COMPETITION ERODES PROFITS
Experts say that the most common factor forcing companies to choose between market share and profitability is “competitive conditions”. In recent years, the intense competition in the GSM sector has had an impact on the growth strategies of the companies in the sector. It is striking that, because of competition, the three major operators have focused on prices and experienced a significant decline in profits. In the sector as a whole, prices have fallen by 30 percent and profitability in the sector has declined by 15 percent. Avea, which has been the most aggressive player in terms of prices, has seen its profit margin fall from 20 percent to 3 percent. In 2009, the profits of Turkcell, the market leader, fell by 8 percent compared with the previous year.
Avea General Manager Erkan Akdemir says that the management’s most important priority is profitability and adds: “We are targeting returning to the profitability levels of 2008 and before. We hope that in 2010 we don’t experience the trauma of 2009 again.” Sürreya Ciliv, the CEO of the sector leader Turkcell, summaries their future strategies as follows: “Our profitability fell a little in 2009, when we experienced a decline of around 8 percent. The major factor behind this was competition in the market. What is important is to increase the volume of business. You need profitable growth in order to be a healthy company. We see that some of our rivals tripled their losses. We think that profitable growth is important if we are to make investments in the future.”
14 giants focusing on "Profit"
WHAT IS HAPPENING IN WHITE GOODS?
Another sector where there is fierce competition is consumer durables. In this sector, where Arçelik and Vestel dominate different categories, the companies are continuing to grow through pursuing different strategies.
Levent Cakıroğlu, Arçelik General Manager and President of the Koç Holding Consumer Durables Group, says that in the future they will restructure their consumer electronics business. “As the result of our decision to focus on profitability rather than volume growth in this business channel, our turnover in TVs has declined compared with the previous year, but our profitability has increased,” he says. Vestel is focusing on sustainable growth. Vestel Companies Group Board Chair Ömer Yüngül says that the most important way to achieve this is innovation and adds: “We are doing everything to preserve the confidence the consumers have in us and to strengthen brand awareness and sustain these, One of the basic principles of economics is that margins fall in environments where there are a lot of players”
NEW COMPANIES ARE FOCUSED ON MARKET SHARE
It is not news that companies which have newly entered the market are prepared to tolerate losses for a time and focus on market share. Nedim Esgin, general manager of Darty which entered the Turkish market in 2006, says that it is normal for companies which are new to the market to focus on growth without making any profit for a few years. “We can say that these are years of investment and achieving a certain volume,” he says.
Since it was acquired by Esas Holding, Pegasus has caught the eye by being one of the companies which is moving forward by focusing on market share. By focusing on market share the company has succeeded in becoming the second largest player in air transportation. In addition to its economical prices, in 2009 it came to the fore in the sector through the numerous promotional campaigns that it ran. It increased its market share from 13.7 percent in 2008 to 16.7 percent in 2009.