Name: Ettahir El hadi Ali Swese

University: Kastamonu Universitesi

Student No: 181060007
Department: Mechanical Engineering

Submitted to
Dr.

Assignment
 Comparative analysis and understanding of Critical Success
Factors of four Air Conditioning makers i.e. Turkish (Arcelik A.S,
Baymat) and Korean (LG, Samsung).

Heating, Ventilation and Air Conditioning (HVAC) system is an important part of the
overall building system and is necessary to maintain a balance in the internal
environment of the designated area. Turkey, being located at the junction of the Middle
East and European region, experiences diverse climatic conditions with extreme
summers and winters. Hence, there is an essential requirement of HVAC products in
the region. Turkey and Korean has a robust HVAC industry base with strategic tie ups
with the educational and research institutions which contributes to the development of
energy efficient HVAC technologies. Factors such as a growing urban population and
decent growth in economy will further increase the consumption base in the coming
years. Apart from this, the recent international treaties on climate change will further
create opportunities for green technologies like usage of R-32 refrigerant in the HVAC
products.

Introduction of Turkish Firms

Arcelik A.S establishment in the year 1955 having its Headquarters in Istanbul, Turkey
is a well-known Air conditioning manufacturer having operations in durable consumer
goods industry with production, marketing and after sales services. The company
offers its appliances and services around the world having 30,000 employees with 18
different production facilities in 7 countries i.e. (Turkey, Romania, Russia, China,
South Africa and Pakistan). Arcelik A.S is having 34 sales and marketing companies
in 32 countries all over the world and working under its 11 brands which are (Arçelik,
Beko, Grundig, Blomberg, ElektraBregenz, Arctic, Leisure, Flavel, Defy, Dawlance
and Altus) serving products and services in more than 145 countries. Similarly
Baymak, which has also a long history and manufacturing expertise of more than 50
years in the air conditioning sector which operates in Tepeören with two production
facilities on a total area of 60,000 m2. Baymak in Turkey, which is one of the leading
manufacturers of Turkey, close to 1,000 dealers, more than 2,100 points of sale and
a service technician over 1500. Baymak with over 600 employees always aiming to
produce advanced technology. Moreover Baymak has become 100% BDR Thermea
Group company as of 2013. BDR Thermea Group is the third largest European
company in the air-conditioning sector.

Introduction of Korean Firms

Samsung is a Korean technological giant, and with the success of its electronics
business, Samsung has been recognised globally as an industry leader in technology
and now ranked as a top 10 global brands. The digital age has brought revolutionary
change and opportunity to global business and Samsung electronics has responded
with advanced technologies, competitive products and constant innovation. Samsung
Electronics is relentless in their efforts to deliver innovative products and experiences
that maximize user convenience and make the lives of consumers better. In 2016, they
saw an increase in sales throughout Asia in addition to revenue growth across
premium appliance markets in North America, Europe, and Korea. Most of all,
Samsung’s market share ranked first in the US, a key market for home appliance
brands. The same year, they launched innovative products that shifted market
paradigms, like the FamilyHub refrigerator, Add Wash washing machine, and Wind
Free air conditioner. The Samsung continue to garner positive feedback from their
consumers.

Samsung has also focused on strengthening and expanding their business with a new
built-in line up and system air conditioners. In 2017, Samsung continued to bring real
value to consumers by launching differentiated products and technologies. Their
ground-breaking and consumer-focused products challenge routines and stereotypes,
leading the market by delivering true innovation and convenience to their valued
consumers. They have the ambition and vision to maintain their market leadership
position with premium, innovative products like the Family Hub refrigerator featuring
advanced voice recognition technology that is guaranteed to improve family
communication, the Flex Wash washing machine which can support two simultaneous
or separate washes of different clothing capacities and fabric types, and the Wind Free
air conditioner for staying cool without direct wind. In addition, they are continuing to
invest in revolutionizing products and distribution methods for high-growth, high-profit
B2B business. Furthermore, Samsung Air Conditioners are designed to be
outstandingly efficient.
The history of LG Electronics has always been surrounded by the company's desire
to create a happier, better life. Pioneering in technology through LG's innovative start
and continuous growth. LG is becoming a faster and smarter global brand of the future.
LG Electronics was established in 1958 and has since led the way into the advanced
digital era thanks to the technological expertise acquired by manufacturing many home
appliances such as radios and TVs. LG Electronics has unveiled many new products,
applied new technologies in the form of mobile devices and digital TVs in the 21st
century and continues to reinforce its status as a global company.

Comparative Study and Critical Success Factors

Before we start with the comparative study we need to understand the usage of Air
Conditions all around the word. The japan refrigeration and air conditioning industry
associates (JRAIA) has conducted the study and summarized the estimated results of
2017 air conditioners (AC) demand in the main countries around the world. This study
is conducted by JRAIA global committee almost every year.

Note: the graph below shows RAC and CAC demand by region from 2012 to 2017.
 This makes us understand the real demand of Air Conditioners all around the world.
To understand and analyse what is the best air conditioner brand i.e. either Turkish or
Korean brands? To answer this, it is important to understand the difference between
price and value. When an air conditioner has a good price, it means that it is cheaper
than other comparable AC brands. However, if that air conditioner has a low price
but also has a poor reputation, then one might say that it has a good price, but
a poor value. As such, when identifying top air conditioner brands, it is imperative to
address this from the aspect of the best value to customers.

1. Reliability – one cannot recommend a company that has reliability issues or customer
satisfaction will suffer greatly.
2. Cost – part of determining value is cost. Is one brand too expensive? Do we get more
bang for your money with one air conditioner brand over another?
3. Customer Service – how does the company deal with warranty problems and do they
readily supply spare parts at affordable prices?
4. Features – although delving deeply into features is beyond the scope of our
comparative study, features available were taken into account when studying critical
analysis.

By studying the Turkish Baymak product range and technical evaluation of their
various variants of cooling systems i.e. ELEGANT PLUS 09 / ELEGANT PLUS 12 /
ELEGANT PLUS 18 / ELEGANT PLUS 24 with following features:
 5 Years Warranty.
 Low power consumption with A ++ high energy efficiency class.
 High comfort with 0.5 ° C sensitivity and 5 different fan speeds.
 Stylish design with Hidden Led Display.
 Saving electricity with ECO mode.
 Quiet operation
It seems that with the rapidly developing new technologies, they have begun to
encounter more in every aspect of their lives. Baymak are now living in a world where
consumers are conscious, prefer more brands that understand themselves, respond
to their needs and offer special solutions. With this understanding, they have built
Baymak on sektör understanding human Avrupa in the process of change which
started in 2013 with the acquisition of BDR Thermea, one of the leading groups in
Europe (small brief about DBR Thermea: BDR Thermea is the third giant company of
the air conditioning sector, and the Baxi Group, De Dietrich and Remeha Group at the
end of 2009 was formed by the combined forces).

Baymak job is to touch people, to understand, to be in communication, to have

continuous development and unity. Baymak's values need to be respectful, fair,
transparent, honest and innovative. Baymak takes the global power of BDR Thermea
to realize these important values and makes a difference with its fast, dynamic and
modern structure in the sector. Today, Turkey is a point that surrounds a tip nearly
1,000 dealers, more than 2,100 point of sales, service technician over 1,500 and
Baymak with all its employees’ family's priority is always to keep customer satisfaction
at the highest level. As one of the leading companies in the sector to Baymak, winner
in Turkey, it won the industry continues to be an example to convert the structure of
the investment in this territory.

In contrast Arçelik A.S is following another strategy i.e. collaboration with Korean
electronics Giant LG electronics. Arçelik-LG Klima Sanayi ve Ticaret A.Ş. will also
manufacture commercial air conditioners under the LG brand. Following the extension
of the Arçelik A.Ş.-LG Electronics Inc. partnership agreement until 31 December 2023,
it has been announced that not only domestic air conditioners but also commercial
ones will be included in the Arçelik-LG Klima Sanayi ve Ticaret A.Ş. (Arçelik-LG)
product range in the new term. By acquiring the LG brand’s sales and distribution
rights, Arçelik A.Ş. will expand its commercial air conditioner business, which it has
conducted with the Arçelik and Beko brands until now. Can Dinçer, the General
Manager of Arçelik Turkey, which introduced the newest VRF type Multi V 5 systems
in the world under the LG brand, said: “The VRF market in Turkey is worth almost 250
million dollars, almost all of which is composed of imported products. Their target is to
nationalise also the commercial air conditioner market.”

The Heating Refrigeration Air Conditioning Manufacturers Association - ISKID,

representing 90% of Turkey's air conditioning sector, announced the industry's 2016
report. ISKID Chairman Taner Yonet when evaluating air-conditioning sales which
showed an increase over the previous year, according to the disclosed ISKID inventory
2016 data, stated that: "Domestic type air conditioner sales in Turkey increased 17.5%
compared to the previous year, reaching 800,000 units. Turkey has maintained its
status as one of the three largest markets in Europe, with this sales volume."

In the statement made from ISKID, the following statements were made: "Similar
increases in sales figures of variable air-conditioner outdoor units, which are called
commercial air conditioners, were reflected in inventory studies and sales volume
reached 31.000 units in the last 6 years. Air conditioning sector in Turkey with central
systems, chiller groups, and accessories together, reached a total of $ 1.4 billion (in
2016) in domestic sales volume. In Mediterranean countries, while the utilization rate
of household air conditioners is in the range of 20-50%, this rate is around 10% in
Turkey. This situation is interpreted as a gradual increase in the use of household air
conditioners in Turkey and as demonstrating a clear growth potential in the residential
market interpreted. Turkey air conditioning sector is an important part of the world
market and shaped in the context of global developments. In parallel to this, there is
an extremely conscious customer base in Turkey.

In recent years, users choose their air conditioners not only by looking at their prices
but also by considering the energy class and advantages of the installation of the
devices. They demand that the air conditioner they purchase must be installed by
authorized services. There has also been a significant increase in the sales of
additional maintenance packages, which are demanded awareness of air conditioning
maintenance in terms of health and economics and for extending air conditioners'
service life. Since we are entering the hot season of 2017, all İSKİD member
companies have granted various advantages to customers with important campaigns
and sold many air conditioners especially during March-May period due to the SCT
reduction provided for air conditioning. Early sales in order to lighten the installation
burden during the summer and to provide more efficient service for the users positively
affected the sector. Following the positive development in the first six months of 2017
and given the significant impact of summertime temperatures in the decision to
purchase air conditioners, the air conditioning market in Turkey is expected to
continue growing this year."

High urbanization rate, decent economic growth, growth in constructional activities

along with diverse climatic conditions will create demand for HVAC products. In terms
of volume, the Turkey HVAC market will increase at a CAGR of 5.31% from 2016-
2022.
With globalization, many air conditioning manufacturers are expanding and merging
to become big corporations that give them an edge over their competitors. Competition
in the manufacturing of HVAC equipment have forced these companies to reduce their
manufacturing cost, procurement of parts, services and hence bringing profit to the
shareholders.

Producing bigger quantity means that they have bargaining power over the cost of
materials and hence better pricing in the market. LG and Samsung from South Korea
have been very aggressive in pushing for volume in the unitary products globally. Their
unitary products are competitively priced and have marketed these products globally.
The ability to market it competitively is because of the high volume being produced.
However in contrast Turkish Air Conditioning Sector exports grew by 15 % in 2018.
Turkish Air Conditioning industry closed 2018 with exports of 4.5 billion dollars. The
sector, which exports 3.9 billion dollars in 2017, reached the highest level of exports
in its history. In 2018, exports to developed markets such as Germany, England, Italy,
Romania and France, the sector experienced an increase in export markets in both
quantity and unit prices and in dollars. Last year, exports increased by 7.7 percent as
the amount of the sector, value of 15 percent of the increase in exports provided. In
other words, products with higher value added were exported at higher prices.