SWOT analysis of methodsof business connections

between Montenegro andTurkey

Dr. Nikola Perovic

Table 1: Methods of market entry in international business

Export: Indirect Export, Piggyback

(export associated with export

arrangements), direct export, export

Consortium, Lohn operations, leasing

Joint ventures and strategic alliances:

Distribution Alliance, Manufacturing

Alliance, R & D alliances

International cooperation agreements:

contract management, contract

manufacturing, assembly production,

long-term production cooperation,

business and technical cooperation,

licenses, franchising

FDI: Acquisitions, Mergers,

greenfield investments

Table 2: Comparation between international entry modes

Factor/International

entry mode

EXPORT International

contractual

arrangements

SA/JV FDI

Control Minimal Minimal if quality

contract

Medium Maximal

Agents’ cost

Significant

Maximal

Limited

Minimal

Initial investment

Minimal

Minimal

Limited

Significant

Market share M/S

Minimal/Medium

Minimal/Medium

Medium/Significant

Significant

Proprietorship of

technology

Own

In homeland

/Contract

Transfer to JV by

the contract

Own

Risk of falsificates Limited Significant Limited/

Significant

Minimal

Political and

cultural risk

Minimal

Minimal

Limited/

Significant

Significant

STRENGHTS O F ME THODS OF BUSINES S CONNECT IONS

! Trading companies have played a positive role in the initial launch of many

products at initial stage of export growth through indirect export. It is specially

important for small companies from Montenegro to use this methods in order

to receive collective orders from Turkish market.

! P iggyback in the essence is to find an experienced exporter which the

company's products were complementary to the sales offer for export buyers.

Due to the fact that most of Montenegrin companies are S&M this method is

fast gateway for Turkish market.

! D irect export has active approach to sales , and includes knowledge of the

regulations of the local market and the ability of selecting foreign buyers.

Trade between Montenegro and Turkey was 43 million euro in 2013. Export

from Montenegro in 2013, which declined 17%, has been only 29% of import

value.

! Total FDI to Montenegro from Turkish investors have been 55 million euro

for the period between 2006 to 2013. Major investments: Gintas-retail outlet

(Greenfield), Toscelik-steel industry (Acquisition), Container Terminal

General Cargo (CTGC) (Acquisition by GPH (Global Ports Holdings).

W E EKNESESS OF METHODS OF B USINES S CONNECT IONS

L arge trade deficit between Montenegro and Turkey and it is growing, since

import exceeded export for 243,3% in 2013. Altought Montenegro and Turkey have

Trade Agreement from November 26, 2008, there are no free trade arrangements for

main finished export product-wine. For example, import duty for Montenegrin wine is

35% (before 75%), which makes Montenegrin wine more expensive than any Turkish

wine (Kavaklidere or Doluca as 2 most important)

M ontenegro-Turkey trade relations made only 2% of total Montenegrin trade in

2013.

OPPORTUNITIES OF METHODS OFBUSINESS CONNECTIONS

Turkey has the largest import of :

INTERMEDIATE GOODS

Unprocessed materials incidental to industry

Processed materials incidental to industry

Unprocessed fuels and oils

Parts of investment goods

Parts of transportation vehicles

Unprocessed materials of food and beverages

Processed materials of food and beverages

Opportunity for S&M from Montenegro!

OPPORTUNITIES OF METHODS OFBUSINESS CONNECTIONS

To reduce import duties for most important export products, e.g. wine. It can increase

level of satisfaction of touristis from Western Balkan when they spend holidays in

Turkey, since awerness of Montenegrin wine is high among counsumers of Western

Balcan.

To have joint arrangements as Mediterenenan countries for the fastest growing

economy and touristic population-China using method of Consortium for market-

geographical orientation ( association for specific foreign markets ) .

OPPORTUNITIES OF METHODS OFBUSINESS CONNECTIONS

Lohn jobs are export performance of manufacturing services for foreign customers ,

and can be a good starting point for companies that have unused production capacity,

such has been the case in textile industry of Montenegro.

Leasing is an essential way of exports through specially formulated contract based on

credit , and the reason of frequent use can be found in the rapid obsolescence of

equipment , which would not be able to qualify for classical transaction. Turkey is

producer of great equipment and therefore Montenegrin S&M companies could lease

if agreed upon favorable conditions.

OPPORTUNITIES OF METHODS OFBUSINESS CONNECTIONS

Most fhe forms of international contractual arrangements are not utilized:

management contracting (specially important know-how transfer from Turkey in hotel

and management in tourism) , contract manufacturing, assembly production , long-

term production cooperation , business and technical cooperation , licensing and

franchising .

Regarding FDI there are many opportunities for investors from Turkey in the fields of

energy, transport, industry, agriculture, banking and education.

Social Media and Marketing know-how: The aim of TurkishBusinesPlatform.com

is to bring business opportunities presented in Turkey which is “the shining star of the

global economy” by using developments in information technologies to deeply

influence the shopping-culture and put new methods of procurement and marketing.

Utilisation of economic diplomacy, as a central part of foreign affairs, specially for

Montenegro.

TH REATS O F ME THODS OF BUSINESS CONNECT IONS

The lack of mutual understanding of opportunities of business connections described

earlier.

The lack of goodwill and mutual negotiation skills to have liberal trade between

Montenegro and Turkey, specially for the most important export products.

As per the SWOT analysis i t has be en ident ified t he

largest pot ent ial in “Opportuni t ies” . It i s on us to develo p

these o ppor tunit ies in order to h av e great st ren gths of

internat io nal busin ess relat ions betwe en Mo nt enegro a nd

Turke y.