Question

Can you please write about the macroenvironment of Turkey by using PESTEL analysis (Political, Legal, Social, Cultural, Economical, Technological) (you can consider that you are making an analysis of an existing product and a proposal for the expansion of that product into an existing foreign country that does not currently have the specific product/brand.)?

Answer 1

PESTEL Analysis for Introduction of Ola Cabs in Turkey

Ola Cabs is a successful cab-hailing service start-up based out of India. It is looking at making in-roads to countries outside of the Indian sub-continent and Turkey is being considered as an option. The following is the PESTEL Analysis for the same

Political: On a broad scale, the political scene in Tukey is liberal and encouraging free trade with more and more countries. However, sporadic terror attacks and bouts of violence is seen as a political risk by prospective investors. Relevant to Ola, Istanbul Municipality’s iTaksi has to be seen as an important factor. iTaksi was a late entrant to the market; however, it captures consumer data that is seen as an intrusion of consumer privacy. Ola will have to consider the balance between security requirement of municipality and consumer privacy needs.

Economic: Turkey’s economy is driven by its service sector. Service sector contributed to 61.4% of Tukey’s GDP in 2017. Turkey has capitalized on being relatively unaffected by the economic crisis of 2009 to become an attractive free-market economy. Turkey’s large current account deficit combined with rising unemployment has made the economy more open to FDI. Turkey’s Free Trade Agreements with India, which welcomes companies to the country’s populated cities and comparatively low cost labor is a positive scenario for a company like Ola. As the PPP continues to grow, the market for cab-hailing service is there for the taking. Though Ola will not be the first cab hailing service to enter Turkey, the market is far from saturated and is conducive for investment.

Social: The demographic dividend is in Turkey’s favor. With more than half of the population below the age of 30, Turkey is a country rich with young, working population. This is the segment for the demography forms both the resource (drivers) and market (customers) for Ola. The skill-set is a mixed bag. The education system continues to struggle to meet the market demand for skilled labor. However, there is a rich supply of workforce willing to work. If Ola is willing to invest in basic training facilities, the resource side of the supply chain will be managed easily.

Technological: Compared to other EU countries, Turkey is slower when it comes to adopting technology. The spend in R&D is at a lowly 0.6% of GDP (2006). Though the telecommunications and IT sector continues to grow, it is much behind an IT super-power like India. Thus, Ola will continue to depend on resources back home to meet its technological needs at least in the short term. However, as far as adoption to Ola by customers go, the presence of Uber and Government backed iTaksi ensures that consumers would not face any learning curve when it comes to using Ola.

Environmental: Turkey is facing environmental challenges of pollution and global warming. The ever-increasing number of vehicles is leading to situations of smog in cities. It is also turning into a serious health concern. Under these circumstances, cab-hailing service like Ola, which discourages individual cars, reduces vehicles on the street with cab sharing, and pooling services, is sure to get a lot of backing.

Legal: Turkey’s labor regulations are relatively stiff and remain a source of deterrent. In February 2017, Turkish National Police mandated all public vehicles to record travelers. This is a compliance requirement new to Ola. In addition, the recent legal struggle between Uber and Istanbul’s taxi drivers is something that Ola should be wary of. Cab drivers have taken Uber to court, accusing them of running an unlicensed cab-hailing service in the country. There have been reports of Uber drivers being threatened. Since Ola has a business model that is very similar to Uber, the same issues shall plague them.