Prioritizing turnover

What should take priority, growth in turnover or growth in profits? There is no doubt that both are very important. But, according to the prevailing circumstances, companies target prioritizing one over the other. In recent years, "profit" has clearly taken precedence. But 2013 has been characterized by targets based on growth in turnover. A total of 30 out of 42 major groups and companies have announced that they are prioritizing growth in turnover in 2013. These companies are focusing on turnover for reasons such as benefiting from economies of scale, increasing their influence on the markets and preserving market share. They believe that growth in turnover will bring profits in its wake.

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IN 2012 almost half of the 500 largest companies in Turkey closed the year with double digit growth. This picture continued in 2012. 2013 has been a year in which companies have concentrated on growth in turnover. The research we conducted has made this very clear. A total of 30 of the 42 groups and companies that participated in our survey said that they were prioritizing growth in turnover in 2013. Only 12 companies said that they were focusing on profit. So, are those who focus on turnover able to achieve their targets? Why do they focus on turnover? Is profit enough on its own for those who focus on it? Is this a periodic strategy? We sought the answers to these questions from the companies. Here are the results:

WHY DO THEY SAY TURNOVER?
The 30 companies which are focusing on turnover in 2013 include giants such as Boyner Holding, JTI, Hayat Kimya and Assan Aluminium. For these companies, increasing their turnover takes precedence over profit and other performance indicators. İmam Altınbaş, the board chair of Altınbaş, which is one of the companies which are focusing on turnover in 2013, says that they are reducing the time between purchases and sales of gold and have focused on increasing turnover in order to minimize losses resulting from changes in the gold exchange rate. JTI General Manager Bilgehan Anlaş says that turnover growth is more of a long-term
strategy. “We know that profitability will result from volume growth at the right time and economic conjuncture,” continues Anlaş. “As a result, it is important for us to monitor the optimal balance between profit and turnover.”~

IS GROWTH ENOUGH?
Most of the companies that focus on growth in turnover see that the most important benefit is an advantage in terms of economies of scale. Is a high turnover sufficient in itself? LC Waikiki boss Vahap Küçük's response to his question is “No”. He says: “A high turnover is not sufficient in itself and for this reason we are working to increase our profits.” Küçük notes that they attach the same importance to sustainable growth and profitability and adds: “When we increase turnover we increase the scale and gain purchasing advantages as a result. We reduce our fixed costs and increase our profits and market share. We have formulated a strategy of increased productivity and scale.”

Polisan Holding CEO Erol Mizrahi believes that a high turnover is not enough on its own. Mizrahi says: “If you are not making any profit from your business then, however high your sales are, you will eventually have to downsize and wave goodbye to your previous high turnover. Turnover does not mean anything on its own. On the other hand, you have to have a high turnover if you are going to dominate the market, be influential and position your brand so that it sets the market dynamics; and, as a result, you may be faced with the danger of being cut off from the market while you run after high profits. The healthiest thing to do here is to achieve an optimal balance.”

AMBITIOUS TARGETS
One of the most ambitious of the companies that have focused on increasing their turnovers in 2013 is Gold Teknoloji Marketleri. The company's Marketing Manager Kılınç Orhan Erdemir says that they are planning to increase their turnover by 60 per cent in 2013 and explains what they will do in order to achieve their target of TL 800 million. ���First of all, we have changed our marketing strategy. We have developed new communications and marketing plans. We have upgraded our existing stores and added new ones. We are implementing a strategy to increase the number of customers in our existing stores.”

Dogus Cay ve Gıda is targeting turnover growth of 52 per cent by the end of the year, Haluk B. Yıldız, the company's assistant general manager, explains how they will achieve this target as follows: “Our strategy is to focus on the potato chips category, which makes the largest contribution to our turnover, through a major investment.~
Following our entry into the appetizer category, which is new for us, we have strengthened our distribution network and increased our communications budget. We are receiving the returns we expected from all of these investments.”

COMPANIES' OXYGEN
Those who are focused on growth in profits in 2013 are extremely upbeat. For example, Medianova CEO Serkan Sevim is very upbeat about the company’s plan to increase its profits by 120 per cent. Sevim explains why they are focusing on profits rather than turnover as follows:

“Profitability is extremely important for a company's healthy, independent growth. It is like oxygen. Because growth without profit needs to be financed through borrowing or selling shares. There is a limit to this. The recent closure of a string of popular ecommerce companies is a saddening but real result. My priority is growth in profits first and then turnover.”