Dragon Multinational from Turkey- Arcelik

White goods industry collapsed in India after globalisation, how did the Turkish firm survive and prosper? Internationalisation and investment in R&D are two main reasons.

Internationalisation

Outward foreign direct investment (OFDI) enables both small and large MNEs to potentially enhance their competitiveness through securing access to new markets, technologies, brand names, resources and strategic assets abroad. In their constant search for better exploiting, consolidating and expanding their capabilities (or resource base), firms pursue a variety of strategies, which include product and technological diversification across fields and geographical sites . These potential enhancers of competitiveness would not be available to firms that elected to stay focused on their own domestic economy. Moreover firms that stay focused on the domestic market increasingly miss out on opportunities that are available only to firms that are prepared to internationalize – opportunities such as becoming integrated in global value chains or attracting global customers. In this paper -ACCELERATED INTERNATIONALIZATION BY EMERGING MULTINATIONALS: THE CASE OF WHITE GOODS- the authors document the rise of Haier, Mabe and Arçelik (from China, Mexico, and Turkey, respectively), as successful examples of latecomer firms that managed to upgrade their operations, evolving from the production of simple goods, generally as Original Equipment Manufacturer (OEM) subcontractors, into new product lines developed through their own design, branding and marketing capabilities.

Read : http://www.oecd.org/development/pgd/36317032.pdf

Arçelik was founded in 1955 to produce metal office furniture, and moved quickly into home appliances, manufacturing Turkey’s first washing machine in 1959 and first refrigerator in 1960. By the early 2000s it had seven production plants in Turkey to produce a complete range of home appliances.9 The company, producing 7.5 million units in 2004, is the leading firm in Turkey’s consumer durables, accounting for more than 53% of domestic sales and 54% of exports. A OEM contract in the United States was secured with Sears Roebuck in 1988 to supply refrigerators under the Kenmore name, followed a nine years later by a similar, but much larger, European deal with Whirlpool for dishwaters. Arcelik made major purchases of brands in 2002 – Blomberg (a subsidiary of Brandt) in Germany, Elektra Bregenz and Tirolia in Austria, and Leisure (cookers) and Flavel (appliances and TV sets) in Britain. In 2004 Arçelik acquired the brand name Grundig, after the German firm went bankrupt. (Arcelik had been an OEM supplier to it previously.)
 

Investment in R&D

R&D and innovation were examined in- The role of innovation in the effective international expansion of an emerging-country firm: The case of Arçelikby .

https://www.sciencedirect.com/science/article/pii/S1877042812008968

The impending entry into its largely protected domestic market of major foreign competitors once the Customs Union went into effect was another factor that necessitated quality improvements. The establishment of a Research and Development Center in 1991 appears to be the most critical decision pertaining to Arçelik’s strategy of international expansion. Arçelik A.Ş., which holds the most patent applications in Turkey, ranks 74th among 270 companies on the Global Patent Filings list published in 2017 by the World Intellectual Property Organization (WIPO). Today Arçelik A.Ş. owns one out of every three global patent applications submitted from Turkey.

Patent battles

Patent suits are inevitable part of global domination.  Arcelik, filed a case for patent infringement against South Korean appliances manufacturer LG Electronics and its subsidiaries in France and Germany. Arcelik claimed that LG Electronics used the Turkish firm's washing machine technology, named 'Direct Drive', in its devices under another name -- '6 motion'. LG filed a lawsuit against Arçelik and its German affiliates Beko Deutschland GmbH and Grundig Intermedia GmbH in connection with freezer door-ice making technology in LG Side-by-Side refrigerators. This was followed by infringement lawsuit against Beko Deutschland GmbH in Mannheim District Court in Germany for infringement of a patent for steam technology that protects certain garments from damage.

 

Jewels in the Crown: How Tata of India transformed Britain's Jaguar

The first industrial power, Great Britain was also fast in losing national iconic brands- most were sold out to foreigners. ROLLS-ROYCE MOTOR CARS, THE MINI,  OXO, MANCHESTER UNITED,KITKAT,THAMES WATER,P&O, were few of them.  And most brands lose value in M&A. In Asia Pacific region, value after acquisition declined by 38%. Chrysler merged with Mitsubishi motors in 2000 with lot of hype and  fell apart four years later.
In this scenario, Tata Motors acquired jewel of the British crown, Jagaur along with Land Rover from Ford paying $2.3 billion. Observers had described Jaguar as a basket case and joked that since most bidders were primarily interested in the potential for Land Rover, the sale proposition by Ford was `Buy one  and get one'. Most cynical of them including UK politicians argued that Tata had simply paid a lot of money for two well known brands and that before long , JLR's equipment and expertise would be shipped off to India, leaving the West Midlands as an automotive wasteland. They reminded of the promise made by the Chinese manufacturer Nanjing Automotive when it acquired the remains of MG Rover and said it would revive mass production at Longbridge. Shareholders in India were equally pessimistic and share price post acqisition dropped by 77% from its previous high. a rights issue intended to fund the purchase was a dumb squib.
Tata pulled along, arranged $3 billion bridge finance piecemeal from 21 different lenders active in Indian market, invested further 800 million pounds in R&D and managed the acquisition in its own Tata style, empowering people. The turn around of Jaguar, given up by giants of U.K & USA, clearly show that the Uncertainty Avoidance Index of Indian mangers was more favourable to manage global firms now .There has been no brand erosion, jobs remained in Britain and Jaguar as an independent entity survived and prospered, all due to the vision of Ratan Tata.

Journalist Ray Hutton chronicles the development in an eminently readable book.