1. 1 Prof. Dr. Yeşim Toduk November 25, 2011 Facilitating FDI flow to Turkey by understanding Turkish Culture

2. 2 Prof. Dr. Yeşim Toduk November 25, 2011 FDI: Theory and Practice CULTURES & FIRMS BEHAVIOR PATTERNS

3. 3 Prof. Dr. Yeşim Toduk November 25, 2011 Factors Relevant to Selecting Locations for FDI Cultures and Investor’s perceptions as a person

4. 4 Prof. Dr. Yeşim Toduk November 25, 2011 Internationalization Behavior of Firms Key issue in internationalization of firms is the need to understand and adapt to cultural characteristics of host country. Along with cultural differences in language, business practices, market structures, legal and political systems, level of economical development, human resources availability. There is also PSYCHICDISTANCE.

5. 5 Prof. Dr. Yeşim Toduk November 25, 2011 Internationalization Behavior of Firms There is also a psychological barrier towards some markets by the decision maker(s) which is only the perceptions, not REAL. It is called in the literature as Psychic Distance. It is believed that, it has preconditioning of cultural distance roots. Key reasons for Turkey’s underperformance of attracting FDI was lack of information and poor perceptionse.Eliminating this psychic distance is based on personal visits to country, starting exports, learning through experience, meeting of similar professionals with similar backgrounds, who understand their culture, builds trust as a person and advisor. Hofstede’s work -related values based framework for national culture will be used in comparing the Turkish culture (host country) with the countries the investment is sought after.

6. 6 Prof. Dr. Yeşim Toduk November 25, 2011 What is Work-Related Values Based Framework Culture? A system of values and norms that are shared among a group of people and that when taken together constitute a design for living. Hofstede

7. 7 Prof. Dr. Yeşim Toduk November 25, 2011 Understanding National Cultures Five dimensions of National Culture: 1- Power Distance 2- Individualism/Collectivism 3- Masculinity/Feminity 4- Uncertainty Avoidance 5- Long/Short Term Orientation

8. 8 Prof. Dr. Yeşim Toduk November 25, 2011 Power Distance PDI that is the extent to which the less powerful powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. This represents inequality (more versus less), but defined from below, not from above. It suggests that a society's level of inequality is endorsed by the followers as much as by the leaders.Power and inequlity are extremely fundamental facts that will be aware that 'all societies are unequal, but some are more unequal than others‘ Large Power Distance Employees afraid of bosses Depend on their bosses Large emotional distance Small Power Distance Approach and challenge bosses Bosses consult with staff Small emotional distance

9. 9 Prof. Dr. Yeşim Toduk November 25, 2011 Individualism/Collectivism Individualism Interests of the individual outweigh the interests of the group Individual is independent One must look after himself/herself Collectivism, that is the degree to which individuals are inte-grated into groups. On the individualist side, societies in which the ties between individuals are loose, everyone is expected to look after him/herself and his/her immediate family. We find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families, which continue protecting them in exchange for unquestioning loyalty. The word 'collectivism' refers to the group, not to the state. The issue addressed regarding all societies in the world.In collective cultures, people are supposed to look after them in exchange for loyalty and in individualistic cultures they look after only themselves and the immediate family. Collectivism Interests of the group outweigh the interests of the individual Group is one’s identity Group=protection

10. 10 Prof. Dr. Yeşim Toduk November 25, 2011 Masculinity/Femininity Femininity Social gender roles overlap Men and women are both modest & concerned with quality of life Little difference between genders Emphasize relationships, concern for others, and the overall quality of life Masculinity Social gender roles are defined Men are assertive & tough Women are modest & concerned with quality of life High difference between the genders Achievement of visible and symbolic organizational rewards Femininity, refers to the distribution of roles between the genders. Women's values differ less among societies than men's values,men's values from one country to another.The assertive pole has been called 'masculine' and the modest, caring pole 'feminine'. The women in feminine countries have the same modest, caring values as the men; in the masculine countries they are somewhat assertive and competitive, but not as much as the men.

11. 11 Prof. Dr. Yeşim Toduk November 25, 2011 Uncertainty Avoidance Uncertainty avoidance deals with with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth.People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, who are more phlegmatic and contemplative are more tolerant of opinions and relativist. Strong Uncertainity Employees in high uncertainty- avoidance cultures tend to stay with their organizations (Japan, Greece, and Portugal) Weak Uncertainity Those from low uncertainty-avoidance nations are more mobile (United States, Singapore, and Denmark)

12. 12 Prof. Dr. Yeşim Toduk November 25, 2011 Long/Short Term Orientation Short Term Orientation Values associated are respect for tradition, fulfilling social obligations, and protecting one's 'face'. Personal steadiness and stability Reciprocation of greetings, favors, and gifts Long Term Orientation Values associated are thrift and perseverance Ordering relationships by status and observing this order Having a sense of shame Long-Term Orientation is the fifth dimension of was found in a study among students in 23 countries around the using a questionnaire designed by Chinese scholars.It can be said to deal with Virtue regardless of Truth. Both the positively and the negatively rated values of this dimension are found in the teachings of Confucius, however, the dimension also applies to countries without a Confucian heritage.

13. 13 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Value Dimension Scores

14. 14 Prof. Dr. Yeşim Toduk November 25, 2011 Power Distance and Uncertainty Avoidance 4 *UK *USA 1 *Hong Kong *China *India *Germany 3 *Arab World *Italy *Spain *Turkey *South Korea *Japan 2 Uncertainty Avoidance High Low Power Distance High Low

15. 15 Prof. Dr. Yeşim Toduk November 25, 2011 Individualism and Power Distance 4 1 *South Korea *China *Hong Kong *Arab World *Turkey *Japan *India *Spain *Germany *UK *USA 3 *Italy 2 Individualism High Low Power Distance High Low

16. 16 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions

17. 17 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions for Turkey

18. 18 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. European Countries

19. 19 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. France

20. 20 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Germany

21. 21 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Italy

22. 22 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Spain

23. 23 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. United Kingdom

24. 24 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Culture Dimensions Turkey vs. Asian Countries

25. 25 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. China

26. 26 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Hong Kong

27. 27 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. India

28. 28 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Japan

29. 29 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. South Korea

30. 30 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Arab World Arab World

31. 31 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. United States

32. 32 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. Canada

33. 33 Prof. Dr. Yeşim Toduk November 25, 2011 Hofstede Cultural Dimensions Turkey vs. World Average

34. 34 Prof. Dr. Yeşim Toduk November 25, 2011 Target Company Selection Process Reactive Approach Proactive Approach

35. 35 Prof. Dr. Yeşim Toduk November 25, 2011 Reactive Approach If Foreign Investor(s) acts helpful but reactively answering the general interest of investors and multipliers. Typical approaches used with passive market selection are inquiries from foreign firms increasing their commitment to Turkey or through contacts established by indirect media used by Foreign Investor(s) in order to attract the attention of foreign prospects (customers): Participation of business conferences, investment exhibitions, investment missions, trade missions, taking part in directories, Use of media – general PR campaign, specific industry catalogues, brochures, factsheets, newsletters, Foreign Investor(s) Website, other state websites

36. 36 Prof. Dr. Yeşim Toduk November 25, 2011 Proactive Approach Foreign Investor(s) is active in initiating the selection of foreign markets to open offices, and the further industry and customer segmentation of these markets. Proactive approach is more systematic and formalized, Foreign Investor(s) representatives with international experience and access to international market information (ie- using internet to access potential investors’ web sites, previous investors network, exporters network, other resources- social media?) have KPI targets to reach. Focused Marketing; ie. Industry Targeting and Segmenting, Company Targeting and Approaching, focused calling-mailing Critical meetings – Cultural Factors (whom to meet?), presenting right material at the right level. Connecting and networking for RESULTS Systematic follow ups, REPORTING

37. 37 Prof. Dr. Yeşim Toduk November 25, 2011 Proactive Approach Industry Targeting : – Segmenting the sector Company Targeting : – Identification of potential investors: Size, performance of company, R&D intensity, exports to Turkey Active FDI investors (Yes/No?) Explicit international or globalization strategy (yes/no?) Accurate contact details – right level of decision makers, the staff –ie. Talk to CEO Assistant, Turkey Region belongs to MENA? CEE?Europe?

38. 38 Prof. Dr. Yeşim Toduk November 25, 2011 Proactive Approach Company Targeting (continued): – Relationship building with target company executives (Regional VP). Bring the business relation into the trusted advisory role Positively influence the psychic barriers to Turkey PEOPLE make decisions Presentation – Competitive advantages of investing in Turkey and how Foreign Investor(s) assists and facilitates. Send related materials regularly ie. Corporate Governance regulations Organizing networking events: sector conferences, national celebrations Using existing investors as Ambassadors

39. 39 Prof. Dr. Yeşim Toduk November 25, 2011 Worldwide FDI Flows

40. 40 Prof. Dr. Yeşim Toduk November 25, 2011 40 Page  40 Trained by multinationals over several decades Resilient to economic crisis Consumer and corporate unlevered, yet liquidity issues Low-leverage in the economy Bridge between East & West Russia’s access to South Strategic position for trade and logistics 75m people, 28 years of avg. age, ongoing urbanization Young and growing population 150 years of market economy with 70% in SMEs Entrepreneurial corporate culture 350% USD GDP growth in the last 20 years Resilient to economic crisis Structural reforms in last 9 years with guidance from IMF and EU Improved macro fundamentals 6 th in Europe, 17 th globally; poised to become 4 th in Europe and 10 th globally Largest economy in the region with strong long-term growth Trained by multinationals over several decades World-class management talent Strengths of Turkey

41. 41 Prof. Dr. Yeşim Toduk November 25, 2011 Large and Growing Economy

42. 42 Prof. Dr. Yeşim Toduk November 25, 2011 World-Class Management Talent

43. 43 Prof. Dr. Yeşim Toduk November 25, 2011 References 1) www.geert-hofstede.com