New Strategy: 6 States, $20 Billion, in 3 Years

Turkey has announced 2006 as “The USA year” and within the following two-year period the government will organize special activities in the six target states (New York, Texas, California, Illinois, Georgia and Florida.) State Minister Kursad Tuzmen spoke about Turkey’s new strategy to TURKOFAMERICA.

Considering the mutual relations with the USA starting from the period of the Ottoman Empire, it is difficult to observe any remarkable development. What are the reasons for this?
The geographical distance, tough competition, and the unique characteristics of the US market, and also the fact that the companies which wanted to enter the market didn’t determine long term strategies led to the development of these relations falling behind the desired level. The US market is a specialized market which requires long term policies in marketing and has tough competition conditions.

Also because of the fact that the country is made up of states, each with its own economic, social and legal structure, we haven’t had trade relations on the level we desired. Moreover, for a long time only textile and ready-made clothing industries saw the US market as a target; only recently have industries like ceramics, iron and steel, or jewelry been approaching the US market. Our aim is to increase the number of such examples, put the US among our target markets, and open the way for our companies. For this purpose we announced 2006 as the “American year” and our activity program, which aims to acquire the portion we desire from the US market, primarily covers the period 2006 – 2008. Our strategy is focused on increases in export and it is “state-based” and “sector-focused”. We believe this approach will bring important openings to our exporters in the US market.

Why did you feel a necessity to have a strategy to enter the US market? What kind of a strategy have you developed?
Turkey has set off with a $100 billion target for exports until 2010. It is time to remember Ahmet Ertegun’s advice to Ray Charles at the start of his career: “If you go after pennies, you will get pennies; if you go after dollars, you will get dollars.” We have approached the US market as a single market so far; now we should handle it as separate markets on a state-by-state basis, and make our companies approach these regional markets, professionalized on a product-sector basis.

The US economy is the largest economy in the world with its $12.5 trillion capacity. Our share in this market, however, is only three per thousand with an export capacity of $4.9 billion.  When analyzed on state-by-statebasis, our market share gets even smaller. For example, the import capacity of California alone is $274 billion annually and the market share of the Turkish companies from this amount is 0.1%.

Can you explain the contents of the work schedule that you have developed on a state-by-state basis?
The USA is structured as 50 states and 3 dependent territories. Among these states, New York, California, Texas, Georgia, Illinois and Florida were determined as the target states in terms of their GNP potentials and the role they play in foreign trade. The most important 15 customs offices of the US are in these six states.

Moreover, these states are the distribution centers for their regions. For example, Texas and Illinois are the distribution centers for the south and the mid-west.  Therefore, access to these distribution centers will pave the way to access to purchasers in other states. On the other hand, our strategy will be specialized on a product-sector basis as well.

For example, in recent years we have observed an increase in our jewelry, marble, and steel and iron exports to the USA. Today, the primary marble exporting companies to the USA are Turkish companies. In the jewelry industry, our companies are becoming well-known brands. It is important to make this process permanent and increase the number of similar success stories.

What are the things to be done within the scope of this strategy? How do you support the companies?
The primary vehicles to put into use to enter the US market are promotion campaigns. Advertising  our country’s products to American consumers and creating a positive image in the eyes of the consumers are the key points for the success of the strategy.

This is why the most important issue is to initiate a promotion network. It is possible to see such activities in two important categories. The first concerns the activities that would strengthen the image of Turkey and Turkish products And the second would be the relatively short term activities to introduce our companies to related distribution channels.

How important are fairs within this project?
In the year 2006, from automotive to giftware, in many sectors participation in more than 200 fairs was supported in various cities, such as Las Vegas, New York, Chicago and Dallas. Eight Turkish fairs were organized. The Textile Fair in New York, which is organized biannually, has become well-established. If we could increase the number of these examples our success in the US market would increase as well. Our aim is to continue such activities in 2007 and 2008. For this purpose, if my program is available, we will organize a trade council trip under my leadership to California and Florida in 2007. Also preparations continue to organize smaller scale boutique trade councils to New York and Chicago.

How do you support the companies that would open to new markets?
The Undersecretariat of Foreign Trade provides the companies that want to do export to the US market, or other markets, with R & D support, assistance for market research and product promotion, real-estate support for offices, department store or show-rooms, and the TURQUALITY® support program and assistance for participation in the fairs.  

What are the expectations from this US market strategy?
Our target is to increase our trade volume from $10 billion to $20 billion in three years. Along with our economic objectives, we are hoping to strengthen the image of Turkey and Turkish products, to attract the attention of the American investors, and to improve our mutual relations in the general sense by reflecting the positive economic relations onto political and cultural platforms.

What can be done to increase partnerships with American companies?
Currently more than 600 American companies are active in Turkey. One-third of them came to Turkey after the year 2003.  Turkish and American companies carry out joint construction projects in a wide geographical region from Afghanistan to Lebanon. Enlarging these partnerships to other sectors will turn these commercial contacts into joint investments, which in turn will lead the Turkish companies to become more effective in the strategic production networks expanding rapidly around the world.

What is the route to follow to become successful in the US market? Which road should the sector representatives take? How important is it to become a brand?
The competition observed in the US market is tough to the utmost degree. The capacity of the market and the advantages it offers are the same both for us and the other countries. This is why issues like becoming a world brand, which would support our competitive dynamics, are very important. However, it is difficult to say that we are where we desire to be.

However, we shouldn’t forget the efforts of companies like Mavi Jeans, Gilan, Sarar and LTB, and the point to which they have come. Yet we have to increase the number of these examples. Currently, Turkish companies have the biggest market share in the marble industry. Also, we have a good reputation for steel and iron. Our ceramic products are on the same path as well. Moreover, Turkey’s name is mentioned with Italy and India in the jewelry sector. We have to increase these examples.

200 YEARS IN COMMERCE
The first trade agreement between the Ottoman Empire and the USA, the “Trades and Trafficking Agreement”, was signed on May 7, 1830. By this 9-article agreement the USA was given the title of “most favored nation”. According to the agreement, the USA would pay taxes at the ratio of the privileged nations and no further taxes would be requested.  The USA was also awarded the right to have a commerce representative in Turkey. At the end of the 19th century, the trade volume between the Ottoman State and the USA reached one million dollars. When today’s figures are considered, in 2004 the foreign trade volume with the USA reached 9.5 billion dollars and it exceeded 10 billion dollars in 2005.  

In the year 2005, 6.7% of Turkey’s exports and 5.1% of its imports went to and came from the USA. Considering the 1.7 trillion dollar import capacity of the US, our import volume is still very low. Currently the USA is Turkey’s fourth largest export market and the fifth largest market that Turkey  imports from.

TARGET PRODUCT GROUPS AND STATES
Food, Chemical Products, Textile and Ready-to-wear Clothing, Leather and Leather Products, Processed Marble, Jewelry, Non-iron Metals (copper and aluminum), Electronics and Machinery, Automotive Supply Industry and Furniture  

On the state-by-state plan, priority is given to New York for food, chemical products, textiles, non-iron metals, ceramics and furniture; to California and Texas for leather and leather products, ready-to-wear products and jewelry; and to California, Texas, and Illinois for electronics, machinery, and the automotive supply industry. (January 2007, Issue 23rd)

 
TURKEY-U.S. TRADE ($Million)
Year         Export        Import
2000        3.041        3.720
2001        3.054        3.094
2002        3.516        3.113
2003        3.788        2.900
2004        4.933        3.362
2005        5.182        4.269
2006*      2.263   2.351
*(First 5 months)
Source: census.gov


U.S. GOODS IMPORT (2005)
Countries        Import / Billion        Percentage of total imports
1- Canada         287.9                    17.2        
2- China            243.5                     14.6
3- Mexico          170.2                     10.2    
4- Japan           138.1                      8.3
5- Germany        84.8                      5.1
6- England         51.1                      3.1
7- South Korea  43.8                      2.6
8- Taiwan           34.8                      2.1
9- Venezuela     34                         2.0
10- France         33.8                     2.0
11- Malaysia      33.7                     2.0
12- Italy               31                        1.9
13- Ireland         28.6                     1.7
14- S. Arabia     27.2                     1.6
15- Brazil           24.4                     1.5
42- Turkey           5.1                     0.3
Source: census.org