Manufacturing, and Services. Currently, Energy is the highest potential sector with 100 power plants or 15,000 MW on auction which is 1/3 of the total capacity. Ms. Vardar reported Turk Telecom sold for $6.5M, Vodafone Telsim for $4.5M, and Shell-Tupras for $4.1M in cry-out auctions.
The key challenges Ms. Vardar listed were interesting because the top three challenges would not be found in the U.S.:
The economic review provided by Economist Murat Uger was similarly interesting. Statistics I found interesting was the per capita income growth:
Related to the per capita income is the age of the population. 40% of the population is 30 years old or younger. Having this quantity of young people is an advantage if it can convert this population into skilled labor.
During Mr. Uger’s presentation, we had a financial history lesson. We learned about the greater than 100%/year hyperinflation of the 1990’s and the resulting fiscal discipline that occurred from 2003-2007. Inflation is now 9-10% since 2004 with a target of 5%. The stabilization was partly due to the single party government. A benefit of a single party government is decisions are made quickly and decisively.
With respect to the global financial crisis, Turkey has been in good shape since there was so much financial reform. There were no bank collapses or government bailouts in Turkey.
The second presentation of the day was the Entrepreneurial Panel. My friend’s company was one of the companies presenting: Pozitron. Pozitron had been involved with Endeavour since 2007. They design mobile banking applications for portable devices like phones. Before I went to Turkey I downloaded some of their applications to my iPhone including an ATM locator for Istanbul. My friend says that mobile banking from your phone will be a much more accepted form of transacting in the future in the U.S. In Turkey mobile banking is quite extensive already.
During these presentations, I learned about Endeavour itself. The NPO provides a unique opportunity for entrepreneurs in developing countries and assists them in strategic, governance, structural, advertising/marketing, financial, and legal advice. Its continued growth is dependent on the success of the entrepreneurs it selects and their success after their mentorship period has passed. Successful business will reinvest in Endeavour with time, money, and as a mentor to grow other entrepreneurial businesses. The model is interesting and should increase the success rate of businesses in the developing countries in which it is established.
An interesting point of the presentation and repeated by the larger corporations later in the week include the fact that it is hard to keep talented staff because they are pursued by other companies. In addition, we learned that financing for small and medium businesses is difficult. Lastly, stock options and equity/ownership options don’t have much appeal to potential employees because (1) the Turkish mentality is still anchored to the hyperinflation period and (2) there are not many examples of successful exits from acquisitions. Legally, we learned non-compete contracts are not enforceable and intellectual property is difficult to protect.
That evening, we went to the Spice Bazaar and the Blue Mosque by riding the tram. We later had dinner at a seafood restaurant under the bridge that connects “new” Istanbul to “old” Istanbul. My friend had told me to try Kalkan which is a fish that is native to the Black Sea. It is a mild white fish and looks hideously ugly, but it tasted pretty good.
Tuesday, May 18, 2010
On Tuesday we first heard from Mr. Omer Aras, the CEO of Finansbank. The presentation began with a banking industry summary. We learned that during the fiscal tightening the banks consolidated from 85 to 49. Of those there are 32 deposit taking banks and 32 Islamic Banks. Islamic Banks give no interest, but provide “profit sharing” which is roughly equivalent to the current interest rate. 65% of banks are private and 35% public. In 2002 there were no mortgages due to hyperinflation, but now $3B is mortgaged. Turkish banks are very well capitalized. The required amount is 8% but they are capitalized at 20%.
With respect to Finansbank, we learned that they have diversified in the reverse direction of most other banks, from less to more developed countries. We also learned that there are crises about every 5 years in Turkey and its anticipated. The CEO of Finansbank considers bubbles to be opportunities and this is the way they built the bank. They monitor the environment, identify opportunities, and take action. From 1987 to 2009 it has grown from 40 to 10,000 employees and from $4M to $23.1B in assets. Finansbank is the 5th largest bank in Turkey with 5-11% of the country’s assets.
At the end of his presentation he spoke about leaders. He stated leaders have a dream, sell a dream, and have passion and drive to achieve a dream. His advice is to recruit the best because the most important asset of a business is human capital. The qualities needed for a good employee are not listed on a resume but include qualities such as character, hard work, sincerity, and fairness. Other lessons are as follows:
The second speaker was Dr. Erdal Karamercan, CEO of Eczacibasi. First we went to one of the Eczacibasi holdings which was a lifestyle center including a mall, a large residential building, and a large office tower. The mall was 5 stories high and was architecturally beautiful. We were later told the residences sold out immediately, which is very different than the current residential market in lifestyle centers in Florida. The security into Eczacibasi was extensive and modern and the interior décor of the room we met in was beautiful.
Eczacibasi employees 9,300 people and had sales of 3.9B Lira in 2009. It focuses on building products, healthcare, consumer products, and others totaling 40 companies. In 2009, they didn’t lose market share even though the market shrank. Their turnover is 0-0.5% because they select people whose culture fits the “Eczacibasi culture”. While the recruitment process may take longer, the end result is more happiness in the workplace. Dr. Karamercan stated that people don’t resign from a company, they resign from a manager. Other interesting initiatives include the goal of systematically training employees to be more innovative and to reward employees for their innovations. This company was the first one where we learned about large corporations’ social responsibility initiatives. They invest in the Museum of Modern Art, the Foundation for Culture and Arts, and the educational Hygiene Project and Scientific Research and Medical Award funds. They are also a member of the World Business Council for Sustainable Development, the Climate Platform, and the Copenhagen Communiqué. They provide opportunities for their employees to volunteer, raise funds to support children, and have a donation matching program. Dr. Karamercan stated that business is based on the following:
There was a live band and mojitos.
Wednesday, May 19 2010
Today was my daughter Lillian’s 5th birthday and it was our day of sightseeing. We went to St. Sophia, the Blue Mosque, Hippodrome, Topkapi Palace, and Grand Bazaar. The interesting cultural experience I can share is that a German woman approached me in the Blue Mosque and asked why I was covering my head. She asked where I was from and I responded I was from the U.S. She asked why I was wearing the head scarf and I said because I wanted to honor the Muslim tradition. She responded, “You better not because you may just be forced to in the future!”
Thursday, May 20 2010
On Thursday we went to the Mercedes Bus Plant. Their presentation was perfected and we later learned they had been giving up to 2 group tours of the plant a day but now it’s about every other day.
First the Assembly Manager Mr. Gurhan Coban reviewed the general Turkish economy and automotive industry. Interesting statistics from this segment of the presentation was the capacity utilization rates:
To produce the buses, they have 200 domestic and 600 international suppliers. They have a warehouse with 16,000 parts that uses a logistics package that cost 36M lira. The average number of parts to produce a bus is 9,000-11,000. Car production takes 10-15 man-hrs, truck production 60-65 man-hrs, and bus production 800-1200 man-hrs. In 1967 bus throughput was 0.5/day and in 2010 it is 13/day.
Mercedes focuses on 1) efficiency and 2) on-time suppliers that supply the quantity needed. For improvements, they rely on workers and best engineering practices. They reward generously for workers’ improvement solutions because the overall savings, efficiencies, and benefits are so great. They also utilize an outside surveying company to provide confidential feedback on their products.
This tour was relevant to my company which manufactures mobile laboratories. Take-home ideas I wrote down were pre-commissioned parts carts which lists missing parts. The benefit is workers don’t leave their station looking for parts and if a part remains, they knew it wasn’t used so it’s an automatic quality check. They also use the Kanban system, which we do at my company for small parts. For larger parts they use hinged gates that cover the parts when it’s full as the workers pull from the other side, when it is emptied, the gate is flipped and workers pull from the full side while the empty side is refilled. Lastly, they use large TVs to display a timer counting down. When the time is at zero, the buzzer indicates the bus needs to move to the next station. The workers are still in the bus working as other workers push it forward. The workers know when they’re at a certain position in the plant they should have completed certain tasks. The countdown clock keeps employees focused on time and gives a visual, audio, and spatial reminder about their work progress. They tack time was 87 minutes between stations at the plant.
Culturally, we learned that corporations provide transportation to and from work for their employees, which totals 80 buses at Mercedes. Most businesses also provide lunch, but Mercedes provides dinner as well. They also have an exercise facility/gym that was open to both the employees and their families.
The next presentation was Borusan. The CEO, Mr. Agah Ugur, met with us for an hour. Similarly to the other holding company we visited, Ecazacibasi, Borusan believes in social contributions. We met in a modern art gallery they own and had to leave quickly because their orchestra was going to be giving a concert there that evening. The orchestra is the most prominent in Turkey. They also have a music library with sheet music and 15,000 CDs. They have an artist residency program and also exhibit them.
We learned that in Turkey, there are many conglomerates because if you do only one line of business, often, it is not enough. Turkey had a protected market for many years so Turkish companies are:
The rules of engagement Borusan has used include not getting involved in politics, not doing business with the government (until recently), focusing on business to business, quality, social responsibility, and sustainability. Mr. Ugur stated that Turkish business people are good at managing prices because there is a crisis every 5 years and they know how to renegotiate. This was a reiteration of what we learned from the Finansbank presentation.
As a holding company of multiple independent businesses, they view their role as providing 1) direction, 2) support to bring influence and technical support, and 3) some operational/strategic control/advice.
Mr. Ugur also provided some cultural lessons:
Friday, May 21 2010
Today was my daughter Miriam’s 2nd birthday and it was our final full day in Turkey. We went first to the Dearsan shipyard. We couldn’t take photographs there, but it was quite impressive. They have a $500M contract with the government to produce 16 57 m, 25 knot patrol boats. They will be used in efforts against piracy, drug trafficking, and illegal immigration. They will also be good for peacetime naval work. They invested time and capital into attaining the following certifications:
The design phase was 2 years, negotiations were 6 months and the production schedule is 1-4 over the next 6 years. Dearsan expects additional orders and has a goal to sell to E.U. countries. They have 6 boats under construction and the first boat was christened April 2010 and the ceremony was attended by the Nave head and Prime Minister.
Dearsan has other bids out, such as a Submarine Rescue Mothership to rescue stranded submarine occupants and a coast guard boat. They also expect to gain from 10 year spare parts and maintenance contracts. They use an ERP system to manage all spare parts and maintenance requirements for their products.
Other additional information relevant to my company includes:
The cultural lesson I learned was that of generosity. When the economy was slowing, rather than laying off the workforce, he invested in the production of a speculation oil tanker to keep people employed. I have a high respect for this generous investment during a slow period in the economy.
The final company visited was Pepsi. We learned that Pepsi also has a social corporate responsibility creed. They base their business on sustained growth, empowered people, and responsibility/trust. According to them, they
During the marketing presentation we learned that surveys/research is important, education is necessary in developing countries not accustomed to Americans’ snack foods.
In summary, the presentations were very informative and well thought out. The presenters’ English was good and they responded thoughtfully and sincerely to our questions. I thoroughly enjoyed by experience in Turkey and believe it could not be matched by a tourist visit to Istanbul. I am very grateful for the efforts of the department and the opportunity to attend.
EMBA 11 International Trip
May 15-21, 2010
Istanbul, Turkey Journal
Pre-Trip and Related ReflectionsPrior to the trip I had a range of emotions and thoughts. When the trip location was announced I was a little disappointed because I had thought we were going to China and I wanted to see the country where my brother spent a year teaching English at a University.
However, my disappointment passed when I shared the news with my husband. He told me one of his exchange student friends from high school was from Istanbul and owned a company there. The fact that I had a local resource made the trip much more intriguing because I could get personalized insight and possibly a tour. Because Angie had asked for contacts for any companies we knew about in Istanbul, I immediately emailed her the information about his company and his contact information.
I was also interested in Turkey because it was an opportunity to visit another Muslim country. I had previously travelled to Egypt and enjoyed visiting the mosques, seeing the beautiful carpets, and especially listening to the calls of prayer.
The fact that Turkey is a Muslim country led to my consternation leading up to the trip however. When the State Department issued the Travel Alert, I was one of the individuals requesting additional planning and security to ensure our safety. In retrospect the worries were unfounded. At the time though, I imagined our group being of a size that would make our presence obvious. I had imagined a garrulous group drinking too much at local bars and drawing attention to the fact that we were American. During the trip though, the dynamics of the group were that smaller groups clustered to go to dinner or out at night and I felt our presence was generally ignored.
Walking down Istiklal Caddesi though, there were multiple large gatherings of individuals listening to speakers and on one occasion one evening there were many people shouting. That was the only time I was nervous walking about the city.
If in the unlikely event a future country the department visits is in the midst of an anti-American security alert, I would recommend discussing that the group naturally disperses into smaller groups and is not as obvious or important to the locals as one may assume. I sincerely appreciate the department’s pre-trip efforts to ensure our safety. Knowing there were contingency plans increased my confidence in the department. As in any crisis situation, addressing potential risks thoroughly and early is essential.
Sunday, May 16, 2010
On the drive from the airport to the hotel, I was impressed with the esplanade along the Bosporus Strait. Families were picnicking on blankets and at picnic tables, children played on beautiful playgrounds that appeared to be spaced every 1000 feet or so, and individuals exercised on outdoor exercise equipment. To see so many people enjoying the temperate weather on such a beautiful esplanade was extremely fulfilling. In large cities, public parks are such an asset. It was great to see families using Istanbul’s parks so fully. The other first impression I had of the environment was the buildings. The landscape was filled with 6 story square buildings, mostly apartments. Some were built into wall remnants of 5th century forts. In some parts of Istanbul, a cluster of tall 40 story buildings breaks the sea of 6 story apartment buildings. These buildings are modern and all architecturally unique, unless they’re part of an identical pair. The mix of old and new architecture is different from what I see on a daily basis and I enjoyed the juxtaposition.
After arrival to the hotel, I called my husband’s friend. He picked me up after a quick shower and we went to get lunch. His apartment was 5 minutes from the hotel and we dropped off his car there. Across the street there was an old bomb making factory that has since been turned into an art gallery. He explained his office is about a 5 minute walk from his apartment on Taskim Square. My group visited his office later in the trip. He enjoys living in the Taskim district and being within walking distance of so many restaurants, bars, and businesses.
He took me to a penthouse restaurant in a fancy boutique hotel that overlooked the Bosporus. I had lamb, chicken, and beef kebabs over eggplant aubergine and drank Turkey’s most popular beer, Efes. We were the only customers in the restaurant because it was the middle of the afternoon but it was a beautiful setting with all windows open, the cool breeze blowing off water, and sheer white fabric hung on the ceiling and wall billowing quietly. I could tell this restaurant was frequented by Istanbul’s rich, hip crowd and its atmosphere and food could compete with any trendy metropolitan restaurant.
He then took me to another restaurant. We walked along the cobbled streets between the tall 6 story buildings in narrow alleys. There were multitudes of outdoor cafes with tiny restaurant tables. He explained that the Taskim district has really turned itself around. Formerly, it was filled with drugs and prostitutes but it is now vibrant and a hip part of the city. He explained that the government was privatizing a lot of its holdings and one of the privatizations was a beverage company that made a beer that he called Monopoly beer because it was the government’s beer monopoly. He said it was only available at one restaurant anymore so we went there to have some. Our next stop was for Turkish Coffee. Customers sit in the alley on little stools. Stools are transferred from table to table and people will sit next to strangers. The Turkish Coffee/Tea experience does not take very long because the cups are small. He explained how the coffee is finely ground and boiled twice. The grinds encoat your mouth. He also explained that Turkish people usually use one sugar cube but he drinks it black. As you can see form the photo, he smokes cigarettes. Lots of people in Turkey smoke on the streets.As we walked along Istiklal Caddesi, we passed his high school. He explained it was 500 years old and 20 acres. His father and grandfather went there as well. During the week, when we went out at night, we would often pass the high school. It was a good landmark.
He also showed me a catholic church, Santa Maria Latin Catholic Church. It was below the street grade level, had an open courtyard before its entrance, and you walked down into the courtyard from the street elevation. No interior photos were allowed but it’s always interesting to see old churches and their stained glass windows. The building was made of block. I pulled a photo off the internet to supplement mine which was not very illustrative of its unique entry. The last stop we made was to purchase an instrument for my husband. I like to purchase local instruments when traveling and my friend explained that handmade cymbals were unique to Turkey. All the great rock bands used Agean cymbals and he named a number of them. We went into a few music stores to try to get a deal on a cymbal which would be easy to pack. They each had a unique tone and were hand hammered flat. Ultimately, I decided on a Kirmizigul which is the same manufacturer, but the brand name seemed more Turkish.
That evening we had a great dinner at the Conrad and learned about the role Turkey will have in piping oil from Russia to Europe. The information contained within Dr. Ozdora’s presentation tied in nicely to the business efforts of a later presentation given by Borusan. Borusan manufactures pipe and is a leading steel manufacturer in Europe with an annual capacity of 925,000 tons of steel pipe. As natural resources such as oil become scarcer, resource suppliers as well as transit corridors become more important in ability of nations to provide for their citizens and sustain themselves economically. The oil pipeline being constructed through Turkey provides a great foundation of power. In the short-run it is an asset for its manufacturers such as Borusan as well as the employment of its citizens.
Monday, May 17, 2010
The first company presentation held was Deloitte Turkey. We learned about Mergers and Acquisitions from Ms. Basak Vardar. The immediate cultural experience I learned was that even though Turkey is a Muslim country there are women who have high level positions in the business world. Ms. Vardar for example is a Partner at Deloitte. In fact, one of our classmates asked that specific question about women in the workplace in Turkey and she responded in a way that made it seem like women in upper positions was not abnormal.
The privatization lesson I had earlier from my friend tied in nicely to this presentation. We learned that many additional national holdings are being privatized and accounts for 30-35% of the volume of acquisitions. In 2010, government holdings available for privatization include Ferry, Gas Distribution, Lottery, Highways, Bosporus Bridge, Cement, Telecom, Ports, and Sugar.
With respect to Mergers and Acquisitions (M&A), I learned were that foreign investors account for 2/3 of the M&A deal volume with respect to value because they’re interested in Turkey’s low cost base, geographic expansion, and expected growth potential. Interestingly, Turkish investors account for 55% of the quantity of the M&A deals. The main sectors are Financial Services, Energy and Telecom, but other M&A sectors include Retail, Iron/Steel, Food & Beverage, Media, Cement, Infrastructure, Tobacco, IT, Textiles, Mining, Manufacturing, and Services. Currently, Energy is the highest potential sector with 100 power plants or 15,000 MW on auction which is 1/3 of the total capacity. Ms. Vardar reported Turk Telecom sold for $6.5M, Vodafone Telsim for $4.5M, and Shell-Tupras for $4.1M in cry-out auctions.
The key challenges Ms. Vardar listed were interesting because the top three challenges would not be found in the U.S.:
- Lack of Transparency – lots of off the book transactions
- Lack of Financial Reporting – Small and Medium sized companies do not even have business plans
- Lack of Corporate Governance – she reports its improving
- Value Expectations – Turkish companies believe their business should be higher than market value.
The economic review provided by Economist Murat Uger was similarly interesting. Statistics I found interesting was the per capita income growth:
- 2000: $3,400/capita
- 2008: $10,000/capita
- 2009: $8,500/capita
Related to the per capita income is the age of the population. 40% of the population is 30 years old or younger. Having this quantity of young people is an advantage if it can convert this population into skilled labor.
During Mr. Uger’s presentation, we had a financial history lesson. We learned about the greater than 100%/year hyperinflation of the 1990’s and the resulting fiscal discipline that occurred from 2003-2007. Inflation is now 9-10% since 2004 with a target of 5%. The stabilization was partly due to the single party government. A benefit of a single party government is decisions are made quickly and decisively.
With respect to the global financial crisis, Turkey has been in good shape since there was so much financial reform. There were no bank collapses or government bailouts in Turkey.
The second presentation of the day was the Entrepreneurial Panel. My friend’s company was one of the companies presenting: Pozitron. Pozitron had been involved with Endeavour since 2007. They design mobile banking applications for portable devices like phones. Before I went to Turkey I downloaded some of their applications to my iPhone including an ATM locator for Istanbul. My friend says that mobile banking from your phone will be a much more accepted form of transacting in the future in the U.S. In Turkey mobile banking is quite extensive already.
During these presentations, I learned about Endeavour itself. The NPO provides a unique opportunity for entrepreneurs in developing countries and assists them in strategic, governance, structural, advertising/marketing, financial, and legal advice. Its continued growth is dependent on the success of the entrepreneurs it selects and their success after their mentorship period has passed. Successful business will reinvest in Endeavour with time, money, and as a mentor to grow other entrepreneurial businesses. The model is interesting and should increase the success rate of businesses in the developing countries in which it is established.
An interesting point of the presentation and repeated by the larger corporations later in the week include the fact that it is hard to keep talented staff because they are pursued by other companies. In addition, we learned that financing for small and medium businesses is difficult. Lastly, stock options and equity/ownership options don’t have much appeal to potential employees because (1) the Turkish mentality is still anchored to the hyperinflation period and (2) there are not many examples of successful exits from acquisitions. Legally, we learned non-compete contracts are not enforceable and intellectual property is difficult to protect.
That evening, we went to the Spice Bazaar and the Blue Mosque by riding the tram. We later had dinner at a seafood restaurant under the bridge that connects “new” Istanbul to “old” Istanbul. My friend had told me to try Kalkan which is a fish that is native to the Black Sea. It is a mild white fish and looks hideously ugly, but it tasted pretty good.
Tuesday, May 18, 2010
On Tuesday we first heard from Mr. Omer Aras, the CEO of Finansbank. The presentation began with a banking industry summary. We learned that during the fiscal tightening the banks consolidated from 85 to 49. Of those there are 32 deposit taking banks and 32 Islamic Banks. Islamic Banks give no interest, but provide “profit sharing” which is roughly equivalent to the current interest rate. 65% of banks are private and 35% public. In 2002 there were no mortgages due to hyperinflation, but now $3B is mortgaged. Turkish banks are very well capitalized. The required amount is 8% but they are capitalized at 20%.
With respect to Finansbank, we learned that they have diversified in the reverse direction of most other banks, from less to more developed countries. We also learned that there are crises about every 5 years in Turkey and its anticipated. The CEO of Finansbank considers bubbles to be opportunities and this is the way they built the bank. They monitor the environment, identify opportunities, and take action. From 1987 to 2009 it has grown from 40 to 10,000 employees and from $4M to $23.1B in assets. Finansbank is the 5th largest bank in Turkey with 5-11% of the country’s assets.
At the end of his presentation he spoke about leaders. He stated leaders have a dream, sell a dream, and have passion and drive to achieve a dream. His advice is to recruit the best because the most important asset of a business is human capital. The qualities needed for a good employee are not listed on a resume but include qualities such as character, hard work, sincerity, and fairness. Other lessons are as follows:
- Match position with the right person
- Be a good listener and give credit when due. Get opinions, evaluate, and decide.
- Give love and respect
- Be frank and sincere
- Gain respect of a team with technical knowledge and personality
- Work hard
- Measure performance and manage incentives by pushing costs to variable, benchmarking the competition, and rewarding success fairly and generously
- Revenues > costs, control costs, and look at risk adjusted returns
- Always: be an optimist during a crisis, pessimist during good times, a pusher for innovation, worrier to determine if there is a better way of doing things and be good at following up to make sure things get done.
- Competition often self destructs, rankings change after a crisis, and opportunities come during a crisis
The second speaker was Dr. Erdal Karamercan, CEO of Eczacibasi. First we went to one of the Eczacibasi holdings which was a lifestyle center including a mall, a large residential building, and a large office tower. The mall was 5 stories high and was architecturally beautiful. We were later told the residences sold out immediately, which is very different than the current residential market in lifestyle centers in Florida. The security into Eczacibasi was extensive and modern and the interior décor of the room we met in was beautiful.
Eczacibasi employees 9,300 people and had sales of 3.9B Lira in 2009. It focuses on building products, healthcare, consumer products, and others totaling 40 companies. In 2009, they didn’t lose market share even though the market shrank. Their turnover is 0-0.5% because they select people whose culture fits the “Eczacibasi culture”. While the recruitment process may take longer, the end result is more happiness in the workplace. Dr. Karamercan stated that people don’t resign from a company, they resign from a manager. Other interesting initiatives include the goal of systematically training employees to be more innovative and to reward employees for their innovations. This company was the first one where we learned about large corporations’ social responsibility initiatives. They invest in the Museum of Modern Art, the Foundation for Culture and Arts, and the educational Hygiene Project and Scientific Research and Medical Award funds. They are also a member of the World Business Council for Sustainable Development, the Climate Platform, and the Copenhagen Communiqué. They provide opportunities for their employees to volunteer, raise funds to support children, and have a donation matching program. Dr. Karamercan stated that business is based on the following:- Trust
- An Ethical Approach
- Corporate Responsibility
- Tremendous Efforts
- Quality
- Consumer/Customer Approach (a personal touch)
There was a live band and mojitos.
Wednesday, May 19 2010
Today was my daughter Lillian’s 5th birthday and it was our day of sightseeing. We went to St. Sophia, the Blue Mosque, Hippodrome, Topkapi Palace, and Grand Bazaar. The interesting cultural experience I can share is that a German woman approached me in the Blue Mosque and asked why I was covering my head. She asked where I was from and I responded I was from the U.S. She asked why I was wearing the head scarf and I said because I wanted to honor the Muslim tradition. She responded, “You better not because you may just be forced to in the future!”
Thursday, May 20 2010
On Thursday we went to the Mercedes Bus Plant. Their presentation was perfected and we later learned they had been giving up to 2 group tours of the plant a day but now it’s about every other day.
First the Assembly Manager Mr. Gurhan Coban reviewed the general Turkish economy and automotive industry. Interesting statistics from this segment of the presentation was the capacity utilization rates:
- 2001: 30%
- 2008: 75%
- 2009: 55%
To produce the buses, they have 200 domestic and 600 international suppliers. They have a warehouse with 16,000 parts that uses a logistics package that cost 36M lira. The average number of parts to produce a bus is 9,000-11,000. Car production takes 10-15 man-hrs, truck production 60-65 man-hrs, and bus production 800-1200 man-hrs. In 1967 bus throughput was 0.5/day and in 2010 it is 13/day.
Mercedes focuses on 1) efficiency and 2) on-time suppliers that supply the quantity needed. For improvements, they rely on workers and best engineering practices. They reward generously for workers’ improvement solutions because the overall savings, efficiencies, and benefits are so great. They also utilize an outside surveying company to provide confidential feedback on their products.
This tour was relevant to my company which manufactures mobile laboratories. Take-home ideas I wrote down were pre-commissioned parts carts which lists missing parts. The benefit is workers don’t leave their station looking for parts and if a part remains, they knew it wasn’t used so it’s an automatic quality check. They also use the Kanban system, which we do at my company for small parts. For larger parts they use hinged gates that cover the parts when it’s full as the workers pull from the other side, when it is emptied, the gate is flipped and workers pull from the full side while the empty side is refilled. Lastly, they use large TVs to display a timer counting down. When the time is at zero, the buzzer indicates the bus needs to move to the next station. The workers are still in the bus working as other workers push it forward. The workers know when they’re at a certain position in the plant they should have completed certain tasks. The countdown clock keeps employees focused on time and gives a visual, audio, and spatial reminder about their work progress. They tack time was 87 minutes between stations at the plant.
Culturally, we learned that corporations provide transportation to and from work for their employees, which totals 80 buses at Mercedes. Most businesses also provide lunch, but Mercedes provides dinner as well. They also have an exercise facility/gym that was open to both the employees and their families.
The next presentation was Borusan. The CEO, Mr. Agah Ugur, met with us for an hour. Similarly to the other holding company we visited, Ecazacibasi, Borusan believes in social contributions. We met in a modern art gallery they own and had to leave quickly because their orchestra was going to be giving a concert there that evening. The orchestra is the most prominent in Turkey. They also have a music library with sheet music and 15,000 CDs. They have an artist residency program and also exhibit them.
We learned that in Turkey, there are many conglomerates because if you do only one line of business, often, it is not enough. Turkey had a protected market for many years so Turkish companies are:
- Not as competitive internationally
- Often do not have a second language
- Do not look abroad for growth because there is so much opportunity in Turkey
- Were used as a “native partner” by international companies to grow into the Turkish market
The rules of engagement Borusan has used include not getting involved in politics, not doing business with the government (until recently), focusing on business to business, quality, social responsibility, and sustainability. Mr. Ugur stated that Turkish business people are good at managing prices because there is a crisis every 5 years and they know how to renegotiate. This was a reiteration of what we learned from the Finansbank presentation.
As a holding company of multiple independent businesses, they view their role as providing 1) direction, 2) support to bring influence and technical support, and 3) some operational/strategic control/advice.
Mr. Ugur also provided some cultural lessons:
- Americans = straight. Direct. Success-oriented, transparent, open for new initiatives, no hidden agendas, team-oriented but accountable, no big consensus building
- German = consensus building, no “buck stops here” companies
- Arab = single decision makers, emotional with moods up and down, prefer institutions with professional managers, and they want only exclusive partners with strong loyalty
Friday, May 21 2010
Today was my daughter Miriam’s 2nd birthday and it was our final full day in Turkey. We went first to the Dearsan shipyard. We couldn’t take photographs there, but it was quite impressive. They have a $500M contract with the government to produce 16 57 m, 25 knot patrol boats. They will be used in efforts against piracy, drug trafficking, and illegal immigration. They will also be good for peacetime naval work. They invested time and capital into attaining the following certifications:
- NATO Secret Facility Security Clearance Certificate
- National Secret Facility Security Clearance Certificate
- ISO 9001:2000
- OSHA
- SaSaD Defense Industry Manufacturers Association Certificate
The design phase was 2 years, negotiations were 6 months and the production schedule is 1-4 over the next 6 years. Dearsan expects additional orders and has a goal to sell to E.U. countries. They have 6 boats under construction and the first boat was christened April 2010 and the ceremony was attended by the Nave head and Prime Minister.
Dearsan has other bids out, such as a Submarine Rescue Mothership to rescue stranded submarine occupants and a coast guard boat. They also expect to gain from 10 year spare parts and maintenance contracts. They use an ERP system to manage all spare parts and maintenance requirements for their products.
Other additional information relevant to my company includes:
- They subcontract out their workers such as electrical, paint, steel, piping, and electronics.
- They have cost-plus government contracts that account for inflation because projects are 3-4 years out
- They negotiated volume deals with suppliers and for raw materials
- Even though they have decreased their staff by 40%, they have 10-40 employees in design and provide a high budget. They are now turning around new proposals in shorter time periods and with lower costs.
The cultural lesson I learned was that of generosity. When the economy was slowing, rather than laying off the workforce, he invested in the production of a speculation oil tanker to keep people employed. I have a high respect for this generous investment during a slow period in the economy.
The final company visited was Pepsi. We learned that Pepsi also has a social corporate responsibility creed. They base their business on sustained growth, empowered people, and responsibility/trust. According to them, they
- Care for their customers, consumers, and the world
- Sell products they can be proud of
- Truth and candor
- Balance short/long term
- Diversity and inclusion
- Respect and succeed together
During the marketing presentation we learned that surveys/research is important, education is necessary in developing countries not accustomed to Americans’ snack foods.
In summary, the presentations were very informative and well thought out. The presenters’ English was good and they responded thoughtfully and sincerely to our questions. I thoroughly enjoyed by experience in Turkey and believe it could not be matched by a tourist visit to Istanbul. I am very grateful for the efforts of the department and the opportunity to attend.
posted by duhl at 11:18 PM
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