Strategic management

Samsung Heavy Industries Entry to The

Turkish Market

Presented to

Dr. Tamer Karam

Presented by

Khaled Mohammed

Nermin Hegab

Omar Soliman

Rania Aboelnasr
 Table of content

Q1. Environment Variables .................................................................................................... 1

1. Micro................................................................................................................................. 1

2. Macro ................................................................................................................................ 2

3. Competitors ...................................................................................................................... 2

3.1Gemak (50 Years Experience) ................................................................................... 2

3.2Besiktas Shipyard ....................................................................................................... 3

3.3GESAD ........................................................................................................................ 3

Q2. Challenges, and opportunities ......................................................................................... 4

1. Challenges ........................................................................................................................ 4

2. Opportunities ................................................................................................................... 6

.3 Social responsibility ......................................................................................................... 8

Q3. Guidelines and Market Entry Strategy ........................................................................ 12

1. Country Analysis: Turkey ............................................................................................ 12

1.1EFE Matrix ............................................................................................................... 12

1.2Competitive Profile Matrix (CPM) ......................................................................... 14

2. Entry Strategy Suggestions and Guidelines for Samsung Heavy Industries ........... 16

Conclusion .................................................................................................................. 17

References .................................................................................................................. 18
 List of figures

Figure 1: The Turkish Economic Diagram ........................................................................... 1

Figure2 :Challenges facing Samsung heavy industries in the Turkish market ................. 4

Figure 3: Samsung SHI eco-friendly ships ............................................................................ 6

Figure 4: HSE management policies which implies Health, Safety, and Environmental

management. ............................................................................................................................ 8

Figure 5:Social Contribution Team of Samsung Heavy industries .................................... 9

Figure 6: Samsung Social commitment and management polices .................................... 10

Figure 7: green management engaging green workplace with green production process

and green community. ........................................................................................................... 10

Q1. Environment Variables

1. Micro

Turkey, officially known as the Republic of Turkey, is a powerful transcontinental country

bordered by Egypt, Cyprus, Romania, Russia, and Ukraine by sea. Turkey was once the center

of the Ottoman Empire. The Aegean Sea borders Turkey to the west, while the Black Sea is to

the north, and the Mediterranean Sea is to the south. Ankara is the capital of Turkey but Istanbul

is its largest city. Turkish people are generally welcoming and friendly, and many cities

(particularly Istanbul) are multi-layered and multi-cultural. The Turkish technology market is

rapidly growing and going beyond the confines of cities to reach out to rural areas. Turkey has

a vision of becoming one of the top 10 technologically advanced countries in the world by

2023. It also aims to make 80 percent of the population computer literate. Discriminating

employees based on their religion, race, language, gender, political views, and other similar

grounds are prohibited by Turkish law. The Turkish Economic Diagram as shown in figure1.

Figure 1: The Turkish Economic Diagram

Page 1 of 19
 2. Macro

Turkey is a member of multiple international organizations, including the United Nations,

NATO, the IMF, and the World Bank. It is also a founding member of the OECD, OSCE,

BSEC, OIC, and G-20. Turkey is a regional power with geopolitical and strategic importance

due to its central geographical location. Turkey is a formerly parliamentary republic that

became a presidential country in 2017. Turkey has great potential as a sustainable supply source

with its strong manufacturing industry offering a high variety of different products.

Procurement from Turkey can offer you great advantages:

• Customs union with EU

• Logistic advantages for your supply chain because of proximity to Europe

• Lower minimum order quantities than Asia

Employment laws in Turkey apply to Turkish nationals and foreign nationals alike. In addition,

special provisions exist which regulate the employment and residence permits of foreign

nationals who intend to work in Turkey. Shipping companies in Turkey have a robust

shipbuilding industry they can rely on. Turkey's shipyards employed as many as 27,189 people

in 2017 and built 21 ships - source. Not only were new ships built, but the shipyards also carried

out repair and maintenance with the output standing at 21 million deadweight tons in 2017. The

figures have stayed more or less stable over the last three years. Hence, it's seen that Turkey's

shipping companies have their shipbuilding industry to acquire their ships.

3. Competitors

3.1 Gemak (50 Years Experience)

Turkey’s one of the first and leading ship maintenance repair and conversion yards in Turkey

which was established in 1969 in Golden Horn, Istanbul.

Page 2 of 19
 3.2 Besiktas Shipyard

Was established in 2007 in Yalova Turkey as an investment of Besiktas Group. Today it is

listed as the 8th most active ship repair yard in the World, ranking 1st place in Europe with

over 180 ships docking per annum.

3.3 GESAD

The Turkish Association of Ship Industrialists, is a unique association in Turkey that represent

marine equipment manufacturers and related industry acting in Turkish Ship Industry sector.

its members consist of marine equipment manufacturers, service suppliers, and shipbuilders.

Training of Ship Industry workers, occupational safety and health, Research Innovation

Development (RID).

Page 3 of 19
Q2. Challenges, and opportunities

1. Challenges

Turkey offers a diverse and promising market that challenges Samsung heavy industries in their

adaptability, persistence, and patience. Challenges commonly divided in legislation and

governmental policies, the scale of Turkish shipbuilding industries, environmental impact, and

other global out of control conditions as follows (Figure 2):

Figure2 :Challenges facing Samsung heavy industries in the Turkish market

Source: The researcher

1. Legislation and governmental policies: the inconsistent or contradictory policies,

regulations, documentation requirements, difficulties with the public procurement

process, including price preference for Turkish companies, and burdensome

documentation time-consuming, unpredictable judicial, legal, and regulatory

framework. Such as:

▪ To start a business, companies must deposit a percentage of capital to the

account of the Competition Authority before depositing initial capital into a

bank, filling the incorporation notice form, having a notary certify the legal

books, and following up with the tax office on Commercial Registry’s

Page 4 of 19
 notification. Turkey gets in the world’s 142nd place for dealing with

construction permits by the World Bank and International Finance Corporation

(IFC) ranking. There are 20 procedures to complete during the process, which

take an average of 180 days.

▪ Facilities such as electrical connections take around 70 days to complete as it

requires work from engineers, checking by Boğaziçi Elektrik Dağıtım A.Ş.

(BEDAŞ) and permits from the local municipality and Chamber of Electrical

Engineers (EMO).

▪ The enforcing contractor takes 420 days spent in court during trial and

judgment procedures and the enforcement of the ruling.

2. The scale of Turkish shipbuilding industries: Turkish shipyards are relatively small as

compared to its Asian competitors. That has caused several Turkish shipbuilders to

earn less from “economies of scale” than other competing companies with better

capacities. Also, the localization of high innovation segments through research and

development to enhance capability remains a challenge for the shipbuilding industry of

turkey. The yacht industry in turkey is a bit foreign dependent on a majority of value-

added things, many of them that exported from their competitors such as Italy,

Germany, the United Kingdom, and united states, etc. (Tuğba Yilmaz, 2018)

3. Environmental impact: Minimizing the impact on the environment is a big challenge

to the Turkish shipyards industry. This industry causes rapidly increasing the number

of heavy metal ions discarded in the wastewater. Metal ions tend to accumulate in the

living organism and are known to be toxic or carcinogenic that causes concerns about

the need to optimizing the industry practices.

4. Other global out of control conditions: the shipbuilding orders decline in 2020 by the

covid 19 crisis. According to Clarkson (1999), Global ship orders and deliverers

decreased by around 50 percent and 20 percent, respectively, in the first half of 2020,

as compared to 2019.

Page 5 of 19
 2. Opportunities

1. environmental regulations and the global demand of eco-friendly ships: an ever-

increasing demand for eco-friendly ships and the modification of ships with green

technologies increased by the reinforcement of environmental regulations. under the

slogan of "GHG Free, Energy Saving, Pollution Free", Samsung SHI developed the

best eco ships in the world (figure 3) to leads the green ship market. It minimizes the

greenhouse gases emission as well as the discharge of environmental pollution

Figure 3: Samsung SHI eco-friendly ships

Source: https://www.samsungshi.com/Eng/sustainability/Green_Climate02.aspx

Page 6 of 19
2. The increased activities of turkey ships recycling: the ever-increasing pressure on the

tourism industry due to covid 19 led to shipowners making the decision, of the removal

of older vessels from their fleets to reduce their size and decrease their expenses, those

vessels are then sent to turkey for recycling and they come from Europe, unites states,

also some vessels that are considered too small by the Indian subcontinent scrap

shipyards are being sent to turkey which caused turkey recycles shipyards to have an

increasing number of vessel sent for recycling reaching a number between 4000 and

1000 light vessels something that has not been seen in previous years (eda Turan 2015),

which is an opportunity for Samsung heavy industries as most of those vessels are being

disposed of in turkey, increasing the activities of turkey ships recycling, Samsung can

make use of these scraps to produce, the product that it is developing, such as the new

green vessel (Samsung Shi)

3. Adapting with new market conditions: along with the significant decrease in demand

worldwide for new constructions, turkey shipyards have set their sight on tailor-made

vessels that are targeting buyers in Europe by doing though they have managed to

establish a strong front in some niche market tugboats, superyacht and small chemical

tankers beside the production of the vessel.

4. Skilled labor: turkey has a wide range of skilled workers that Samsung shipbuilding

industries are in dire need of as most European, Korean and Japanese are facing a

problem with the aging of skilled workforce which turkey highly skilled labor can

substitute for with their trained naval architect.

5. The loyalty of labor and trust of customers: Samsung can gain the loyalty of its

employees and customer satisfaction to achieve an environmentally-friendly company

while meeting the requirements of ISO14001 and OHSAS18001. HSE management

policies imply Health, Safety, and Environmental management (figure4). Its bases to

combine the philosophy of ''respect for life'' and achieve the goal of no diseases, no

accidents, no pollution.

Page 7 of 19
 Figure 4: HSE management policies which implies Health, Safety, and Environmental
management.

Source: https://www.samsungshi.com/eng/Sustainability/hse_overview.aspx

6. The yacht building industry: turkey has relatively small shipyards which could be

utilized for building specialized ships as it allows companies to quickly adapt to any

demand of the customer and innovate in providing services that tend to customers’

needs, for example, yacht building, the yacht building industry has been expanding in

turkey influenced by its skilled workforce and the affordable cost structure gives it a

competitive advantage over its competitor in Italy, Germany, and holland, concentrated

in Istanbul and the southern Mediterranean coast, turkey provides a superyacht for their

customers, etc. (tuğba yılmaz 2018)

3. Social responsibility

as nowadays business and government underline that social responsibility and economic

responsibility are aligned, stressing how firms can benefit economically from being socially

responsible (Edmondson and Carroll, 1999)

On Samsung's official website, Samsung heavy industries clarify its social contribution policy

to help its neighbors and needy countries. There are 255 volunteering teams consist of

executives and employees from each business unit (figure 5). Their volunteer activities lead the

development of a happy and healthy community through the diversity of social sectors. The

volunteering programs such as:

Page 8 of 19
 ▪ the renovation of seniors’ welfare centers and playgrounds

▪ environmental clean-up

▪ youth mentoring

▪ support for the rehabilitation of the disabled

▪ sisterhood relationship building with needy teenagers

▪ scholarship support

▪ a Food Bank program

▪ book donation for young families

▪ support for remote regions

▪ donation of blood donors certificate cards

▪ Kimchi donation of love

▪ support for agricultural villages in the busy season.

Figure 5:Social Contribution Team of Samsung Heavy industries

Source: https://www.samsungshi.com/eng/Sustainability/social.aspx

Samsung heavy industries have a social commitment that aims to minimize all the harmful

effects of the shipbuilding manufacture, products, and services. Also, it aims to reach a long-

term green management policy (figure6) through engaging (figure7) (samsungshi,2015):

▪ greening management and taking full responsibility for the production process

▪ a greening workplace free of pollution, accidents, and illness

▪ greening production process by saving energy and providing clean systems with no

effect on the environment

▪ greening community and building green partnerships with the local communities

Page 9 of 19
 Figure6: Samsung Social commitment and management polices
Source: https://www.samsungshi.com/eng/Sustainability/hse_green.aspx

Figure 7: green management engaging green workplace with green production process and
green community.

Source: https://www.samsungshi.com/Eng/Sustainability/Green_overview02.aspx

Page 10 of 19
According to a study conducted in Inebolu and Bartin ports located in the black sea region in

turkey in years (2013,2014), in both of these ports, there has been Cr, Cu, and Cr, Cu, and ni

pollution in terms of M.galloprovincialis which is variations of heavy metals content in mussels

were determined with the main factors in achieving these results were loads in the ports,

shipyards and marine maintenance and repair faculty, ships, and river inputs. (Kutalmış

Gökkuş, 2019)

Therefore, Samsung heavy industries must address these problems in its plan. Achieving this

by optimizing how to handle the loads, submarine maintenance and repair faculty, and other

shipyards activity should be arranged to prevent any possible leaks of pollution to the marine

environment and lastly, Samsung heavy industries are advised to construct a wastewater

treatment plant to help keep the environment clean.

Page 11 of 19
Q3. Guidelines and Market Entry Strategy

Samsung Heavy Industries, founded in 1974, is the leading company in the global

shipbuilding industry and it operates with the sole objective of building global leadership in

each market domain via devoting technologies and human resources for creating high-quality

products and offering supreme quality services (Samsung Heavy Industries, 2021). The

company is seeking to enter Turkey, thus, the report includes a strategic analysis of Turkey

through complete country analysis by means of external factor evaluation (EFE) matrix and

competitive profile matrix (CPM) so that suitable market entry suggestions can be developed

for Samsung Heavy Industries.

1. Country Analysis: Turkey

1.1 EFE Matrix

EFE matrix is a widely utilized strategic assessment and management tool, which

enables in determining the prominent macroeconomic or external factors influencing the

business entities. The matrix prioritizes and denotes key threats and opportunities for the

business with reference to social, legal, political, and economic factors (Capps III &

Glissmeyer, 2012).

Key External Factor Weight Rating Total Weighted

Score

Opportunities

High GDP growth and 0.10 2 0.20

a strong economy

Encouragement and 0.30 1 0.30

support to foreign

Page 12 of 19
 investment in

shipbuilding

Low corporate tax rate 0.15 2 0.30

Adequate technology 0.05 3 0.15

infrastructure

Threats

Security issues due to 0.10 2 0.20

political uncertainties

Strict environmental 0.05 3 0.15

regulations

Less government 0.15 2 0.30

involvement and

heavy privatization

Number of local 0.10 1 0.10

players

Total 1.0 1.7

It is analyzed from the examination of macroeconomic factors of Turkey that

significant development in the Turkish shipbuilding sector and rising world demand contributed

to the exponential rise in product diversity and production volume at the subsidiary industry.

Turkey is making a mark in the global maritime sector through combining modern techniques

with traditional shipbuilding capabilities and it also attained the position of the 5 th largest

country across the globe in terms of shipbuilding (Turan & Cengiz, 2015; OECD, 2011).

However, this industry is highly privatized with minimal government involvement and there is

a lack of support measures for the companies operating in the shipbuilding sector. Additionally,

the presence of various local players, lack of government support, and stringent environmental

regulations are areas of concern for companies seeking to enter the Turkish shipbuilding

Page 13 of 19
industry. It is evident from table 1 that political uncertainties and less governmental support are

prominent threat areas in Turkey (Oytun, 2019; AYDIN & AYDIN, 2019).

1.2 Competitive Profile Matrix (CPM)

CPM is a crucial strategic management tool that facilitates in comparing a business

organization with key industry players or rivalries and it presents an accurate picture of a

business entity concerning its strong and weak areas relative to its rivalries. This tool is

deployed for examining the competition and the external environment in a specific sector

wherein this profile matrix determines key rivalries of an organization and compares them with

respect to critical success factors of the industry (Capps III & Glissmeyer, 2012).

Table 2: CPM of Samsung Heavy Industries with respect to the Turkish Shipbuilding industry

Critical Weight Samsung Score Gemak Score Besiktas Score

Success Heavy shipyard Group

Factor Industries Tuzla Rating

Rating (Gemak

shipbuilding)

Rating

Market share 0.10 1 0.1 4 0.4 2 0.20

Brand 0.15 3 0.45 3 0.45 2 0.30

reputation

Advanced 0.20 4 0.80 3 0.60 3 0.60

logistics and

infrastructure

Workforce 0.10 3 0.30 2 0.20 2 0.20

capabilities

and

leadership

Page 14 of 19
 Quality of 0.25 3 0.75 3 0.75 2 0.50

products and

services

Production 0.20 2 0.40 3 0.60 1 0.20

planning and

distribution

Total 2.8 3 2

Rating: (4: major strength, 3: minor strength, 2: minor weakness, and 1: major weakness)

It is noted in regard to the competitor analysis of the Turkish shipbuilding industry that

a large number of local players are present in the industry that may threaten the growth of

Samsung Heavy Industries and may pose barriers to success and sustainability in the Turkish

market (Turan & Cengiz, 2015). Some of the key rivalries are identified as Gemak shipyard

Tuzla (Gemak shipbuilding and Beskistas Group for Samsung Heavy Industries (SHI). It is

explored through evaluation of the Turkish shipbuilding industry that production planning

capabilities, distribution channels, quality and innovation in products and services, leadership,

workforce capabilities, market share, brand reputation, and advanced logistics, as well as

infrastructure, are prominent critical success factors (Oytun, 2019; AYDIN & AYDIN, 2019).

SHI is well-known for the use of advanced infrastructure and innovative technologies

and for providing value for money services and products to its clients. However, production

planning and distribution issues need to be addressed to achieve success in foreign markets.

CPM and table 2 reveals that the Gemak shipbuilding group would be giving tough competition

to SHI. Additionally, the scarce product portfolio of the group may aggravate difficulties while

expanding (Celik et al., 2009).

Page 15 of 19
 2. Entry Strategy Suggestions and Guidelines for

Samsung Heavy Industries

Exporting, franchising, a wholly-owned subsidiary, joint venture, FDI, and licensing

are some of the most widely used market entry strategies by businesses while entering new

markets. However, a market entry strategy needs to be selected with reference to target market

attributes, industry-specific aspects, and proper consideration to strong areas and weak areas of

the firm (Watson IV et al., 2018). It is identified from the CPM matrix and EFE matrix that

political uncertainties, the dominance of local players, lack of government support or assistance

are challenging areas for SHI. Therefore, joint venture as a market entry strategy can be used

by Samsung Heavy Industries for minimizing risk factors persisting in the Turkish shipbuilding

industry and for leveraging the benefits of the joint venture through strong supply chain

relations in the local market (Oytun, 2019; Watson IV et al., 2018).

A joint venture would facilitate the firm to combat with local forces adversely affecting

company operations and distribution channels amid high competition and security issues.

Samsung Heavy Industries can form a joint venture with Gemak shipyard Tuzla (Gemak

shipbuilding group) to ensure its growth and success in the Turkish shipbuilding industry and

exploit opportunities present in the ship manufacturing sector of Turkey. A joint venture would

help in cost-cutting, enhancement of capabilities, sustaining good relations with local regulators

and government officials, and making proficient use of resources in R&D activities and

innovation (Lim, Kim & Lee, 2017).

Page 16 of 19
 Conclusion
It is concluded that the Turkish shipbuilding or manufacturing sector is growing at a

rapid pace with the adoption of modern technologies and it presents substantial growth

opportunities to global players within the shipbuilding industry. It is deduced in the light of the

CPM and EFE matrix that joint venture can be adopted as a market entry strategy by Samsung

Heavy Industries to accomplish success goals in Turkey.

Page 17 of 19
 References
▪ AYDIN, M., & AYDIN, T. Y. (2019). IS TURKEY REALLY A GLOBAL

COMPETITOR IN YACHT BUILDING INDUSTRY?. The Online Journal of Science and

Technology-April, 9(2).

▪ BBC (2019) US removes Turkey from F-35 fighter jet programme, available

at: https://www.bbc.co.uk/news/world-us-canada-49023115 (accessed 21 July, 2019)

▪ Capps III, C. J., & Glissmeyer, M. D. (2012). Extending the competitive profile matrix

using internal factor evaluation and external factor evaluation matrix concepts. Journal of

Applied Business Research (JABR), 28(5), 1059-1062.

▪ Celik, M., Kahraman, C., Cebi, S., & Er, I. D. (2009). Fuzzy axiomatic design-based

performance evaluation model for docking facilities in shipbuilding industry: The case of

Turkish shipyards. Expert Systems with Applications, 36(1), 599-615.

▪ Eda turan, hulya cengiz.2015. Turkish shipbuilding industry – challenges and potential

▪ Gokkus, K.2019. Heavy metal pollution in Inebolu and Bartin Ports, Black Sea, Turkey

▪ ITA (2019) Turkey – Information and Communication Technology, available at:

https://www.export.gov/article?id=Turkey-Information-and-Communications-Technology

(accessed 22 July 2019)

▪ Lim, C., Kim, Y., & Lee, K. (2017). Changes in industrial leadership and catch-up by

latecomers in the shipbuilding industry. Asian Journal of Technology Innovation, 25(1),

61-78.

▪ Murat Aydin, tuğba yılmaz aydın.2018. IS TURKEY REALLY A GLOBAL

COMPETITOR IN YACHT BUILDING INDUSTRY?

▪ OECD. (2011). Shipbuilding industry of Turkey. Retrieved July 05, 2021 from

https://www.oecd.org/turkey/48641944.pdf

▪ Oytun, Ü. N. A. L. (2019). Investment and Financing Problem in Turkish Shipbuilding

Industry. ECONOMICS AND MARKETING 18-20 APRIL 2019, ISTANBUL, 51.

Page 18 of 19
▪ PWC (2019) Turkey: Taxes on corporate income, available at:

http://taxsummaries.pwc.com/ID/Turkey-Corporate-Taxes-on-corporate-income (accessed

20 July, 2019)

▪ Samsung Heavy Industries. (2021). Company Overview. Retrieved July 05, 2021 from

http://www.samsungshi.com/eng/company/info_overview.aspx

▪ Turan, E., & Cengiz, H. (2015). TURKISH SHIPBUILDING INDUSTRY–

CHALLENGES AND POTENTIAL. Brodogradnja: Teorija i praksa brodogradnje i

pomorske tehnike, 66(4), 87-101.

▪ Trading Economics (2019) Turkey Imports, available at:

https://tradingeconomics.com/turkey/imports (accessed 15 July 2019)

▪ World Bank (2019) Turkey: Overview, available

at: https://www.worldbank.org/en/country/turkey/overview (accessed 21 July, 2019)

▪ Watson IV, G. F., Weaven, S., Perkins, H., Sardana, D., & Palmatier, R. W. (2018).

International market entry strategies: Relational, digital, and hybrid approaches. Journal of

International Marketing, 26(1), 30-60

▪ World Meters (2019) Turkey population, available at:

https://www.worldometers.info/world-population/turkey-population/ (accessed 20 July

2019)

▪ https://clustercollaboration.eu/cluster-organisations/turkish-association-ship-industrialists

▪ https://www.trackingdocket.com/shipping-companies-in-turkey/

▪ https://fmcgroup.com/services/supplier-search-turkey/

▪ https://www.tmf-group.com/en/news-insights/business-culture/top-challenges-turkey/

▪ http://www.besiktasshipyard.com/about-us/

▪ https://ukdiss.com/examples/customer-perception-corporate-social-responsibility.php

▪ https://www.samsungshi.com/Eng/Sustainability/Green_overview02.aspx

▪ https://www.trade.gov/knowledge-product/turkey-market-overview

▪ 6-https://www.oecd.org/sti/ind/shipbuilding.htm

Page 19 of 19