issue: October 2005 APPLIANCE Magazine
Extending a Global Reach
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APPLIANCE Staff Feature
With production of a new washing machine plant set to begin in Russia next year, Turkish appliance maker Arçelik A.S. has experienced a positive 2005 and expects to do the same in 2006.
One of the top five appliance makers in the region, the Turkish-based appliance maker recently reported an 87-percent increase in profit from 36 million liras (approx. U.S. $25.9 million) to 68 million liras (approx. $49 million) in the first quarter of 2005. In addition, the company has been the recipient of several industry awards on merits ranging from innovation to energy efficiency to design. Recently chosen as one of Turkey’s favorite firms by economics magazine Capital and human resources firm Adecco Turkey, the company has a specific outlook in mind regarding its share of market and future success, which includes expanding its international brands and consumer-focused strategy.
APPLIANCE talked to Nadir Yalçinalp about Arçelik’s goals as it continues to rapidly invest and expand in the European appliance market.
Q. Arçelik reported strong growth in 2004 and so far in 2005. To what do you attribute your company’s success?
A. In 2004, a 29-percent increase in turnover has been attained. The revenue from foreign sales has reached 44 percent of the total turnover. 2004 shall go down in our company history as our most successful year. While maintaining our steep rate of growth, we have also increased our profitability, and augmented every item of our balance sheet, thus proving once again that not only is Arçelik A.S. a shining jewel of Turkey, but also is one of the major players of this sector in Europe.
The success we have reached today has been attained by rigorous planning; the high quality of our human resources; our service philosophy of being ever-ready to respond to customer expectations; and our decisive approach creating our own technology. Throughout the last 50 years, we have played a serious part in increasing the welfare of our society, and augmenting belief in a progressive lifestyle by pioneering numerous inventions and new ideas. Thanks to our business dictum, which places customer satisfaction first and foremost, we have reached a point in world markets where we can purchase companies and brand names.
Q. Arçelik has traditionally been strong in Turkey. Where else are you stong?
A. Three of Arçelik’s brands are marketed locally—Arçelik, Beko and Altus. Through these three brands, Arçelik holds more than 50 percent of the Turkish market share. The closest competitor is Bosch with approximately 12 percent market share. Independent research indicates Arçelik has the highest brand name recognition ever attained. There are almost 15 million households in Turkey and 60 million products of our brands are in use locally. This means, on average, every other household has at least 4 of our products in terms of household and small kitchen appliances.
We have a rich portfolio of domestic and international successes, together with 75 million products in use. In 2004, 44 percent of Arçelik’s 2.7 billion euro (approx. $3.3 billion) turnover was realized in international markets. In 1991, we decided to expand globally under the Beko brand name with great success. Today our products are marketed under the brands Arçelik, Beko, Blomberg, Altus, Elektra Bregenz, Arctic, Leisure, Flavel, and Tirolia.
In the British market, we have a 14-percent market share for refrigerators and a 7-percent market share for washing machines. In Belgium, our market share for single products is 14 percent and is 43 percent for ovens. We have a 5-percent market share for all product groups in Poland and a market share of nearly 20 percent for all product groups in Lithuania. We have reached a market share of 7 percent for freestanding products and a 5-percent market share for branded products in Europe.
Whether it is in the local or in the international markets, we believe in our own technologies and in high-quality products. Our competitive edge is effective cost control management, advanced technological production, product diversity, and the strength of our brand names.
Q. Last year, Arçelik invested in a Russian washing machine plant. What are your plans for the Russian market?
A. In June, we celebrated the groundbreaking ceremony for our new refrigerator and washing machine plant in Kirzhach. The factory will create opportunities for employing around 1,000 people as of the beginning of 2006. With about 58 million euros (approx. $71 million) it is a really serious investment by our company. The yearly production capacity of the Beko LLC plant will be 600,000 washing machines and 300,000 refrigerators and the production will start with the Beko brand. The appliances will mostly be distributed in Russia but also in Ukraine and the ex-Russian republics.
Russia is a potential market as the consumer durable market reaches a total volume of $6 billion. We entered the country in 1994 with our Beko brand and now expand with a plant that will guarantee international quality and standards to consumers. We believe that our investment will highly vitalize the region’s economy. Our present market share in Russia is 8 percent in the washing machine sector, and increases around 7 percent each year.
Q. Korean appliance makers are also aggressively trying to enter the European market. What is your competitive strategy?
A. We are aware of the increasing number of competitive Korean and Chinese products. Let me point out that a low price is not the main factor that determines consumers’ choices. The main criteria are brand awareness, quality and safety—we represent these issues. In addition, we produce our appliances close to the European market, which means that we save environmental resources and maintain lower costs on transportation and logistics. With the effective cost control management, we are able to serve our consumers with reasonable prices.
Q. What goals do you have for Arçelik in both the short and long-term?
A. Our main short-term and long-term strategies are to grow 12 percent each year, to reach a turnover of 3 billion euros (approx. $3.7 billion) by the end of 2005, to increase our presence and market share for the built-in products, and to further grow through our brands. With its innovative approach, its production standards, and its sense of environmental responsibility, Arçelik has become a role model for its competitors. Arçelik’s new vision is aiming to posses one of the top ten brand names of the world by the year 2010.