Case study on TurkeyPosted by Winnie Melda on November 12th, 2018 Executive Summary The assignment addresses the diverse challenges that Turkey faces in the context of their economic, international issues as well as human resource management attributes. The discussion addresses the attributes that revolve around the development of a healthy and prosperous nation that normally starts with an effective and concerned leadership. The case further addresses the country PESTLE components which offer an assessment of the political, economic, social, technological factors that influence the conducting of business in the country. It is imperative to note that the main attribute will be in the manner these components promote or discourage investment in the turkey. An assessment of the issues that could be responsible for the challenges that Turkey is facing will additionally be addressed and will range from the leadership attributes to the issues relating to international relations and the role that the leadership insistence of Making Muslim the guiding principle has on the nation. It follows Turkey Prime Minister Tayyip Erdogan was angry at the fact that the IMF report had failed to take note of the numerous policy reforms that his administration had been able to achieve. The main reference that the IMF report was focusing on was the progressive inflation in Turkey, the worsening deficit current deficit count along with the growing rates of unemployment in the country. According to the prime minister, the IMF was ignoring the policy realities that characterize the Turkish region. The IMF appeared to ignore the hard times that were being faced in other regions like the European debt crisis, the slow growth in the US and Japan and choosing to overlook the decade of economic success that Turkey had enjoyed. The underlying attribute, however, is the fact that the Turkish prime minister is overlooking the challenges that his country is facing as their policy of refusing to work with their neighbors which were compounding their problems. The additional refusal by the country to support the UN in implementing the sanctions to Iran additionally offers a testament to the issues that are characterizing Turkish development. By the year 2012, issues of Turkey having challenges with debt appeared to be a distant memory, with the economic performance of the country being regarded as spectacular. Between the year 2002 and 2007, the country’s GDP had grown by 6.7% annually, although the financial crisis made their growth turn negative but recovered fast to 9.3% and 8.6% before slowing to less than 3% in the year 2011. The inflation in the country had dropped to 5% during the recession presently stood at 10.6%. Unemployment at the time was at 9.15 which are lower than any time this century, with the worst news being that their present account balance was almost negative billion, which is 10% of their GDP and that the foreign capital was the main component that was still keeping their country afloat. During the glory days, Turkey enjoyed more than 0 billion of the cumulative foreign direct investment as well as the additional portfolio investment. In the case of the European countries, Turkey presented numerous attractive features in addition to their relatively low wages along with the flexible labor markets. The additional issue of corruption was not a big issue at the time as it was neither strong nor weak about the report by Transparency international. From the day Erdogan became turkey’s prime minister in the year 2003, the role that Islam plays in Turkey became a preeminent issue. Following the 2002 financial crisis, the central bank of Turkey started engaging in the inflation targeting strategies whereby the monetary policy was directed towards the primary objective of minimizing inflation. Chapter 1: Introduction Background of the Case Study Turkey used to be a country that enjoyed economic, political, and social as well as international glory. It was the country of choice for many European economies and investors due to the vibrant nature of their economy. There was low inflation supported by an adequate supply of cheaper workforce, an attribute that was a significant attracting force to the international investors. The growth in the literacy levels supported by the universal participation in education supported the other facets as health as the population was aware of the most immediate health needs. However, in light of the numerous challenges that the country is facing in almost all the facets of their development, it has become impossible for the country to sustain the success they enjoyed. They are currently riddled with challenges ranging from the diplomatic challenges with their neighbors as well as the UN, the ever increasing rates of inflation, increasing unemployment along with the growing radicalization that is dealing a huge blow to any peace that could aid the resurgence of their economy. Significance of the Research The research is meant to elicit the main issues that have been contributing to the development of the challenges that Turkey is facing. Through this assessment, it will be possible to address the underlying features contributing to the crisis, and the consequent recommendations that other countries were facing similar challenges could adopt. Additionally, the research offers insight into the pertinent issues that are crippling turkey, an attribute that is instrumental in informing the policy makers as well as the other individuals to develop solution and measures that will address these challenges. The results of this research will be vital in developing a body of knowledge that other researchers could apply in conducting additional studies on this issue. Problem Statement The success of any sovereign nation is normally dependent on numerous attributes, both within the country as well as from the external forces as neighbors and the other trading partners. The internal issues as uprising and intolerance between members of a nation play a huge role in dampening the development efforts by a nation as these attributes tend to scare away investors. Poor and unpopular leaderships has the additional impact of making the majority of members of a state be against the leadership policies that the leadership generates, further making the status of the country deteriorate further. Diplomatic rows with neighbors as well as the neighbors additionally serve to increase the challenges that a country faces as they do not receive the support of these nations that they are in conflict. Division and equality between the members of a nation and more so when the division is in the religious or ethnic grounds, there consequent uprising polarize the nation further as the oppressed tend to fight for inclusion and access to the means of production. Research Aim The aim of this investigation is to conduct an assessment of the diverse issues that were causing the problems being witnessed in Turkey and consequently offers a recommendation of the solutions that will solve these challenges. Research objectives
Research Questions
Structure of the case
Chapter 2: Case Brief The internal challenge in the country which is a predominantly Muslim nation has seen an increase in the issues of the power struggle between the conservative Muslims and the secularists. There has additionally been an increase in the diminishing of the freedom that the press enjoys mainly under the leadership of Erdogan. Turkey has for the past decades been facing an assortment of challenges that have has the impact of literally bringing their economy to a halt. Growth slowed down in the wake of the Gulf war, with year’s high inflation, the weak banking system, deficit spending as well as the growing foreign debt being the challenges the country is facing. The country has seen the IMF loan bailout the Turkish creditors in light of the stress by the IMF on the significance of the addressing inflation issues via the implementation of firm monetary as well as exchange rate policies. Although there has been a contraction in the inflation rates from 60% to 36% annually, the current account deficit had widened sharply to almost 5% of their GDP (Durgun, 2015). The public sector debt, on the other hand, has increased to 101% of the country’ GDP, and the borrowing cost kept on increasing; the banks in the country were compelled to sell the government bonds at a loss as they tried to maintain liquidity. There depreciation of the exchange rate since the year 2010 has seen a huge fall in the dollar based labor by more than 12% and the consequent suffering of productivity as a result of the relatively rigid labor markets along with the additional lack of investment. The rapid growth of credit by banks, the intensive competition among the businesses involved in exporting along with the housing bubble had lowered the domestic public savings to 12.8% in the year 2012. The degeneration of the global risk appetite in the year 2010 led to a 30% depreciation of the Turkish lira, which consequently drove the inflation rates to 10.6% by the year 2012. The banks in this case started to pursue rapidly the monetary policy whereby stability along with financial stability was complementing one another (Yildiz, 2014). The additional issue of the Kurdish, which encompasses approximately 20% of the Turkish population encompasses a situation whereby most of the primarily located in the rural areas. Additionally, this component of the population is poor; impoverished as well as unemployment, an attribute that has been making an excellent ground to foster nationalist sentiments and extremism, causing major instability in the country. Reasons that can be attributed to the turkeys faced problems
Assumptions The assumption guiding this study follows the assertion that if Turkey abandons the extreme dependence on the foreign investment along with the promotion of sanity in their operations, the country will manage to promote a resurgence of their economy. The elements supporting this case that the growth of economic dependence will initiate the recovery of their economy as the investments will not be dependent on the international relations. The additional promotion of political stability will be a good indication to the investors that the country has systems that promote the safety of their investments thus encouraging them to install capital that will enhance their recovery. Problem Statement For the prominent part of the past decade, Turkey’s economy enjoyed remarkable success. Between the year 206 and 2006, during the initial term of the justice and development party (AKP), the country’s growth was averaging 7.2% annually, making the country a star performer in the difficult region. The growth was beneficial to the AKP as it made it possible for them to be elected in three consecutive parliamentary terms with overwhelming majorities. The growth can be attributed to the positive steps that the AKP put in place after winning the election as well as the continued IMF-led reforms along with the maintenance of the responsible fiscal policy. The situation has changed in a significant manner over the past few years as the country has transformed from an exemplary emerging market to a country that is constantly grabbing headlines with stories relating to their financial vulnerability and economic weakness. Analysis of the Problem Finance The current list of the of challenges is daunting, with the slowing growth, rising inflation, rising fiscal expenditures, foreign exchange pressure, overall debt, increasing unemployment rates as well as the loss of their export competitiveness. According to the IMF, Turkey is going to growth by just 3% between 2015 and 2016. The lira has consequently lost more than 10% of its value from the beginning of the yea. The country is additionally falling behind the rival emerging markets with the best example being the fact that China left Turkey 2.9% growth in 2014 with an impressive 7.5%. International Business The most fundamental attribute relating to turkey’s structural challenges is the countries over dependence of the foreign investment. The country’s excessive dependence on the capital inflows from abroad along with the persistently high current account deficit that was 6% of the GDP by the end of 2014 made the country vulnerable to numerous international shocks. The recent economic crisis affected the country in the worst manner possible with the economy shrinking by more than 5% in the year 2009. The weakness has led to the country being listed by Morgan Stanley in the year 2013 to be among the fragile five emerging economies at the greatest risk of a downturn. Human Resource Management Even though there has been a productivity growth in Turkey as the debt crisis between the year 2001 and 2002 had been strong in both the productivity of labor as well as overall productivity, there was a slump during the crisis and was followed by a modest recovery. However, depreciation of the exchange rate from the year 2010 has seen a 12% fall in the dollar based labor costs. The additional productivity issues continued suffering from the lack of investment along with the rigid labor markets in the country. It is imperative that efforts are put in place to rejuvenate turkey’s financial and investment might mu developing their internal finance sources. Additionally, it is necessary to ensure that there is the development of structures that are going to guarantee political stability in the countries. The rationale behind these attributes is the fact that through the reinforcement of these elements, there is going to be the development of trust and confidence in the country’s market forces and additionally promote the ability of the country to cease the dependence on external funding as well as repay their international debts. Economics
The root-cause analysis encompasses the systematic process adopted to offer guidance to people as they discover and consequently understand the initiating causes of a problem, with the objective being to determine the missing as well as the inadequately utilized controls that will prevent the recurrence (Malone, 2008).
The risk-based approach revolves around the methodology that makes it possible for a country to prioritize their financial issues relying on the analysis of their previous financial data. The methodology is applicable in that it makes it possible to prioritize interventions based on the identified highest risk, are is less expensive and consequently makes the identification of risks faster.
International Business
The assertion in the application of this approach is that a nation can develop new advanced factor endowments as such as strong technology, skilled labor as well as the knowledge base, culture and government support. The use of the diamond-shaped diagram offers the basis of the framework in illustrating the determinants o f the national advantage.
The theory offers a description of the impacts that the society’s culture has on the values of its members and additionally how the values translate to behavior via the use of a structure that has been generated from factor analysis. The components of this theory include the power distance index, masculinity against femininity, individualism against collectivism, pragmatic against normative, avoidance of uncertainty index and restraint versus indulgence. About a nation culture, the theory has six dimensions which represent the independent preferences of one state of affairs that are the main attributes differentiating it from that of other countries (Piepenburg, 2011).
The theory of electric paradigm presents a three-tiered framework that a company applies when determining if it is profitable to pursue the foreign direct investment. The basis of the theory is on the assumption that institutions tend to avoid transactions that are in the open market when the internal transactions carry lower costs (Cantwell, 2014). The three tenets of the electric paradigm theory include:
Human Resources Management
The theory present a reliable assessment of the change attribute in an organization mainly in dealing with barriers. It offers an assessment of both the apparent as well as the unseen barriers to the issue of change in an organization (Kotter &, Rathgebe, 2016).
The theory posits that is a product of conscious choice reached from the different alternatives with the sole objective of maximizing pressure while at the same time minimizing pain. According to the theory, the performance of employees is dependent on factors as skills, personality, knowledge, abilities, as well as experience and that performance, effort, and motivation, are linked to an individual’s motivation (Louis & David, 2011).
The theory asserts that the development of goals is essentially connected to the performance of a task. According to the theory, specific as well as challenging goals in addition to the necessary feedback have a huge contribution to improved as well as better performance of tasks (Edwin & Gary 2013). Proposed plan of analysis
CHAPTER 4: ANALYSIS AND FINDINGS The Risk Based Approach Turkey’s annual GDP growth rate has slowed down gradually from the initial 11.9% in the first quarter of 2011 to a dismal 3.1% in the first half of 2012. The additional slowdown in the issue of job creations is additionally attributed to the slump in the economic growth, with the forecast indicating that the overall growth in employment is going to fall from 6.7% in the year 2011 to 2.3 in 2013 and between 1% and 2% between 2013 and 2014. Risk Identification and Analysis The fiscal, as well as the financial reforms that were implemented following the 2001 financial crisis, tightening control mechanism as well as institutional arrangements, have assisted in consolidating turkey’s financial structure. Although there has been significant reductions in the public debt, the share of the public sector overall external debt has seen a significant increase. Although turkey’s share in the overall external debt amounted to billion, 33% in 2002, the debt reached 5 billion, 69% in the year 2014 (Çoruhlu & Demir, 2014). It is additionally clear that both the country’s production as well as the external debt have been on a rise from the year 2002. In this period, the GDP rose from 3 billion to 0 billion in the year 2014 although the external debt tripled within the same period. The main attribute to analyze in assessing the external debt attributes is the ratio of external debt stock to GDP. The ratio offers a presentation of the macro credibility on the economy as well as the certain thresholds that have been employed by both the IMF and World Bank (Altug & Filizteki, 2006). Turkey’s overall external debt was 56% in the year 2002 while it was 50% in the year 2014 implying that Turkey has been categorized among the heavily indebted countries in the year 2002 while it was on the border of the medium and highly indebted countries in the year 2014. External Borrowing Imbalances The fast increase in turkey’s current account deficit between the year 2010 and 2011 has lead to an increase in the concerns on the sustainability of the borrowing. Propelled by credit-fueled the rise in the demand for imports as well as the higher prices of fuel, it got to 10% in the year 2011. It is additionally expected to remain relatively large although the indications include the fact that it should ease for most of the 2012-2014 period levels averaging 7% of their GDP mainly as a result of the slower domestic demand products. Cause Analysis Turkey’s over-reliance on external investments and the additional structural challenges and the constitute policy conflict contribute to the challenges that the country us facing. Turkey as a country possess adequate artificial as well as natural resources that are adequate to attract external investors confidence, create enough internal jobs as well as offer adequate export resources that could promote their independence and the consequent economic excellence. However issues as the ongoing risks due to the country’s huge external funding needs, a situation that is exacerbated by the fragility of the global capital markets along with the elevated geopolitical challenges the country is facing. The additional lack of visibility on whether the government is going to implement decisive economic reforms that are necessary for supporting the growth, enhance national stability as well as minimize the external vulnerability are increasing the challenges that the country is facing. Alternative Scenario Some open conflicts relating to the economic policy are adding to the challenges such as the bank Asya incident, whereby turkey’s banking watchdog argued irregularities as their justification of seizure of shares belonging to Islamic lender. The clashed between the president and the governor of the central bank relating to the issue of monetary policy was additionally unfortunate as it led to erosion in the confidence of the central bank. Human Resources Management Most sections of the research were an assessment of whether the debt that turkey has is sustainable about their human resources component. The researcher, in this case, is going to undertake an assessment of the previous year’s performance of the labor component in Turkey. It is additionally going to encompass an assessment of an alternative situation relating to the Turkish case. Goal Setting and Vroom’s Expectancy Theory In the year 2002, the overall LPG and LPG grew to 289% a 378% respectively by the year 2009; they had decreased to -230.5% and -828.7% respectively in the year 2009. Through the use of the Vroom’s expectancy theory, the only that an organization’s goals can be realized is if they can align them with the expectations of the employees. In the year 2014, Turkish nationals were still protesting against the issues of oppression by the administration, an attribute that makes it impossible to increase the productivity of the employees due to the unhappiness. The goal setting theory, on the other hand, argues that it is imperative that an organization’s goals need to be open for debate but must be realistic goals. The case in Turkey is different however as the lack of policies to restructure the banking sector to offers loans for personal development as well as the growing layoffs with the expectation that they contribute to the country’s economic growth failing to make any reality.
The Alternative Scenario- Change Management Iceberg On the case of the dismal industrial and low labor productivity which is mainly as a result of the poor investment in Turkey in addition to the poor education attainment of their population with the test scores of their 15 years olds being low that most of their OECD trained counterparts. The main issue here is that the turkey administration is rushing their population through a poor quality delivery systems that make them rate lower than most of their counterparts. International business The chief components that promote the Turkish economy are including the industry and agricultural sectors which accounted for over 32% of their GDP in the year 2009. According to the porter’s diamond of national competitive advantage, these components are proving less instrumental to the country unless they have undergone through significant innovation along with deployment. There were constant increases as well as decreases in these components between the year 2002 and 2014, with the US pulling out their tapering plan as well as the geopolitical instabilities that threatened the investors. These issues had a direct impact on the amount of trade that took place in the region although there indications that the country’s industrial exports are growing. There was a growth in the demand for the local products which could have had the impact of compelling innovation by the diverse businesses to manage to stay competitive both on their local as well as international platforms. However, the issues of geopolitical instability, lack of investment capital as foreign investors were running away, poor quality of education and poor banking sector made the attainment of the objective complicated. The Alternative Case- Electric Paradigm The overall assumption follows that if the turkey has been able to invest in quality education, maintained political stability and invested in the internal ownership of businesses; it could have been able to maintain a qualified and experienced labor force even with the exit of the foreign investors. The electric paradigm contends that the possession means as well as the factors or production along with Turkeys expansive population and attractive opportunities for investors could be a significant economic powerhouse for the country. Chapter Five: Integrated Discussion Of Analysis The previous study sections of this study have implemented a concise assessment of the diverse factors that have a link with the crisis that Turkey has been facing. The study has additionally employed diverse tools to assist in the analysis of the elements especially in relating to the country’s sustainability of the private and external debts as well as the health of their country economy. The main findings of the analysis encompass the following: Finance
It is evident that Turkey has major shortcomings in the area of balancing their economy to promote sustainable growth and development. The case here encompasses the fact that there is the significant imbalance relating to the overdependence on the foreign investors as the expense of their domestic investments. The actions by the US Federal Reserve to cut on their paper tapering implied that these foreign investors did not have enough capital to invest and consequently had to pull their investment out of turkey. The impact was that the country suffered immensely as numerous jobs were lost and sources of revenue were no longer available.
It is additionally evident that is a sustained growth of the country’s both private as well as external about the GDP and attributes that are making the country’s debt sustainability situation a concern. Although there is the indication that the country’s economy may have improved between 2000 and 2008, the consequent increase in both the private and external debts by 33% in 2002 and 69% in 2014. It is thus imperative that policy measures that will address these rates be implemented to revert the situation. Human Resources Management Turkey’s economy enjoyed a lot of success when the foreign organization has heavily invested in the country which these investments employed a huge proportion of the population. It is the situation changed when these foreign investors started exiting the country due to the cutting of cutting off investment capital by the US federal government as well as the growing geopolitical situation in the country. The consequent impact was that a huge proportion of this population was laid off, and consequently their purchasing power waned off as a result of the dilapidating economic situation in the country. The rates of unemployment in the country rose by from 10.3% in the year 2007 to 14.1% in the year 2009. International Business Although there are certain factors that make turkey and excellent investment location as the successful foreign investment along with the consequent natural features that make the country and excellent tourist destination, there are the additional attributes that inhibit the desire to invest in the country.
These attributes, therefore, make it more likely that the investors are going to choose countries that are safe to conduct their business, where the rule of law is respected as well as those with an effective education system producing qualified professionals. Plan of Action
Economics
Industrial and Labor Productivity
Promoting the Local and International Businesses
Limitations of the Study The duration that was allocated to the study was one of the biggest limitations as it was short and thus had to rush over the project. The language barrier was additionally a limitation that characterized the study as some component were in the Turkish local dialect which implied that the researcher had to look for an interpreter, taking more time. Conclusion Amid the numerous challenges that Turkey is facing, it is imperative that the administration takes a concise assessment of the situation and implement the necessary measures. Most of these challenges that are characterizing the case are as a result of deficiencies in the administration, mainly in the case of political stability and implement of necessary fiscal policies. References Durgun, Ş. (2015). LEFT-WING POLITICS IN TURKEY: ITS DEVELOPMENT AND PROBLEMS. Arab Studies Quarterly,37(1), 9-32. Yildiz, U. B. (2014). Rethinking Civil–Military Relations in Turkey: The Problems of the Democratic Governance of the Defense and Security Sectors. Turkish Studies, 15(3), 386-401. doi:10.1080/14683849.2014.954744 Yılmaz, M. C., Güner, M. A., Tekdemir, İ., & Ersoy, M. (2015). A general evaluation of the problems of anatomy education in Turkey. Anatomy: International Journal Of Experimental & Clinical Anatomy, 9(3), 182-184. doi:10.2399/ana.15.028 ÇORUHLU, Y. E., & DEMİR, O. (2014). CURRENT PROBLEMS EXPERIENCED IN DEVELOPMENT OF THE FOUNDATION IMMOVABLE PROPERTIES OF TURKEY AND SOLUTION APPROACHES. Sigma: Journal Of Engineering & Natural Sciences / Mühendislik Ve Fen Bilimleri Dergisi, 32(4), 423-432. Kouskouvelis, I. I. (2013). The Problem with Turkey's "Zero Problems". Middle East Quarterly, 20(1), 47-56. Altug. S, & Filizteki, A. (2006). The Turkish Economy: The Real Economy, Corporate Governance and Reform. Routledge Taylor and Francis group economic problems facing turkey. Routledge. Carkoglu, A &, Rubin, B.(2004). Turkey and the European Union: Domestic Politics, Economic Integration Simsek, M., & Uzay, N. (2009). ECONOMIC AND SOCIAL PROBLEMS OF ENTREPRENEURS AND TURKEY APPLICATION. Journal Of Academic Research In Economics, 1(3), 289-307. Onis, Z. & Rubinm, B.(2004). The Turkish Economy in Crisis: Critical Perspectives on the 2000-1 Crises. Routledge Okes, D. (2008). Root Cause Analysis: The Core of Problem Solving and Corrective Action. ASQ Quality Press Malone, Cheng Hoon Lim (2008). A Risk-Based Debt Sustainability Framework. International Monetary Fund Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in legitimate paper writing services if you need a similar paper you can place your order for custom college essay services. Like it? Share it!More by this author |