Globus Vision sits down with Hakan Göral, CEO of INCI HOLDING, where they discuss G20, the future of Turkey’s exports, and much more.
Shortly before the G20 Summit in Antalya, Turkey will hold its second election this year. What steps would you like to see the next government take to help the country recover its momentum?
We as a country and as an economy are not experiencing the best times in our history for two reasons. One is the fact that we were not able to form the government after elections, which creates uncertainty and instability.
And then, on top of that, further uncertainty and instability is triggered globally because China’s economy is slowing down and it is unclear when FED will raise interest rates
Customer confidence has been decreasing and the value of the Turkish Lira has plummeted. The Turkish economy needs a balance between imports and exports and there is always a current account deficit that needs to be financed by some means.
Of course, we are happy if current account deficit is financed by foreign investors and we would be glad if the country’s legislation were able to attract more foreign investors. What we would like to see after the election is, of course, from a democracy point of view, a coalition that can reflect the thoughts of different fractions.
That’s my personal opinion, but thinking out of the big box, the first priority is to have a government that can rebuild consumer confidence. That’s a businessman’s expectation.
Then, from an industrial point of view, I would like to see all those structural reforms that were on the agenda of the government before the election in June, particularly in relation to financial markets, education, intellectual property rights, investment climate and R&D fostering innovation.
Turkey has set highly ambitious targets for 2023, that include $500 billion of exports. We interviewed the former Economy Minister Nihat Zeybekci and TIM Chairman Mehmet Buyukeksi on the progress and challenges towards these targets. How do you assess the potential of Turkey to reach its ambitious export targets for 2023, and how important is the automotive and its supply sector to Turkey’s ambitions?
The Turkish automotive industry was established in 1950’s and there has been an accumulation of manufacturing culture since then. From a location point of view, Turkey is placed between Asia and Europe.
No doubt about it, it’s a strategic location. In addition, Turkey has one of the youngest populations in the developing world. So this is a very attractive country both from available work force and expected market growth point of view.
In Turkish automotive industry there is infrastructure in terms of manufacturing culture and available skilled labor force to support growth. We have the big players like Fiat, Renault, Hyundai, and Toyota… so many big players, and there is a supply industry of which at least 40%-50% are Turkish entrepreneurs like us.
We started our manufacturing operations with wheels in 1968. Soon after we entered into a partnership with a German group called Lemmerz, the first joint venture we had in the group.
Then Lemmerz group was acquired by Hayes Group of United States and became the Hayes Lemmerz and they got into trouble and were sold to Maxion, which is the biggest wheel manufacturer in the world.
As a consequence, we ended up with having a JV with the biggest player of the world. We have four wheel plants in Turkey, producing more than 11 million wheels, having exports as a percent of the sales of plus/minus 60%.
The same is now going on with batteries. We started our battery operations ourselves. Then we had a partnership with Ceac of France, and later, Ceac was sold to Exide. We became partners with Exide.
Then something different in comparison to wheel story happened. Exide got into trouble, so we had to buy our shares back and it was then 100% owned by Inci. And at that time, we decided to grow through exports which have been in a way restricted before.
Then the program of the Turkish government called Turquality was introduced, and we were the first company to be granted the Turquality status in our sector in 2010.
How has the Turquality program helped you grow into a global brand?
It provided us with morale support as much as financial support. The Turquality goal was to create 10 global brands in 10 years. We decided that we needed to have a structural approach and create several brands with different positioning strategies.
After being granted the Turquality designation we started positioning our brands according to strategy, and according to different markets, different customer groups and different usages.
For example, for taxi drivers we came up with a different battery because the car is always running, so they need to have special lead plate otherwise they are running out of battery.
And think what kind of a reputation we would have if the taxi drivers started to talk negatively about the Inci battery or Inci brand. So we have adapted different strategies for different markets, different usages, different sectors and different countries as well.
In some countries, we have employees working directly for us and in other countries we have representatives. In some countries we have big wholesalers working for us.
Although we now have exports to more than 80 countries, I wouldn’t say it’s the end of the story. We are now the Number 1 in exports in our sector in Turkey. Now that we reached a certain size, our success has caught the attention of the second biggest battery manufacturer in the world called Yuasa.
We found ourselves sitting around the table having discussions and doing business with Yuasa. In spite of the fact that discussions with Japanese companies take long, our discussions were quite fast.
We have come to a point whereby we have signed our agreements, and we received approval from the competition boards in two countries. We are just awaiting approval in Ukraine and once we get this, we will have our closing
We have already started exchanging ideas on how we can extend operations in Turkey, how we can collaborate in markets where they are not present by making use of their know-how and trade name, and vice versa.
I would say this has been quite complementary. It’s not a competition; it’s complementary business collaboration, so we are proud of it.
What impact will this collaboration have on your global presence going forward?
We will join forces together with Yuasa. Their strength in new battery technologies and Asian type vehicles combined with our knowledge of our span of markets and the western type vehicles will bring growth to our collaboration.
Can you give an indication of how your R&D activities here in Turkey have translated into inventions that we see on the market?
In our battery operations, we have an R&D center that’s approved by the government and to some extent subsidized by the government. Thanks to this program we are well positioned. We have been able to spend resources, human resources as well as monetary resources, on R&D because of the support of this program.
We know as a group, that the only way we can make a difference is through innovation. This is why we have been placing big importance on how we manage the company and how we deploy this strategy.
We are proud that our efforts were recognized at the TIM Innovation Awards 2014, when we were honored for having the best ‘innovation culture’ in Inci Aku.
How do you foster a culture of innovation here at Inci?
You can’t put five geniuses into a company of thousands of people and expect them to change the culture. Those five geniuses would probably have a burnout. Instead, what you need to do is start from the bottom and invest in creating an atmosphere of learning and innovation.
Once you adapt this culture in your organization, it starts to pay back and add value to your business processes and, ultimately, your products.
We noted before the interview that Turkey ranks among the lowest G20 countries in terms of high-tech, value added exports. What can be done to foster a greater culture of innovation across the country?
We need to increase the dollar value of per ton our exports and to do that we must strive for innovation and more sophistication in our products. This starts with people: Investment in how we educate our people and how we improve our human capital.
It doesn’t necessarily mean everybody needs to be a university graduate; it is also about vocational training in schools, whereby you teach people specific jobs.
We need to decrease the gaps between education systems, private schools, government schools, west part of Turkey, east part of Turkey… this is one country and education is something the government should provide equally across the country.
Furthermore, the investment climate needs to be improved. Is doing business in Turkey is easy? No. There is still a lot of bureaucracy. Also, there needs to be greater protection of intellectual property rights.
The depth of the financial markets is probably another area that needs to be improved, as well as better tax incentives to invest. We need more areas like Manisa. Manisa is an industrial zone with land, electricity, natural gas, and excellent land and sea transport links.
The government should copy these good examples to attract more foreign direct investment.
You already export to more than 80 countries across 4 continents. If we break that down, which markets do you view as the most important for your future growth and expansion?
Europe and Middle East. For each company and each country we have a different story. For batteries, depending on the country we either have a footprint or we have a representative or we have wholesalers, but we are doing it ourselves.
For our wheels groups, in some countries we are doing it ourselves, and in some countries we are doing it with global sales organizations.
You have previously said that this is a company that has grown through partnerships in every aspect. Is there room for more partnership in your holding?
It’s possible, but we go forward only when it makes sense. In all our joint ventures there are benefits for the other joint venture partner, there are benefits for us and we are expecting to create joint venture babies that will become healthier and stronger.
We have met a lot of executives here in Turkey. In terms of your leadership, what traits would you say differences you?
I don’t know whether it is good or bad, but I am always an engineer and I take an engineer’s approach to everything being result oriented. This means I am always looking for an edge in innovation.
Of course there are more clichéd things: I like to work with teams, I trust my people and respect them, and I expect the same in return.
Finally, you have been at the helm of Inci Holding for three years. How would you sum up your vision and your targets for the company?
By 2023, the centenary of the Turkish Republic, we want to be in the top 100 players of world in the global supplier automotive industry. We also want to double the value of the company and to achieve these goals we are hungry for investment.