Koc Holding SWOT and PESTLE Analysis

Strength

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. Further, the company’s market capitalization was close to 19% of Total Market Capitalization onBorsa İstanbul as of December 2017.

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: Koc has a highly diversified 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 YapiKredi in Finance sector. Koc huge size can be judged from the fact that its 2017 revenues were close to 75 of the Turkey’s GDP and the group contributed to 10% of the total Turkey’s exports in 2017. The company also benefits from economies of scale and brings added value to the investors with high growth potential with leading positions in sectors with low penetration and advantages of economies of scale.

Weakness

1. Exposure to insolvent companies: KocHolding 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.

Opportunity

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Threat

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References

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

2. Koc Holding Factsheet 2016: https://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? : https://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: https://fortune.com/2017/01/22/turkish-economy-lira-value/

7. At a tipping point: A currency crisis roils Turkey's economy: https://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: https://www.worldbank.org/en/news/press-release/2017/02/02/growth-in-turkey-to-recover-in-2017-thanks-to-improving-exports-says-world-bank

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. US companies with major investments in Turkey are at risk: Turkey President RecepTayyipErdoğan 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

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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. Also change in the lifestyles of Turkish people can result in high profit margins through the design of new products.

3. 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

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Legal

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Environmental

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References

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

2. Koc Holding Factsheet 2016: https://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? : https://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: https://fortune.com/2017/01/22/turkish-economy-lira-value/

7. At a tipping point: A currency crisis roils Turkey's economy: https://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: https://www.worldbank.org/en/news/press-release/2017/02/02/growth-in-turkey-to-recover-in-2017-thanks-to-improving-exports-says-world-bank