How COVID-19 Crises May Affect A Foreign Construction

Company in Turkey
      
COVID-19 crises have affected all around the world. Countries closed their borders, a
lot of companies are closed or companies fire their employees so the unemployment rate is
increasing, approximately 3 million people are infected and 210 thousand people died,
unfortunately. While the whole world struggles with this new case, of course, Turkey is
affected, too. So how Coronavirus crises may affect the external environment of a foreign
construction company in Turkey is examined. Economic, demographic, environmental
uncertainty, and political factors are analyzed.

As almost all sectors decreased their production/construction capacity because of the

coronavirus, construction companies are also affected. Yet, it is harder to recover for
construction companies because these companies went into a decline approximately two years
before the coronavirus case. When it is the case, the firms in the construction sector start
selling their existed structures for low prices to pay their early debts that are caused by the
earlier decline in the sector. This fast-selling is sometimes at a lower price than the
construction’s cost and these low-priced structures will be a barrier to construct new ones
because of the existing market price. Even if this foreign firm starts to build new buildings,
the buyers would prefer the cheap ones, not the new ones. Although the market price of
constructions declined after the corona case, it could rise in the coming years in Turkey
because, during the economic recession, the company would lose its economic power so
strong firms will start to build and want to sell their construction over the cost price to gain
profit. 
      
The other aspect that should be considered for this foreign construction company in
Turkey is the decline in the number of buyers. When there are fewer buyers, the construction
rate will fall and so the sales. Also, because there is an excess of supply until the supply-
demand equilibrium balanced again in the construction sector, the company’s decline in sales
will remain. After the Covid-19 case, if all other sectors will fix their economic situations and
the economy starts to recover, and then the construction company’s sales would increase
again. If the economy does not recover, its sales would keep decreasing. Because, in these
circumstances, people tend to buy inferior goods rather than luxury goods. When their food
supplies, and water, electricity, natural gas expenses come to the forefront, the situation gets
harder for the company to recover because people would suspend their new house plans.

On the other hand, even if this foreign construction company constructs structures like
roads, bridges, with state tenders, it will get harder for the company to recover because it is
possible for Turkey to suspend or cancel the tenders as a result of the recession during the
Coronavirus case. While the country faces such a downfall, government promotions go
towards industry and production sectors mostly so promotions for constructions would be
delayed. Also, if people have good economic conditions to buy, concerns about the virus and
uncertainty would lead people to cut their expenses and save money.
 One of the other force and/or factor that affect the foreign construction company’s
production behavior is the demographic environment of Turkey. Demographic environments
are important and should be considered seriously during the management of a company. It is
because companies need markets to trade and makes a profit, and markets consist of buyers
and sellers. The possible attitudes and economic situation of the target sellers will, of course,
affect the buyers. Also knowing these possibilities lead a company to deduce whether their
buyers will increase in the coming year, or not. By doing so, the company could change its
strategy and make provision if the company decides that the sales are going to decrease or
not. 

It could be hard for a foreign company to know all the aspects of a different culture.
Thus, because of the probable outcomes that the demographic environment of Turkey lead,
this company should make an expert survey on trends in population characteristics such as
age, gender, education level, geographic location, income, and family composition. For
example, as Turkey has the youngest population compared to the European countries, with the
15.8 percent of people between the ages 18-24 in its population, according to Turkish
Statistical Institute, this great number of young people are, of course, going to try to find jobs
after they graduate from high school and/or colleges. Yet, because of the recession in the
economy that coronavirus situation leads, firms start to fire their employees and are going to a
reduction in their production/construction ranges. While the unemployment rate is increasing,
the coming young generation will have a hard time finding jobs and when it is the case, it is
almost impossible for a young person to leave his/her family and move to a new place with no
income. So, young people will start to come back to their parents’ houses and live with them.
Increasing numbers in houses will bring down the construction company’s sales, naturally. 

Furthermore, this foreign firm’s location and the location of its construction are very
important because the wages, rent prices, sale prices, and the number of sales differ all around
Turkey. For instance, if it is located in Istanbul, wages in Istanbul are higher especially for
white-collar employees than the other cities, and wages are also important for the company
because, during the corona crises, the company’s revenues are declined. Why the wages are
higher in Istanbul is rents and the population in this city is likewise higher. If the company
does not own it is building and/or offices, so they pay rent, paying rental while the firm is not
getting revenues could harm its economic situation. Moreover, sales prices and the number of
sales are higher in Istanbul due to its large population. Normally, these conditions contribute
to the firm’s revenues and sales but as Istanbul has the highest population, it has most of the
Coronavirus cases and unemployment of Turkey. Thus, if the company and its constructions
in Istanbul, it is possible for the firm to be affected badly. Supposing that the foreign company
is located in a city cheaper and smaller than Istanbul, and its investments are made in that city.
When the conditions are more stable than Istanbul, the firm will face easier plight. Low rents
and low wages will help the company to make its payments, so continue its existence. Yet, the
negative effect of a smaller city is even if the city is not affected by the Corona Virus that
much, because there are fewer people, it's market also smaller. In that case, the foreign
company could not sell enough structures.

In addition to the aspects that are examined above, assessing environmental

uncertainty is essential for the foreign firm. Firstly, the political, economic, and sociocultural
environments of Turkey should be known well to overcome the uncertainty and make
assumptions on the sector’s future. In this case, the organization (the foreign construction
company) will be so dynamic because of the changing environment of Turkey’s economic
situation and Coronavirus crises. When the environmental factors keep changing regularly,
the firm has to adapt itself to a new situation. Analyzing the components and applying new
strategies are the solution for the firm to be affected less from the changing environment and
economic recession. Although there is a lack of information because this case is new to
everyone, the managers of the company should search and consult professional predictions
about what they are going to face in the coming months, years. By doing so, these complex
and dynamic crises are overcome with less harm.

Additionally, another factor that this foreign company will be affected is political
issues. Because of the company’s investment and its managers are foreign, during the Corona
Virus crisis, the firm has a lot to do with local laws. First, they need lawyers that are good at
international relations because the borders are closed, and flights are canceled. So the
managers or foreign employees stuck at where they are. If they are in Turkey, they may want
to go back their own countries because of the virus crisis’s seriousness or if they are stuck in
their countries, they may want to come back to Turkey because it will be very hard or even
impossible to manage their jobs without being there.

Consequently, this foreign firm has hard times due to the decreased buyers, low
market prices, and economic recession in almost all sectors. To overcome this crisis that the
whole world faces, the firm has to analyze its environment and market: the construction
market of Turkey. Demographic, socio-cultural, and political aspects are vital for the
company to recover and continue its existence because considering those aspects will help
them to predict the future as this COVID-19 is a new case.

References:
https://en.wikipedia.org/wiki/Demographics_of_Turkey
https://www.dailysabah.com/turkey/2014/07/15/turkey-has-eus-youngest-population-tuik
https://www.hurriyetdailynews.com/youth-constitutes-15-8-of-population-143499
https://www.worldbank.org/en/country/turkey/overview
https://www.al-monitor.com/pulse/fr/originals/2018/10/turkey-construction-sector-threatens-
big-fallout.html
https://oxfordbusinessgroup.com/country/turkey/construction
Lecture notes
“Managing the External Environment and the Organizational Culture” Chapter 3
“Managing in a Global Environment” Chapter 4

Ahmet DÜNDAR

2019501255