New General Manager’s Profitability Plan

There has been a surprise change in the management at Beko, which has increased its share of the European market to 20 percent and is targeting being listed among the top 10 companies within five years. It has been revealed that one of the main reasons for this change was that its balance sheet for the first quarter of the year posted a loss. The new General Manager Yağız Eyuboğlu explains that this was the result of developments in the sector. But he says that the company has begun to take important countermeasures. Eyuboğlu predicts: “I believe that this situation will begin to correct itself in 2006.”

Beko Elektronik has recently been the subject of considerable speculation as the result of it closing the first quarter of 2005 with a loss. This resulted Beko coming under considerable scrutiny. The next month there was a change in the management. Yağız Eyuboğlu, who had previously worked at Arçelik, was appointed general manager. This surprise development produced a variety of comments.

After four months as general manger Yağız Eyuboğlu has issued some clarifications. Eyuboğlu said that the change in the management of Beko was a normal development, describing the process as similar to a relay race. Eyuboğlu says: “There has been no change in the company’s strategies or the way in which it is managed. The problem with profitability is a transitory. This is a problem in the sector. But I believe that we shall overcome it once high added value new products are launched. I think that this situation will begin to right itself from 2006 onwards.”

Yağız Eyuboğlu said that Beko will continue to grow. He notes that the growth model has three dynamics. The first is the transition to flat-screen televisions. The second is the diversification of export markets. The third is focusing on sales of higher value, brand name products. Yağız Eyuboğlu, Beko’s new general manager, answered Capital’s questions as follows:

How do you expect Beko to close 2005?

We closed 2004 with a turnover of €1.1 billion. Our target for 2005 is €1.3 billion. Our business is primarily export-oriented. Last year our exports totaled €750 million. We aim to raise this to €900 million this year. In March we announced losses of TL 27.7 trillion.

As you can appreciate, this is not something which can be changed overnight. But we expect a significant change as of the final quarter of the year.

The figures you have given indicate growth of 13-14 percent in 2005. What type of growth plan do you apply at Beko?

We foresee a very rapid transition from what we call CRT, or cathode ray televisions, to the flat televisions we call panel televisions. I mean LCD TVs and Plasma TVs. All of the markets are moving rapidly in this direction. Turkey is no exception …

All of the players on the LCD and Plasma TV markets, which have higher added value and where the rate of technological change is more rapid, are trying to adapt quickly. We are as well. As a company we are trying to adapt very rapidly. We are trying to grow in this area in particular in both Europe and Turkey. As a result, our growth dynamics are based on the transition to flat televisions.

What are the other components of the growth dynamics?

When one looks at the distribution of our exports, over 95 percent are to Europe. When one looks at all of the Turkish producers together, around 50 percent of all of the televisions on the market in Europe are produced by Turkish manufacturers. There is stiff competition on the market not just with other Turkish producers but also with players from the Far East. Particularly in this market, it is very difficult to be profitable. As a company we think that if we only concentrate on this market then we shall be limiting our capacity for growth. We must not neglect, and must focus more on, what we can describe as our natural markets such as the Turkic Republics, North Africa and the Middle East. We are restructuring our organization with this in mind.

But neither should we neglect Russia, which is a very important market. As you know, we have taken several investment decisions there. As Beko we also want to be active there. We are studying what kind of added value participation in the investments that Arçelik has made there can contribute to our company. As a result, our growth dynamics are not limited to Europe but we shall also pursue a strategy of focusing on neighboring countries.

Does your growth model include any plans for branding?

If your business is only OEM, I mean manufacturing for other companies, then this is always very risky. They buy from you today because you are cheap and if another is cheaper tomorrow then they buy from them. You can be left holding stock. As a result, another of our strategies is to concentrate on higher value added ODM and form long-term relationships for brand name product in which we are responsible for the planning and design. We want to increase the proportion of such activities in our balance sheet. We want to focus on brand-name, high added value sales.

Will you do all of these things organically? Will there be any acquisitions?

At the moment we are not thinking of any inorganic growth. But it is included in our strategic plans. In the end, opportunities for inorganic growth will arise. We shall also evaluate them. But at the moment our priorities are to assimilate the brands we have bought and their parallel organizations. I think that we have covered a lot of ground in this regard. Grundig is performing much better than we had anticipated.

You have already announced that your target is to become one of the 10 largest companies in the world over the next five years. Where do you currently stand in relation to this target?

We still have the target of being one of the most important players in the world in this field. But this is a long-term goal. We think that we are already an important company as we have a 20 percent share of the European market and are targeting a turnover of 1.3 billion. We also want to move this forward.

THE LATEST TRENDS IN ELECTRONICS

IT TECHNOLOGIES ARE DEVELOPING Electronics is a rapidly growing field in which televisions occupy the most important place. When it comes to electronics one should also not overlook IT and computer components. Our computer and computer components department at Beko Elektronics has a turnover of US$150 million. There are significant developments in this field in Turkey and the rest of the world.

THE ERA OF MOBILE PRODUCTS We are seeing a continuing increase in consumer demand for products which can be used on the move. There is a significant demand for portable consumer products, such as small televisions and Apple Ipods. I think that this is the direction in which the sector is heading. There will be significant demand for products which combine mobile telephones, software, music and even video software. The products are in any case continually shrinking in size. But the capacity for the software which can be loaded onto them is continually increasing. As a result, with the exception of televisions, I expect significant growth in products with these features.

EBRU FIRAT
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