Victoria Secret in Turkey

The Middle East consists of several countries in West Asia. Armenia, Azerbaijan, Bahrain, Gaza Strip, Georgia, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, West Bank, and Gaza, are all the 19 countries that are categorized as the Middle East. The term Middle East is considered to be a Eurocentric term and is used as a synonym for the Near East. Since the Middle East extends over so many countries, there are major economic, cultural, and religious differences.Some of the countries in the Middle East are extremely wealthy oil nations like Saudi Arabia, Qatar, and United Arab Emirates, that generate large amount of revenue and are on the top list of the world’s wealthiest nations based on income per capita. And then there are some really poor nations, like Gaza and Yemen, which are characterized by unrest and war. The Middle East also varies a lot when it comes to culture and religion. Islam is the biggest religion i n the Middle East and many of the countries have really strict religious rules, with little freedom for women.But there are also countries where Judaism and Christianity are represented, and women have equal or almost equal rights as men. Victoria’s Secret was founded in 1977, in San Francisco by Roy Raymond. It started with three stores and a mail-order catalog. In 1982, after only five years of operations, Raymond sold the company to Leslie Wexner for $4 million. During the 80’s Victoria’s Secret rapidly expanded into U. S malls. By the early 90’s Victoria’s Secret had become the largest American lingerie retailer, topping one billion dollars.There are approximately 1,000 Victoria’s secret lingerie stores and 100 independent Victoria’s Secret Beauty stores in the U. S. We sell a range of brassieres, panties, hosiery, cosmetics, sleepwear, and other products. In 1995 Victoria’s Secret had their first fashion show, which today has become a huge hit. The show features some of the world's leading fashion models such as current Victoria's Secret Angels Adriana Lima, Alessandra Ambrosio, and Miranda Kerr. Because of the huge differences in economy, culture, and religion, we at Victoria’s Secret decided to focus on one country at a time.We decided that it would be the best opportunity to open our store in Turkey. Turkey has the largest economy in the Middle East based on nominal gross domestic product (GDP) and the cultural and religious barriers are not as dominant as in some of the other Middle Eastern countries. Turkey also has a huge market for tourism. Market Turkey has a large population with 71 million people. They have generally a young population, with 61% of the people being younger than the age of 35. Turkey’s average gross national product (GNP) per capita is $7,500.About 71% of the population lives in the urban areas. Istanbul is Turkey’s largest city with about 12 million peo ple, and Ankara, the capital, has about 5 million people. Turkey is located in Southeastern Europe and Southwestern Asia, bordering the Black Sea and the Aegean Sea. Turkey’s location gives them an excellent base for economic activities throughout the region. Turkey has a budget revenue of $176. 8 billion and a budget expenditure of $189. 2 billion. Turkey is running a budget deficit of 1. 6% of real GDP.This budget deficit, together with uncertainty related to the monetary policy-making, and political disorder in Turkey’s neighbor countries, makes the Turkish economy vulnerable to destabilization shifts in investors’ confidence. Turkey has a young and well-educated population, but 10. 3% of the Turkish population is unemployed. The labor force is 27. 43 millions, where 25. 5% works within the agricultural sector, 26. 2% works in industries, and 48. 4% works within the service sector. Young people between the age of 15 and 24, 25% are unemployed. Women are still an untapped labor force in Turkey.Researchers say that about half of all Turkish women enter the labor market at some point in their lives, but most end up quitting because of family obligations or poor working conditions. We feel that this is a great opportunity for our company, because our target market is women. We will strive to create ideal working conditions for all of our employees so they feel that they want to keep working for Victoria’s Secret. Economic and Political Climate We at Victoria’s Secret have been attracted to the Turkish market by the country’s rapidly expanding economy, political and economic stability, and the possibility of European Union membership.Since Turkey is an associated member of the EU, it had to adopt many directives, regulations, and laws that are required by the EU. Turkey is going through changes, to strengthen its democracy and integrate its economy into the global market. The changes that Turkey is going through are goin g to be beneficial to us, because it will make Turkey an easier market to enter and to do business in. It is also crucial for us that Turkey’s government are become a more stable government. It would be hard for Victoria’s Secret to thrive when the government is unstable and there are rapid and drastic policy changes.For a business to survive in a foreign country, it is crucial that there is a government that can maintain itself in power and whose fiscal, monetary, and political policy are predictable. Turkey has an open market economy, with a blend of both modern and traditional industries. Turkey’s industry and service sector are becoming the major drivers of the Turkish economy. Their private sector is becoming increasingly important, as state involvement is reducing. The traditional textiles and clothing sectors, still account for one-third of industrial employment in Turkey.During 2011, the United Sates exported to Turkey for $15 billion, this is 34% increa se from 2010. Foreign direct investment (FDI) has in the recent years been attracted to Turkey because of their market reforms, strong growth and economic and political stability. The U. S. has officially invested about $6-7 billion in Turkey, a number that is understated because U. S. companies have invested through third countries. There are no restrictions over the export of goods from Turkey. Exports are exempt from the value added tax (VAT), duties and transaction taxes. Goods manufactured in Turkey have a duty free access to the EU.There are also no import restrictions over goods imported to Turkey, with the exclusion of some restraints of very minor character. For imports that are imported to Turkey from countries other than European Union, customs duties and charges are applicable in agreement with the requirements of the customs union. Regardless of origin of goods, whether from the EU or a non-EU country, VAT is at a rate 18% (1% or 8% for certain basic goods). Good and se rvices imported into the country, industrial, commercial, agricultural goods and services, and deliveries of goods and services caused by other activities, are all subject to VAT.The guidelines involving to the remittance of foreign capital and dividends out of the country are set out in Law No. 1567. According to these regulations, foreign investors have the same privileges and responsibilities as Turkish investors. The regulations also guarantee the transfer of profits, fees, and royalties and the repatriation of capital in the case of a liquidation or sale. For foreign businesses to enter into Turkey there is no longer a minimum amount of capital requirement, due to Turkey’s new Foreign Direct Investment Law. â€Å"It is no longer obligatory to bring a minimum of $50,000 in share capital. As long as the form of company is included in the Turkish Commercial Code, it is your own choice on what company you want to establish. â€Å"It is no longer obligatory to establish eit her a limited liability company or joint stock company. † In 2006, Turkey cut its corporate income tax rate from 30% to 20% making it one of the most competitive rates in the OECD. These corporate income tax rates, has mad Turkey an attractive business environment that presents advantages and potential opportunities for business wishing to enter the market. Culture and InfluencesCulture is defined as â€Å"the sum of the total of the beliefs, rules, techniques, institutions, and artifacts that characterize human populations. † Societies are composed of its people and their culture; it is therefore difficult to talk about one aspect without referring to the other. Sociocultural has become the term that is used among businesspeople when talking about cultures and societies. For Victoria’s Secret to be successful in opening a store in Turkey it is crucial for us to realize that there are a culture differences from that of our own, as well as learning the characteris tics of the culture so that we can adapt to them.Since culture is so broad, a listing of its components may ease the analysis of the sociocultural viewpoint. These components include: aesthetics, attitudes and beliefs, religion, material culture, language, societal organization, education, legal characteristics, and political structures. The component that apply for Victoria’s Secret launch in Turkey is in particular religion, but aesthetics, and societal organization can also have an impact.Religion is an important component of culture and holds responsibility for many attitudes and beliefs the people have. In Turkey, the people practices the religion Islam and the population consist of 99. 8% Muslims, mostly Sunni. The Muslims follows the Koran, which is the collection of Allah’s revelations to Muhammad, and is said to be the messenger of God. Following the Koran means freedom, and it is said to bring happiness for the Muslim to follow Gods word. For all Muslims the basic spiritual duties consist of the ive pillars of faith: accepting the confession of faith; making the five daily prayers while facing Mecca; giving charity; fasting during the daylight hours of Ramadan, a 29- or 30-day month in Islam’s lunar calendar; making a pilgrimage to Mecca at least once in a person’s lifetime. The Turkish state is becoming more and more modernized, and so is also its religion. Turkey seeks to modernize Islam because they believe that it might hinder their development in becoming a more globalized and modern country. We believe that Turkey is a good place to open our next store in the Middle East because they are open for this kind of new businesses.Aesthetics refers to a culture’s sense of beauty and good taste. As the Turkish people are getting more modernized, they will also get more influenced by the rest of the world. We believe that the fashion trends that are popular in the U. S. will become popular in Turkey as well, and that V ictoria’s Secret lingerie can become part of the Turkish women’s daily life. Societal organization â€Å"is the patterned arrangement of relationships defining and regulation the manner by which its members interface with one another. The women in Turkey don’t have the same status as women in the U. S. , and the men and women’s roles may vary a lot. This might cause a problem when launching Victoria’s Secret in Turkey, nevertheless, we believe that the Turkish women, as they get more influence by the fashion trends in rest of the world, they will create a desire to buy our products. Victoria’s Secret is facing some sociocultural challenges when launching our business in Turkey, and we will have to give our customers some time to adapt to our products.However, when considering Turkey is development toward a more modern and global nation we have a bright outlook for the future, and believe those challenges will be exciting to tackle. Competit ion â€Å"International strategy is concerned with the way firms make fundamental choices about developing scare resources internationally. † It is going to be crucial for Victoria’s Secret to implement an international strategy because it involves decisions that deal with what products or services to offer, which markets to enter, and how to compete.It also deals with all the various functions in the organization, such as marketing and production. The goal with an international strategy is to create competitive advantage, which means that the business has achieved and maintained a unique and valuable position both globally and within a nation. To create sustainable competitive advantage it is important that a product or service creates value for consumers and for which customers are willing to pay for, are rare, are difficult to imitate or substitute, and are organized in a way that allows the company to fully exploit and capture the value of the product or service.Th ere are numerous lingerie companies in Turkey that can act as competitors when launching Victoria’s Secret in the country. The Turkish economy is growing and the local companies are developing great skills when it comes to adapt to customers demand, which results in companies that are becoming stronger when competing in the global market. However, the main reason why Victoria’s Secret has become so successful is because we have been able to create products and services that meet the criteria for a sustainable competitive advantage. Therefore we believe that we will be able to successfully compete against the Turkish lingerie companies.Turkish is the predominant language in Turkey, spoken by 90% of the population. Minority languages include Kurdish, which is spoken by 6% of the population, although this isn't recognized as an official language. 1. 2% of the Turkish population speaks Arabic but most of those speakers are bilingual and speak Turkish as well. Because we wi ll compete at a local level we believe that it will be important to communicate in Turkish. We will make sure that we have employees that are fluent in Turkish to be a part of our marketing and business team in order to establish a local presence with our products.Because verbal communication is more dominant than written expression in business in Turkey we will focus much of our advertising through media such as radio and TV. Since most of population is Muslim we have to take this into consideration when creating our advertising campaigns. Something that could be a challenge for us is the variable prices many stores and competitors have. This cultural difference where everything is negotiable have to be considered when entering Turkey. A wide range of shops has no prices listed. Customers simply have to ask the price of everything and the sales person will have the right answer.Even luxury shops selling diamond jewelry are open to negotiation. We have chosen not to adjust to this c ultural difference. It does not go well with our business model and we believe that customers will be able to adjust to Victoria’s Secret stricter price listings. But, it is still something to be aware of when training our employees that will be working in our stores. Special offers and other sales or marketing tricks are common in the Turkish business environment. The â€Å"buy one, get one free† offer can be seen in most retail stores in Turkey. This is something that we will use and take advantage of.We will use the same strategies as we have in the US. Making special offers for customers if they buy more than one of selected items. Seasonal offers will also be implemented. Victoria’s Secret in the Middle East We want to make Victory Secret the most known lingerie brand in the world. By expanding with a third store in the Middle East, and more specific in Turkey, we are certain that we will be able to reach this goal. 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