I tried to establish a correlation between competition and the dramatic turbulence in the list of the first and second 500 largest companies of the İstanbul Chamber of Industry (İSO). By looking at the great changes in the ranks of companies, I concluded that this was caused by the changing nature of competition. As my space is limited, I could not elaborate on my argument. One of my readers, Ulf Nilsson of Sweden, asks how changes in the list of the largest 500-1,000 companies are related to competition. For him, there will always changes in such a ranking simply because of industry dynamics.This may actually require further research on the topic beyond the İSO survey. However I think my reader has the correct answer thanks to his own research on the topic. He found that “companies experiencing higher competition also tend to adopt more modern cost-management techniques, i.e., are more efficient.” As a matter of fact, the situation is no different here in Turkey. Let me note two of my recent observations:
Firstly, the share of exports in total production has been dramatically increasing in Turkey for the last five years as a result of parity pressure, the limits of domestic market and more. This means that almost every sector in Turkish industry is seeing to become more export-orientated. Under the pressure of global competition, those who increase their profitability via cost-saving techniques, including innovation and productivity surge, form the most successfully integrating sectors.
Secondly, the growth performance of companies in these sectors is among the best. To give a symbolic example, underlining the nature of productivity and competition, I will mention one firm in the list of second 500 largest companies which jumped almost 339 spots this year. This firm is producing chemicals, mainly paints for the exteriors of houses. I realized that this company successfully applied nanotechnology in this particular industry, thereby not only reducing production costs but also increasing the quality and diversity of products. The same can be seen in the table provided, where the link between productivity and growth is shown. The fundamental message here is that if a company can increase productivity it will record high growth and more profit.
Nilsson’s second point relates to the perception of competition by Turkish people. As he notes: “It is often seen as something bad, in particular if the competition comes from abroad. However increased competition is wonderful for consumers as the companies will be motivated to work much harder to survive and profit. This means we will get better treatment, lower prices, better goods, etc., as consumers.” Obviously I agree with him. But the sources of suspicion and anxiety toward “foreigners” are quite different and to be discussed later in this column.
