i Hacettepe University Graduate School Of Social Sciences Business Administration Management and Organizational Behavior A STUDY ON COMPETITIVE AND INTERNATIONALIZATION STRATEGIES OF TURKISH CONSTRUCTION COMPANIES OPERATING INTERNATIONALLY Levan Bolkvadze Master’s Thesis Ankara, 2017 ii A STUDY ON COMPETITIVE AND INTERNATIONALIZATION STRATEGIES OF TURKISH CONSTRUCTION COMPANIES OPERATING INTERNATIONALLY Levan Bolkvadze Hacettepe University Graduate School Of Social Sciences Business Administration Management and Organizational Behavior Master’s Thesis Ankara, 2017 v ACKNOWLEDGEMENTS I want to express my highest gratitude to Asst.Prof.Dr. Özge TAYFUR, to my thesis supervisor for her tireless work and for her limitless support on each stage of working process. Want to mention her tolerance and brave character, deciding to become my thesis supervisor and leading it professionally. I am very grateful. I also want to express my special gratitude to the Embassy of Georgia to the Republic of Turkey, to the Ambassador of Georgia Irakli Koplatadze, to Consul Makvala Kharebava, to counselor Achiko Sudadze and to H. Çağla Mazlum – the regional coordinator of Foreign Economic Relations Board for their support revealed during the practical section of my research. Thank you for helping and supporting me while establishing relations with Turkish construction companies and while making interviews with them. This would be impossible without you. Of course I want to express my endless thankfulness to my family, to my mother and to my father for their encouragement, for their support and for their chance, without which I wouldn’t be able to obtain my degree. And at last, special thanks from me to my lovely wife, to Natia Chaligava, who was supporting and encouraging me all the time during my dissertation works. Love you and wish you a best of luck in life and in your dissertation too. vi ABSTRACT Bolkvadze, Levan. A Study on Internationalization and Competitive Strategies of Turkish Construction Companies Operating Internationally. Master's thesis, Ankara, 2017. Technological developments and other rapid changes in the business environment made competition more intense and only the firms having competitive advantage can survive under these conditions. The competition in domestic markets has become one of the main motives for expanding the operations to other countries and markets. Thereby understanding how companies differentiate themselves from their competitors, why and how they expand their operations in international markets has become important issue nowadays. The main objective of this research is to study the competitive and internationalization strategies of Turkish international construction companies in domestic and international markets. Considering the aims of the study, purposive sampling was used such that only the companies having operations outside of Turkey were included in the study. Data were gathered from 10 international contractors through in-depth interviews. The interview questions were prepared in line with the literature about competitive and internationalization strategies Data were analyzed using descriptive and content analyses techniques. Results demonstrated that six of the participant companies follow the differentiation strategy, one of them follows cost leadership strategy, one of them follows cost leadership and differentiation strategies at once and one company follows the focus strategy to differentiate themselves from their competitors in domestic markets. In international markets, however, four of ten companies use differentiation strategy, another four of them uses both differentiation and cost leadership strategies and remaining two companies use all of the competitive strategies (i.e., differentiation, cost leadership and focus strategies) at a time. It is noteworthy to mention that majority of the investigated companies prefer a joint-venture mode for operating on abroad country markets. Looking at the results of this study, contractors are suggested vii to make use of cost leadership strategy more and follow it through backward integration. Key words: construction sector, competitive strategy, internationalization strategy, entry modes. viii ÖZET Bolkvadze, Levan. Uluslararası düzeyde çalışan Türk inşaat şirketlerinin uluslararasılaşma ve rekabetçilik stratejileri üzerine bir çalışma. Yüksek lisans tezi, Ankara, 2017. İş dünyasındaki teknolojik gelişmeler ve diğer hızlı değişmeler rekabeti daha yoğun hale getirmekte ve bu koşullarda sadece rekabetçi avantaja sahip olan firmalar faaliyetlerine devam edebilmektedir. Yerel pazarlardaki rekabet, başka ülke ve pazarlara faaliyetleri genişletmenin en önemli nedenlerinden biri olmuştur. Bu nedenle, günümüzde firmaların kendilerini rakip firmalardan nasıl farklılaştırdıklarını anlamak, uluslararası pazarlarda faaliyetlerini nasıl ve neden genişlettiklerini anlamak önemli bir konu haline gelmiştir. Bu araştırmanın esas amacı, Türk uluslararası inşaat şirketlerinin yerel ve uluslararası piyasalarda kullandıkları rekabetçi ve uluslararasılaşma stratejilerini incelemektir. Çalışmanın amaçları göz önünde bulundurularak, amaçlı örnekleme yapılmış, bu çerçevede sadece Türkiye dışında da faaliyetleri olan inşaat firmaları çalışmaya dahil edilmiştir. Veriler 10 uluslararası inşaat firmasından derinlemesine görüşme tekniğiyle toplanmıştır. Görüşme soruları rekabet ve uluslararasılaşma stratejileri ile ilgili literatür göz önünde bulundurularak oluşturulmuştur. Elde edilen veriler betimsel ve içerik analizi kullanılarak analiz edilmiştir.. Elde edilen sonuçlara göre, incelenen 10 şirketten altısının rekabet stratejilerinden farklılaştırma stratejisini, birinin maliyet liderliği stratejisini, birinin farklılaştırma ve maliyet liderliği stratejilerinin birlikte ve diğerinin odak stratejini takip ettiği tespit edilmiştir. Uluslararası pazarda ise on şirketin dördünün farklılaşma stratejisini, diğer dördünün farklılaştırma ve maliyet liderliğini bir arada kullandığı ve geri kalan iki şirketin ise bütün rekabet stratejilerini ( farklılaşma, maliyet liderliği ve odak strateji) kullandıkları görülmüştür. Ayrıca, araştırılan şirketlerin çoğunluğunun yurt dışı ülke pazarlarında faaliyet göstermek ve bu pazarlara girmek için ortak girişim yöntemini tercih ettiği bulgusundan bahsetmekte fayda vardır. Bu çalışmanın sonuçlarına bakıldığında inşaat şirketlerinin maliyet liderliği stratejisine vurgu yapmaları ve geriye dönük entegrasyon yoluyla takip etmeleri önerilmektedir. ix Anahtar kelimeler: Inşaat sektörü, rekabet stratejisi, uluslararasılaşma stratejisi, giriş modları x TABLE OF CONTENTS ACCEPTANCE AND APPROVAL...........................................................................i DECLARATION.........................................................................................................ii YATIMLAMA VE FİKİR MÜLKİYET HAKLARI BEYANI...........................iii ETIK BEYAN.............................................................................................................iv ACKNOWLEDGEMENTS........................................................................................v ABSTRACT................................................................................................................vi ÖZET........................................................................................................................ viii TABLE OF CONTENTS............................................................................................x LIST OF TABELS....................................................................................................xiii LIST OF FIGURES..................................................................................................xiv INTRODUCTION…………………………………………………...........................1 CHAPTER 1: LITERATURE REVIEW………………………………..................3 1.1. Corporate Level Strategy.........................................................................4 1.2. Competitive Strategies..............................................................................7 1.2.1. Five Competitive Forces..............................................................7 1.2.1.1. Threat of Entry..............................................................8 1.2.1.2. Rivalry among Existing Firms....................................11 1.2.1.3. Threat of Substitute Products......................................12 1.2.1.4. Bargaining Power of Buyers.......................................12 1.2.1.5. Bargaining Power of Suppliers...……………...................13 1.2.2. Three Generic Strategies..........................................................13 1.2.2.1. Cost Leadership Strategy............................................14 1.2.2.2. Differentiation Strategy..............................................15 1.2.2.3. Focus Strategy............................................................16 1.3. Internationalization Strategy.................................................................17 1.3.1. Country Selection Process………………………….................21 1.3.1.1. Opportunities……………………………..................23 1.3.1.1.1. Product Demand in the Host Country..........23 xi 1.3.1.1.2. Resource Availability..................................23 1.3.1.1.3. Cultural Forces…………………….............24 1.3.1.1.4. Market Size, Economic, Financial Forces...25 1.3.1.1.5. Easiness and Compatibility of Operation....27 1.3.1.1.6. Country Infrastructure.................................27 1.3.1.2. Risks……………...……………………………...................27 1.3.1.2.1. Financial Risk and