Tesla in Turkey - Essay Example

Tesla in Turkey Introduction Tesla Motors Incorporated is an automobile company that has its headquarters in Palo Alto, California. The company designs and manufactures electric cars and other electronic components in the automotive industry. Tesla, since its inception in 2003, has developed several remarkable electric cars such as the Tesla Roadster, Model S and Model X (Marcovici 4). The company has reinvented the way people regard electric cars. Prior to their entry into the automotive industry, electric cars were bulky cars strapped with solar panels and batteries. Tesla motors have revolutionized the electric car, and it seeks to compete with other established automotive companies such as Toyota and Mercedes (Marcovici 5). In order to compete with the aforementioned companies and many others, Tesla motors have to embrace international trade. International trade presents a myriad of opportunities that could benefit the financial growth of this young company (Marcovici 68). The company operates on the recent trend of environmental sustainability that is slowly gripping the world. Their electric cars support this global initiative and for this reason, Tesla Motors has to capitalize on foreign markets. Tesla Motors Incorporated’s globalization plans have entered markets in Europe, Asia and Australia. The company has neglected the Middle Eastern countries, Turkey being one of them. The Middle East is characteristic with slower sales of electric cars as compared to other markets (Marcovici 137). The low fuel costs in these countries are the reason behind their slow adoption of electric vehicles. However, the decline in the pricing of electric vehicles has warranted electromotive companies such as Tesla to reconsider their stand on this lucrative market. This essay will comprehensively analyze the Turkish market and the chances Tesla Motors has in expanding into this market. Body Turkey, also known as the Republic of Turkey, is a transcontinental country bordered by eight countries. The country is at the boundary between Europe and Asia that gives it geostrategic significance since the Paleolithic age (Heper & Sabri 2). The country has been inhabited since the start of man’s history on earth and has undergone several changes since the Paleolithic age. Alexander the Great conquered the country and from that time Turkey became an important country due to its strategic position; between Western Asia and Southeastern Europe (Heper & Sabri 3). The country is culturally rich due to the various empires that have ruled the country. In 2013, the country had a population of around 80 million Turkish citizens (Statista 2014). The provinces of Istanbul, Ankara and Izmir hold a majority of this population. Turkish is the official language of this country as 85% of the population speaks it as their mother tongue. Kurdish, Arabic and Zaza are the other languages spoken in this country. The 25 – 54 age group comprise 42.7% of Turkey’s population followed by 0 – 14 (25.9%) and the 15 – 24 (17%) age groups (Statista 2014). The median age of the country is 29.2 years while the population growth rate is 1.16% in the year 2013. The majority, 71.5%, of the Turkish population is found in urban areas, and the rate of urbanization is 2.4 % (Statista 2014). The life expectancy of this country is high with males living up to 71 years and females reaching 75 years of age. There are various religions found in this country, with the majority being Muslims (99.8%). The rest of the population is comprised of mostly Christians and Jews (Statista 2014). Analyzing the political, legal and financial environment of Turkey assists Tesla’s executives in managing potential risks from entering the Turkish market. This data helps Tesla Motors in becoming more competitive by producing its automobiles at lower costs in the country. The automotive industry is very important after the construction and tourism sectors (Saee 194). This industry creates the country’s highest multiplier. Furthermore, the industry intertwines with other industries such as marketing, fuel, finance, service and insurance. Any changes in the automotive industry are important to the country’s economy. The best approach for Tesla Motors in this country is to cooperate in the production and marketing fields. This increases the company’s capacity in the country’s automotive industry. The company enjoys more economic competition, innovations and investments for new models. In short, the automotive industry in Turkey is lucrative and with the right market entry strategies, Tesla Motors will enjoy significant profits. From a political and legal perspective, the country has liberalization (Nas & Mehmet 41). Turkey is a key supporter of liberal trade and investment policies that permit trade with countries in the European Union. The custom union of 1996 allowed Turkish firms to expand and become more successful internationally (Altug & Alpay 25). Turkish exports have continuously increased by 10% on an annual basis showing the trading potential of the country. The country charges sales tax, inclusive of VAT and exclusive consumer tax, on all motor vehicles (Saee 191). These taxes are higher compared to those other developed countries. The sales tax comprise of almost 19.2 percent to 117.1 percent. The country’s legislation on motor vehicle changes rapidly depending on changes in technology. These amendments, consequently, affect the domestic demand for vehicles ultimately affecting production (Saee 192). These continual amendments affect the decisions of investors in the industry forming a bottleneck for the entry of electric motor vehicles in the country. The country’s legislative shortcomings affect the production and sales of the vehicles in the country. The Research and Development (R & D) expenditures are the most affected by these amendments. The country should implement a tax incentive system to resolve this issue. In addition, the country should lower the sales tax on electric motor vehicles due to their environmental friendliness (Altug & Alpay 65). The country’s income per capita together with the individual car per head ratios are way below the world average. The country will improve these figures by reducing the sales tax. To facilitate the entry of electric vehicles in the country, the country should regard their respective legislation and infrastructure as autonomous expenditure (Altug & Alpay 66). The Turkish economy will benefit from these expenditures over time. The country is characterized by a high flow of foreign investments, which contributes to its economic strengths (Altug & Alpay 81). These investments have helped in the country’s rapid expansion and growth. The country channels the foreign investments into the expansion of its infrastructure. This growth in infrastructure makes the country increases the chances of it being a location for a Tesla Motor’ automotive plant. The automotive industry in Turkey attracts both foreign and domestic investments (Saee 194). In addition, the industry contributes large tax revenues to the state while making tremendous profits. Saee continues to state that the industry also employs a substantial number of Turkish citizens thereby directly contributing to the country’s per capita (194). The previous players in the automotive industry have established and benefited from partnerships with global giants. The country is a suitable place for the establishment of Tesla Motors due to its strategic location and liberal society. The country's inflation rate has declined steadily over the years, and its economic growth surpassing those of other countries (Altug & Alpay 39). The country lowered the cost of bank loans in the process making car loans attractive to its citizens (Altug & Alpay 46). The banking sector is able to fund both the buyers and sellers of vehicles in the state. Labor cost is an important factor in considering entry into the Turkish market. The country’s labor costs are attractive but not as cheap as other Central European countries, China and Russia (Altug & Alpay 72). Despite this, the country’s excellence in production and marketing make it an ideal market for the Tesla Motors. The social and cultural environment of Turkey also favors the entry of Tesla Motors. There is a growing interest by Turkey’s population in electric cars and their environmental friendliness. The Turkish population, on average, prefers environmentally friendly cars. Tesla Motors should exploit this fact by establishing itself as an automotive player in the Turkish market. The Hofstede’s cultural dimensions theory is a tool that assists in the analyzing the effect culture has on the values of society’s members (Geert-hofstede 2014). Power distance of the Turkish society, is high. This attributes the Turkish society as dependent and hierarchical. The society prefers a father figure due to the centralization of its head and power. This information assists Tesla Motors during employment recruitment and winning the Turkish society. In individualism, the second Hofstede’s indicator, Turkey scores lowly. This is because the Turkish society is a collective society and people belong to groups such as families, clans and organizations (Geert-hofstede 2014). The individuals in this society care for each other while avoiding open conflicts. The Tesla Motors should introduce family cars and SUVs in the Turkish market. The population is likely to buy more of these models rather than the more personalized sports models. According to the Geert-hofstede , the country scores are low on the masculinity dimension which means that the Turkish society has more female characteristics than other societies (2014). This dimension encourages softer aspects of culture while avoiding conflicts. The electric motor vehicle manufacturer should concentrate on designing cars with more aesthetic taste. This will ensure that people quickly adopt Tesla car models. On the uncertainty avoidance indicator, the country scores high. The Turkish nationals are religious and law-abiding citizens (Geert-hofstede 2014). With this in mind, Tesla motors should abide by all the laws and rules set by the country. By abiding by these rules, the company and its products will be quickly accepted by Turkish market. The other indicators of pragmatism and indulgence are hard to ascertain. Furthermore, these two indicators have little influence in the adoption and success of the Tesla brand in Turkey. Various marketing mechanisms are suitable for the Turkish market. Tesla Motors should take advantage of trade shows, exhibitions and other marketing opportunities in selling its car models (Kaynak 146). The company should also understand how Turkish culture influences marketing in Turkey. Tesla executives and marketing teams should be aware of the Islamic holidays and attitudes of the Turkish people. The Islamic culture disallows the use of alcohol, cigarettes and other drugs in advertisements (Kaynak 139). The use of paid product placement is also a violation of the country's moral standards. Finally, Tesla Motors should employ locals in the management, distribution and all other sectors in their Turkish branch. This enhances the rate of acceptance of Tesla products and their future success (Kaynak 147). Conclusion The above-mentioned facts support Turkey as a potential market for Tesla products. The only factors that might pose a challenge are the culture and religion of the nation. Works Cited Altug, Sumru, and Alpay Filiztekin. The Turkish Economy. 1st ed. London: Routledge, 2006. Print. Geert-hofstede.com,. 'Turkey - Geert Hofstede'. N. p., 2014. Web. 30 Apr. 2014. Heper, Metin, and Sabri Sayari. The Routledge Handbook Of Modern Turkey. 1st ed. New York: Routledge, 2012. Print. Kaynak, Erdener. International Marketing. 1st ed. New York: Haworth Press, 1996. Print. Marcovici, Michael. The Tesla Motors Way: How to Build a Car Manufacturer from Scratch. Norderstedt: Books on Demand, 2013. Print. Nas, Tevfik F, and Mehmet Odekon. Economics and Politics of Turkish Liberalization. Bethlehem: Lehigh University Press, 1992. Print. Saee, John. Contemporary Corporate Strategy. 1st ed. Abingdon [England]: Routledge, 2007. Print. Statista,. 'Turkey - Total Population 2014 | Statistic'. 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