PESTEL Analysis for Turkey

Table of contents

Table of figures

List of abbreviations

Abstract

1. Introduction

2. Basic principle of the PESTEL analysis

3. PESTEL analysis for Turkey
3.1 Political
3.2 Economic
3.3 Social
3.4 Technological
3.5 Environmental
3.6 Legal
3.6.1 Turkish Limited (Limited Sirketi)
3.6.2 Public limited company in Turkey

4. Conclusion

Bibliography

Table of figures

Figure 1: Six factors of Pestel- Analysis

Figure 2: Turkey: Inflation rate from 2003 to 2013 (compared to the previous year) Source: Statista Inc

Figure 3: : Population Pyramid - Source: CIA Factbook (28.01.2014)

List of abbreviations

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Abstract

Author: Belal Kayumi

Title: PESTEL analysis for Turkey

This scientific paper is written within the scope of the Global Perspectives of International Management. A PESTEL analysis is carried out for Turkey and described with the help of its six factors. In the beginning, the concept PESTEL is explained and later applied to ‘Turkey’ as a practical example.

1. Introduction

This scientific paper would help investors who are considering an investment in Turkey.

It gives investors an insight into political, economic, social, technological and legislative situation in Turkey which is necessary to invest successfully in the market. With the help of PESTEL analysis, six areas have been analysed and evaluated. In the beginning of this scientific paper, the PESTEL theory is demonstrated and the basic principle of the analysis method is made clear. Afterwards, the PESTEL analysis is applied to the current situation of Turkey with the help of six factors.

In the end, a conclusion is drawn for investors.

The data in this scientific paper has been lifted mainly from the Internet.

2. Basic principle of the PESTEL analysis

The PESTEL analysis is a procedure which is applied particularly in the areas of marketing, management and strategic controlling.

With the help of suitable illustrations, the analysis method differentiates the six factors or components of PESTEL.

The range of application of the PESTEL analysis covers not only the analysis of companies or organizations, but also the analysis of countries with the help of the six factors. This is most important for investors as it gives a sort of overview of a country covering all the six spheres.

The political factor emphasize the role of the state, the economic factor refers to macro- economic aspects like exchange rates, commercial cycles and different economic growth rates. Among the rest, social influence change cultures and demography, for instance the population will be older and older in many western countries. Technological factors refer to innovations, for example, the Internet and the nanotechnology. The environmental factors deal, for example, with the environmental pollution and the juridical aspects refer to laws, as for example laws of coalescences or laws for society foundations.¹

As already mentioned, each letter of the word ‘PESTEL’ stands for six factors of the PESTEL analysis: P stands for Political, E stands for Economic, S for Social system, T for Technology, E for Environmental and L for Legal. Each factor is analysed with the help of the PESTEL method.

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Figure 1: Six factors of Pestel- Analysis Souce: Advisory Council

3. PESTEL analysis for Turkey

In this section, the Pestel analysis is applied to Turkey.

3.1 Political

The basis of Turkish political system is the third Turkish constitution which was framed in 1982. The form of government is parliamentary republic. In 1996, Turkey made an agreement with the trade union which permitted many Turkish companies to operate successfully in the global economy. The party AKP which has been ruling since 2002 for justice and development is politically under fire. The AKP has been accused of Islamization of the society.²

The government is also rocked by a corruption scandal which deepened the political crisis.³

Terrorist organizations like PKK also put the country under threat. Repeated terror attacks shattered Turkey. Turkish soldiers had been deployed frequently to bring the situation under control.⁴ Therefore, terrorists’ threat is a big disadvantage for a company that wants to set up business in the country. However, exports rose by 10% on average over the last years. In 2012, the total exports of Turkey amounted to $151.9 billion.⁵

3.2 Economic

Turkey is mainly a free market economy⁶. Non-achievers/weaker citizens do not have same chances in a fiercely competitive free market economy. Therefore, the free market economy is often criticized because of the country’s support for the achievement-seekers.

One of the economic strengths of Turkey is the foreign direct investments (FDI). According to A. T. Kearney, Turkey ranks the 13th most attractive location worldwide under the foreign direct investments index.

By the end of 2011, as many as 30,000 enterprises with foreign capital were active in Turkey.⁷

The majority of the foreign direct investments come from the EU, North America and the Gulf States.⁸

The FDI inflows, however, are invested for the development of the country’s infrastructure.⁹

For German investors and exporters, there are opportunities in the energy sector (also renewable energy). Opportunities are also there in the field of infrastructure, tourism and in the protection of environment. However, rising labour costs and persistent tax load put modernization of Turkish industrial companies under pressure. ¹⁰

The GDP currently amounts to $789.3 billion and the GDP growth stands at 2.2%. The service industry (62.9%), the industrial sector (28.6%) and the agriculture sector contribute to influence the BIP. ¹¹

The present inflation rate as seen in the graph stands at 6.54%.¹²

The line graph shows the inflation rate of the last years in Turkey. The inflation rate fell drastically as the International Monetary Fund released a loan of $476 million to Turkey on the one hand and, on the other hand, the debt repayments which would have been due in 2004 and 2005 were shifted to 2006.¹³ The inflation rate, however, remains stable in the healthy area.

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Figure 2: Turkey: Inflation rate from 2003 to 2013 (compared to the previous year) Source: Statista Inc.

In comparison to the G-20 states, Turkey’s balance of payments deficit is highest. In January, the difference between exports and imports stands at $6 million. The higher credit grants and the dependence on energy imports are the two main reasons for the highest balance of payments deficit.¹⁴

3.3 Social

One of the biggest advantages of Turkey is its demographic profile. More than half of the population is under 30 years. This means the country has a huge potential for productive employees. This young generation offers the spirit of enterprise to speed up the country’s growth. The following graph makes this amply clear.

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Figure 3: Population Pyramid (Source: CIA Factbook (28.01.2014)

In comparison to the European countries, for example, Germany or France, where the demographic profile is marked by an older population, the Turkish population is clearly younger.¹⁵

However, one of the disadvantages is high unemployment rate in Turkey. The young unemployment relating to different aspects of labour market poses a big problem. Currently, the rate of unemployment is 9.1%.¹⁶

[...]

¹ Cf. Johnson/ Scholes/ Whittington 2011, pg. 80f

² Frankfurter Allgemeine (2014)

³ Spiegel Online (2014)

⁴ BBC (2014)

⁵ Invest in Turkey (2013a)

⁶ CIA- The World Factbook( 2013a)

⁷ Invest in Turkey (2013b)

⁸ Invest in Turkey (2013c)

⁹ BVL- Bundesvereinigung (2014a)

¹⁰ BVL- Bundesvereinigung Logistik (2014b)

¹¹ The World Bank (2014)

¹² Statista (2014)

¹³ International Monetary Fund (2014)

¹⁴ DEUTSCH TÜRKISCHE NACHRICHTEN (2014a)

¹⁵ CIA- The World Factbook (2013b)

¹⁶ Eurostat (2013)