Turkey's textile industry and an emerging fashion entrepreneur's expansion strategy

Entrepreneur

Turkey has long been a major player in the global textile business. The country built a competency in the industry during the Ottoman Empire and continue to this day. Turkey is one of the world's leading producers of cotton and the country is now embarking on a path to create a diversified textile industry (Saba, 2013). Turkey's geographic position situates it well for sales around the region, from Europe to Russia to Iran and the Middle East. The Turkish government has also invested in creating a fashion hub in Istanbul to help increase the degree to which the Turkish textile industry is vertically integrated (ITKIB, 2010).

Turkey is a major emerging economy. Situated at the crossroads between Europe and Asia, it has a population of 80 million. Turkey's GDP in 2012 was $1.125 trillion, such that it ranks 17th in the world and 6th in Europe. The country's economy still has a high level of government involvement, and agriculture is a relatively significant portion of the GDP given the development level of Turkey. The GDP has experienced strong growth up until 2012, when growth slipped to 3%.

The importance of textiles to Turkey is important, and has become part of the Turkish culture. The government recognizes the importance of the industry and has proven willing to invest in its development, not only in terms of trade policy but also through spending to vertically integrate the industry. Economically, textiles are worth around $5.4 billion to the Turkish export market, and there is strong domestic consumption as well (IKTIB, 2010). Overall, the conditions in the Turkish textile industry are favorable. Factor costs are significantly below what they might be in the EU, but the quality is just as high. This gives Turkey tremendous competitive advantage that it leverages in order to become a major textile supplier to the EU in particular.

The entrepreneur is working in the textile business, designing denim jeans and other fashions. The clothes are sold in fashionable boutiques, primarily in Istanbul but also in Ankara and Izmir. The entrepreneur has recently begun selling Europe, and is making inquiries about the Russian market as well, since there appears to be significant growth potential in both of these export markets.

Interview

Q: Thank you for agreeing to meet with me. How are you? How is your business?

A: I am well. I just had my first child, a daughter. I'm very excited, but I do not sleep as much as I used to. But business is going very well. I'm working with my designers to finalize the fall season right now. We're about double from last year so it is quite hectic.

Q: The GDP is growing much slower than that. What are you doing right?

A: We're small. That helps. But we also have a lot of belief in what we are doing, that what we are doing is going to help change how people perceive Turkish clothes.

Q: This success -- where did it come from?

A: A combination of factors. I grew up near Gaziantep, and so I was exposed to how big the cotton business in this country is. I went to school in Germany, because my father lived there for a while. I saw a market there, and when I came back to Turkey I wanted to find a way to get involved. I was encouraged by the relative weakness of the lira, and I thought that it would be best for my future to run my own business. That way, if the economy struggles, I still have control over my own fate. I knew people in Istanbul who wanted to get into fashion design, and they were attending school. The government is funding a school for designers, to make sure that they stay in Turkey. But my friends, they are wonderful designers, but they are not business people. So I decided that is what I would do.

Q: So you decided to start a clothing company? How could you afford that?

A: We started very small. I had the two designers working on the clothes, and they had their mothers and sisters sew the clothes by hand. It was very small. Everybody worked from home the first season. I rented a tiny shop in Cihangir, the sort of closet-sized shop you might have found an old kahvehane (ed. A Turkish coffee stall -- room for a samovar and a couple of stools) in. So we had very little capital, just what I could borrow from my friends and family. We all had other jobs. I worked as an assistant manager at a restaurant on Istiklal, trying to learn a few things about businss like how to manage the books. After the first season, I went to the bank to get a loan. That did not work out well, but I went back after the second season and I got a loan. We expanded, and now four years later we keep expanding.

A: And what do you do -- why are you successful?

Q: We have a good quality, but the price is right, too. Our designers are excellent, but we can make their designs quite affordably. We have a cost advantage over clothes of equal quality that are made in Europe. In Russia, it is mostly a quality advantage -- their basic clothing staples are not that great. You have to view each international market as unique. That way, if you try to tailor your strengths to each market, you will be more competitive. This is not a good industry for companies that are trying to be second best. We expect to compete differently if we go to a smaller city in Turkey, much less if we go to another country.

Imagining

If I ran a clothing business in Istanbul I would likely begin to think about my strategy. There are many niches within the market, and what works in Istanbul might not translate to smaller cities in Turkey where there is less money and people are less fashionable. The key to success is to understand your target market and how you can appeal to it. I would also be wary of embarking on an international strategy before I had conquered the domestic market. There is always a tradeoff between opportunity and spreading oneself thin. He has lived in Germany so knows the culture a little bit, but the experience of trying to sell over there is probably a bit daunting.

I would also evaluate my product mix and my positioning. The quality at a low price positioning is great, but the clothes must live up to the quality part. If friends and family are doing the production that is probably not a sustainable model. This brings us to the third recommendation. He needs a plan to scale up. He is already exploring foreign markets without thinking it through too much, but eventually he will need to professionalize the business. Too often he is at his own store, which takes away from the time he could use to build the business. Finding ways to delegate authority is an important thing for entrepreneurs when they grow. When a company is in the beginning or high growth stage of the business cycle, there comes a point when the founder must let go some control so that the business can be more professionally run.

The current business model is somewhat aimless, but oriented towards high end positioning. An alternate direction is that the business can focus on becoming a volume supplier. The designer is capable of having a mainstream touch, and Turkey is a great place to follow a high-volume, low-margin business model for export. This would leverage the low cost of production and the effort that the government puts into creating export opportunities. At this point, as an unknown brand, he still has the capability to go in that direction.

Works Cited:

CIA World Factbook. (2013). Turkey. Central Intelligence Agency. Retrieved April 29, 2013 from https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html

ITKIB. (2010). Turkish textile industry. stanbul Tekstil ve Konfeksiyon "hracatc" Birlikleri Retrieved April 29, 2013 from http://www.itkib.org.tr/english/about/sectors/textile/textile_info.pdf

Saba, G. (2013). Global marketing -- Turkish textile industry and its competition power. Ege University. Retrieved April 29, 2013 from http://www.slideshare.net/GamzeSaba/global-marketing-turkish-textile-industry-and-its-competition-power