“Although 2023 was a challenging year for everyone, it seems that 2024 will be even tougher. While inflation might not rise at the same rate, it is expected to continue increasing, consequently affecting the purchasing power of the domestic market. Given these circumstances, businesses solely focused on the domestic market will face challenging times due to the anticipated slowdown in internal demand. Therefore, diversifying risks, broadening revenue streams, avoiding dependency on the contracting domestic market, and mitigating the adverse effects of exchange rate fluctuations should be prioritized by all enterprises.”
Export companies in Turkey have to face many challenges in the global market. At the forefront of these challenges is the ‘Global Economic Waves’. Fluctuations in the world economy can have a shaking effect for businesses that want to show themselves in the foreign market. Malogra Consultancy Founder Bikem İnce İnaç, who provides consultancy services to companies on these issues, asked them to turn to scientific exports instead of traditional solutions in order to avoid losses in the competitive environment. Inaç, who claims that 2024 will be tougher than this year, gives seminal advice especially to flour and pasta exporters.
Hello Bikem, first of all, thank you for accepting our interview request. Through Malogra Consulting, a company you founded, you provide financial management solutions to businesses and chart a roadmap for incentives and grants. Could you please tell us about yourself and your work?
Hello, and thank you for the kind invitation. At Malogra Consulting, we’ve been providing financial management solutions to businesses for approximately seven years. When I initially founded the company, my starting point was observing that financial awareness was relatively low in almost all businesses. I noticed that businesses often found themselves in difficulties due to incorrect financial decisions.
Unfortunately, globally and especially in our country, accounting and finance departments and their functions are often conflated in businesses. This tendency leads companies to operate mainly from an accounting perspective, lagging behind in future-oriented planning. To put it simply, we can distinguish between accounting and finance: while accounting records and reports a business’s past monetary transactions to the government, finance aims to plan, track, suggest, and develop measures for the future based on a business’s past activities, thereby ensuring controlled movement and increased profitability.
At Malogra Consulting, we enable our clients to improve their businesses by increasing profitability through various financial management processes. Our services include finance department management, budget reporting and analysis, feasibility reports, incentive and grant consultancy, export consultancy, and finding potential customers abroad.
Could you discuss the importance of exports for Turkish companies as a developing country?
In fact, the revenue generated from exports is a crucial parameter for every business and country, regardless of whether they are developed or developing. Exporting plays a pivotal role as a gateway for countries and businesses. Firstly, it offers opportunities for companies to expand and increase revenue in the international market. This not only means going beyond the local market but also enables companies to become globally competitive.
Exports also create a source of innovation and competitiveness. To exist in international markets, companies need to continuously improve their products and services, compelling them to be innovative. This increases motivation for investment in technology and innovations, keeping businesses current and enhancing growth prospects.
The advantages of earning foreign currency and distributing risks through exports cannot be overlooked. Generating income from abroad, especially for Turkish companies, provides currency diversification and protection against fluctuations in the economy.
Moreover, exports create opportunities for Turkish companies to develop international relations and enrich themselves culturally. This process opens doors to collaborations and partnerships, leading to new business prospects.
Lastly, the role of exports in increasing employment and sectoral development should not be underestimated. Growing exports can contribute to increased employment and the development of specific sectors. In short, for Turkish companies, exporting is not just an option but is progressing as a strategic priority.
What are the main challenges faced by exporting firms in Turkey in the global market?
Achieving a competitive position in global trade always comes with numerous difficulties. Among the prominent challenges for exporting firms in Turkey, market diversity and access issues stand out. Different countries’ preferences and demands make conducting business more complex in certain sectors. Moreover, establishing a strong balance in competitiveness and pricing is crucial. When competing with other countries, pricing strategies, quality-focused approaches, and cost management become highly significant.
Additionally, foreign trade policies and barriers pose significant hurdles for exporting firms. Factors like customs procedures, taxes, and trade agreements between different countries can complicate operations. Furthermore, language and cultural differences are another aspect to consider. When targeting different markets, communication and marketing strategies need to align with local cultures and preferences.
The concept of finding the right customers using scientific export methods is an overlooked and undervalued aspect for businesses in our country. Not adhering to scientific methods poses its own challenge. If companies opt for traditional export methods over scientific approaches, they might face difficulties in identifying and reaching their target customer base. This process entails determining the right communication channels, understanding the needs of potential customers, identifying potential buyers already interested in the product, and offering suitable solutions.
Another challenge in the customer acquisition phase is establishing a reliable customer base and fostering long-term relationships.
Finally, global supply chain management and logistics processes can pose significant challenges for exporting businesses. Managing logistics across long distances and different countries requires stringent planning and effective organization.
In summary, for Turkish exporting firms, overcoming these challenges and staying competitive in the global market involves emphasizing market diversity, pricing strategies, trade policies, logistics management, and scientific export methods to reach the right customers. Continuous improvements in these areas will significantly propel businesses forward in exports.
PROVIDING APPROXIMATELY 500 DIFFERENT SUPPORT PACKAGES ANNUALLY
What would you recommend for SMEs struggling with limited access to finance?
Access to finance for SMEs is a pivotal factor determining the growth and advancement potential of businesses. These challenges can hinder businesses from leveraging growth opportunities and realizing their true potential. However, there are several strategies and approaches to overcome these difficulties.
Firstly, effective financial planning is essential to enhance the financial reliability of businesses. Elements such as cash flow management, profitability analysis, and borrowing requirements form the cornerstone of a robust financial plan. Businesses, while setting financial goals, should aim to utilize existing resources effectively and support financial growth.
It’s crucial for SMEs not to solely focus on traditional sources of financing. Today, aside from traditional bank loans, there are numerous alternative financing options available. These options encompass resources such as venture capital, angel investors, crowdfunding, grants, incentive programs, and fintech solutions. Businesses should evaluate different alternatives to determine the most suitable financing options for their business model.
Another critical aspect is the credit history and credit score of businesses. A good credit history and a high credit score can provide a significant advantage in accessing finance. Hence, it’s critical for businesses to regularly monitor their credit histories, make timely payments, and take necessary steps to enhance their credit scores.
Careful consideration is necessary when availing government supports. Many countries offer various incentive and support programs to facilitate SMEs’ access to finance. Our country also boasts a rich landscape in terms of incentive and grant regulations, providing approximately 500 different support packages annually. Through these programs, businesses can benefit from advantages such as low-interest credit facilities, incentives, export development support, sectoral aids, tax benefits, and educational resources.
Lastly, establishing an effective communication and networking ecosystem for accessing finance is crucial for businesses. Strong relationships and communication can facilitate the establishment of more robust and solid collaborations with banks, financial institutions, or investors. Consistent and transparent communication with financiers can assist businesses in obtaining better terms and agreements regarding finance.
Access to finance for SMEs requires a series of strategies, planning, and relationship-building processes. However, with the right steps taken, it’s possible to overcome these challenges, allowing businesses to effectively realize their growth potential.
GROW WITH SCIENTIFIC EXPORTS
In your previous explanations, you mentioned ‘Financial Increase through Scientific Export’—could you elaborate on scientific export? How should companies take the right steps for proper export? What is scientific export?
In Turkey, everyone wants to engage in exports, but often, they follow the path and market of their competitors or attempt to develop exports through trial and error, without a systematic approach. We refer to this as traditional export. However, today, information is accessible and has become global. Therefore, conducting market research reports specific to the product being exported allows access to the countries that import the product the most, numerical data on import demand in those countries, average unit pricing in the market, lists of companies importing in those target countries, their contact information, and details of key personnel. By reaching out to these companies based on these reports, we call this scientific export—a more methodical approach. Trying to export by blindly following competitors’ actions in the market leads to inefficient use of resources. Efficiently managing limited resources while meeting the infinite needs of our businesses and striving to develop them by moving forward scientifically will save both time and money for businesses.
What is the significance of exports in businesses’ global market objectives?
For businesses, expanding into global markets and engaging in exports is a crucial element that supports growth and sustains competitive advantage strategically.
Exporting serves as a fundamental driver in businesses’ global market objectives by offering the opportunity to explore market diversity in various geographical locations. This not only allows businesses to transcend the limitations of local markets but also facilitates growth by reaching consumer segments in different cultures and regions. It not only increases revenues but also expands growth potentials.
Moreover, venturing into global markets helps businesses diversify risks, enhancing their resilience against economic uncertainties. Operating solely in a single market might expose businesses to specific market risks and increased sensitivity to economic fluctuations, while operating in different markets balances risks, fortifying businesses with a more robust structure.
Additionally, being competitive in international markets requires businesses to continuously reassess and enhance their products and services. This process enables them to innovate, improve product quality, and excel in customer-centric approaches. The international competitive environment drives businesses to become more efficient and competitive.
Furthermore, exports offer businesses the opportunity to earn foreign currency, which safeguards them against fluctuations in currency rates. Generating revenue in different currencies allows businesses to gain advantages in price flexibility and cost management.
Opening up to global markets also signifies new business opportunities and collaborations for businesses. Partnerships across various geographical regions allow businesses to build a broader network, forge new strategic relationships, and explore new markets.
In conclusion, engaging in exports is a critical step for businesses to achieve their global market objectives. This process supports businesses’ growth strategies, enhances their competitive edge, and provides sustainable growth potential in the long run.
What should be the right financial management for small and medium-sized enterprises (SMEs)? What should be done for proper financial growth?
The correct financial management strategies for small and medium-sized enterprises (SMEs) are vital for their growth and sustainability. Firstly, businesses need to have robust financial planning in place. Creating a comprehensive budget, managing cash flow, and tracking regular financial reporting processes allow businesses to progress on a solid financial footing by considering the outcomes of these reports and making decisions for their operations.
Additionally, establishing effective cost management strategies is crucial to enhance profitability and maximize efficiency. In the financial planning process, businesses must outline their short and long-term goals and devise suitable investment strategies to achieve these goals. These strategies should be prepared while balancing risks and considering the business’s growth potential.
Access to finance also plays a significant role in financial management for small and medium-sized enterprises. A good credit history and strong relationships with banks are essential to meet financing needs. Moreover, utilizing technological tools in financial processes can enhance the efficiency of businesses.
In addition to these strategies, leveraging professional consultancy services can provide a significant advantage for businesses. Financial education and consultancy can enhance the financial knowledge and competencies of businesses, enabling them to make more informed decisions.
Proper financial management for small and medium-sized enterprises not only ensures financial stability but also serves as a fundamental driver for long-term growth strategies.
What recommendations would you suggest for flour and pasta producers and exporters who have been challenged by the inflationary environment in our country in recent years?
For flour and pasta producers and exporters grappling with the inflationary environment, several strategies can aid in their protection:
Monitoring and optimizing costs is paramount. Identifying potential areas for savings and implementing cost-cutting measures are prudent steps. Long-term supply agreements or price-fixing strategies against input cost fluctuations can mitigate risks. Maintaining flexibility through inventory management to adapt to sudden market changes is crucial. Moreover, diversifying income streams by exploring different markets and enhancing efficiency through technological investments will fortify their resilience against the challenges posed by the inflationary environment.
These recommended strategies aim to assist businesses in safeguarding themselves amid the prevailing inflationary conditions.
Turkey has been at the top of global flour exports for the past nine years. However, a significant portion of this export is observed to be directed towards our neighboring countries, especially Iraq and Syria. Iraq’s emphasis on establishing milling factories internally to procure its own flour poses a significant threat to the industry. What preventive measures should the Turkish flour sector take to avoid difficulties in the upcoming period?
As you mentioned, Turkey’s leadership in flour exports heavily relies on trade with neighboring countries. However, for sustainable success, the sector needs to take certain measures. Diversification into new markets is crucial. Flour producers should expand into new geographies to broaden their customer base and mitigate risks. This way, the sector won’t be overly dependent on a single geography or the decisions made there. Moreover, technological investments should be made with a focus on increasing productivity. The sector should prioritize technological infrastructure and modern production techniques to gain a competitive edge. These investments will reduce unit costs and allow for price competitiveness. High-quality products and value-added exports could enhance the sector’s competitiveness. Creating a diversified export portfolio with quality-driven products is crucial. Additionally, a focus on innovation and R&D strategies can be pursued. R&D activities enable the development of innovative products while increasing market diversity with unique content. Long-term and robust trade relations with neighboring countries are vital. Finally, developing and diversifying the local market can increase diversity and demand within the domestic market. This approach can reduce external dependency and focus on local market dynamics. The Turkish flour sector should look towards global markets for future growth and strategic diversification. These steps will be crucial for the sector’s success and growth.
Facing a potential downturn in the sector, what recommendations would you offer to flour and pasta exporting companies?
Sectoral contractions can be challenging for businesses, particularly if they are heavily focused on specific products or sectors. For companies involved in exporting flour and pasta, I can suggest several strategies to cope with such situations. Firstly, diversification holds immense importance. Opening up to different markets or expanding the range of products can diversify income sources and mitigate risks. Additionally, reviewing and reducing costs is crucial. By increasing efficiency and minimizing unnecessary expenses, keeping costs under control can be achieved. Moreover, innovation and differentiation can be a strategy. Developing new products or improving existing ones can lead to a stronger position in the market. These steps are vital strategies that can help businesses cope with contractions and make them more resilient.
What recommendations would you offer to these companies for long-lasting exports?
Long-term export success holds critical importance for exporting companies. Several strategies are recommended to sustain this success. Firstly, market diversification is a fundamental step for long-term success. Operating in multiple markets is crucial for risk distribution and creating continuous demand potential.
Moreover, offering products that adhere to quality standards and maintaining customer satisfaction is crucial for long-term customer loyalty. Considering sustainability and environmental factors can also provide a long-term competitive advantage.
Additionally, innovation and adaptation are necessary to adjust to continuously changing market conditions. Adapting to market needs, providing products that fit local cultures and expectations are essential for long-term success.
Long-term business relationships and robust communication networks are critical factors for sustainable success of exporting companies. Understanding and managing the legal and commercial risks that come with international trade are important for long-term success. Furthermore, improving not only sales but also post-sales services will give them an advantage over competitors.
In conclusion, achieving long-term export success requires a combination of factors such as market diversification, quality, sustainability, adaptation, alignment with local needs, post-sales services, strong business relationships, and risk management.
Finance and Treasury Minister Mehmet Şimşek emphasized that domestic demand will slow down in the upcoming period. He suggested that the business world should seek foreign markets, promising to provide all kinds of support. He highlighted that exports are Turkey’s way out. Even if external demand is weak, he advised expanding market share by becoming competitive, acquiring additional market share, no matter how small, compared to others. What would you like to add to this?
As we all know, there is an ongoing global economic crisis affecting countries worldwide. Unfortunately, Turkey is among the countries where this crisis is felt most severely, and its importance is critical when compared internationally. Although 2023 was a challenging year for everyone, it seems that 2024 will be even tougher. While inflation might not rise at the same rate, it is expected to continue increasing, consequently affecting the purchasing power of the domestic market.
Given these circumstances, businesses solely focused on the domestic market will face challenging times due to the anticipated slowdown in internal demand. Therefore, diversifying risks, broadening revenue streams, avoiding dependency on the contracting domestic market, and mitigating the adverse effects of exchange rate fluctuations should be prioritized by all enterprises.
However, this doesn’t necessarily mean recklessly depleting resources or attempting export endeavors through trial and error in new markets. Identifying firms already demanding these products through market research is now feasible. Focusing on these companies and initiating communication can already create new export opportunities.
Moreover, in our country, there are numerous export supports available. These aids are given as grants, facilitating businesses in exporting while reducing their costs.
Hence, I wish everyone a year where they follow a scientific approach to exports, decrease their expenses through government support, and step into sustainable export practices.
Is there anything else you’d like to add or share on these topics?
Firstly, I want to express my gratitude for your insightful questions aimed at guiding the readers. I wish all businesses embark on a journey guided by accurate strategies, focusing on profitability, sustainability, growth, and export-oriented approaches. I encourage everyone to value finance and exports scientifically. They won’t regret it.