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Koc Holding SWOT & PESTLE Analysis

Last Updated : 22 Jun, 2017

OVERVIEW

Name of the Company: Koc Holding

Business Sector: Retail

Operating Geography: Istanbul, Turkey

About the Company: Koc Holding is Tukey’s largest conglomerate and that country’s only entry in Fortune Global 500 list. It has headquarters in Nakkestepe, Istanbul and is controlled by the Koc family. The group comprises of 113 companies, 90000 employees and 14000 dealers.

Revenue: 17.91 billion – FY ending December 2016

SWOT & PESTLE Analysis

The SWOT analysis for Koc Holding is presented below:
Strengths
Weaknesses
1. Only Turkish company in Fortune 500 global ranking
2. Strategically positioned in lucrative businesses
3. Highly diversified and transparent portfolio
4. Market leader in almost every business they operate
5. Benefit from economies of scale
1. Exposure to insolvent companies
Opportunities
Threats
1. Positive expectation from export markets
2. Turkey becoming growing energy transit hub
3. Increase in the per capita income and decrease in the tax burdens
4. Expected growth of car rental sector
1. Recession to continue in commercial vehicle segment
2. Contraction of automotive industry due to increased special consumption tax
3. Environment of highly geopolitical risks and domestic policy uncertainty
4. Economic slowdown and downfall of lira
5. Changing consumer expectations and behaviours
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Strengths

1. Only Turkish company in Fortune 500 global ranking – Koc Holding is Turkey’s leading investment holding company and largest industrial and services group in terms of revenue, employees, exports, and taxes paid. It ranked as one of the world’s largest 500 companies among the Fortune Global 500.

2. Strategically positioned in lucrative businesses – Koc Holding has leading positions in strategic and lucrative businesses with strong competitive advantages in various sectors like energy, consumer durables, automotive and finance. The strategy of increasing market share in existing markets and also expanding into new ones maintained their leadership position among Turkey’s top exporters in 2016.

3. Highly diversified and transparent portfolio – They have highly diversifies portfolio with business in four major sectors like Energy, automotive, consumer durables and finance. They have 90% of their NAV in the listed companies and have achieved successful results with this diversified and balanced portfolio structure, strong cash position and prudent risk management.

4. Market Leader in almost every business they operate – They maintain their leadership positions in every sector they operate like Tupras and Aygaz in energy sector, Ford Otokar, Fiat Tupras and TurkTraktor in Automotive sector, Arcelik in consumer durables and Yapi Kredi in Finance sector.

5. Benefit from economies of scale – They bring added value to the investors with high growth potential with leading positions in sectors with low penetration and advantages of economies of scale.

Weaknesses

1. Exposure to insolvent companies – Koc Holding in past have been exposed to number of companies and suppliers which became insolvent. Koc Holding Oil Company has planned to shut its Singapore business because of series of exposure to insolvent companies in the past.

Opportunities

1. Positive expectation from export markets – The automotive business of Koc Holding has positive expectations from Europe which Ford Otosan’s main export market for the commercial vehicle segment of up to 3.5 tons.

2. Turkey becoming growing energy transit hub – The Turkey has provided export routes from central Asia to Europe, Middle East and rest of the world. Arcelik, leader in consumer durable sector, has established a trade corridor between the Asia- Pacific region and Turkey.

3. Increase in the per-capita income of Turkey – According to the distributors, the most important factor for the growth of the automotive sector is the rate of increase in the per capita income and this result is even more important than decrease of tax burdens.

4. Expected growth of car rental sector – The car rental sector is expected to grow more than the automotive sector with the rate of growth of 90% over the automobile sector in 2016. In 2017, 75% of the people expect that the rental sector can grow 10% over the automotive sector. Koc Holding can leverage from this growth as they plan to expand Otokoc Otomotiv service network with new investments and upgradation of existing facilities.

Threats

1. Recession to continue in commercial vehicle segment – Recession in the commercial vehicle segment can affect the sales of Koc Holding automotive business but with new products and expansion into new markets the Otokar, the leader in bus segment, expects to increase its market share.

2. Contraction of automotive industry due to increased special consumption tax – Turkish automotive industry is expected to contract due to increased special consumption tax on passenger cars. In addition, rising exchange rates can lead to increase in cost of production. Legal impacts like new truck regulations and compliance with the Euro 6 emission standard can also impact the automobile sales.

3. Environment of highly geopolitical risks and domestic policy uncertainty – The taxation policies on automotive sector and environment of heightened geopolitical risks and domestic policy uncertainty can also weaken the Turkey’s medium-term growth outlook. During the time of heightened foreign exchange volatility, potential event and execution risk stemming from Koc Holding’s acquisitions and divestments are also considered.

4. Economic slowdown and downfall of lira – The geopolitical risks increased the Turkey’s risk premium in global markets which weakened the Turkish lira. The crumbling lira pressures Turkish retailers as they shut their businesses which could impact the consumer durables sector of Koc Holding.

5. Changing consumer expectations and behaviours – After tax burdens and adverse effects of foreign exchange volatility, changes in the consumer expectations and behaviours are among the most important external factors which can affect the authorised dealers because of the rapidly changing consumer demands. The new generation of consumers expect more offerings and options from dealers.

To get the complete detailed SWOT report on Koc Holding please mail us at: support@swotandpestle.com. or contact us here.

Koc Holding SWOT analysis has been conducted by Nitish Kataria and reviewed by senior analysts from Barakaat Consulting.

References

1. Koc Holding Annual Report 2016: http://www.koc.com.tr/en-us/investor-relations/financial-statements-and-statistics/Annual%20Reports/2016%20Annual%20Report.pdf

2. Koc Holding Factsheet 2016: http://www.koc.com.tr/en-us/investor-relations/InvestorRelations/FACTSHEET%202016.pdf

3. KPMG Turkey 2016 Automotive Executives Survey: https://home.kpmg.com/content/dam/kpmg/pdf/2016/06/tr-kpmg-auto-survey-eng.pdf

4. Turkey crisis: how will oil and gas supplies be affected? : http://theconversation.com/turkey-crisis-how-will-oil-and-gas-supplies-be-affected-63073

5. Moody's affirms Koc Holding's Baa3 ratings; positive outlook: https://www.moodys.com/research/Moodys-affirms-Koc-Holdings-Baa3-ratings-positive-outlook--PR_344770

6. Crumbling Lira Pressures Turkish Retailers as Economy Slows: http://fortune.com/2017/01/22/turkish-economy-lira-value/

7. At a tipping point: A currency crisis roils Turkey's economy: http://www.cnbc.com/2016/12/13/at-a-tipping-point-a-currency-crisis-roils-turkeys-economy.html

8. Growth in Turkey to Recover in 2017 says World Bank: http://www.worldbank.org/en/news/press-release/2017/02/02/growth-in-turkey-to-recover-in-2017-thanks-to-improving-exports-says-world-bank

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The PESTLE analysis for Koc Holding is presented below:
Political
Economical
1. The TTIP Agreement can impact Turkish automotive sector
2. European parliament suspending talks with Turkey on EU membership caused Lira crisis.
3. US companies with major investments in Turkey are at risk
1. High profitable opportunities for investors with low labour cost
2. Recovering of GDP growth rate of Turkey
3. Economic developments and exchange fluctuations
Social
Technological
1. Changing purchase decisions of consumers
2. Young population of Turkey is an opportunity for consumer durables sector
3. Changing lifestyles of Turkey people
4. Fashion is an important parameter in white goods industry now
1. Digital transformation Program of Koc Holding
2. Big Data and Analytics can be sued to collect data efficiently
3. Manufacturing sector can be improved through Industry 4.0
Legal
Environmental
1. New Turkish regulations improves investor friendly environment
2. Increasing market share of environment friendly vehicles, carbon dioxide emission practices
1. Awareness of environmentally-friendly aspect of LPG is growing
2. Importance of efficient use of natural resources and environmental sensitivity
Get Your Free Copy of the SWOT & PESTLE
Analysis Report
Get the original SWOT & PESTLE.com report delivered straight to your email inbox for free.
Our insightful and holistic reports have helped corporate,academia and researchers to take their research forward. Like us on Facebook to stay updated with the latest published SWOT & PESTLE Report.

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Political

1. The TTIP Agreement can impact Turkish automotive sector: The Transatlantic Trade and Investment Partnership (TTIP) Agreement can cause major changes in the global trade system and this might impact the Turkey as it being the party of Custom Union. Considering the fact that the significant amount of exports of the Turkish automotive sector is to the EU, the cost advantage to USA will important for EU which is the most important market to Turkey.

2. European parliament suspending talks with Turkey on EU membership caused Lira crisis: The crisis of Turkish Lira comes after the wake of a series of events including the European Parliament suspending talks with Turkey on EU membership and Donald Trump which disturbed the emerging markets.

3. Changing lifestyles of Turkey people: Turkey President Recep Tayyip Erdoğan called out a war with its own central bank and has been resisting the normal response to sliding currency. This erratic behaviour of Erdogan makes US companies with major investments in Turkey at risk. Ford which has a partnership with Koc Holding are exposed to domestic market turmoil.

Economic

1. High profitable opportunities for investors with low labour cost: Lower labor cost and lower average wages together with increasing labor productivity is creating highly profitable opportunities for investors and therefore high cost of production.

2. Recovering of GDP growth rate of Turkey: The GDP growth rate will recover to 2.7% because of increasing exports that will help Arcelik as it exports to more than 100 countries around the world.

3. Economic developments and exchange fluctuations: Economic developments and exchange fluctuations are matters of concern for Turkish employees.

Social

1. Changing purchase decisions of consumers: The purchase decisions of consumers are changing with rapidly growing technology and innovations. Product features for example in automotive purchase decisions (fuel efficiency, vehicle design features, safety features, ergonomics, and comfort, environmental friendliness) are a matter for today consumers.

2. Young population of Turkey is an opportunity for consumer durables sector: Turkey’s young population is an opportunity for Turkey’s house appliance sector because the number of new families that will settle and establish a new home is significantly high compared to other world countries with aging populations.

3. Changing lifestyles of Turkey people: Change in the lifestyles of Turkish people can result in high profit margins through the design of new products.

4. Fashion is an important parameter in white goods industry now: Koc Holding is the major contributor of white goods industry in Turkey which can shape the changing trends as Fashion is now an important factor in consumer durable industry. High profit margins can be achieved through the design of new products.

Technological

1. Digital transformation Program of Koc Holding: Koc Holding has already launched Digital Transformation Program to carry out cultural transformation in tune with the digital world. This includes ‘Digital Maturity assessment’ which is conducted on several criteria such as strategy, culture, organization and capabilities and results are compared with best practices in the industry.

2. Big Data and Analytics can be sued to collect data efficiently: Big Data and Analytics can be used to collect data efficiently today because of increasing speed of information processing, data storage capacities and advanced mobile technologies. Koc Holding after collaborating with relevant group companies has started creating synergies within the group to accumulate the know-how of this fast emerging area.

3. Manufacturing sector can be improved through Industry 4.0: As Turkey enjoys the advantage of low labour cost, it can focus on Industry 4.0 as it stand out as a field set to improve the current state of manufacturing.

Legal

1. New Turkish regulations improves investor friendly environment: New regulations like Turkish Petroleum Law No. 6491 and Application Regulation for the Turkish Petroleum Law supports privatization and create more investor-friendly environment.

2. Increasing market share of environment friendly vehicles, carbon dioxide emission practices: During the course of next five years, the issues of priority for the automotive sector is the increasing market share of environment friendly vehicles, carbon dioxide emission practices and thus can impact the automotive business of Koc Holding. The Optitruck project of Ford Otosan focuses on lowering fuel consumption and emission values by up to 20%.

Environmental

1. Awareness of environmentally-friendly aspect of LPG is growing: Awareness of environmentally-friendly aspect of LPG is growing and the performance and safety perception of users is also improving with advances in conversion system technologies.

2. Importance of efficient use of natural resources and environmental sensitivity: The importance of efficient use of natural resources and environmental sensitivity has already been achieved by Tupras(Turkey’s sole oil refiner) as it achieved a first in the sector with its Residential Greywater Treatment and Reuse in Processing Project.

To get the complete detailed PESTLE report on Koc Holding please mail us at: support@swotandpestle.com. or contact us here.

Koc Holding PESTLE analysis has been conducted by Nitish Kataria and reviewed by senior analysts from Barakaat Consulting.

References

1. Koc Holding Annual Report 2016: http://www.koc.com.tr/en-us/investor-relations/financial-statements-and-statistics/Annual%20Reports/2016%20Annual%20Report.pdf

2. Koc Holding Factsheet 2016: http://www.koc.com.tr/en-us/investor-relations/InvestorRelations/FACTSHEET%202016.pdf

3. KPMG Turkey 2016 Automotive Executives Survey: https://home.kpmg.com/content/dam/kpmg/pdf/2016/06/tr-kpmg-auto-survey-eng.pdf

4. Turkey crisis: how will oil and gas supplies be affected? : http://theconversation.com/turkey-crisis-how-will-oil-and-gas-supplies-be-affected-63073

5. Moody's affirms Koc Holding's Baa3 ratings; positive outlook: https://www.moodys.com/research/Moodys-affirms-Koc-Holdings-Baa3-ratings-positive-outlook--PR_344770

6. Crumbling Lira Pressures Turkish Retailers as Economy Slows: http://fortune.com/2017/01/22/turkish-economy-lira-value/

7. At a tipping point: A currency crisis roils Turkey's economy: http://www.cnbc.com/2016/12/13/at-a-tipping-point-a-currency-crisis-roils-turkeys-economy.html

8. Growth in Turkey to Recover in 2017 says World Bank: http://www.worldbank.org/en/news/press-release/2017/02/02/growth-in-turkey-to-recover-in-2017-thanks-to-improving-exports-says-world-bank

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