Country analysis framework and methodologies

Country Analysis

Our company is considering two markets to enter in the near future. Italy represents a strong established world market, while Turkey represents a developing market with significant potential. This paper will analyze the characteristics of each market and make a determination as to which market is best for our company. A market entry strategy will then be outlined.

Italy is one of the world's leading economies. Italy has 58 million people, making it one of the largest nations in the developed world. The country's GDP (purchasing power parity) ranks 11th in the world at $1.823 trillion, although it ranks lower in GDP per capita. The nation's economic structure is divided between the wealthy industrial north and the relatively poor, agricultural south.

In business consulting, marketing is often relationship-driven. This is the case in Italy as well. Firms in the north are more willing to carry multiple consulting relationships and shop around, while in the south the emphasis is placed on long-standing relationships. Professional consulting is a less well-established concept there. The industry overall is stronger in the north as well, due to the business culture that more resembles central and western Europe. As with consulting elsewhere in the world, Italy's industry is facing a downturn in business as corporations seek to contain costs during these times of economic uncertainty.

The political environment in Italy can be volatile, but that lends the impacts on business a certain consistency. Elections are frequent, as are coalition governments. However, this instability hinders the ability of government to get things done. As a result, "Italy has moved slowly on implementing needed structural reforms, such as lightening the high tax burden and overhauling Italy's rigid labor market and overgenerous pension system." (CIA World Factbook, 2009). When these changes do occur, however, it is expected that they will increase the demand for the services of consultants with experience in less rigid business regimes. Also, Italy is within the EU, meaning that it is subject to the whims of that considerable bureaucracy.

In terms of resources, Italy has a favorable environment. The key inputs in the consulting industry are money and talent. Italy -- especially the north -- is rich in both. The education system is strong and the country's managers are experienced. The emphasis on small and medium-sized businesses provides a rich talent pool from which to draw and the nation's wealth and free capital markets provides access to the necessary financing.

In some respects, Turkey is similar to Italy, but the pace of its development has been slower, resulting in some significant differences as well. Turkey is a large market of 76 million people, and is the 17th largest economy in the world. On a per capita basis, however, Turkey's economy places it in the second world. The market is moving towards a free capitalist system, but the state remains in control of several large industries, including banking. An estimated 30% of the country is still employed in basic agriculture.

Because of the government's heavy hand, the marketing institutions for consulting business emphasize governmental connections in addition to long-standing relationships. It can take longer for consulting firms to become established in Turkey, but there are still some early-mover advantages available.

The political environment is moderately difficult. Turkey is moving towards membership in the European Union, which is brining the political and legal environments more in line with European nations. The currency has become stable and despite being a Muslim country, Turkey continues to emphasize Ataturk's desire for secularity. The government is trying to create an environment that is favorable for investing and the rapid pace of economic growth indicates that this is a success. However, there remains considerable political risk. Relations with many of Turkey's neighbors have been difficult in the past and relations with Greece in particular could sour a move by the country into the EU. If EU membership is taken off the table -- which could happen if the country fails to resolve the Cyprus issue, the Kurdish issue and the Armenian issue -- the political scene could become highly unstable.

Turkey has strong financial resources. There has been a strong influx of capital into the country. Despite strict government control of the banking sector, the government's desire to modernize its banking and investment climate means that capital is available. Talent is less available. While many Turks speak English, it is difficult to find top Turkish talent. Most of the country's brightest minds are in Istanbul and to a lesser extent Ankara, with tens of millions of Turks lacking in the advanced education or work experience needed to contribute to our company. The language barrier makes it difficult to bring in consultants from other countries.

It is recommended that our consulting firm enter into the Turkish market. While the Italian market is more mature, that simply makes it a more difficult place in which to gain a toehold. Moreover, there is limited prospect for growth in Italy -- the south is not going to become like the north any time soon.

With Turkey, the company has an opportunity to become established while the country is still upwardly mobile. Normalization of relations with the country's neighbors will lead to greater political stability and possible EU membership. Membership would not only bring an influx of capital but would create massive legal and structural changes from which the market for consultants could only benefit.

Moreover, the Turkish economy is growing rapidly. Real GDP growth tops 6% in many years. The new oil pipeline from the Caspian to Europe should also improve the country's economic capabilities. The rapid growth of Turkey makes it a more compelling story than Italy, even if it is also a more challenging nation to enter.