TURKISH APPAREL ECONOMY A CASE STUDY OF MANUFACTURERS IN ISTANBUL AND THEIR INDUSTRY
BSc in Industrial Economy - Logistics
Frej Johansson
Programme: Industrial Economy – Logistics Engineering Swedish title: Turkisk klädekonomi – En fallstudie av tillverkare i Istanbul och deras industri English title: Turkish apparel economy – A case study of manufacturers in Istanbul and their industry Year of publication: 2020 Author: Frej Johansson Supervisors: Daniel Ekwall, Jonas Waidringer, Sara Lorén Examiner: Bo Månsson Key words: Turkey, Istanbul, textile, apparel, manufacturing, export, economic development, SWOT, FDI, supply chain management, China, Bangladesh. ______
Abstract
This paper describes textile production in Istanbul, Turkey. From its historical background to the challenges of today. The respondents have told about how they work, talked about competition, communication, achievements, investments and much more.
The purpose was basically to find out how important the textile industry, with focus on apparel, is in the economy of Turkey today. Also how this industry can develop, and what it will take to reach such development. The empirical material comes from experienced people in the field and is analyzed with the SWOT model besides other marketing and logistics related theory.
Used method is a qualitative approach with semi structural interviews. Companies and associations in Istanbul have responded. These contributors are a mix of senior managers, specialists, officials, employees and entrepreneurs. An interview guide was developed after a pre-study in Sweden.
Findings of the study shows that these companies are competing for international customers, but also working together for their industry and country. Some important factors to become successful is experience, research, innovation and customer care. To take a step of further development, more strategy, competence and investments might be needed.
There are many other countries which can also challenge about the customers in this business. China and Bangladesh do have similarities with the early development of Turkey in the case of textile garment industry, but are now considered different as competitors. Turkey do have some national advantages, and not least its beneficial geographical position.
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TABLE OF CONTENTS
1 INTRODUCTION
1.1 Background
1.2 Previous research
1.3 Problem discussion
1.4 Purpose and research questions
1.5 Demarcation
2 THEORY
2.1 SWOT
2.2 FDI
2.3 Concepts from the literature review
3 METHODOLOGY
3.1 Choice of methodology
3.2 Pre study
3.3 Sampling 3.3.1 Criteria 3.3.2 Sample 3.3.3 Company contacts
3.4 Quality criteria
3.5 Methodology discussion and reflection
4 RESULTS
RP, the pre study company – big brand in Sweden
R1 – Focus on women’s knitwear
R2 – Big customers in fast fashion
R3 – Specialized in denim, own brands
R4 – Fast Fashion producer, important supplier of RP
R5 – Specialised in high end customer brands
R6 – The industry organisation
R7 – The investment organization
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R8 – Specialized in jeans, experience of own brands
R9 – A label producer
R10 – A small entrepreneurial company
R11 – A fabric producer
Summary
5 ANALYSIS
SWOT
6 DISCUSSION
7 CONCLUSION
8 REFERENCES
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1 Introduction This thesis examines textile garment producers in Istanbul, Turkey. Using interviews and a SWOT analysis including strengths, weaknesses, opportunities and threats. By talking with exporting firms the idea is to evaluate what impact and importance their sector has for the country’s economic development, and how it can improve. This is compared with conditions in China and Bangladesh, putatively competing countries with different circumstances but as well a significant textile sector which impacts their economies and development. Investments from other countries is also a study topic. The outcome is a picture of an industry with both struggles and ambitions. Surrounded by a flourishing but diverse and tough business environment.
Turkey is an important player in this global sector, but was never left without competition. As industry, textiles is also by nature rapidly changing when new conditions emerge. To remain successful, it seems always important to cooperate over borders, along value chains, creating both profitability and sustainability.
This subject is chosen due to a grant that facilitated the journey to Turkey, a choice with inevitable consequences on this project which will be further expressed both later in this chapter and regarding methodology.
1.1 Background Even the Ottoman empire was boosted by textile production. Today’s Turkey still has a large and varied textile industry, with a lot of people employed and engaged. According to the investigations made for this study, fairly good working conditions apply, meaning a low amount of child labor and that a certain level of minimum wages are complied with. But what does the research of other studies tell? Economically there have been some ups and downs over the years, one major event was introducing the “Turquality” project in January 2004 to meet a one year later abolishment of quotas. It aimed for protection from global competition (Mangir 2013). Without quotas textile exporters are more dependent on their own competitiveness (Nordas 2004). It also seems to have favoured middle-income countries (e.g. China) on behalf of the high-income ones, where low-income countries (e.g. Bangladesh) in general were not as much affected (Lu 2013). Previous key occasions in Turkey were as follows.
An uprising came in the early 1980’s with the decision to liberalize the country’s economy (Öz 2002). Another in 1996 by a customs union with the European Union, an agreement that also triggered improvements in product quality, productivity, environmental awareness and social responsibility (Karabag, Lau & Suvankulov 2014; Culpan & Ekin 2009). More recently the government has set ambitious targets until 2023, when the country will celebrate their anniversary of a century as a sovereign state (Haberturk 2011; Garanti & PWC 2017). These targets involve big investments in infrastructure, a focus on services and business with the aim to raise exports and play a bigger role in the world economy. Yet the last years economic and political instability has raised some questions marks for a few of these projects (Financial Times 2018). Growth rate of the gross domestic product, GDP in Turkey has been relatively high during the last years. Despite a dip during the financial crisis in 2009, an average well above the OECD’s. Absolute poverty1 has also decreased during this period, from 13.3% to 1.6% between 2006-2014 (OECD 2017). The textile sector is important for both employment and growth, in 2013 it accounted for 7% of GDP and 18.3% of total exports. Only the clothing industry had more than 918 000 employees working in over 52 000 companies.
1 Measured as the share of people living below the national poverty line.
There is also a large amount of unregistered employment, which in reality might increase this number, in total 35.7% for September 2014 (Turkstat 2018).
China also have a long history of textile manufacturing; their economic reform began in 1978. Since then capacity, quality and product range has increased, as well their exports with new trading partners. By 2005 China were trading with more than 200 countries and regions, Germany, Italy and the Netherlands are important European importers. By the elimination of quotas China were able to rise their exports even more. 1999 their government embarked a program for technology upgrade in the textile industry, including design, research and development. State ownership has also dropped since the 90s. Lately a new round of improvements in technological innovation and quality has been carried out, while at the same time the industries start to move from coastal regions to central and western areas (Wu, Chen & Chen 2012). This article does also say that the major drive for Chinese production and export is the competitive advantage from having a large low-cost workforce available. Some import of high-end technological material occurs, which is one of a few production branches the country has not been able to develop. No competitors are mentioned here, instead a cooperation with trading partners. Distance is a factor as they trade more with their neighboring countries.
Textiles is a large field, including clothes, carpets, home textiles, bags etc. Here the focus is laid on garments, for example fast fashion, jersey and denim producing companies. Moreover, this thesis focuses on manufacturing for export to Europe. Today the competition is strong, and many more countries are now in this business. As it once was for China and Turkey, textile manufacturing can be an early step to raise a country from agriculture and poverty to industrial production and a prospering economy, where Bangladesh is now on its way.
Bangladesh textile industry took another step by the phase out of quotas in 2005. But it has grown rapidly since the late 1980’s. At this time their government, as the Turkish did a few years earlier, decided to take on a more outward oriented development strategy. Capacity grew from around 50 factories employing a few thousand people, to around 4500 factories in 2013. In a country with around 160 million people this new business development means a lot for creating growth and reducing poverty. It did not come without friction like unrest and protests, but means new possibilities for the country to invest in both education and new industries, that will develop the country even further. But still, even though apparel stands for 25.5 billion U.S. Dollars, 82% of total exports in 2015. It is in 2012 just around 13% of their GDP, where agriculture represents about the same share and services more than three times the amount. Sales and service of motor vehicles has almost a quarter of that sum. (Rahman & Sayeda 2016; Himi & Rahman 2013; Export Promotion Bureau of Bangladesh 2018).
Turkey was in 2017 the 14th largest economy in GDP with respect to purchasing power parity (The world factbook 2018), a major target for 2023 was to reach the top ten. Despite their climb of a few places during the last years it seems hard to achieve. To become successful Turkey must raise their earnings from exports, maybe also lower their imports, and here textiles are an important commodity (Sekerden 2011). While competition is growing in the textile garment business, yet economic instability has also made the currency weaker, Turkish lira dropped during spring and summer 2018 from 4 to 5,3 per US dollar and the inflation rate was nearly 16%. Also incoming Foreign Direct Investments, FDI is affected when circumstances are uncertain. GDP growth is estimated by IMF to 3,6% in 2020, average now is around 7% per year since 2003 (Financial Times 2018, 2).
So far a more general economy and industry background. Next sections contain a review of previous literature, with focus on competition and communication. Followed by the research questions and descriptions of method as well as theoretical concepts. Chapter four shows the results of this thesis empirical fieldwork. Finally, this paper presents its analysis, discussion and a conclusion with response to the research questions and suggestions on further studies.
1.2 Previous research The Turkish textile apparel industry, its resources and competitive advantages is widely well known and investigated, Karabag, Lau, & Suvankulo (2014) describes some determinants of competitiveness. Basic factors according to them is the cotton production of up to 500 000 tons per year and the geographical position. Also that Turkey has a large and well qualified workforce. In the same paper the authors show a distinction between competitiveness of firms and by nation or region, where their focus is on firm measures. Porter (1998) claimed that as well the latter is important, and that countries needs to improve the competitiveness for their firms to be competitive on a global market. Even earlier, Porter (1990) introduced the diamond framework, to be described in the theory chapter, which despite some criticism2 can be a useful way to picture the components of national advantage. As suggested by Öz (2002) also in an emerging country like Turkey. Their paper presents Turkey’s advantages in five internationally competitive sectors, where the leather clothes industry is one of the cases. The textile and apparel sector is described as a strong cluster of almost exclusively competitive industries. It is as well stated that the articles case studies ascertained the usefulness of Porter’s diamond framework.
In a Chinese context, Lau, To, Zhang, & Chen (2009) finds government policies and “related industry infrastructure” together with domestic demand to be the most important determinants of competitiveness, which is here measured by productivity, supply and demand side determinants. Traditionally determinants of competitiveness focuses on costs and margins. The paper also concludes that competitive advantage can be a sign of exchange rate variations and purchasing power parity, rather than an underlying competitive position. Foreign Direct investments, FDI is found to cause good effects on technology, knowledge, competitiveness and exports. But Hu & Mcaleer (2004) discovered that enterprises internal R&D could replace the effect of a technology transfer by FDI.
A study by Bwalya (2006) on the other hand shows a diverse picture of the impact from FDI on technical progress and economical development in Zambian manufacturing firms by spillover effects. It is not given that local companies will gain from the presence of multinational ones.
From a buyer’s point of view, strategic sourcing has become increasingly important. Key areas are defined as elements of supply chain integration, such as cross-functional communication, information sharing with and development of important suppliers. It requires proactiveness, long term focus and top management support. Formal evaluation is another tool to establish and improve such relationships (Su 2013). Using data from 180 US textile and apparel firms, their study's survey “indicates that strategic sourcing significantly impacts buyer-supplier relationships”, and also that supplier evaluation significantly influences.
2 For example about originality and analytical utility.
A study from Bangladesh is about integration in the global apparel value chain. It shows that linkage back and forth in a value chain is beneficial in connections with foreign suppliers and global retailers, but not necessarily with domestic suppliers. On the sales side this can be explained by the size, resources and markets of the retailing company, who can open up the market for Bangladeshi products. Along this path a small firm can also learn from the bigger ones and over time improve their performance. On the supply side their explanation is more about communication, relationships and stability improvements. It is also like with the forward linkage to sales, a possible learning process that can make a difference. Moreover, Bangladesh lacks raw material and must import most of it. The quality of input seems to affect the firms’ efficiencies in later stages. Manufacturers using raw material of low quality also tend to produce more basic types of garments (Rahman & Sayeda 2016). The same paper also argues that an industry upgrade occurred thanks to this type of integration with buyers and suppliers, as well as growing market access in US and Europe. Moreover that such value chain integration is a real cause for progress, rather than changes in the type of production, e.g. from woven to knit. Even though the latter likely contains more types of operations such as sampling and design.
This literature review is narrative and aims to generate understanding for the topic, rather than accumulating knowledge about it. Hence a wider scope was possible to study and the theory below is an outcome of this chapter (Bryman & Bell 2015). It is also by their advice that this study tries to find unanswered questions in the literature, and as well an attempt to analyze the articles content in order to find relevant questions for a way to contribute.
1.3 Problem discussion Turkish textile and apparel production have helped the country to raise from poor to a good level of development. This paper focuses on a few apparel firms and how they are working on improving themselves in competition with other companies and countries. Under examination is the present and future role of a textile exporting company in Turkey. In a big picture this industry may continue to help its economy moving forward, with the contribution of apparel export. How may their competitiveness as country, industry and firm become even sharper? Is it through textiles, how will that then be achieved? Or is it through other industries, what do managers in the textile industry think? How are they preparing for the future? This is studied on a manager level of individual firms through interviews about their work and visions.
Yet there are not many researchers who have described the Turkish apparel industry's relevance for its economy, told by managers in manufacturing and exporting companies. This study aims to discover what such managers themselves can tell, and suggest in terms of improvements on these three levels: firm, industry and country. Where other scholars might use statistics for their analyses and explanations, this study is seeking a personal presentation of experience and competence. Karabag, Lau, & Suvankulo (2014) said that “previous studies failed to answer a very crucial question that what is the managerial perception of a firm’s competitiveness”. Su (2013) also suggests further studies on buyer-supplier relationship and sourcing performance. This present study intends to contribute on these areas, in an apparel exporting environment.
As this is a rather small but also deep case study, there is no claim on having answers to a country’s or even industry’s priorities. An objective is to learn about the participating organizations, their view of the business and its prerequisites. The outcome can possibly be helpful for others in the industry sector and its stakeholders, but no generalizability is expected. The scope of application is mainly participants, while others in and around this business can hopefully also get useful information and advice by the insights from this work.
1.4 Purpose and research questions Purpose of this thesis is consequently to map and investigate certain apparel manufacturers in order to understand their importance, impact and possibly the future of this industry in Turkey. With examples from Istanbul the main objective is to portray these firms’ development and contribution to the Turkish economy. Market, communication, investments and government targets are the core measures. Empirical information is analyzed with the SWOT framework, by the respondents’ picture of firm, industry and country. To some extent also as individual companies. Economy and industry development are compared with the respondents’ stories, over time and with the countries of China and Bangladesh. Below are the three questions to answer by analysis, discussion and conclusion. They are formulated wide enough to possibly catch up on side topics, beside the interview guide. Fields that the respondents might point out as important.
What is the managerial view of Turkey’s textile industry – apparel exporting sector, how is it going, how can it be developed and how does it contribute to the country? How can Turkey’s apparel export sector improve in the future, based on results of this case study? What is the impact of competition, state, FDI and customer relations? Which other factors are important for development, in firms, industry and nationally? And how do the respondents compare Turkey with China and Bangladesh?
1.5 Demarcation This work has been accomplished within the program of MFS (Minor Field Studies). It became possible thanks to a grant received from SIDA, the Swedish International Development cooperation Agency. And thanks also to Borås University who helped out with the application. Because of them it was feasible to carry out the interviews in Istanbul, Turkey. A criterion was to visit a so-called developing country, which Turkey is by SIDAs definition. Seizing this opportunity also provided some natural constraints.
The interviews have been held in Istanbul with companies based there, who also have their production capacity located mainly in the same region. These were possible to contact and visit within the budget and timeframe of a visa free stay in the country, 90 days. Several practical reasons, including the concentration of textile companies pointed to this city. Interest for the country and friends in the region were also important initial factors to look at Turkey. Textiles became a natural area of studies because of these reasons, together with contacts made in Borås at the planning stage and own interest in the business it set out a path to explore and investigate. 2 Theory Previous studies have often used theory about competitiveness and how to assess the companies’ resources, therefore these ideas will also be described here and used for analysis in chapter five. As well FDI and some important logistics terms have been recognized. SWOT is the principal theory in this paper. Other concepts derive from literature review and respondents, they are presented alphabetically and in sets below.
2.1 SWOT Starting with the main theoretical notion of this paper, SWOT analysis is a tool developed by the marketing professor Philip Kotler. In the book Principles of Marketing it is described as a management tool for analysis and overall evaluation of a company’s Strengths, Weaknesses, Opportunities and Threats. Where strengths include internal capabilities, resources and positive situational factors.
Things that can help the company to serve its customers and achieve its objects. Weaknesses include internal limitations and negative situational factors which may interfere with the company’s performance. Opportunities and threats are the possible impact of external factors such as customers and competitors. The goal of this analysis is to match internal strengths with external opportunities, as well as weaknesses with threats for the best possible outcome. While improving the strengths opportunities can be reached, and by overcoming the weaknesses threats can be avoided (Kotler, Armstrong & Parment 2011).
2.2 FDI One of the questions wanted to answer is about the frequency in use of Foreign Direct Investments, FDI. Both in General, based on the respondents’ knowledge, as well as with their own business and respective company as examples. Defined in the web lexicon of Financial Times, FDI means an investment from one country into another, normally made by a private firm. It involves establishing operations and/or acquiring tangible assets, including stakes in other businesses. It can also be a purchase or establishment of any income generating asset in a foreign country which entails control over operations and/or organization. FDI can possibly be distinguished from portfolio investments by the level of control as it does not only transfer ownership but usually also a combination of knowledge, management and technology. Three types of strategic FDI are described. Horizontal refers to a process where a company carries out the same activities in another country. Vertical means when another stage of activity is implemented abroad, typically either forward or backwards in a value chain. Conglomerate implies that an unrelated business is added abroad, which is not very common as it means both internationalization and diversification at the same time. Greenfield entry describes the approach of starting from scratch, while the term takeover also can be expressed as an international merger or acquisition (Financial times 2018, 3).
2.3 Concepts from the literature review Clusters are described by Michael E. Porter (1994) as “geographically proximate groups of interconnected enterprises, suppliers, service providers and associated institutions in a particular field, linked by commonalities and complementarities.” Zhang, To & Cao (2004) entitles the “cluster effect” three features of competitiveness: increased productivity, efficient access to specialized resources, and hence reduced transaction costs and higher margins.
Competitiveness is defined by Porter (1990) as the ability of a firm to compete successfully in a given business environment. Porter (1998) claims the importance of national competitiveness and highlights that countries can make improvements for their firms. Yet Krugman (1994) already a few years before that problematized the term of competitiveness when between countries, declaring that it can lead to bad economic policy. According to this paper productivity is a more appropriate measure.
Diamond of national advantage is a model introduced by Porter (1990) which contains four industry determinants. Factor conditions, such as human resources and infrastructure. Demand conditions, home market specifically mentioned. Related and supporting industries, like suppliers, customers and competitors. Finally also firm strategy, structure and rivalry. Management practice are here compared between Italy, where it is described as family based, and in Germany as hierarchical. None is said to be universally correct, instead it should converge with the industry’s source of competitive advantage. Together the four determinants are ingredients for a firm to achieve international competitiveness. National environment is considered to affect these circumstances. The diamond is described as systemic, its elements work together as a chain of links, no stronger than the weakest part.
It is said to create an environment that promote clusters, with both vertical and horizontal relationships between the companies. At the same time geographic concentration makes the diamond stronger through one of its components, rivalry. The diamond system is thereby self- reinforcing. Two outside factors are also described here. Governments role should be indirect, to catalyze with policy that creates an environment with incentives for own research and innovation within the companies, and thereby competitive advantage. The role of leadership is drive, will and ability to change. Seeking stability and low risk should instead ultimately lead to decreased competitiveness. In a book Porter (1998) also describes the role of chance.
Goal formulation is a tool which can be connected to the SWOT analysis, and used as a next step to develop specific goals for a certain timeframe. Also defined as objectives specific in magnitude and time. Examples are profitability, growth, market share and innovation. Four criteria should be met: hierarchical arrangement, quantitative when possible, realistic and consistent (Kotler & Keller 2016).
Purchasing Power Parity, PPP, is a concept measuring prices in separate areas using certain goods. For example how much a unit of one country’s currency can buy in another country with their currency (World Bank 2020).
Resource Based View, RBV, is theory that focuses on explaining how firm-specific resources and capabilities can form a basis of sustained competitive advantage. Important resources are tangible assets and capabilities in staff, contracts, technology and organization. These are characterized by value, rareness, non-imitability and non-substitutability. Strategic sourcing can be considered one such resource (Su 2013).
Supply chain management, SCM, “is the design and management of flows of products, information, and funds throughout the supply chain”. Where the supply chain is a network of entities involved in producing and delivering. This may include suppliers, producers, distributors, retailers and customers. As each of these entities are supposed to add value, value chain is also a common term, used synonymously. Customer focus is emphasized, and responsible for linkage to the customers is marketing. This as one of four functions in an organization, together with logistics, sourcing and operations. For a SCM to be competitive, three characteristics are given: responsiveness, reliability and relationship management. Due to the evolution of relational and one-to-one marketing customer relationship management CRM, has evolved as a technical tool to handle large amounts of customer specific data. Such technology is also a drive for cooperative integration within and between companies, however vertical integration refers to ownership upstream (supplier) and/or downstream (customer) the supply chain (Sanders 2012).
Included in SCM theory is the concept of sustainable supply chain management, SSCM. This term involves environmental, social and financial aspects, also some principles. Comprising community involvement and economic development. A section which is telling that such engagement also benefits the company. Four reasons for sustainability follows, besides community relations they are revenue, regulations and moral (Sanders 2012).
Supplier evaluation relates to the concepts above, it was developed as a complement to the ISO 9000 standards of consistency and quality. It is connected to supplier selection (preceding) and performance measurement (succeeding). Such evaluation is a formal process, analyzing variables of price, delivery, quality and service (Bloomberg, LeMay & Hanna 2002).
This contact may also lead to supplier development, meaning a stronger relationship with mutual interest in improvement and efficiency (Mangan, Lalwani, Butcher & Javadpour 2012). Third party logistics, 3PL, is a type of freight company among so called logistics service providers, LSP, together with 4PL. One difference is the level of service that each company provides, but these terms are also overlapping. In general such a third part is neither buyer or seller of goods, and their services can be anything from transportation, customs, warehousing, packing and even manufacturing. Also monitoring tasks such as inventory management and reverse logistics management, this was an original idea of the concept 4PL, but is commonly done by 3PLs. Inventories could also be managed by vendors, using third parties belongs to a general SCM trend in outsourcing of non-core competencies, where the reasons can be price, strategy, flexibility and technology (Mangan, Lalwani, Butcher & Javadpour 2012; Sanders 2012). Related to shipment of goods is the definitions of incoterms, they regulate the responsibilities of buyers, sellers and LSPs. The choice of provider can reflect for example transportation speed and related service. There are a few categories based on the amount of risk taken and effort made by the seller, divided as steps towards the buyer. Departure, carriage paid or unpaid and arrival. In case of delivery by the supplier to a customer’s domestic warehouse or distribution center the so called group F can be used, for example with the agreement named FOB “free on board” (Mangan et al 2012). 3 Methodology Presenting used method, sampling, interpretations and a discussion. In use is a case study with twelve semi-structured interviews whereof one a pre study. As well an interview guide.
3.1 Choice of methodology To answer the questions of this thesis, a qualitative approach was chosen and semi-structured interviews have been used. With the chosen sampling method, interviews were made until an assumed reach of theoretical saturation. Thus the empirical material is considered to answer the research questions well. Every meeting was followed up by a brief measure on the total amount of answers and how they were corresponding to each other. This paper is oriented towards interpretivism in terms of epistemology, believing that the empiricism impacts those involved in its context. As well constructivism as ontology which assumes that we are co-creators of our social reality. The general approach is deductive, known theory has been used to deduce questions and analyze the interview material (Bryman & Bell 2015).
In terms of design this paper can also be described as a single case study of type two, where the textile garment industry is its case and every heard organization called an embedded unit of analysis. This type of design also contains a context, being the country of Turkey, same for the whole industry and all of its organizations. For this reason it is not considered a multiple case study, where cases and units of analysis have their own separate contexts. Based on five types this case is representative and longitudinal (Yin 2014).
A measure of structure has been used for the interviews, an interview guide was developed for being able to ask every respondent the same type of questions and compare their answers in the SWOT analysis. As said by Whyte (1953), no interview stands alone, meaning comes in terms of other interviews and observations. Yet an aim was to understand the managers’ individual views of Turkey as a textile country and their own specific industry branch. Which is the reason why there is not very much structure, there were always time provided for the respondents to answer in their own manners. In order to answer the research questions a type of answer were sought that could picture how the situation was perceived and what kind of possible changes and improvements were brought up (Bryman & Bell 2015).
This study is based mainly on interviews, alongside with the literature of previous studies. Own observations could have been an alternative or complement but was not possible to carry out, mainly because of time limitation. Advantages with interviews is also the ease to utilize historical descriptions and comparisons, and the possibility to focus on a chosen issue. While observations also have benefits such as the opportunity for a greater cultural understanding, and a possibility to discover unexpected events. Though some of the companies did show around in their facilities, which strengthens their trustworthiness. Except this it comes down to trust these individuals on their words (Bryman & Bell 2015). More about quality criteria in section 3.4.
3.2 Pre study In order to better understand the Turkish market, business environment and its competitors, an interview was conducted at a local apparel company. They do their purchases mainly from one Turkish manufacturer, which is also represented among my respondents. This interview took place in Sweden, before the main interviews and facilitated the setup of an interview guide. It was held in their main office building with a sourcing and production manager. This empirical data is used as an extra resource for the analysis with comparisons and evaluation.
3.3 Sampling For this study expert sampling has been selected, people with managerial positions and long experience were preferred. Respondents were contacted based on a combination of convenience, purposive and snowball sampling (Bryman & Bell 2015). This thesis is the result of a field study within the SIDA funded MFS program. One “emerging country” destination was among the first choices to make. Consequently time constraints and language barriers has limited the possibilities to conduct a sample as if made on home ground. During three months in Istanbul eleven interviews were made with nine companies, one industry organization and another organization specialized in investments. To reach these people some contacts have been taken through Borås University and a fellow student there, others were contacted on spot. Some respondents were asked for contacts that could render more interviews with people of the same knowledge and positions. One respondent, R8 was found this way. Another two, R4 and R9 through contacts in Sweden.
3.3.1 Criteria Eleven respondents were sampled with an objective of describing the situation in medium to large sized apparel manufacturing companies which produces mainly for export to Europe. The criteria were also to interview companies and other organizations who could provide information about the textile garment industry within the context of Turkey as a nation. Due to the sampling methods used, based on the given circumstances, interviews were conducted with the following respondents. Most of them are medium sized apparel companies, but there are also three minor exceptions with related business operations. R9, R10 and R11, which will contribute to a broader perspective on the research questions (Bryman & Bell 2015). They are all consequently presented with numbers to remain anonymous.
3.3.2 Sample RP – The pre study company. Large brand in Sweden. R1 – Focus on women’s knitwear. R2 – Big customers in fast fashion. R3 – Specialized in denim. Own brands. R4 – Fast Fashion producer. Important supplier of RP. R5 – Specialised in high end customer brands.
R6 – Industry organisation. R7 – Investment organization. R8 – Specialized in jeans. Experience of own brands. R9 – Label producer. R10 – Small entrepreneurial company. R11 – Fabric producer.
3.3.3 Company contacts Most of the respondents were firstly contacted by an email. That introduced myself, the study and its purpose, as well as the possibility to participate anonymously. All who actually responded have been truly kind and easy to talk with. The case of the two organizations is different, meetings with them has been arranged by personal visits to their office buildings and associated receptions.
3.4 Quality criteria Validity, replicability and reliability are commonly used to measure the quality of information gathered, interpreted and analyzed. Also trustworthiness can be a useful term.
Studies with semi structured interviews are difficult to provide with a high validity, except ecological. The respondents were free to formulate themselves about the topics which makes their stories personal and contextual. The questions are however both about company, industry and country, and aimed to provide a general picture of the industry and its possibilities in Turkey. But other companies might have offered a different story, perceptions and circumstances also change over time. Therefore reliability is also low in this study, it would be difficult to repeat. Both these and other organizations are likely to respond differently on another occasion. What can be expected to last a little longer is an aggregated analysis of the whole business. An attempt to achieve this is by striving for a so-called thick description, related to the concept of transferability below (Bryman & Bell 2015).
Previous terms are highly associated with quantitative studies. Trustworthiness offers four aspects which are softer and easier to connect with qualitative interviews. Credibility and transferability relate to validity, dependability to reliability and confirmability with objectivity. The objectivity is high when the investigator is able to let own values aside and not intrude the study. Another criterion is relevance, which is based on the studies degree of contribution. This study aims to investigate a unique case and generate useful but context-dependent knowledge about it, rather than generalizability to other cases such as different industries. Neither garment production in other countries i.e. contexts, they are discussed primarily to identify measures for the SWOT analysis. Credibility can be reached through good practice and sharing of results with participants, both of these are intended. By thick descriptions transferability can be reached, if not among industries or national borders, so at least over a period of time. Dependability might be difficult to maintain through records. It also goes against the aim of anonymization ethics, which will be prioritized here. A fifth aspect, authenticity aligns with the objective to provide useful knowledge (Bryman & Bell 2015).
3.5 Methodology discussion and reflection Anonymization was a prerequisite for some respondents, with others it might also have helped them to more freely formulated answers. Making all of them anonymous might give less strength to the analysis, which also became harder to conduct with numbers instead of names. Yet it was a natural choice to offer such integrity, every interview was recorded which have anyway led to the experience of some self-censorship.
But also a more feasible transcription process. All interviews have been carried out in the respondents’ facilities and with their own choices of location. No further disturbance than a few phone calls and some inevitable tea drinking have been experienced. Yet some of them invited as well for both joint meals and transports, while others did stick to their promised period of talk. Overall the four common ethical principles have been well cared for. Bryman & Bell (2015) provides a list of these areas.
Harm to participants can include self-esteem and stress, some meetings were rebooked for lack of time and some finished before the last question. This caused some prioritization, but no push, they decided what to do and when to quit. This way also their privacy was respected. No question was left unanswered for any ethical or other principal reason. The respondents were also informed by the best of ability before giving their consent, for example about purpose and recording. For their confidentiality, all recordings will be kept safe as long as they are needed and deleted when possible. No names are mentioned, either of people, brands or companies including customers, neither any gender, to avoid the risk that anyone could be identified. Again this might make the analysis weaker, also the language a bit scanty, but the first priority is to honor a promise. The possibility of doing harm to oneself was rarely considered, but curiosity was part of the motivation and rewarded with experience. Deception should not be an issue here, except that it took a long time from making these interviews to publish this report, sincere apologies. Also, funding was a part of this grant, but should not cause any conflicts of interest.
One step aside from objectivity is a preconceived view of competition between companies, that one’s failure will benefit others. This opinion can also be found here, but is not very common, yet this conception has initially influenced my questions. Later this was changed to a more open way of asking about this subject. 4 Results This chapter presents the most important answers from each interview, in the same order as they were conducted. And finally from the written reply by R11. The intention is to provide a rich, thick and interesting story from every individual informant, but analyze only the most core and easy to validate information. Respondent 1-5 and 8 are the base of medium size firms. Number 6 and 7 are organizations who strengthens the picture of their industry. 9, 10 and 11 are smaller firms which provides both supportive and complementary views.
RP, the pre study company – big brand in Sweden The pre study company RP, provided a good basic understanding for the market and retailing process with Turkey and competing countries, this helped in writing the interview guide. Turkey stands for 40% of their sourcing, but their share was larger before. China has 30% and Bangladesh 15%. They also buy from Pakistan and India. Transportation takes 7-10 days from Turkey. Bangladesh needs 4-5 weeks and China 5-7 weeks. Other benefits with Turkey are easier communication and more experience from production, their fashion is also more similar to ours. On the other hand, prices are higher due to wages. Though Turkey is said to be cost efficient and have a high level of automatization. China has a broad repertoire, almost anything can be ordered from them. Turkey is specialized in tricot and fine knit. Bangladesh is characterized by their fast rate of development.
R1 – Focus on women’s knitwear R1 is a manufacturer for Europe and US, only knit and especially women’s wear. The company was founded in 1989 and is relatively old.
Always produced for export only, fitness wear is a new segment and one of their recent achievements. The company values lead time, quality and design. R1’s thoughts about Turkey’s economic development refers to the textile business where there is a growing competition with China and Bangladesh. Turkey has the advantages of product quality and closeness to Europe, still we need to adjust our prices according to theirs says R1. Generally, about the economy they are waiting for the elections and will see what happens after that. Something that could be done differently is to better equip the facilities, focus on own strengths and this way differentiate from other countries.
As a company R1 says that their advantage is fabric research and development, R&D and in- house production. They export to various countries, mostly European. A strong design team makes it possible to produce all different styles requested. Delivery takes five to six weeks from here, customers prefer five but are mostly satisfied with the lead time. Differentiation from other companies is done by production location, fabric collection and details of the garments. R1 mentions a secure structure as important, together with in-house production. But they are not competing with other manufacturing companies, focus is on their own markets and clients. Instead R1 compares with other countries like China and Bangladesh to make sure that they remain competitive. New customers are said to compare companies by delivery times, price points, design and company structure. But we have loyal customers says R1, clients that they have worked together with for a long time and often visits. There is a tough price pressure, which sometimes makes the customer choose a lower quality for their garments.
“You need to be efficient, otherwise you cannot survive in this market I guess” – R1.
Customers can always find another company with lower prices. Our focus is on service and quality says R1, who tells that price is the most important thing for fast fashion brands. Their company has invested in every part of the firm to improve its cost structure. New improvements that they would like to make is about customer service and communication with clients. To better understand their needs and assure that they are satisfied.
R2 – Big customers in fast fashion R2 is also working in a relatively old company, but started a few years later than R1. They say that their kind of companies often do not get older than 5-7 years, then “kaput” because of the competition. R2s capacity is around a third of R1, they work with big customers in the fast fashion segment. One recent achievement is an environmental certification demanded by a customer, their factory is the first to reach this target. R2 thinks that the Turkish economy is not going well, but that it is also affected of the declining world economy. Says that the government should give more importance to the textile sector, make more studies and projects. Because the textile industry has a lot of employees, and is very important for employment, both in Istanbul and around the country, more factories should be opened in the eastern parts of the country.
This company’s advantages are said to be their fast service, product development and short lead times. All of which they also want to develop, as well as customer focus. Fast decisions and customer perspective led to this position, and is also their recipe for further improvement. This company is more dependent on logistics as they have five subcontractors spread out in the country. Quality control is trusted by the customers to be made either on the production sites or at the headquarter, where they also come regularly to check. Garments are then sent to their customers warehouses in Turkey. R2 is specialized in ladies stretch trousers, customers told that they wanted this type of garment, so we developed lots of collections. Now we are taking lots of orders.
Another achievement is the four years old collections department, now 70% of the orders are from collection. Collections, speed and innovations are mentioned here as selling points. Especially innovation, both in technology and fabric.
For Turkey compared with other countries, the strengths according to R2 is fast deliveries, fashion and production know-how. Italy and Sweden have less knowledge about production, Bangladesh is learning but do not provide fast fashion, as it takes longer time to order from there. Made in Turkey is seen as a quality mark compared to made in China. Customers can expect more as we make every lab test, which R2 does not think is the case in China or Bangladesh. Export goes to many European countries, mainly because of one big customer.
Also Asia and the Middle East, but not US due to the prices. 10-15 years ago it was more common because of the dollar and euro rates. Delivery time is three to four days to domestic customer warehouses and around two weeks to stores in Europe, which is faster than R1, and satisfying for the customers. This company has no brand or label, but is strong as a manufacturer compared to others. One reason is that they are working with two of the biggest European fast fashion customers. Which gives a powerful position to negotiate with fabric and accessory suppliers. Also they have been working with both suppliers and subcontractors for a long time, the company name is well known and trusted. So they can keep a competitive cost structure, but does not think that investments will increase their efficiency. FDI is not for them as there are no big needs. Brands must invest in advertisement, fabric suppliers in machines. We want to invest in people, because items are always the same. R2 also considers machinery as needs rather than investments and the collection department as a must. As well research and development, where the customers sometimes are coming up with new ideas.
“Innovation for us is to give importance to the people, to employ and invest in people. Rather than in the machines. As well people in the factories and among subcontractors” – R2.
Moreover they want to improve for example their communication with customers, just like R1 to better understand their needs. As well to add more social benefits, like their parental leave. The collection department is also in focus for improvements, which are not considered too hard to achieve. A board of directors with five people helps the company to make fast and good decisions. They have not thought of any venture so far, but maybe with a brand says R2. Who also explains a Turkish mentality about competition between domestic manufacturers, that they are working together for their country, and might even share knowledge through the customers. Here they rather feel sorry when someone fails, while still doing some benchmarking, but focuses on own strategy rather than other companies. An aim is to both expand and improve every year, by knowing their customer’s needs. For example to use water and electricity more efficient, now 20% less consumption makes them more competitive. From the governments side, regardless the election outcome, R2 is hoping for employment focus by facilitating for new factories in eastern Turkey. Also a good dialogue regarding possible regulation changes, that they are taking information from the business areas into consideration. As competition is tough, the market does not have much space for new actors. R2 sees the same amount of competition now as in the past and for the future. Macro factors are important as also this company exports all of their production, since the beginning.
To contribute for the country they want to employ more people and improve their business by communicating with more designers in the brands. R2 thinks that FDI is very important for Turkey, but not in their company, maybe other textile businesses. Compared with China and Bangladesh, Turkey is less populated which affects the prices.
Focus should be on innovation, and opening of new factories in the east. But also a rising dollar rate means more orders to Turkey on their behalf. In general no more comparisons, rather with Spain and France. Then China with America.
R3 – Specialized in denim, own brands R3 is working for the only company among my respondents who has its own brands, with more than 600 stores. It is even part of a holding group, present also in other sectors. As a manufacturer they produce largely for fashion brands rather than fast fashion ones, and they have a factory outside of the country. Production there is cheaper than in Turkey, but the lead times are longer. However not as long as from China and Bangladesh. For that it was a good decision to invest in this country. The cultural difference was handled by Turkish managers who moved there with their families. In connection with this factory there is also a mill, which cuts lead time by making own fabric. It was a huge investment which we are proud about says R3. Another milestone was to establish their first own brand. This respondent knows the owners and their kids, they have been working together for a long time. The company’s mission is about customer satisfaction, and environmental care. They have been working with most of their customers since many years, so the relationships are strong. The person responding is a sales director, managing sales, product development and coordination. Their company is strong in R&D, mainly about washing. Customers are sometimes asking for collections within certain styles, these are created and exhibited in showrooms, which always have to contain something new for them.
Regarding Turkey’s economy R3 is worried about the exchange rate, as US dollars are gaining against the euro and lira. We are buying in dollars and selling in euros, so it does not help. Because of prices and taxes, we are (like R2) selling less to the United States, and Europeans are mostly paying in euros. This will affect our prices says R3, but they are trying to resist. While keeping advantages as quality, development and lead time. So what is suggested for improvement that can increase the company’s export? Key to success is the product. Customers use to go for profit margin. European customers are also increasingly aware of how fast they can turn stock to cash. The most similar competing country is not China or Bangladesh, rather Tunisia. Among other Turkish companies, five competitors are mentioned by name, none of them are as big as this firm. One is growing, two are slowing down. R3 also explains that the owners of such big companies are not too many, they know each other and are going out for dinner sometimes. They are explained to be competitors at the sales level, but not at the boss level. As a company they try to develop unique products, so that the price cannot be compared too easy. This company’s greatest advantage is their foreign factory, which allows them to offer competitive prices. Also their development of new products. Number three is their strong customer relationships. Turkeys strengths are said to be lead time, European approach, flexibility and raw material. Focus on competition is also here more about what other countries may provide, rather than what other companies are doing for their customers. They are satisfied with their locations, which is said to be important for both offices, production and the cultural proximity to Europe, which helps the understanding. Denim is their strongest product, washing gives uniqueness. The owners are always looking for new machines and techniques. “They love to invest”. The company's most recent achievement is an investment in eco laundry, which was initiated in cooperation with a customer and is now said to set a standard for everyone else. Their export goes around Europe, but also to US, Japan and Australia, even China through a big brand. Transportation by truck can be done within 3-4 days. The company is well known as a manufacturer, and their brand side is growing in certain market segments. Talking about cost structure and competitiveness, again their advantage is product rather than price. Yet they are also working on costs and productivity, especially in their youngest factory.
What to improve is their design department, preferably by hiring someone from UK or Spain, R3’s biggest markets. The sales organization has two directors, both with their own customer base. FDI has not been made in this company, it is a family owned business. On the other hand, they have been investing in Europe. Business ventures is considered dangerous, as it might ruin the trust from other suppliers. Or you can lose customers by having a venture with just one of them. The same point of view applies for their own mill, it is considered as equal to the others they use and not given any specific advantage. As access to the other ones is crucially important.
R3 is trying to grow and improve by deeper relationships with stable customers rather than finding new ones, more visits and better products is their way. Regarding regulations there are subsidised regions, one of them is Aksaray where this company is now investing favourably. Otherwise a stable situation, no such risks are experienced, either in the past, now or for the future. Also their market seems stable, as well as their share of it. Communication with customers, also mentioned as an advantage, is said to work as good as it can be for the moment, just that they could come and visit here even more often. Videoconferences are used sometimes. Around 10% of the production is for own brands and stores, this share might increase over the next years as their third brand is now entering the market. If the company can help for a good Turkish economic development, it is by raised export numbers, grow and hire more people. FDI is not considered as helpful to anyone in the industry, actually it has never happened. R3 thinks that investors in textiles would rather go to Bangladesh because of their low cost. Also, that this country is getting closer to the Turkish quality. But will never become a close competitor because of their different mindset. Though they are growing, while working on infrastructure and other problems. Turkey on the other hand is struggling not to shrink on their and other’s behalf. But this country has fabric, and are exporting to Bangladesh, as customers there wants it more than China’s. Bangladesh is also said to have a different set-up, no small or medium size companies, but huge factories where normally the entire village is working. So it is hard to compare with Turkey, rather China could be compared historically to where Bangladesh are now according to this person.
R4 – Fast Fashion producer, important supplier of RP R4 worked in their company for ten years, quite average in this respondent group. Started as many others with merchandising, moved to sales and is now a specialist in this area. This is no longer a family owned company, 2010 it was “transferred to a corporate company”. A process assisted by for example Deloitte and SAP. They have small offices in Spain and Sweden. Export goes mainly to Europe, but US is a new market for this company, one customer so far. No own production here, only from subcontractors. Like R3 they export with “free on board” terms using a third-party logistics company. Ambitions for the future is also like with the previous and next respondent just to keep going. Sales have dropped and one customer has changed its strategy to target a younger group of people. The same customer is also trying to differentiate their assortment, which makes production more difficult. This though also gives a chance to improve efficiency in a way that can raise turnover and be more profitable, R4 is taking that challenge. History of textiles in Turkey goes back to the 16th century ottoman empire, already during these days it was an important and well-developed business. Capacity was expanded during the 20th century, much thanks to the favourable conditions for growing cotton. Until the 70s there was a national development plan, and in the late 80s Turkey opened to foreign markets. During the 90s textiles reached 10% of turkeys total exports. 2015 the export value is 5,4 bn US dollars, and nearly 25% of total exports, including yarn and fabric. Some materials, for example polyester are imported from China. But Turkey as country generally has the advantage of raw material supply, together with geographical proximity to Europe. Qualified labour force is another benefit.
General economic development in the country is dependent on textiles, for exports and jobs. With our strengths we can exploit niches in the market says R4. Improvements could be to use or develop new technology, also fabric as the cotton will finish someday.
Advantages as company are for this firm a good integration in their value chain. They are involved on the fabric side, they have designers and focuses on the importance of good communications. As they are customers themselves it is easier to understand their own customers’ needs. And location means time says R4, for transportations and visits. Their product focus is female and jersey, after trying other materials and garments and experiencing strong competition it was decided to stay with what they know best. One recent achievement is said to be within HR and education. R4 thinks that their company is strong on this side and that such investments are good for the whole sector. Since the company’s corporation this is being done even more professionally. English language and IT are skills that have been strengthened this way. Turkey’s strengths as country are geography, skilled work force and long experience in the sector. As well an advantage on the raw material side. In China and Bangladesh the labour cost is cheaper, but the lead times are long, so as a customer one needs to know their priorities. Time, price and quality for example. Earlier Tunisia has been pointed out as a close competitor, here as well Morocco is mentioned. They are also well located, strong in woven and good at communication. Working conditions are also mentioned in comparison with China and Bangladesh, these countries are not always paying for over time and life insurance. Long workdays are another issue, but these things might happen in Turkey as well.
Regarding exports the US market is said to be an economic stabilizer by incomes in dollars together with euros, quite different from how the previous respondents were reasoning. R4 mentions carbon footprints about transportation, and is also talking about train as an alternative, but the customers are choosing and paying for logistics. The company has no brands but are well known in the sector. For some as demanding, because they have many policies and procedures to follow. Their cost structure seems well planned, balanced and competitive. Planning is being done by season, the amount of buying rounds vary depending on fashion. Relationships with suppliers are good and as well the company is more price- and value- than cost-oriented nowadays, thanks to their partnerships with customers. Cooperation which also includes joint product development, that is the company’s latest stage of improvement from production to fashion orientation.
R5 – Specialised in high end customer brands This respondent offers time to give a really long interview which covers many interesting topics, starting by showing and explaining some documents. For example that Bangladesh recently passed Turkey in the European market. China won some customers from India, Tunisia and Morocco suffered from the Arabic spring. My questions start with Turkey’s way to raise textile exports, which is answered by an urge for the need to work in clusters. These should be divided by different types of garments and other textiles. Other actions would be to increase the production capacity and lower the costs to meet the price pressure. A suggested way of doing this is to move all suppliers in Istanbul to Anatolia, where the labour cost is lower. Over there each type of item should cluster at one specific location each, instead of as now, being spread out in various cities. Government should help the industry to consolidate and rearrange. Exports to US would raise if taxes were not so high, but Europe is affected by the crisis. People tries to save instead of spending says R5. Trying to become a member of the European union has imposed more regulations which makes costs higher. Monthly salary levels are mentioned, for China (500 USD, like Vietnam and Cambodia), Bangladesh (100-150 USD, like for example Burkina Faso) and Turkey (1200 dollars in Istanbul versus 700 in Anatolia).
Comparing the country with China and Bangladesh is hard, according to this respondent they are not competitors for Turkey. Yet these are the top 3 exporters, import excluded. The reasons stated are as mentioned before by the other respondents; Turkey can understand the customers better and deliver faster. Also develop new designs and materials better than China, Bangladesh started recently with viscose but produces still mostly t-shirts and shirts. Closer competitors are Italy, and Portugal which is said to have unofficial government support to their suppliers. Turkey started to export in 1981 but with a quota of 100 000 pieces, China in 1985 with an allowance of around 1 million. Bangladesh started to export in 1995, shortly after the removal of quotas by the EU. WTO also had an impact on this removal, and since then China and Turkey grew tremendously. Yet Turkey cannot produce as big volumes as China. Big sports and fast fashion brands orders sometimes 1-3 million pieces of a single item. So Turkey cannot compete either pricewise or by capacity with China on that. Also R5 describes that the selling price have not increased as much as material and salary costs since they started the company in 1986, and seems to be complaining over the expanded competition. Turkey is on the other hand said to be competitive when the companies want to change their assortment often. A good insight is given on the size of different customer segments in prize levels, where 2 million people in Europe is said to afford really luxury goods, 25 million should be on the second level and 300 million on the fifth and last step with basic garments. Officially all textiles in Turkey, including yarn, fabric, carpets and home textiles was exported for around 12 billion dollars annually in recent years, but the total sum includes unofficial border trade with Syria, Iran and Iraq for another 5bn. Also Ukraine before their war, and other Arab countries without own textile industries. Official export means Europe, UK and US. R5 gives a story about that German companies also exports unofficially, says that I am too young to know. “Just load a truck and send it”, transactions would go through Jewish people in Moscow, and also involve Switzerland. The next sentence claims that newspapers and politicians always tell lies, but that Europe and Sweden is different, less corrupt, better education. In Iran, all textile trade is said to be unofficial. A cost example is given with a big company, they could come to Turkey to look at design but then go to another country like Romania for production, as a consumer who buys online after visiting a shop. Either we sell garments or just fabric.
After 1h and 22min starts the regular interview questions. Some other interviews are not even this long, but this is a special case, providing more perspective on many topics. Some company facts are followed by a look into market and competition. They started by working with Germany, made woven for a period but went back to jersey when China became too strong, similar to R4. The company also started with mid end brands but switched gradually to high end customers. Accordingly they do not want to grow more than 10% annually to remain in control over their business, also they serve the quite limited segment said to target around 25 million Europeans, and they do not want to go back to the mid end range because of solid competition. So the future ambitions are modest, trying to survive seems good enough. Going to new markets seems difficult after a long time in Europe, but growth in other areas helps this company to expand with their European customers. Turkey has a long history and heritage of textile production, even since before the ottoman empire. Since 1980 the strategy has been to export, earlier in the 1900s it was more about making substitutes of imported goods. China followed this path around 25 years ago. And here is a similarity between the countries, as the textile business is a start before an emerge to other industries. Bangladesh is still in an early stage of this development, but will also move forward when there is more money to invest. Turkish textile industry never used much FDI. Since the ottoman empire there have always been skilled workers. Bangladesh have another history as a part of India. The need of capital was never that big here, the businesses were already profitable enough.
And the industry grew all over the world, R5 gives examples of recent generations mentality and shopping behaviour as an explanation. Foreign investors preferred the car industry, and the textile producers grew by their own power and local banks. As a natural development, Turkish shopping malls might belong to former owners of textile companies, also car manufacturers might have started with textile once. Quality control is a reason to make their own investments and neither grow too fast, this company like some other respondents do that themselves in every stage. Some others also work together with their buyers about this.
In the future R5 is looking for nano technology investments in the size of 2 bn USD. Suggests also that cheaper nonwoven garments are something that will come. But to attract such investments there is competition with other countries, which is an issue for the government about policies and strategies. Textile industry is said to be of no interest for foreign investors these days as the return is too low regarding the risk, maybe 5%. FDI is good for Turkey, but unless the government takes action, investors will stay in sectors like service and tourism. Not industry. R5 then tells another story about that China in 2014 tried to manipulate the cotton price, and the small sizes of Turkish chain stores compared with European ones. On the question about personal background also a perspective of Turkey as a developing country compared to Sweden. This regarding the need and possibility to work harder and learn more.
Talking about economic development in the country, R5 has a clear view. The annual rate of 2- 3% will not continue, rather 1%. Before it was 8-10% annually. Which reached an average income of 10 000 USD per year. From there a country should prepare to jump to 20 000. This will need a strategy for investments, as mentioned before. Yet this did not happen and staying at this level means a great risk to lose competitiveness. Turkey should devote to its best competitive advantages instead of struggling with general industries. That would make such a leap possible. Logistics is said to be very important for Turkey, as being “in the middle”. “We can be a hub of logistics”. Turkish airlines is an example here, which is also said to be successful thanks to the country’s young population, “52% is less than 30 years old”. There’s also risk, “political things that I don’t want recorded” says R5. This respondent expects a growth of the Turkish textile industry of 10% per year, because of all the competitive advantages. Though the government is said to have no strategy for this business. With that the growth could be higher. So to develop further, the suggestion for Turkey is to make clusters. And come up with some long-term strategy, 5, 10 and 20 years ahead. This interview is made around one month before national elections, from which some answers will come. For example regarding foreign investments in the country, if they will rise or fall. Competition thoughts are divided into countries and companies, in Turkey there are only three competitors to R5, “same size, able to make R&D and high quality”. All the managers are friends and R5 is also vice president in their association. “So I know everybody, almost all textile people in Turkey”. And the failure of a competitor would not be good for this company, buying offices wants some to choose from, and might go to another country if one or two fails. No market for them without competitors. Location is important, also in terms of being close to the airport when traveling and welcoming visitors. Office in Istanbul is said to be a must, even though the production is sometimes in Anatolia. This company is strongest in heavy jersey garments, jackets and dresses for example. This is a way to avoid competition with “cheap garments”. These high-end products are exported to west Europe, “only those countries can pay our costs”. The lead times here are also longer than for a fast fashion company, 4-12 weeks depending on the order. Though speed is said to be increasingly important for competitiveness in the business compared with size, which was the main advantage before.
One recent achievement is a shift of the workforce to young people, 60% of the staff were replaced throughout a couple of years. This company is said to be well known and appreciated in the market, those who left did not have any problems to find other similar jobs according to R5. Their younger people work harder and know computers better. Here mentioned advantages for Turkey as a country are the rich raw material supply and a young workforce. Also told is that the many regulations, imposed to align with the European union, are a burden for the companies which have to manage well their amount of employees to be economically efficient. Otherwise you will have to pay more than others for the employees’ service and social security. This is also a difference from China and Bangladesh who can expand easier, without such thoughts about labour and human rights.
This company is said to be well renown on the market, with a good reputation. Something that makes it easier to find new customers, which will also be analysed before starting a cooperation. They have to improve all the time to survive with small profit margins. Especially since salaries rise and there is great price pressure, then the other costs must be reduced. Specialised quality control and implementation of new production methods are two ways. Yet they also have to invest in R&D to develop, but development gives pleasure, which is important to find for having energy to work hard. As well there are things to improve, first mentioned is the production team. Also the planning system, making these changes is possible but hard, and the economic situation does not make things easier. Their organizational structure is pyramid shaped, said to be necessary in a production company, unlike examples like google or auditing. Salaries here is said to be higher than average, similar to competitors. Also a good and calm working environment is mentioned. No FDI made here, no use for a sum like 2 million euros, other bigger investments should be made instead, maybe in nanotechnology. No public investments made are especially favourable, but improved education of designers is wanted, as well lower taxes. What the government does is said to affect all companies similarly. A venture would have been made in a younger company or somewhere else in the textile industry, this firm is said to be too old, and the garment business too developed already.
Failure of competitors does not benefit anyone in this segment. They need each other, and there is always room for new competitors who are ready to work hard. Turkey provides 5% of the European consumption. The market share as said before it could be larger, but control over the business is preferred, and expansion is said not to be profitable. Environmental work is done by own interest, not customer demand, also the production is safe for injuries and power outages. The manager says they are “looking at life from the left side”. Yet they want lower taxes, “to be motivated” otherwise no regulations are said to be a risk for the company as this sector is based on human resources rather than big investments. The tax they pay should in their opinion be enough, instead companies like this one are obliged to have own guards, doctors etc. Decided by the government to avoid unemployment says R5.
Further that their competitors go well, that they are developing their businesses together with them. But as 30 years old, R5 would think about going to Mexico and produce for the United States at the border. The competition is expected to increase even more, also Europeans to buy less but Chinese and Indians more. Transportations are made by Turkish 3PL forwarders, which are said to be very good at logistics and successfully growing their businesses. Also by helping European companies to reach destinations in the middle east and former soviet. As well Turkish airlines is a success example here, much thanks to Turkeys location in the middle of three continents.
R5 wants to help the country by employing more young people. FDI is welcome and common in services, tourism and retail rather than industry. Industry is said to be generally suffering in the internet age because of global competition. Big buyers are said to be sensitive on human rights but not environment, availability of cheap consumption is the worst example. This respondent instead suggests consuming less, even though it will lead to another problem of increased unemployment.
R6 – The industry organisation R6 is at an industry association, responsible for garments. Other departments work with carpets, leather etc. There are many companies which produces clothes for export, more than 7000 in the whole country. This association helps with procedures and regulations. Europe is the most important market for these companies, up to 80% of their exports go there. Germany, Great Britain, Spain, France and Italy are the biggest markets. “The richest and most developed countries in Europe, they are our most important customers”. This organization is not governmental but has a special relationship to the government. Semi-governmental, because we also have official duties says R6. We are representing and coordinating the exporter firms. Our duty is to register their exports, also provide them information and know how to help their exports. Problems are submitted to the government for help with solutions. We represent our industry internationally, for example by being present in a similar European organization. This association started around 30 years ago, before the similar national organizations were not so specialized as this one is now. One achievement made here is to enter a customs union with EU. It is the opinion of R6 that the textile and apparel industry is very closely related with the economic development in Turkey. The country’s development accelerated in the 70’s and 80’s then the economy became more open and liberal. The industry started with producing cotton, yarn and fabric. Apparel developed during the 80’s, while this industry was declining in Europe. And there was no such competition as China represents today. Back then United States were also an important market, not so much today because of currency and China’s competition. Textile exports was very important during 80’s and 90’s as there were not as much exports of other industries like cars and electronics. But today when Turkey’s economy is more developed, and so the other industries, the share of textile and apparel in total exports is declining. But this is a good thing, a more diverse economy. Because when you go to Bangladesh for example, their apparel business is 80% of the country’s total export. Yet our textile and apparel sector is very important, one million registered workers, and some unregistered unfortunately. Together with retail and logistics it is around three million people. The share of total exports is around 15-20%, all textiles together where apparel is around 2/3 of that. Three million workers means around ten million people with families, of a population around 80 million people.
During the last 30 years Turkish economy has developed well, and textiles are an important part. The manufacturing companies modernized in order to export to Europe. Until the 70’s export was mainly from agriculture, protectionism during that decade and the previous led the country into a crisis according to R6. Some businessmen started in textiles and then shifted to other industries. Textiles share of total exports was at its prime around 50% during the 80’s and 90’s. For today some improvements would be to further increase the quality and establish more brands. This should be followed by more marketing worldwide, international fairs etc. Let others know about our heritage and design. In business to business trade Turkey have strong and well-known names among their manufacturers. The strength of this organization is its experience which allows their well-educated staff to help companies. Decision making structures and delegation possibilities is an internal area to be improved. Our offices are located near the airport, before there were some factories nearby but they moved away says R6.
The associations aim is to raise these companies’ export, improve their product value, brand power and to make the industry more sustainable. Turkeys geographical location is a benefit to reach markets as Europe, Russia and the middle east easier than their competitors. Strengths compared to other countries are said to be design, logistics and experience. Also speed, a new order can usually be delivered in four weeks, sometimes three. As well business dynamics and entrepreneurial power is mentioned. 25bn dollar export value, to 210 countries, 75% goes to Europe. 7th largest in the world on textile and apparel.
China and Bangladesh are both low labour cost countries, but China is about to lose this advantage due to rising salaries. Bangladesh will be gaining from this situation. None of them use to have their own original design, and both apparel industries are helped by its government. This is not so common in Turkey, but there are some subsidies and incentives like for electricity and land rent. Also tax rebate by refunding, some subsidies are given even though against WTO rules. Yet not much support from the government, our industry is not their priority. But starting to export helped us integrate with Europe. 20-30 years ago Turkey were similar to China and Bangladesh according to R6. Back then there were lower labour costs also here, and undeveloped industries in other sectors. But economic development means going away from textiles and into sectors like automotive, electronics and chemicals. China is maybe 5 years behind us in development, Bangladesh maybe 20. But over time Turkey will also enter new stages, and Bangladesh will become more diversified. Turkish textile companies do have higher costs than these two other countries, but also more competence. Electricity, for example is also more expensive so China is cheaper to buy from. Larger Turkish companies also work with research and development, fabrics and also nano technology even though it needs a high level of capital. Especially those who have their own brands in stores do this. Average salary level is between 600-700 US dollars, minimum wage is 370 dollars, but most workers get a bit more.
R6 says that some FDI is made in textile and apparel companies, then yarn and fibre firms, but mostly in other sectors, including retail. One Turkish brand has foreign investors, aiming to open and own new stores. The investors can be from Europe and Asia. India for example, they built a fibre factory in Adana which exports to Europe, thanks to Turkeys logistic advantage. But for apparel, the case is rather that Turkey is making investments in other countries. Bangladesh, Iran, Georgia, Bulgaria and Romania are some examples. FDI in Turkish textiles gives just a small contribution to its production and exports. Also the textile sector is 99% private owned, before there were some public funds. Earlier the government also built important infrastructure as roads, water and electricity. Factories, machinery and stores is built by the industry. Ventures and also merges are not very common, one reason is that the companies are usually family owned, and like to run their businesses independently. But R6 says that the business culture is changing, and must change. This way small and medium sized companies can become more professional instead of working with family members only. In this sense ventures can improve these firms’ competitiveness. This respondent has a different view on failures, that competitors can benefit from it by taking over their customers, this is also how new companies can find their space on the market. Competition is tougher now than in the past and will increase more, both domestically and from other countries. Our ten largest firms have between 10-20% of all exports, the rest is divided among the other 7000 companies. Among all of them around 60% of the production is exported. This rate have been higher before, but the internal market is also growing now. Most companies, except the largest ones, are using 3PL. Trucks and ships are the common way of transportation, there is not a lot of railway.
No regulatory changes to mention, it has been stable over time. Environmental and human rights work is common, water treatment has improved for example.
The gender gap in salaries is decreasing and the amount of child labour is now very low. It is different from 10-20 years back, thanks to laws and customer demand. Workers safety is also improving, but could be even better, still there are some accidents. Turkeys aim to become a top ten economy in the world is not going very well, the targets for 2014 and 2015 could not be achieved. One aim is a total export value of 500 billion dollars, now it is 160 so it has to triple. The current growth is said to be small and slow but sustainable. Europe is the most important market, but they demand less right now. Middle east and north Africa as well as Russia are also important, other markets which are now buying less.
R7 – The investment organization R7 are employees at a public investment agency. They are working with Foreign Direct Investments, FDI. They try to make more investors come to Turkey, from north America and the UK for example. FDI increases productivity, it helps to raise production on behalf of import. Focus is on the high-tech industry to grow here. “In order to enforce economic development and productivity in different sectors”. Textiles is not one of their priorities, because the industry is old they say. During the 00s it got passed by the automotive sector as largest exporter. Still textiles are important and exported to many countries. Quality has increased during the last decade, also the firms positions in European value chains, so this organization started to focus more on value adding and branding. Textile production are slowly moving from west Turkey to the east. In the west there are more investments in new industries. Yet Istanbul, Bursa and Denizli are important western textile cities. “Textile production is not so much regulated, about energy for example”. The customs union is another important aspect. But there is a tax incentive to move the production east. Textile firms are investing in machinery, R&D and design. Also high tech and in some cases nano technology. Still the industry is based on cheap labour, but tries to move to skilled labour, because in price we cannot compete with countries like China and Bangladesh. Also Pakistan and India are competing. This differentiation was a strategic decision made around 2005 when quotas were abolished.
Turkish economy in general have been strong during the recent years, but the targets for 2023 are hard to reach. They provide us with a vision says R7, and triggers more economic activity than we would have with no targets. But declaring an aim to be a top ten economy in the world was a bad idea, we do not know what the other countries will do. The ministries in Ankara are preparing strategies for every sector, also textiles. Overall we are trying to move from low tech industries to mid and high tech. That is the general goal, also regarding exports. Infrastructure has improved over recent years, making transportation and communication cheaper for the companies. New airport, third Bosporus bridge etc. is also underway and important parts of the plan for 2023. Location means everything for Turkey and is one major part of our organizations marketing. In exports of the country, diversification is an achievement. Since the early 2000s Turkey raised their number of destinations from 120 to 200, and the share of exports to Europe is shrinking because new markets are growing. Product diversification grew until 2008. Niche production, as R4 mentioned interest about, is a future strategic focus for the policy makers.
Smaller textile firms do sometimes face problems with productivity and financing. Some aid for the sector includes cheaper credits and tax cuts for investments, especially in R&D. From the agency they are encouraging both FDI in the textile sector and business ventures between its companies. Their structure is very fragmented, so one’s failure is unlikely to have a big impact on others in the industry. More concerning is the purchasing power of important customers. Regarding regulations there are some general improvements wanted to reduce bureaucracy, Turkey is said to have a more open finance sector than Europe and the US. Easier for foreign investors and customers to do business here.
Such companies also want their intellectual property protected, more laws need to be adopted from the EU to make this work. Still there are many fake clothes on the streets of Istanbul, but as well in other cities. And this business employs a lot of people. A few years ago Turkeys growth rate was 2.9%, low compared with previous years, and not very satisfying. 2% covers just the annual increase of population, above there is real growth. 4-5% is preferred. R7 gives a picture of international competition, where the sector strategies and more focus on manufacturing could help. But says also that Turkey after a history of some financial crises, are bound to IMF programs which does not allow our state to support any business, like many others did in Europe and US during 2008-2009. Also for example China and Bangladesh are doing it, as a difference from Turkey. These restrictions made it harder to recover. Sustainable growth also comes from investments rather than consumption, so it depends on its components. Textiles are important for employment and consumption, general economic welfare, but not as much for the economic development. Maybe nano technology could raise the value added to textile products, mostly universities are working on this now. Also the chemical industry could provide more value. But there is competition from other countries also in this field.
R8 – Specialized in jeans, experience of own brands R8 is a younger company than most of the other respondents, and one which used to produce their own brand. Since some time they focus on other, globally known brands. They had production of an own brand in Germany but needed to stop because of some regulations. In the future, awaiting a better economic environment, they want to start producing own brands again. This time in the Netherlands, an investment that will be open for other actors to participate in their upcoming retail business, which is planned to reach many countries. They will use their own capital to start the production, says that this is less interesting for other investors. R8 have high hopes for the textile industry to develop and improve. Their own target is double export until 2023, at the time it is 50 million US dollars. A general prediction for the development of Turkish economy is that it will go down before it turns up again. A bit unstable as it is a developing country. But the ambition is to raise the export value, up to 500 million USD as in the official plan for 2023. What can be done better to improve more is achieving quality in the production, for textiles and all sectors, also own brands and more innovation.
The communication between local competitors is described as good, that they know what others are doing. Turkey is said to be the second country after China for Europeans to buy their jeans and apparel. Also Bangladesh and Egypt are mentioned as challengers. But R8 know what to focus on in this competition. This company’s advantage is said to be their research and development department, by their fast service on customer requirements. Their location is central, near the airport and subcontractors just a 15-minute drive away. The most important products are denim and trousers for men and women. An achievement is the denim washing process. Strengths of the country is that they can produce everything about textiles domestically, accessories, fabric and cotton for example. Also location, innovation and powerful marketing is mentioned. And for their company the main strengths are communication, collection and price. Delivery to European customers normally takes 6-8 weeks, sometimes down at 4 for a repeat order. They want to balance their cost structure with being creative, fast and innovative in order to produce for big brands. Also, as an improvement, to increase their capacity and move all the production to one common site. Compared with China the salaries are getting more equal, for example 500 USD in Turkey. But in Bangladesh 50, which is a disadvantage, but on the other hand their country is far away from the market in Europe. Also China is getting wealthier and consumes more internally, with a higher growth rate than us they will become more expensive over time.
R9 – A label producer R9 is a label (tag, etiquette) producer for apparel companies. They also make flags for teams, but mostly price tags, care labels, hang tags and size labels. Woven labels is their speciality. The company was established 45 years ago, together with one of Turkeys largest brands of today, the managers were friends and this company is still one of our most important customers. R9 is quite new in this family company with around 300 employees. Thinks that textile is one of the most important sectors in Turkey, because there are big companies that exports. Also that clothing is so important for people because of social media and focus on trends. Turkey is said to be one of the cheapest countries for production, compared with China, Bangladesh and Malaysia. The general economic development seems stable for R9, but negative. The elections just happened and both euro and US dollar is continuing to rise. Which means higher expenses and a risk for the companies and their employees. A wanted solution is to find jobs for the unemployed, by an increased production capacity, which will lead to lower salaries and better competitiveness. Competition means that everyone will have to improve. There are many label companies around, but also many customers. This company’s greatest advantage is teamwork and customer service, which gave them a strong position among its customers. They also have their head office and production at the same place, which is appreciated. This is not the case for all respondents. An achievement of this one is when they had to reproduce a whole batch of defect labels but managed to do it, despite harsh financial conditions. That French customer is now one of their best. Low-cost production is an advantage for Turkey compared with Europe, but China and Bangladesh are even cheaper. Own brands would be good for any country. A reconnaissance is that Turkish companies are establishing plants and offices in Bangladesh now. R9 have been exporting for the last ten years, still improving they say. Their products go to Europe and Africa. The production lead time is 5-7 workdays, and good for the customers, as long as they provide all the necessary information. In Europe they are number three as a label producer, well known among its customers. They work with R&D, tries to always improve and become more competitive. A request from this person is to make their staff more professional, for example the ones responsible for production. Salaries are said to be on an average with similar companies, about FDI it could help them to develop with more production capacity as well as new visions, ideas and creations. For now they are cooperating with other companies to be able to produce according to their customers demand.
R10 – A small entrepreneurial company R10 is a small entrepreneurial firm, they are not producing much but do instead trade with basic garments where they also sometimes apply decorations. Digital print is another area. They buy t-shirts and accessories from China, and can sell for double price at the local wholesale market, also on export to Europe, Africa and Asia. Says that most people in Turkey does not speak English, and are therefore unable to order from China. They trade around one container of t- shirts per month. For the future they wish to have a small factory, and maybe serve more European customers, now they are selling mostly to Arab countries. But Egypt introduced high taxes to avoid Turkish goods. Arab customers like striped t-shirts, Russian and Ukrainian does not. R10 established this company ten years ago with one partner, his sisters’ husband. Their business went very well last year, but not this year, the economy is in crisis. Cash flow and credits are problematic, and the customers cannot always pay on time. Some companies even got bankrupted, a few is trying to change their businesses. Sometimes to construction of houses or infrastructure. This is a big part of Turkish economy since last years. Many currencies depreciated compared to USD over the last years, Russian roubles down to half for example. So Russian customers are not buying much from us now. But for a friend in Iran the sales go better, 2000 t-shirts per month. In the future R10 want to expand and make all the steps in production. This will increase our chances to be profitable.
There are too much people and competition in the textile production business now, some people are working 12-14 hours per day. Like Chinese conditions. It made me feel heartbroken to see this. Their salaries are between 300 to 400 dollars per month. Even down to 250 for 16-year- old children. “The rent of a flat can cost 400, so it takes a couple to make it”. We should create our own brands to get out of this situation. A French company is producing dresses here for 7 euros each, and selling in Paris for 200 euros. This company is hosting a 13-year-old Syrian boy who does not go to school, we give him 200 dollars per month for some small jobs, important money for his family. Maybe in five years he can learn the job and establish a new company.
30 years ago Turkey was like China in textile production, a lot of people relocated to Istanbul. Also Kurdish people, they were working very cheap. 20 years ago China started to learn more about the textile industry and improve their quality. Now it is similar to Turkeys, so many of our former customers now rather go to China, Bangladesh and India. Europeans especially to Bangladesh, but in the near future production costs will also be similar, at least with China. For Bangladesh it will take longer. Then some customers should come back because of production and transportation time. Being far away we would sell nothing with our prices. Chinese people sometimes come to try to steal some styles from Turkey. They cannot produce creative things. Turkey should invest in smart textiles, only a few companies does it, the largest ones. Turkey has goals for 2023, they want to become a top 10 economy by increased exports. But with these economic conditions, I think it is a big lie. R10 here actually even compares Erdogan with Hitler in the sense of giving big promises. “He learned how to use the people”. This respondent thinks that the economy will decrease from now until that day rather than increase. And in an international comparison go down to place 20 or 21. We only produce textiles and agriculture, cars we just assemble. With a depreciating currency there is also not time for FDI in our country, maybe when it starts to rise again. But now people consume more than they earn, and the debts are rising. Turkish economy might get worse than Greek. Bangladeshi salaries can be as low as 30 dollars per month, they can produce a t-shirt for half a dollar. Some people went there to import, but Turkey introduced high taxes to avoid it, one dollar per t-shirt. This person is saying that prices here in their country was like Chinas or Bangladesh’s in the past, and sees some similarities about the economic development. Then summing up our talk by sharing some other future plans, what they do now is not profitable and sustainable, an idea is to focus more on import of accessories from China and sell them to Turkish factories. Taking market shares by price competition.
R11 – A fabric producer R11 is a fabric producing company not met in person, but they responded the questions by email. They are family owned, have around 400 employees and a mission to develop their exports. The vision is to combine high technology with the largest capacity while customer satisfaction is their first priority. The respondent thinks that Turkey is an improving economy with hard working and well-educated people, but could work much more on innovation. Their company’s best advantage is a client friendly mentality, their best products are fleece and elastane fabrics. A new spinning mill is their most recent achievement, one that has made the company more competitive. They export to several European countries. Turkeys strengths are said to be fast production, quality and location. This company produces and delivers in 5-10 days to the clients’ warehouses. They do develop their own collections, but does not work with any research. One thing they want to improve is their showroom. There is no interest in FDI here, but maybe some help to increase the exports, which is why they also look for new employees in marketing. Still R11 finds it hard to increase their market share, and does not think that the failure of another company would make so much difference.
Some customers demand environmental related certificates, communication with customers could improve by visiting them, which is something that many other respondents do. Room for a new competitor on the market should require some kind of differentiation. This company produces fabric, around 5% for direct export. From their customers garment production around 40% is exported. Third part logistic firms are used for their transportations, delivering to customers warehouses. Hard work and innovation are key to success according to R11. Comparing with China and Bangladesh, Turkey is halfway to Europe, not only geographically but in every way.
Summary All respondents have been asked similar questions on themes of their businesses, regarding strengths, weaknesses, opportunities and threats. Also about the industry and general economic prerequisites. The organizations speak both on behalf of firms and their own duties. The smaller companies do have a different type of work, but mostly a similar view of the industry and economy. Please note the difference between transportation and lead time, which includes production. Below all answers about question themes are analysed and discussed, extra emphasis is put on R5 as this interview was remarkably long with many suggestions and ideas. 5 Analysis Most respondents do have a genuine background within the industry, the exceptions R9 and R10 are a bit younger. Most company respondents share a common view of competition between local companies, that it is tough but they rather try to help and complete each other. However R2 also says that some firms are closing at the age of five to seven years because of the hard conditions. R6 at the industry association actually think that one’s failure can benefit another. Other shared thoughts are about the types of advantages Turkey has as a country and that FDI is usually not needed in their type of business. The exception is R8 who wants to start new production in the Netherlands, and invite external capital for an international retail business. Also R9 to increase domestic production capacity. R1 and R2 are open for ventures, for example with brands, but not R3 and R5. They are already big enough not wanting to risk it, just as they respond about not needing any FDI, “we have our own resources” says R3. This is as well the case for R5 who mentions quality and growth control as reasons to make their own investments only. R3’s company is alone among the respondents to have both own brands and sell at the domestic market. R6 explains that ventures are rare because many companies are family owned and prefer to remain independent. R6 also says that the company culture around this might, and in their opinion also should change, which could open for more ventures, merges and acquisitions. Something that R7 the investment agency encourages. But this goes partly against the theory of competitiveness, which rather encourages rivalry. Yet Turkey have so many small companies in this industry, so it might to some extent be a natural outcome that can strengthen the position of those remaining. Also with both startups and bankruptcies taken into account, competition seems to be strong always. One reason to be big enough according to theory of competitiveness, is for bearing own R&D costs, this is supposed to enhance individual firms. R1, 3, 5 and 8 are said to be strong in this area, also R9 does work with it. R2 as well, it is here mentioned as innovation in fabrics and technology. R4 is simply talking about to develop these two areas, fabric also because the cotton is expected to finish at some point. R11 is developing fabric collections. Yet many respondents also mention hard work as a receipt for success. While commitment cannot be devalued, there seems to be room also for productivity increment by technology investments and automatization. Something that R3 prioritizes. Value chain integration is an advantage recognized at R4. Their examples are involvement in fabric production and also their customer communication which can be developed by experience, since they are also customers of their suppliers.
Even R5 is involved in fabrics and able to sell it instead of garments to customers who want cheaper production in for example Romania. Working with big customers in Europe gives these firms a general advantage upstream their supply chain, where they can enjoy low prices on large orders of material and accessories. Brand development would be a way to expand also downstream this chain and come closer to the end customer. Something that might as well contribute to improved communication. R2 mentions regarding competition that knowledge can also be shared with other companies through their customers. Not mentioned but likely used by the respondents are some kind of CRM systems for their communications. The following citation shows its relevance and utility. “The advantage of CRM is that it provides information that aids market segmentation as we can better create clusters of customers based on profitability and other factors. It also helps to predict customer behaviour and create customized customer communication. Therefore, CRM plays a critical role in SCM” (Sanders 2012). Market segmentation is mentioned by R4 and R5 as they are specializing in certain market sections due to competition. This can also be seen in the light of R3 and R5 telling that managers in big companies know each other, and sometimes have dinners together. Communication in terms of internet and globalisation is reason for increased international competition says R5.
Some companies, including R3 and R5 points out that they are careful about safety and environment, more than what the customers are demanding. And that it is because of humanity, everyone also say that they pay above the minimum wages. But mostly they are investing in a good working environment, for example to avoid injuries. R4 also do have some thoughts about greener transportations. These are examples of what is important for a sustainable supply chain management, SSCM. Other examples are R2, R4 and R5 engagement in their staff. This applies as well to the resource based view theory. In SSCM also the principle and reason of community relations and development (Sanders 2012).
Turkey’s textile industry is said to be fully developed, like the one in China, while Bangladesh is still growing. Also to provide just a moderate return on investment, around 5% according to R5. This gives reason for investors to look elsewhere, for example at other Turkish industries or textiles in some low-cost countries like Bangladesh, where Turkey is actually investing according to R9. Also in eastern Europe says R6, Georgia, Bulgaria and Romania are examples, together with Iran and Bangladesh. R5 and R6 both describes how textiles has been an early investment for some businesspeople who later went to other industries that required larger sums and might have been more profitable too. Retail is one such attractive area.
SWOT The SWOT analysis, described above in the theory chapter, is here partly a unification of industry and country. Every unit of analysis in this case is closely conjoint with and dependent on the context. Firm specific characteristics are described just above and in the findings of each interview. Here this information is used to represent business and context. Starting with the garment industry; its strengths are that it is well developed in terms of technology and competence. Also that they value environment, health and security. Their need of capital investments can usually be financed by own funds. Many companies focus on customer relations and are strong in this area, as well in search of new customers. Also important is the access of raw material where for example Turkey grows cotton domestically. Last but not least there is long experience and proven quality. A weakness is often to be highly dependent on customer preferences, which might limit the firms’ own originality. Another the management which is often family based and sometimes as a consequence less professional or strategical. There is a perceived lack of ability to initiatives for further long term development.
Research and development are ongoing, but largely dependent on customers demand and request together with law, both regarding collection and production. Yet some opportunities have shown up, including smart textiles and nano materials, which would need strategical focus and large investments to be produced. Sourcing is generally associated with good opportunities as most fabric and accessories can be produced domestically. Brands. A threat is the by some informants anticipated decline in growth, and also currency devaluation which can make trade less profitable. But there are also threats from other countries which industries can produce cheaper, while learning to improve their quality. And as well those who have a more specific development and investment plan, regarding nano technology for example. Other nations favorable domestic conditions with special taxes and subsidies is a threat on the country scale, but might lower their industries’ competitiveness according to theory. As a country, Turkey’s strength is its location and proximity to both east and west. This geographic position promotes both lead times and visits. As well in terms of both culture and fashion similarities with Europe, all respondents say that customer communication is an advantage against competing countries.
Weaknesses are a higher price due to the higher salary level than most competitors. Opportunities would be to invest more specifically in brand development, also smart textiles and further process improvement, including resource savings. Threats are macroeconomic factors like currency changes. Also the competing countries’ respective ability to develop further, and compete with both price and quality. Possibly a perception gap could also be threatful. Factory respondents are experiencing textiles as an important part of the country’s economy, while the organizations are more clear with its limited ability to contribute nationally. By overcoming these weaknesses, mentioned threats could possibly be fought more effectively, using strengths to seize opportunities would probably also need a reduction of weakness. In the sense of improving strategical focus and stronger management. Running such prospects are of course also associated with a certain risk, which someone must be able to measure and take. Using the regular strengths of experience, quality and service for the basic opportunity of finding new customers is much less risky in the short term, but probably also less rewarding. According to diamond model theory, seeking stability will lead to decreased competitiveness.
Goal formulation is a tool which can follow the SWOT analysis, in this case goals for the garment companies could be to reach a certain amount of new customers in a given timeframe. As the theory suggests these goals should be structured, quantified, realistic and consistent. More ambitious targets could then instead be to establish partnerships for brand development, hire or educate new managers for this purpose, and consolidate to strengthen market positions.
To follow the diamond model, R5s initial idea would be an appropriate opportunity or target. Factor and demand conditions connects also to the current situation. The ideas of related and supporting industries, together with strategy, structure and rivalry points especially at the cluster formation. Which is what this respondent suggests implementing, with some help from the government. It would certainly need a lot of support and take a long time, which makes its utility questionable. Such environments being built up from scratch is a different thing, but this could possibly be done while the current industry is still running, as a transformation and expansion process. Speaking on behalf of this project is the present industry structure in need of reform, with seven thousand, often family owned companies. Typically too small to perform own research and development. Which relates to all four determinants of the diamond. As such a comprehensive and revolutionary idea it is reviewed here separately from SWOT and associated goals. Some implications are to be covered in the discussion. The diamond model says that the role of government should be indirectly supportive. R2 is asking for more studies and projects to help the industry forward. R5 for education of designers and lower tax.
6 Discussion The purpose of this thesis is to understand something about the Turkish textile garment industry by interviewing a few of its managers. For example about their perception of competitiveness. Considering the rate of theoretical saturation attained, together with some confirming words from the industry organization. The firms’ situation, their strengths, weaknesses, opportunities and threats seems to be true also for other companies of the same size and type. As well regarding their opinions about what the industry contributes with, and how it can be developed. Yet they are individual informants and the method in use does not allow generalization. However with thick descriptions, transferability. In this regard the purpose can be seen as fulfilled, but also rather narrow. While it might seem to aim for more than it actually can and should do, it is important to point out that a broader view or meaning of this result only comes with a reader’s interpretation. But this way, it can be used for others as a source of information.
Many good ideas and intentions are mentioned and discussed by the respondents, time will tell what is actually going to be finalized. Some require more work, like a complete rearrangement in sectorial clusters, processes have already started. If this were done, moving to Anatolia would create space in the Istanbul region for other industries. Perhaps more technology intensive ones, better suitable for the salary level of this area. R7 also discusses this scenario. If not fulfilled it has highlighted a structural issue that can also be handled in a perhaps smaller scale. One of the other suggestions is to merge smaller textile firms into larger ones, at least by management. This could be more efficient, instead of them all working alone unable to afford much R&D for example. Benefits of scale could be possible if these often family owned firms became more professional, or corporate as R4 said. As a measure to achieve improved international competitiveness. In theory it should be important to welcome domestic rivalry, in practice the family firms willing to help rather than conquer each other is maybe rather a hold back for this kind of development. Also larger firms looking for consolidation might welcome this change, while smaller ones may on the other hand fear a rationalization of staff. Even the big companies could oppose, as this would mean a change in their traditional business environment. But as suggestion it might be a way to welcome development by rivalry. With this view on competition it is also interesting to remember R5s explanation of how they and their competitors are helping each other to create a market for certain customers. Buying firms which establishes an office where the supply is stable. This is not an unusual way to deal with sourcing, but it connects with an unexpected experience of merchandising in Turkey. It is a common thing to locate one type of store, for example with lamps, all together on the same street. Very convenient for the lamp buyer, for the stores they might work rather as one entity instead of on their own. But this structure can also be compared with a cluster. While being a case of personal preconception that should not be hidden away, it also provides an important example of local business mentality.
R5 also tells that some regulations have been imposed to align with the European union, but causes problems when the number of employees as a consequence are controlled to avoid extra costs. While other countries can compete easier with less respect to people’s rights. Despite this negative consequence things are also getting better in terms of sustainability. R6 mentions improvements regarding water treatment, which R2 have achieved. Also gender salary gap, child labour and general safety has become better. Economically GDP growth has been higher than the forecast of R5, average between 2015 and 2018 is nearly 4,9%. But export figures are stable over the last years and imports are rising. In PPP adjusted GDP Turkey reached one step up to place 13, passing south Korea. But above lies Italy, Mexico and France with high numbers, so spot 10 seems far away. As R7 said, it will depend also on what the other countries are doing.
According to R6 the economic development in Turkey has been more closely related with the textile industry before, especially during the 70s to 90s. Also since then but less as other industries grew in importance. Competition means that everyone have to improve says R9, the label producer. But R10 the entrepreneurial firm also sees that it makes small companies suffer, that some people work up to 14 hours per day. As well R4 realizes this issue. Says that it can happen in both Turkey and other countries. 7 Conclusion So the textile sector is important for the Turkish economy when it comes to employment, and to some extent their export. Both of these provide income and stability, but does not characterize a focus area which will drive the economic development forward. Just nano technology and other high-tech involvement seems to have this potential capacity. What the companies are doing is to continue to develop their quality and customer focus skills to differentiate from low labor cost countries, where Bangladesh is sometimes described as unable to reach Turkeys level of quality and communication. Others say that this is just a matter of time. According to Rahman and Sayeda (2016) performance, relationship and stability improvements comes with communications, also in Bangladesh. If and when they reach, Turkey will need more than quality, hard work and innovation to differentiate. Clusters in Anatolia can contribute to efficiency and competitiveness, but still there is a wage gap which will make Bangladeshi products cheaper for a long time ahead. Above in the previous chapter some suggestion topics are discussed, but based on the questions this is what can be concluded.
The view of these managers is that they are struggling to keep their businesses going and growing in this tough business environment. Improvement is primarily suggested through more research and development in process, material and design. Together with enhanced communication and relationship building with customers. Competition is rather taken in terms of quality and service than price. These factors will probably sharpen the firms’ current activities, but even more will be required in a longer perspective. Price pressure and other countries’ development is a perceptible fact for all of these companies. Competition inside the industry forces the companies to perform their best, while other countries are often perceived as the real threat. For this reason, the business aims to focus on their competitive advantages and attract the customers this way.
The state could help companies with initiatives to improve their competitive power, such as education and energy savings. Also with support to carry out a long term strategy. Infrastructure is already a priority, but much more does not seem to be anticipated from the government. Their priorities are rather the more investment intensive industries which are believed to contribute more to the nation's development. Areas that can also bring FDI to the country. Smart textiles and nano technology would be applications which could bring the textile industry back on this agenda, and such long term strategical initiatives are requested by the industry. A few of the largest firms are already working in this field. General economic conditions affecting trade and customer demand are also something for the responding companies to follow and tackle. China and Bangladesh are often considered as competitors, together with north Africa, eastern Europe and other nations in Asia. Sometimes Turkey also invest in and work together with these countries. China can compete about every order from Europe and Turkey tries to stand out in quality, lead time and service. Also against Bangladesh, but yet only regarding the simpler types of garments that they are able to produce. What many companies and also the organizations point out as a game changer is own brands, that would be more profitable to produce but also require more competence, investments and risk taking.
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