Following Only Your Own Sector Is Not Enough

Many sectors of the economy are affected by developments in other sectors. The messages that come them contain important messages for the others. Experts says that the era of only ‘following one’s own sector’ is over and that companies now probably need to follow a large number of sectors.

In 2004 the automotive industry sold a total of 754,000 vehicles. The total market grew by 88 percent when compared with 2003. This increase had a positive impact on the insurance sector. The increase in the automotive sector was reflected in the accident branch where premiums grew by 44 percent compared with 2003 to YTL 3.031 billion. This growth resulted in the accident branch growing to account for 45 percent of total premium production. The share of the accident branch in non-life premium rose to 54 percent.

As can be seen from the statistics, the accident branch has a very important place in premium production in the insurance sector. The accident branch comprises compulsory third party and fully comprehensive insurance. For this reason, insurance companies evaluate closely every development in the automotive sector. They develop strategies according to developments in the sector. That is to say, it is not chance that periods when the insurance sector pursues an aggressive pricing police coincide with periods in which sales of vehicles increase. Positive developments in one field create value in another. For this reason companies do not just follow their own sectors. When they develop strategies and plans and determine turnover and sales targets they take into account developments in sectors which have an impact on them.

In cement it is construction which determines investments

The construction sector creates value in more than 100 different fields. For this reason, developments in the construction sector are followed and monitored by many sectors. Led by the ceramics, paint, cement, iron and steel, furniture and household textiles, companies from tens of sectors watch developments in construction and try to forecast their short-term sales. They fianlize their strategies and preparations according to these forecasts.

New building and construction permits, infrastructure projects and public sector investments are vitally important for the cement sector. Sabancı Holding Cement Group Chairman Erhan Kamışlı makes the following observation: “These developments provide us with an indication of cement consumption and help us make calculations for the following years. As a result, we can determine in which regions there will be growth and forecast what the need for cement will be.”

Furniture follows four fields

Companies in the furniture sector closely follow developments in the construction, household textiles, banking and white goods sectors. Movements in the real estate sector are immediately reflected in furniture. There is an increase in sales of household furniture and fitted kitchens.

Kelebek Mobilya General Manager Nejat Çetin says that they follow the white goods sector. Nejat Cetin says: “Cycles in household furniture run parallel to those in white goods. As a result, we closely follow movements and applications in the white goods sector. We launch promotional campaigns and payment systems in parallel to campaigns in this sector.” Another area which is followed by furniture producers is household textiles. Just as with white goods, this field also has its own cycles. As a result, what is being done in household textiles is followed by furniture producers and similar sales instruments are introduced. Nejat Cetin says that they also watch banking. Because improvements in instruments such as consumer loans and credit card utilization affect sales. This has been confirmed by the way in which, particularly since the crisis, consumers use banking payment instruments in order to buy the products on the market.

Automotive companies give importance to loans

Taxes mean that the automotive sector, which is one of the rising stars of the Turkish economy, closely monitors decisions taken by governments. Tax increases have a negative impact on sales. Banking is the most important of the other fields which are followed. Honda Türkiye Assistant General Manager Ümit Karaarslan explains why they follow developments in the banking sector:

“We follow personal loans. We study the interest rates on Treasury bonds. Because these interest rates affect the purchasing decisions of potential customers. A fall in the interest rates on consumer loans provided by banks increases automobile sales. For example, when monthly interest rates fell from 3 percent to 1.5 percent, sales of automobiles rose by 20 percent.”

Developments in the housing sector also interest automotive firms. Because the housing sector is an alternative to automobile sales. That is to say, when there is a rise in sales of housing then there is a fall in sales of automobiles. Ümit Karaarslan says that, in addition to these areas, the other fields which closely interest the automotive sector are transportation, the supply industry, fuel and the public sector.

PHILIP KOTLER/MARKETING GURU

FOLLOW THE RIGHT COMPANY, THE RIGHT SECTOR

In recent years many companies have been looking in the wrong direction and have experienced difficulties because they have not been monitoring the right company or sector. In fact, if they had followed the right company, this would not have happened. For example, in the technology sector, you should have watched companies like Texas Instruments. And immediately changed and moved to another branch of business and read the writing on the wall. Who are you worrying about? Who are your rivals, who do you need to overcome? You need first to overcome yourself in order to prevent someone else overcoming you.

Steel companies are frequently told: “Do not worry about other steel companies.” Who should you watch carefully? Aluminum producers. Watch and worry about plastics manufacturers. Because automobile companies are increasingly substituting plastic and aluminum for steel engineering products.

Which fields do different sectors follow
Sector Important sector to watch Why is it watched?

PACKAGING Foodstuffs Growth in these fields increases packaging companies’ business volume.

WHITE MEAT Meat A rise in red meat prices produces a shift to white meat.

COMPUTERS Finance The finance sector accounts for 15 percent of total demand.

PAINT Construction New buildings and renovations generate paint consumption.

CEMENT Construction New building and construction permits and public sector investments increase business volume.

ELECTRONICS Retailing Sales in this field have a major impact on sales and after sales.

LEASING Construction machinery Construction machinery accounts for a significant proportion of total volume at 34 percent.

LOGISTICS Textiles A rise in textile exports in particular produces an increase in business volume for logistics.

FURNITURE Construction Developments in real estate stimulate furniture sales.

AUTOMOTIVES Banking A fall in interest rates on consumer loans has a positive impact on automotive sales.

CERAMICS Construction Fixed investments such as housing, business centers and buildings increase demand for ceramics.

INSURANCE Automotives Automobile insurance accounts for an average of 60 percent of total premium production.

EBRU FIRAT
efirat@capital.com.tr