AK Bank Harvard Case Solution & Analysis

  1. Macroeconomic Environment Of Emerging Markets And Developed Markets

Countries with developed market offer stable and safer opportunities for investment than developing markets that have sound and well-established economies. These countries have high income and include openness to foreign investments, ease of capital movement and efficiency of market institutions. Market of a country that has some uniqueness of a developed market is not developed yet it is said to be an emerging market. Rapid growth and industrialization in business or social activity also denotes an emerging market in a country.

Macroeconomists usually assume that the growth of the size of the work force is influenced primarily by longer-term demographic factors; as opposed to short-run macroeconomic events. Macroeconomic performance in emerging markets depends basically on the state of the financial framework. The functioning of the financial framework firmly affects the economy’s long-run growth performance as well as its short-run macroeconomic stability.

In recent years, wealth has risen in the emerging markets and people across the globe have swiftly acquired a taste for Internet technology and mobile phones. But the Internet infrastructure in developing markets is at the mercy of political and legislative issues, funding, physical geography and the clustering of the population base.

Macroeconomic policies can impact financial development in more direct ways in an emerging market than in developed market. Taxation of the financial sector, either expressly or implicitly, will slow down its development and improvement in evident ways; the nature and quality of macroeconomic management will influence the level of uncertainty that describes the domestic economic environment and thus the magnitude of loan assessment along with controlling and monitoring costs.

2. Assessment of Credit Card Sector InTurkey

SWOT Analysis


AK bank has been voted "Best Bank in Turkey" 5 times by Euromoney and 3 times by The Banker. Axessbeing fastest growing card in 2004 positioned it ahead of other cards and has developed the largest member merchant network in the installment based credit card sector with an instant card issuance and is currently available in 25 locations.


Nobody has a dominant market share in the credit card sector. Political stability has lead to an inflow of foreign capital and due to homogenous nature of products; competition among institutions is higher.


AK bank successfully completed strategic partnership with Citigroup and received $3.1 billion for 20% equity stake. AK bank can consider charging no annual fees and it can also tap into new markets of M-Commerce and E-Commerce; which are often preferred by consumers. Promotion and advertising has also raised the demand for credit card so AK bank should consider investing in these activities.


It is difficult to differentiate between the products of banks due to their similar nature; therefore, consumers have many products to choose from. Another threat is increased regulations and policies imposed by the government in Turkey and foreign investment policies have also given rise to foreign competition.

PEST Analysis


Turkey has a history of political instability because of military intervention in political sphere on three occasions specifically 197, 1980 and 1990. However, AKP has performed well in government and management of economy is relatively good and has been in control since 2003. AKP party has also adhered with IMF recommendations, which will lead to policy statement to be followed by AK bank.


Although, the economy has become stable recently but it has previously been really volatile. The annual GDP growth rate averaged 3.7% between 1991 and 2000 and contracted by 7.5% in 2001 but sustained 7-8% growth till 2006. In addition, due to sharp monetary policy tightening and rise in inflation, GDP growth slowed to be healthy with 5% in the second half of the year.


In Europe, Turkey ranked at number third with respect to the largest population with half of the population being women that account for around one fourth of the work force. Continuous reforms implemented by the government resulted in enhancement of education system in Turkey.


Turkey is on the course of developing infrastructure for Internet and data services. Almost 16 million Turks use the Internet, generally at Internet cafes. People having personal Internet connections are few and usage of mobile phone has more than a 70% penetration rate.

Porter’s Five Forces Model

Threat of substitute

Threat of substitute for the industry is medium. Even with credit cards substitute such as prepaid debit card with VISA or MasterCard; people still prefer to use credit cards over them. Larger threat of substitution is from non-financial competitors offering alternative services.

Threat of new entrant

Threat of new entrant is relatively low due to entry barriers that have been placed by the government even though the economy and political environment is stable. Furthermore, capital requirement is very high for opening new banks in this sector due to which potential competitors will be reluctant to enter the market........................

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