Facilitating FDI flow to Turkey by
understanding Turkish Culture
Prof. Dr. Yeşim Toduk
November 25, 2011
1
FDI: Theory and Practice
CULTURES
& FIRMS
BEHAVIOR PATTERNS
Prof. Dr. Yeşim Toduk
November 25, 2011
2
Factors Relevant to Selecting
Locations for FDI
Cultures and Investor’s
perceptions as a person
Prof. Dr. Yeşim Toduk
November 25, 2011
3
Internationalization
Behavior of Firms
• Key issue in internationalization of firms is the need to
understand and adapt to cultural characteristics of host
country.
• Along with cultural differences in language, business
practices, market structures, legal and political systems, level
of economical development, human resources availability.
• There is also PSYCHICDISTANCE.
Prof. Dr. Yeşim Toduk
November 25, 2011
4
Internationalization
Behavior of Firms
• There is also a psychological barrier towards some markets by the
decision maker(s) which is only the perceptions, not REAL. It is
called in the literature as Psychic Distance.
• It is believed that, it has preconditioning of cultural distance roots.
Key reasons for Turkey’s underperformance of attracting FDI was
lack of information and poor perceptionse.Eliminating this psychic
distance is based on personal visits to country, starting exports,
learning through experience, meeting of similar professionals with
similar backgrounds, who understand their culture, builds trust as a
person and advisor.
• Hofstede’s work -related values based framework for national
culture will be used in comparing the Turkish culture (host country)
with the countries the investment is sought after.
Prof. Dr. Yeşim Toduk
November 25, 2011
5
What is Work-Related Values Based
Framework Culture?
A system of values and norms that are shared
among a group of people and that when taken
together constitute a design for living.
Hofstede
Prof. Dr. Yeşim Toduk
November 25, 2011
6
Understanding National Cultures
Five dimensions of National Culture:
1- Power Distance
2- Individualism/Collectivism
3- Masculinity/Feminity
4- Uncertainty Avoidance
5- Long/Short Term Orientation
Prof. Dr. Yeşim Toduk
November 25, 2011
7
Power Distance
PDI that is the extent to which the less powerful
powerful members of organizations and institutions
(like the family) accept and expect that power is
distributed unequally. This represents inequality
(more versus less), but defined from below, not from
above. It suggests that a society's level of inequality
is endorsed by the followers as much as by the
leaders.Power and inequlity are extremely
fundamental facts that will be aware that 'all
societies are unequal, but some are more unequal
than others‘
Large Power Distance
Employees afraid of bosses
Depend on their bosses
Large emotional distance
Small Power Distance
Approach and challenge bosses
Bosses consult with staff
Small emotional distance
Prof. Dr. Yeşim Toduk
November 25, 2011
8
Individualism/Collectivism
Collectivism, that is the degree to which individuals are inte-grated into
groups. On the individualist side, societies in which the ties between
individuals are loose, everyone is expected to look after him/herself
and his/her immediate family. We find societies in which people from
birth onwards are integrated into strong, cohesive in-groups, often
extended families, which continue protecting them in exchange for
unquestioning loyalty. The word 'collectivism' refers to the group, not
to the state. The issue addressed regarding all societies in the world.In
collective cultures, people are supposed to look after them in exchange
for loyalty and in individualistic cultures they look after only
themselves and the immediate family.
Individualism
Interests of the individual outweigh the
interests of the group
Individual is independent
One must look after himself/herself
Collectivism
Interests of the group outweigh
the interests of the individual
Group is one’s identity
Group=protection
Prof. Dr. Yeşim Toduk
November 25, 2011
9
Masculinity/Femininity
Femininity, refers to the distribution of roles
between the genders. Women's values differ less
among societies than men's values,men's values
from one country to another .The assertive pole has
been called 'masculine' and the modest, caring pole
'feminine'. The women in feminine countries have
the same modest, caring values as the men; in the
masculine countries they are somewhat assertive
and competitive, but not as much as the men.
Masculinity
Social gender roles are defined
Men are assertive & tough
Women are modest & concerned with
quality of life
High difference between the genders
Achievement of visible and symbolic
organizational rewards
Femininity
Social gender roles overlap
Men and women are both modest &
concerned with quality of life
Little difference between genders
Emphasize relationships, concern for
others, and the overall quality of life
Prof. Dr. Yeşim Toduk
November 25, 2011
10
Uncertainty Avoidance
Uncertainty avoidance deals with with a society's tolerance for
uncertainty and ambiguity; it ultimately refers to man's search for
Truth. It indicates to what extent a culture programs its members to
feel either uncomfortable or comfortable in unstructured situations.
Uncertainty avoiding cultures try to minimize the possibility of such
situations by strict laws and rules, safety and security measures, and
on the philosophical and religious level by a belief in absolute
Truth.People in uncertainty avoiding countries are also more
emotional, and motivated by inner nervous energy. The opposite type,
who are more phlegmatic and contemplative are more tolerant of
opinions and relativist.
Strong Uncertainity
Employees in high uncertaintyavoidance cultures tend to stay with
their organizations (Japan, Greece, and
Portugal)
Weak Uncertainity
Those from low uncertainty-avoidance
nations are more mobile (United
States, Singapore, and Denmark)
Prof. Dr. Yeşim Toduk
November 25, 2011
11
Long/Short Term Orientation
Long-Term Orientation is the fifth dimension of was found in a
study among students in 23 countries around the using a
questionnaire designed by Chinese scholars .It can be said to
deal with Virtue regardless of Truth. Both the positively and
the negatively rated values of this dimension are found in the
teachings of Confucius, however, the dimension also applies to
countries without a Confucian heritage.
Long Term Orientation
Values associated are thrift and
perseverance
Ordering relationships by status and
observing this order
Having a sense of shame
Short Term Orientation
Values associated are respect for
tradition, fulfilling social obligations,
and protecting one's 'face'.
Personal steadiness and stability
Reciprocation of greetings, favors,
and gifts
Prof. Dr. Yeşim Toduk
November 25, 2011
12
Hofstede Value Dimension Scores
Turkey
China
Germany
Hong Kong
India
Italy
Japan
SouthKorea
Spain
United Kingdom
United States
Arab World
Power Distance Index Individualism Masculinity Uncertainty Avoidance Long Term Orientation
66
37
45
85
80
20
66
40
118
35
67
66
40
118
68
25
57
29
96
77
48
56
40
61
52
80
66
70
54
46
95
92
80
60
18
39
85
75
54
48
39
80
35
89
66
35
25
40
91
62
46
29
80
38
52
68
Prof. Dr. Yeşim Toduk
November 25, 2011
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Power Distance and Uncertainty
Avoidance
Uncertainty Avoidance
Low
High
4
*UK
1
*USA
*Hong Kong
*China
*India
*Arab World
*Germany
*Italy
*Spain
3
*Turkey
*South Korea
*Japan
Low
Power Distance
Prof. Dr. Yeşim Toduk
2
High
November 25, 2011
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Individualism and Power Distance
Low
4
1
*South Korea
Individualism
*China
*Hong Kong *Arab World
*Turkey
*Japan
*India
*Spain
*Germany
*UK
*Italy
High
*USA
3
Low
2
Power Distance
Prof. Dr. Yeşim Toduk
High
November 25, 2011
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Hofstede Cultural Dimensions
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions for Turkey
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. European Countries
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. France
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Germany
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Italy
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Spain
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. United Kingdom
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Culture Dimensions
Turkey vs. Asian Countries
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. China
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Hong Kong
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. India
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Japan
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. South Korea
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Arab World
Arab World
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. United States
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. Canada
Prof. Dr. Yeşim Toduk
November 25, 2011
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Hofstede Cultural Dimensions
Turkey vs. World Average
Prof. Dr. Yeşim Toduk
November 25, 2011
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Target Company Selection Process
Reactive Approach
Proactive Approach
Prof. Dr. Yeşim Toduk
November 25, 2011
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Reactive Approach
• If Foreign Investor(s) acts helpful but reactively answering the general
interest of investors and multipliers.
• Typical approaches used with passive market selection are inquiries from
foreign firms increasing their commitment to Turkey or through contacts
established by indirect media used by Foreign Investor(s) in order to
attract the attention of foreign prospects (customers):
• Participation of business conferences, investment exhibitions, investment
missions, trade missions, taking part in directories,
• Use of media – general PR campaign, specific industry catalogues,
brochures, factsheets, newsletters,
• Foreign Investor(s) Website, other state websites
Prof. Dr. Yeşim Toduk
November 25, 2011
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Proactive Approach
• Foreign Investor(s) is active in initiating the selection of foreign markets to
open offices, and the further industry and customer segmentation of
these markets. Proactive approach is more systematic and formalized,
Foreign Investor(s) representatives with international experience and
access to international market information (ie- using internet to access
potential investors’ web sites, previous investors network, exporters
network, other resources- social media?) have KPI targets to reach.
• Focused Marketing; ie. Industry Targeting and Segmenting, Company
Targeting and Approaching, focused calling-mailing
• Critical meetings – Cultural Factors (whom to meet?), presenting right
material at the right level. Connecting and networking for RESULTS
• Systematic follow ups, REPORTING
Prof. Dr. Yeşim Toduk
November 25, 2011
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Proactive Approach
• Industry Targeting :
– Segmenting the sector
• Company Targeting :
– Identification of potential investors:
•
•
•
•
Size, performance of company, R&D intensity, exports to Turkey
Active FDI investors (Yes/No?)
Explicit international or globalization strategy (yes/no?)
Accurate contact details – right level of decision makers, the staff –ie. Talk
to CEO Assistant, Turkey Region belongs to MENA? CEE?Europe?
Prof. Dr. Yeşim Toduk
November 25, 2011
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Proactive Approach
• Company Targeting (continued):
– Relationship building with target company executives (Regional VP).
•
•
•
•
Bring the business relation into the trusted advisory role
Positively influence the psychic barriers to Turkey
PEOPLE make decisions
Presentation – Competitive advantages of investing in Turkey and how
Foreign Investor(s) assists and facilitates.
• Send related materials regularly ie. Corporate Governance regulations
• Organizing networking events: sector conferences, national celebrations
• Using existing investors as Ambassadors
Prof. Dr. Yeşim Toduk
November 25, 2011
38
Worldwide FDI Flows
Prof. Dr. Yeşim Toduk
November 25, 2011
39
Strengths of Turkey
Largest economy in the region with
strong long-term growth
Strategic position for
trade and logistics
Bridge between East & West
Russia’s access to South
75m people, 28 years of avg. age,
ongoing urbanization
Young and growing population
Entrepreneurial corporate culture
150 years of market economy
with 70% in SMEs
Trained by
by multinationals
multinationals
Trained
over several
several decades
decades
over
World-class management talent
350% USD GDP growth in the last
20 years
Resilienttotoeconomic
economiccrisis
crisis
Resilient
Consumer and corporate unlevered,
yet liquidity issues
Low-leverage in the economy
Structural reforms in last 9 years with
guidance from IMF and EU
Improved macro fundamentals
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6th in Europe, 17th globally; poised to
become 4th in Europe and 10th globally
Prof. Dr. Yeşim Toduk
November 25, 2011
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Large and Growing Economy
Prof. Dr. Yeşim Toduk
November 25, 2011
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World-Class Management Talent
Prof. Dr. Yeşim Toduk
November 25, 2011
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References
1) www.geert-hofstede.com
Prof. Dr. Yeşim Toduk
November 25, 2011
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