Arcelik home appliances international expansion strategy case study Harvard Case Solution & Analysis

Arcelik home appliances international expansion strategy case study Case Solution

Introduction

Arcelik Home Appliances was found in 1926 by Vebhi Koc by Koc Group. It is headquartered in Istanbul and it has marketing offices in Poland, France, Austria, Germany, Romania, U.K., and Spain. Nonetheless, Arcelik has expanded with its expansion strategy and it has expanded in 100 countries. However, it has main expansions in the region of Eastern Europe, Asia, North Africa, Latin America and West Europe. It had a huge industry share and catered about 50% of market share in Turkey.

Although Arcelik was initiated with the business of metallic office furniture, however, it has been diversified to the business of home appliance producers. Arcelik has the first mover advantage as it is the first company in Turkey producing washing machines and refrigerators in the country. When Arcelik started manufacturing in the country, it was a big challenge for it as there were other companies operating in Europe. However, Arcelik has sustained in the domestic market due to its efficient Research and Development Centre. It was due to the through Research and Development process the company was able to sustain in the competing market. Research and Development further brought durability to the household goods and people were able to pay a little more due to the durability of the products of Arcelik.

The inflation in Turkey is unpredictable due to its currency rate globally. Thus, the economy has to endure fluctuation in preferences and purchasing power of the consumers. Similarly, in the economic crisis of 2001, Arcelik had to beara loss of approximately 35% therefore, Arcelik had to focus towards the international market in order to sustain and grow in the industry. Furthermore, the devaluation of Turkish currency, Lira, has also supported the price competitiveness in the international market and it became the priority to export more for attaining growth in the international market.

It became the ultimate goal of the company to achieve international recognition and decrease dependency to the uncertain local market. Moreover, it performed better during 2001 to 2003 in order to achieve the targeted goal with its new CEO. Arcelik approached the annum sales of 11%, which was decreased in the domestic market of Turkey by 1%. Furthermore, Arcelik grew by 46% in the international market. Moreover, the operating profit of the company also reached to 14% per annum.  The product series of Arcelik was recognized internationally through international awards.

Problem Statement

The management of Arcelik changed in the year 2001, the new CEO was appointed to the organization who took Arcelik out from making losses to profit. Moreover, it has incorporated strategies that focus towards international expansion. The results were beneficial for Arcelik. The organization had increased its growth through international expansion and acquisitions. However, the CEO of Arcelik has set the target of the organization to obtain revenue of three billion Euros by 2005. Hence, it is the need of the management to review their strategies that weather they can achieve the huge target or not.

Case Analysis

Background of the Arcelik Home Appliances Expansion

The economycris is of 2001 of Turkey led Arcelik towards international expansion. The crisis led the company towards unemployment in the economy, which significantly affected the purchasing power of the consumers. The demand of the market and the different luxury products decreased to 35% due to the effects of the dilemma. With the rise of the dilemma, most of the companies started exporting products outside the country. Another option was to engage in international acquisitions.  ......................

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