Another sector where the increase in costs is not being passed on to the consumer at the same rate is iron and steel. Veysel Yayan, the General Secretary of the Turkish Steel Producers’ Association, says that the reason for this is that there is oversupply on the global market. “In the world as a whole there is overcapacity of more than 500 million tons and, when global demand is weak, it is not possible to reflect all of the increase in raw material prices in product prices. But we forecast that in 2014, as a result of an increase in demand stemming from the expected upturn in the global economy, we shall be able to reflect on cost increases on prices, even if it is in stages.”
All companies, regardless of the sector, are opting to avoid any decline in sales or market share during this critical process by “sacrificing profits”. So what are the results of an inability to pass on an 18 per cent increase in costs to the prices of final products and services? Of course, the most serious result is an erosion in profits...
Plastics is one of the sectors that is experiencing pressure on profits. Mehmet Uysal, the president of the Turkish Plastics Industrialists’ Research, Development and Training Foundation, (PAGEV) says: “As some of our companies in the plastics sector work from stock, there is no question of excessive losses at the moment. But, in order to avoid any damage from these increases that would have a negative impact on their competitiveness on international markets, our companies are reducing to a minimum any increase in prices as a result of a rise in input costs.”
THE ONLY WAY IS PRODUCTIVITY
So what is the solution? What kind of longterm strategy should be adopted by companies that are currently faced with low profits? How should they manage this process? Company executives are unanimous in answering “productivity.” For example, the Elvan Companies Group, which is one of the strongest players in the chocolate sector, is focusing on productivity. Hidayet Kadiroğlu, the chair of the company’s board, summarizes the measures they have implemented as follows: