Vehbi Koc and the Making of Turkey’s Largest Business Group: – CASE BRIEF
Harsha Vardhan Reddy Tamatam (Section C1) E-mail:
[email protected]
ID: 1461005 What drives Vehbi Koç in establishing his businesses? What motivates him?
The wealth and lifestyle differences between Muslim Turks and non-Muslims around him motivated him to become a tradesman.
The lifestyle differences between the people living and Istanbul and in Ankara pushed him to be more successful
Vehbi followed the market trend when entering a new line of business. For example as and when he noticed that leather and construction business is on an ascent, he entered into those business segments.
Difficulties in importing key parts, as well as import restrictions, motivated Vehbi Koc to produce necessary components for the white-goods within within Turkey. Some of the new businesses that Koc established established are in line with back ward integration strategy.
In one instance government’s failure in providing cheap foodstuff to public motivated him to purchase 75% stake in Migros Turk, a Swiss S uper market subsidiary in Turkey.
Vehbi also felt that the company that enters any market in Turkey first will have success over its competitors, which motivated him to look for business options in automobiles and T rucks segment.
Desire to move into Istanbul market.
What were the most important factors for Vehbi Koç to initially develop his businesses up to the 1950s? The most important factors for Vehbi Koc to initially develop his businesses up to the 1950s are as following:
A small incident about the sheep cheese that made Vehbi to learn that he should always thoroughly investigate a new business before entering it.
The establishment of Republic of Turkey in 1923, which made efforts efforts to create
business class by giving tax
allowances and exemptions, awarding customs exemptions for importing industrial machinery and apparatuses, and granting land parcels to entrepreneurs.. entrepreneurs..
His sharpness in identifying business opportunities and hiring a suitable person who had prior experience in that industry.
When Koc found that any particular business segment is no longer profitable and new business opportunities are
emerging he would exit the existing unprofitable businesses and establish new business.
As Ankara became the capital of modern Turkey, Development and construction work began to proliferate which gave rise to establishment of construction materials business by Koc.
Ankara’s new prosperity provided new opportunities in the automobile segment during early 1920s
Turkey’s entry into world war II on Feb 23 1945 led to supplies disruption and huge demand for trucks by the government.
How did Vehbi Koç build his business group after the 1950s? How does his business group grow so much?
Post world war II Turkey’s government moved from Liberalist approach to protectionism which resulted in import substitution based strategy. Incentives were offered to firms to enter manufacturing.
Minimal competition from international players provided a great environment for the domestic players.
Vehbi Koc recognized that Allies would win WWII and started to build good relationships with US firms in Automobile, rubber and bulb industry. Koc started to get into Joint Ventures with firms such as Ford, and Fiat.
Since 1950s Koc focused more on domestic manufacturing and hence made investments in wide range of manufacturing businesses such as pipes, oxygen gas, metal office furniture, washing machines, refrigerators, tomato juice production, cast iron radiator, and electric cable company by entering into Joint Ventures.
Koc also partnered with State Supply Office (DMO) in 1956 to supply items such as desks, boards, and other steel goods.
Most importantly Vehbi Koc establish Koc Holding to incorporate bring all his businesses under one umbrella. This functioned both as the control mechanism adopted by the Koc family and as an eventual headquarters for the entire Koc group.
Is this a sustainable business model as Turkey liberalized from the 1980s?
I believe that current business model would not be sustainable as Turkey liberalizes from the 1980s.
The Bain Report’s findings support my claim. It can be analyzed from exhibit 11 that at least 70% of Koc Holding’s portfolio are low either on overall business attractiveness or potential to operate independent strategy which is very much important to compete with foreign players.
Through this business model Koc holdings cannot achieve economies of scale, can’t spend much on R&D, and last but not least has to handle with complex management issues.
