Group-3 Vehbi Koc
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Transcript of Group-3 Vehbi Koc
8/13/2019 Group-3 Vehbi Koc
http://slidepdf.com/reader/full/group-3-vehbi-koc 1/19
VEBHI KOC AND THE MARKETING OF
TUKEY’S LARGEST BUSINESS GROUP
Group 3:
Debolin Dey
Akshay Nigam
Manoj Kumar
Nimish Shah
Arnab Kumar Saha
8/13/2019 Group-3 Vehbi Koc
http://slidepdf.com/reader/full/group-3-vehbi-koc 2/19
Case Facts
• Koc Holding - close to 92
companies
• Started taking shape in 1919
when Vehbi Koc closed his
father’s grocery business and
started a leather business
• With Ankara becoming the capital
of Turkey new business
opportunities emerged and• Vehbi started shifting across
different businesses ranging from
• Leather, Kerosene,
Construction Materials
Manufacturing, Construction
business, Automotive etc.
• Vehbi also opened up an office in New York named
Ram Commercial Corporation to deal in US Rubberand also to set up a light bulb factory in 1945
• Automotive division along with Tohfa and Otosan
Group formed the highest revenue share for the Koc
Group
8/13/2019 Group-3 Vehbi Koc
http://slidepdf.com/reader/full/group-3-vehbi-koc 3/19
• Desire for diversified businesses
made him enter areas like
• Truck Manufacturing,
• Oxygen Gas Factory,
•
Pipe Manufacturing Company,• Steel Office Furniture Trading
Company,
• Washing Machine
Manufacturing Company etc.
• During Early 1960s, Koc Holding was
established
• The companies were independent in
their operations but their strategic
decisions started and ended with
Vehbi
• Koc Holding held shares in other
group companies and created a sort
of trust which also held shares in the
companies formed for philanthropic
purposes
8/13/2019 Group-3 Vehbi Koc
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Should the Management be removed from Family
Control?
• The Family Control must be there within the Management for the reasons as
stated-
• Family Controlled Firms like Chaebols-
Korean Firms are much more capable
to weather away different crises like
Financial, Operational, Governmental
etc.
• It is quick in decision making as all the
decisions are to be done by the family
controlled management body
• Other Group Companies don’t
have any cross stake in each other
so it requires lesser deliberation
and lesser bureaucratic which
helps in faster decision making ina dynamic environment
•
Restructuring Organizations becomeswhole lot easier in case of Financial
Crisis with the decision making power
focused on a few members
• They know the strategic vision of the
company and restructure the firm
accordingly without too much outsideinterference
8/13/2019 Group-3 Vehbi Koc
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Vehbi Koc’s life workVerbhi Koc had built a conglomerate that consisted of 92 companies in 7
divisions as of 1988
He had in his own words not put ‘all eggs in one basket’ and gone on
diversifying in different fields from automobiles to consumer goods,
construction and mining , energy and trade to financialsHe understood Turkey’s political and business landscape very well since he
had been part and parcel of this since 1926
Time Range Political Conditions Verbhi Koc method of
adaptation
1945 World War II in progress.
Turkey in urgent need of
trucks
As agency dealer of Ford,
sold Ford Trucks at 90%
profit
8/13/2019 Group-3 Vehbi Koc
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Time Range Political Conditions Verbhi Koc method of
adaptation
1959 Rise in disposal income
resulted in increase of
demand for washing
machine and refrigerators
Entered into technical
agreement with a Belgian
company for production of
washing machines andIsraeli company for
refrigerators
1965 Restrictive environment for
business. Import restrictions
Started manufacturing
components locally . This
attracted GE to provide
technical assistance to Koc.
1960’s Government gave support
to Vebhi’s enthusiasm for
automobile industry
Established Tofas company
as a joint venture between
Fiat and Koc. Otosan was
established with the
technocal assistance of Ford
8/13/2019 Group-3 Vehbi Koc
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• In the new political landscape of 1988 when the government was planning
to eliminate bureaucratic and legal obstacles to Foreign investment Vehbi’s
life ‘s work would be an advantage because :
• With the widest automotive network in the country FDI in the automobile sector
would ensure direct investment in the two companies since MNC’s would want to
leverage this pre established network• Arcelik was also the largest player in the consumer durables market . It s
established network would also invite investments in the company
• Foreign companies would not want to set up companies on its own knowing
Turkey’s turbulent landscape and hence joint ventures could come up with the
existing companies
•
Though Koc had not entered into the electronics market in a big way , companieswould still want to invest in him knowing his penchant for entering new
interesting businesses
Hence his Life’s work in establishing networks throughout the country will be an
advantage in the changed scenario.
8/13/2019 Group-3 Vehbi Koc
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To Divest or not to Divest
Divest
Decrease incontrolling stakes
More publicshareholdings
Morestakeholders indecision making
process
External debtis 1/4th of GDP
Present
Turkey
8/13/2019 Group-3 Vehbi Koc
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Success in unrelated businesses
• Turkey was a developing market when Vehbi entered characterized by poor
product information and no mechanism for consumers to redress problems
• In this scenario Vehbi had build his ventures into dependable companies
with a loyal consumer following
• Though the names of companies were different everyone knew that the company
was owned by Vehbi Koc
• However his companies would have been more successful if he had created ‘brand
identities’ for these companies.
• Capital market intermediaries found in developed companies was unreliable
in Turkey as can be seen by the “brokerage crisis” of 1982 which led to the
establishment of the Istanbul Stock Exchange.
8/13/2019 Group-3 Vehbi Koc
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Success in unrelated businesses
• Consequently investors leery of investing in stand alone companies invested
in companies owned by Koc Holdings, though the family via the Koc
Holdings retained majority of the shares
• Koc Holdings being the largest business group in Turkey had thus the
advantage [ for above reasons] in accessing both public capital and fundingnew ventures in their beginning stages itself
• Thus Koc Holdings self financed its entry into canned food, supermarket
chains, foreign trade , oil and gas , banking and insurance and others
8/13/2019 Group-3 Vehbi Koc
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Influence of Government & Macroeconomic
factors in setting of business group
• Government and macroeconomic factors determine in a big way the growthand sustenance of a business group
• Decades between 1960 and 1980 characterized by planned economicdevelopment and market protectionism. Hence ‘foreign competition’ was nilexcept for presence of Unilver
• It relied on private firms to drive growth , offering them incentives to entermanufacturing, allocate foreign exchange to promote favored sectors andgave state contracts to facilitate construction and international trade
•This shaped Vehbi Koc’s decisions to enter into the industries likeautomobiles, construction and mining group and financial trades
• At least 18 other business groups had their origins in the 1950’s when thesemeasures were announced
8/13/2019 Group-3 Vehbi Koc
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Influence of Government & Macroeconomic
factors in setting of business group
• Also when the RPP was overthrown and the rival Democratic party came to
power
• Vehbi Koc met with difficulty in closing the deal with Ford
• Tax records of his businesses were checked
• Expropriation was meted out as he was thrown out from the post of Ankara
Chambers of Commerce• Government ministries stopped buying gasoline from his companies
• All this proved harmful for the sustenance of his business group and finally
he had to step down from the membership of RPP
• After that government gave enthusiastic support to Vehbi in automobile
industry which led him to form Tofas and Otosan the two largest automobile
companies in Turkey which also accounted for 57.2% of total consolidated
sales and 56.6% of the total PBT
8/13/2019 Group-3 Vehbi Koc
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Should the group focus on small number of areas where it
possessed competitive advantage?
Automotive Industry andTrading
LPG (Energy)Financial
Companies
Areas where Koc hascompetitive advantage
8/13/2019 Group-3 Vehbi Koc
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Strengths- Strong Management
- Pricing Power
- Economies of Scale
- Innovative Culture
- Cost Advantage
- Technology- Customer Loyalty
Weakness- Weak Supply Chain
- Weak Brand
Opportunities
- Fragmented Market
- Innovation
- Loosening Regulations
- Emerging Markets
- International Expansion
Threats
- Volatile Currency
- Mature Markets
- Intense InternationalCompetition
- Government Regulations
- Political Risks
- Volatile Revenue & Costs
SWOT ANALYSIS
8/13/2019 Group-3 Vehbi Koc
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Vehbi Koc: An Opportunist
with an Entrepreneurial Spirit• Differences between Muslims and non-Muslims motivated
him to be a tradesman
• Striking the opportunities arising out of lifestyle differencesbetween Istanbul and Ankara
•
Follower of market trend – e.g. leather and constructionbusiness
• Capitalizing on the import restrictions – backward integration
• Government failure in food space - 5% stake in Migros Turk, aSwiss Super market subsidiary in Turkey
• Desire to move into Istanbul market• Always striving to have a First Mover Advantage – evident
from his never dying spirit to enter automobiles and trucksmarket
8/13/2019 Group-3 Vehbi Koc
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Is Vehbi KOC only a rent seeker ?
• Vehbi put his hands in different varieties of business irrespective of the
expertise required in that business.
• His ventures varied from business producing tomato concentrate, Iron
radiators, Hotel services, Politics, Refineries, Cable production, Banking,
Automotive etc.
• All strategic decisions were taken by Vehbi only at the top.
•This kind of organizational structure is not sustainable for long term. Nointernal synergy between different businesses.
• The organization needed a professional management structure to run so
much wide variety of businesses where decision making power is given to
each business.
• Vehbi argued that because of the unstable political and economical condition
of Turkey it’s necessary to diversify the risk of any business failure by
venturing into different varieties of businesses.
• Turkey is a small country with limited business potential , difficult to grow
business beyond a certain limit.
8/13/2019 Group-3 Vehbi Koc
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Should the group venture into overseas market ??
• As of now the entire business in Turkey is not having a very stable
structure, So immediate expansion without paying attention to current
scenario is not a good idea .
•
No clear leadership succession plan as of now , who will handle theoverseas operations ?
• Adjusting to the new political and economic policy changes happenings
inside Turkey will attract major attention at this time rather than
expanding to overseas market.
• New policy changes may result into some new partnerships which can
be leveraged for overseas expansion, So wait , observe and react would
be the best strategy in current situation.
8/13/2019 Group-3 Vehbi Koc
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Another point of view
• Turkey is a very small country relative to world’s developed country so
smaller demand.
• Difficult to grow a business beyond certain stage in Turkey.
• With new policy changes manufacturing could be cheaper in Turkey and
that can be leveraged to export products in the developed countries at a
good margin.
• New policy changes may increase the competition inside the domesticmarket , So Vehbi may want to look at new opportunities .
8/13/2019 Group-3 Vehbi Koc
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THANK YOU