Economic Development, Market Characteristics and Current Business Conditions in Turkey: A Guide for Successful Business Operations

Introduction

Emerging markets such as China, India, Argentina, Brazil, Mexico, Turkey, Indonesia, Malaysia, Poland, South Africa, Egypt, Philippines, Taiwan, and Russia have become important players in the world economy due to their unprecedented growth, dramatic structural changes, and remarkable market transformation over the past 20 years (Garten, 1996; Bonaglia et al., 2007; Tatoglu & Demirbag, 2008; Cavusgil et al., 2013). Depending on the conspicuous economic developments and growth, these emerging markets have become the strategic destinations for the direct investments of multi-national corporations (MNCs) (Cui & Lui, 2005; Yang et al., 2009; Cavusgil et al., 2013). Considerable amount of academic work (e.g., Krugman, 1994; Khanna & Rivkin, 2001; Fatás & Mihov, 2009; Rodrik, 2011) was conducted in order to understand the underlying factors of this “miracle” success. Apparently, the economic growth of these countries was realised through the success of their firms which developed unique resources within the specific market contexts. According to Khanna and Rivkin (2001), the relative importance of the resources leading to firm performance differ in emerging markets due to the country-specific economic, political and social structures and, hence, every MNC which attempts to do business in these countries must understand their market dynamics thoroughly.

Among the aforementioned emerging markets, Turkey has been designated as a major emerging market which features some important characteristics in terms of its geographical location, and cultural and linguistic proximities to Central Asian, European, and Middle Eastern markets (Garten, 1996; Demirbag & Tatoglu, 2008). Moreover, it is the only developing country that agreed to be a part of the European Union (EU) custom union without becoming a full member of the EU itself. According to the World Bank Report (2011), “the country is among the world's leading producers of agricultural products, textiles, motor vehicles, ships and other transportation equipment, construction materials, consumer electronics and home appliances”. Garten (1996, p. 9) states that Turkey will play a pivotal role in the future, for it is both the link and the buffer between Europe and the Middle East and the southern tier of the former Soviet Union.

Turkey exhibits typical emerging market characteristics such as higher political risk, a relatively more dominant role of government in the economy and higher rate of volatility in financial markets and weaker institutional infrastructure compared to the developed countries such as the United States (US) and EU nations (Tatoglu & Demirbag, 2008; Cavusgilet al., 2013). Business systems can be considered as more relationship-based compared to those in developed countries. Family businesses are common and structures based on multiple firms operating together due to family ties are also frequent. In the absence of family connections, long-term relationships are very important to be able to conduct business activities – a situation which can create entrance barriers for foreign MNCs. Against its difficult and harsh business environment conditions, no firm can ignore the Turkish market due to its huge potential that will hold ever greater share of global assets and wealth in the following years.