by Paul Roggema, European Correspondent, APPLIANCE Magazine
APPLIANCE traveled to Manisa, Turkey to report on Merloni's refrigerator plant.
Of course, Europeans know about Turkey. Its beaches are famous and Turkey wants to join the European Community. That's what most people can tell you when you ask about Turkey.
In white goods, however, for many, Turkey does not exist. This thought pattern, however, could be dangerous. Turkish appliance makers are competitive in the value-for-money segment and the Beko brand has been quite successful in the French and UK markets. In addition, one tends to forget that Turkey is a large country: its population is 70 million, slightly less than Germany.
Merloni Elettrodomestici did not neglect Turkey. It launched operations there in 1995 as a part of its internationalization strategy, which began during the 1980s and includes purchasing brands and factories all over Europe. In this strategy, the focus was developing markets (that's why Merloni is the market leader in Russia right now) and the importance of the Turkish market was recognized.
The current output of the Manisa, Turkey refrigerator factory is 500,000 items per year on 30,000 sq m of manufacturing space. The share of production for the domestic market was 60 percent in 2000, and is currently at 50 percent.
Merloni Turkey is a young company. It began in 1995 with the purchase of the Manisa refrigerator factory. At that time, the Merloni brands were unknown. Francesco Trovato, country manager for Merloni's Turkey operations, says, "We started with two brands: Ariston and Philco. All of the cooling products for the two brands were produced in Manisa, while other items were imported. In 1998 we replaced Philco with Indesit and decided to work here with our two pan-European brands."
The Turkish market is very fragmented and can thus be labeled a developing market. There are about 8,500 independent stores with a market share of 90-95 percent. Typical for Turkey is that the most important sales channel is the single brand shop, which offers a complete product range from one brand. Then there are multi-brand stores. Modern distribution channels and chains are rare in Turkey-market leader Arçelik (a Turkish brand) and Bosch both use the single brand formula.
"When Merloni entered Turkey, it was decided not to copy this formula and go for the multi-brand shop formula," says Pinar Alankus, marketing manager. "Remember that because of their small size, the multibrand stores just have three to five brands, and no more. As we are the largest in this channel, we spent a lot of effort to push this concept. Interesting is that both Arçelik and Bosch have brands (Beko and Siemens/Profilo) that they use for the multibrand shops."
A big advantage for Merloni is that it offers a complete European range, not only the locally produced models. This was an innovative push on the market, in technology and in aesthetics.
"We played the role of the loud newcomer, and are very proud of our 12-percent market share," says Ms. Alankus. " These days, everyone knows our Ariston and Indesit brands."
According to Mr. Trovato, the Turkish market is dynamic and there is huge potential for growth. It is also promotionally oriented. "Every month you need a new promotion," he says. "We offer payments free of interest, rebates, or gifts (such as a cellphone with a fridge, a kitchen robot with a washer). These things are much more important here than in other markets, in level and in frequency. Because of the inflation, we have a new price list every month. Moreover, the nature of advertising is different: normally you would not advertise for specific models, but you would promote more generically, directed toward your brand. Here you'll see specific ads on TV all the time."
He adds that the average consumer is young and needs product information. They notice the advertising and are affected by it. "Our main channel is television," he says, "sometimes supported by radio and newspapers."
Good for Merloni is the general popularity of Italian style. In areas such as fashion and furniture, many Turkish manufacturers use Italian names. Italy is also the second trade partner of Turkey (after Germany), thus many feel that Italian and Turkish culture match quite well.
Concerning Turkish habits in refrigeration, about 70 percent of the market are 70-cm width, which are larger refrigerators that have two doors with a small freezer. No European market likes the larger refrigerators as much as the Turkish, and only here this width is used and produced. Ms. Alankus tells APPLIANCE, "Turkish consumers want fresh foods and shop often on the food markets. They also need cooling space. Freezer compartments are relatively small, because there is no frozen food culture."
How does the Merloni organization reflect these consumer trends? Mr. Trovato says, "We are a young organization and Merloni in general has many young managers. We believe that young people with the right potential give your company speed, flexibility, and innovation. Speed is what you need here in Turkey. The joke is that 1 year here equals 4 years elsewhere, because of a new price list and a new promotion each month.
"When we recruit management we look for graduated people, who are young, who don't have too much experience in the market, who have a global point-of-view and a real commitment to the company," he continues. "We want (and are able to find) Turkish staff and not expatriates. This works so well that we even can export managers to other countries."
The Manisa Factory
On Turkey's western coast, near Greece, is Turkey's biggest port Izmir. The town of Manisa, a few miles further inland, is the home of Merloni's Turkish production site. Merloni took over this factory partly as a clear signal to Turkish society that they were "here to stay."
Mr. Roberto Bruni, plant manager, says, "APPLIANCE readers know the advantages of local production: having a feeling with the market and the local culture, flexibility, and better consumer appreciation."
Merloni worked hard on the management culture after the factory takeover in 1995. Ms. Alankus tells APPLIANCE, "The whole management culture was basically renewed. All staff speak English and some Italian, and most of them are engineers. Because there are good technical universities in Turkey, engineers are widely available."
Mr. Bruni adds, "Another change in the culture we are working now is about customer satisfaction: we are trying to get this in the heads of the people on the work-flow that this is our main focus. We're not only discussing production figures (a part of the process), but mainly the customer satisfaction level (the entire process). Other new aspects include more attention to quality orientation and stimulating working in interfunctional teams (R&D, Quality, Production, Technical, and Marketing). For this we have just introduced the ‘visual factory' concept, where you provide graphics and information in well-defined areas inside the factory so that everyone can educate themselves."
The total workforce at Manisa is 450. Most workers are permanent positions because Merloni needs loyal and dedicated workers. Additional educational programs (and test schemes) are in place for seasonal workers, which is about 35 percent from April to September.
The factory has the usual components: metal pressing and cutting, plastics molding, painting, preassembly, foaming, and final assembly.
While other producers may outsource their painting, the Manisa facility has its own painting shop. The reason, says Mr. Bruni, is quality. "We wanted a quality level we could not achieve with nearby suppliers. We especially want to guarantee the maximum standards for hardness, corrosion, and aesthetics. All of these quality issues here are a ‘must' for us. We have three steps of corrosion protection (zinc); and there are six paint robots who deliver a total of 70 different components."
Foaming operations are performed by 12 Perros (Italy) machines with two input and two output robots.
In assembly, there is a special robot used for chest freezer production. The evaporator tube was shaped in a special frame, which was fitted around the inner lining, and the frame was supplied. However, Merloni developed a technique where a flexible tube is mounted around the inner lining by a robot, using tape. Fitting is much tighter this way, and such a thermodynamic circuit can guarantee the best performance-it is more efficient (no frame is needed) and quality is more consistent.
Mr. Bruni says, "We used to just accept the production capacity of the machines. Now, we want more and we are interested not only in the general efficiency of the system, but we are improving the efficiency of each single movement of the machinery."
The Manisa factory is ISO 9001 certified, including R&D. "We now are working on the 2000 version of ISO standards, named Vision2000," Mr. Bruni says. "A big difference with the previous standards is that there is less paperwork and more emphasis on system analysis. In addition, there now is an explicit demand for a statistical analysis of customer satisfaction. We expect to have this system in place in November 2002, more than a year earlier than thought possible. We will be the second company within the white goods business and the Merloni Group to implement this procedure, after the Stinol facility in Russia."
Despite the slow recovery of the Turkish economy, the future looks bright for the Manisa factory. In 2003, the factory will undergo a 6 million Euro (U.S. $5.9 million) investment, mainly for two improvements: for the second consecutive year, a new product with A++ consumption levels, and a new speed functional test line. The new line will perform intelligent analysis and can detect errors within 8 minutes. New foaming equipment will be needed for the expected higher production levels.
Mr. Bruni says, "We have several goals for our company. For the products, we want to extend the electronic functions, but without the reliability problems found in cars and mobile phones. We want to do long-term planning on energy consumption improvements, so we will be not surprised by unforeseen new rulings. That means that we will ask the suppliers to think with us about our 5-year forecast. Third, the emphasis on aesthetics will remain and through that we will continue to distinguish ourselves from the competition."
Mr. Trovato adds, "Our future goals are to keep the growth higher with general market growth; and concerning retail, increase the quality and volume of our retail network; and to push the multibrand concept. We are sure that with our organization, our people, and our focus on innovation that we can catch a fair share of the growth in the Turkish market."