Jumeirah Group and Emirates Academy of Hospitality Management

On Monday, January 10, the group took a tour of the luxurious Burj al Arab, a five star hotel within the Jumeirah group.  The hotel is built on a man made island and is replete with gold leaf motifs, 24 hour butler service, and incredible views of the gulf and man made palm islands.  We toured the second smallest guest room, which boasts two bedrooms, three baths, servants’ quarters, and amazing views.

We then met with Terry Kane, Director of Digital Strategy for Jumeirah Group.  He overseas all online presence for Jumeriah group which includes over 20 websites, translated into 4 languages.  Mr. Kane spoke about the challenges of creating relevant content for the companies group of websites.  Kane spoke about building a “happy path” for their customers, ensuring the customer’s experience is a good one from start to finish and they find what they are looking for on the website whether it be more information about the hotel or securing a booking.

Next we meet with Dr. Stuart Jauncey, Dean of The Emirates Academy of Hospitality Management.  The school was founded in 2001 by the Jumeriah Group with the intention of training world class professionals in hotel management.  The school currently has just over 300 students representing over 55 nationalities.  Dr. Jauncey touched on his 3 basic rules for doing business in the Gulf:

1. Obey Islamic law, or Shariah
2. Favor Family, tribe and friends first when doing business
3. Be hospitable and protect one’s “face”

Sabanci University

Our trip to Turkey had thus far been a test of everyone’s health, as a terrible flu seemed to affect just about everyone on the trip.  Professor Imparato summed it up well, when comparing us to the last two groups of students who organized trips in previous years, “if the first group would be known for its ambition, the second for its level of responsibility, then your group would be known as the most resilient.”  Fortunately, on Friday morning the group was back to 100% health as we piled into a bus headed towards Sabanci University to meet with Vice Director Selcuk Karaata and others representing the University’s School of Management.

Mr. Karaata provided us with a fitting end to our rich set of hosts from Turkey, by outlining the forces of innovation in Turkey (and in any nation, for that matter) and how innovation acts as a paradigm shift, directly affecting productivity and employment.  Therefore, he added, one cannot calculate a standard of living for any nation based on its level of natural resources or production alone.  One must account for innovation as a primary factor driving future growth in living standards.

Following this presentation we were able to tour the campus and were all struck by its sheer size for university with an enrollment consisting of just under 4,000 undergraduate and post-graduate students (USF is somewhere around 15,000 total).  That night we met with MBA students from the university in Istanbul’s famous Taksim Square, where we all celebrated our final night abroad with our newest friends from Sabanci University.

Our last night in Istanbul in Taksim Square

Anadolu Efes and Coca-Cola

If anyone on our group was thirsty today, you’d never know it.  After our visit to the Anadolu Efes plant and the Coca Cola headquarters for Eurasia/Africa, we knew as much as we could in one day about the business of what you drink.

At Efes we were schooled by the Chief Social Services, Hilmi Kayaer, on the expected rise in beer consumption in places such as Russia, where vodka is the preferred drink of choice and beer is almost considered a “soft drink.”  We were told that the Russian market represented the 4^th largest market in the world for potential beer drinkers, and with something over a 90% market share in Turkey, it only makes sense for Efes to compete in its neighboring markets for growth.   After the presentation we were treated to a guided tour of the brewery and bottling plant, followed by a generous tasting.

If the theme of the day hadn’t been clear by then, our visit with Paul Fourie, Coca-Cola’s Group Strategy and Business Planning Director for the Eurasia and Africa Group, was the tipping point in our understanding of the potential for this region.  Mr. Fourie presented a quantitative look at how his group is able to prioritize the company’s resources in an effort to diversify and maximize their portfolio of assets in a similar fashion to that of an investment fund manager.  Perhaps most interesting, however, were some of the numbers:  This region of the world represented 40% of the growth in worldwide sales of Coca-Cola and only 16% of operating income, which paints the picture for the value of this part of the world in terms of the company’s outlook for future growth.  Already about half of the company’s sparkling products (carbonated) are sold in Africa and Eurasia, mainly since products like Sprite and Fanta are aimed at a younger demographic and most of the world’s young people live in this area.

Overall, to succeed as a beverage company in this area, we learned that it is imperative that you capture a first mover advantage by acquiring well-established local brands or enter markets where new demand is imminent before your competitors, rather than attempt slow growth organically.

American Business Forum in Turkey

Turkey was unified as a republic in 1923, stretching its borders from the Battle of Galipoli in Europe all the way across Anatolia towards Iraq and Iran, in an area that is now about 1/15^th the size of the United States.  Its population stands at 78 million and is young – the median age is only 27 years old.   It is a land of immense potential, yet growth has slowed recently due to a number of reasons.  In a return visit to the Astoria Towers in Istanbul, we sat in on a panel discussion with representatives from Merck, Citibank, higher education, and Mr. Nisa Sinem Aslan from the American Business Forum in Turkey, where we covered a number of pressing issues related to current Turkish affairs, business issues, investment, education, and innovation.

The discussion centered around predictability (or lack thereof) and its impression on the future of investment in Turkey.  For instance, the representative from Merck pointed out in his presentation that while large improvements were made in the last decade to the country’s pharmaceutical R&D programs, surprise government regulations forced companies to pay back millions in money received for research budgets.  This kind of volatility in policy change contributes increased fear in international markets and puts downward pressure on expected foreign direct investment numbers.

The representative from Citibank, however, offered a more positive take on the Turkey’s outlook for foreign investment.  He indicated that in 2011 international trade in Turkey is expected to grow towards $3 billion this year, and foreign direct investment grew 12% in 2010 over 2009 numbers.  Most of this, he explained, will come on the back of a thriving banking sector, automotive manufacturing, textiles, agriculture, and others, with 40% of total assets coming by way of foreign direct investment.

In the end, the contrast in opinions between leaders in Turkey’s banking, education, and pharma industries was an invaluable addition to our program.

YükselKarkinKücuk

Atop the Astoria Towers, 12 million inhabitants of Istanbul (Turkey’s largest city, 5th largest worldwide) milled about below, going to work in a nation that is hungry to retake its place as a major world power and reestablish itself as the true crossroads of civilization.  With a 7.8% annual GDP growth rate, the country has recently been poised to grow at a breakneck pace and finally take its place as a member of the European Union.  Signs of this effort are abound, as everything from regulatory policies right down to the European-style vehicle license plates indicate the country’s desire for official recognition.

One of the country’s latest initiatives is focused on increasing research and development budgets in the public and private sectors in order to promote a more relaxed and robust technology market.  With this in mind, our group visited with Gökhan Gökçe, a Partner with the law offices of YükselKarkinKücuk.   Mr. Gökçe briefed us on the short history of the firm, which was one of the first in Turkey to incorporate the full-service law firm model, and specializes in most b2b legal services, especially in the fields of IT and telecommunications.  He also offered an explanation for how the government remains the major facilitator of innovation in Turkey, but there is a growing trend towards public and private partnerships between major universities and local businesses.

We were also able to hear a presentation from Cem Çelebiler, the founder of the country’s leading internet service provider, TurkNet.  Mr. Çelebiler graduated from MIT and entered the market at a young age in 1996 when the demand for internet access in Turkey was overflowing after years of general isolation from the outside world.  One of his major challenges involved raising money in a time when both inflation and the cost of capital were extremely high, since there was a crowding out effect as investors could expect upwards of around a 20% return when lending to the Turkish government.  Today, however, the landscape in Turkey is slowly changing for the better, as more and more success stories like Mr. Çelebiler’s help wet the appetite for local new entrants with new ideas and easier access to investors.

Abu Dhabi and ADIA

View from the top of the ADIA building

If Dubai was the UAE equivalent to Los Angeles, Abu Dhabi would be like New York or definitely Houston (which happens to be a sister city).  As we drove past the world’s largest indoor theme park, Ferrari World, we could see a skyline in full growth stage replete with half-finished skyscrapers and cranes.  Abu Dhabi is the capital city of the UAE and the state is home to the 95% of the country’s oil, making it the most wealthy of all the Emirates (it generated 56.7% of the country’s GDP alone in 2008).  The city is undergoing a major push towards becoming an international destination for culture and we were able to take a tour of the city’s plans to build a new cultural district which will house a new performing arts center, a Guggenheim museum, and a number of city improvements that look like a modern architect’s dream.

Our final destination in the city was a meeting with representatives from the Abu Dhabi Investment Authority.  ADIA is the world’s largest sovereign wealth fund established by the government to invest its reserves in generally low-risk assets, with an estimated $1 trillion to work with (according to Wikipedia).  Our meeting was at the top of Abu Dhabi with a view that made for some good camera opportunities after the meeting.  We were provided an overview of the organization’s history, it’s portfolio of investments, investment strategy, and some of its latest communications initiatives aimed at providing outsiders some transparency (In the past ADIA had been criticized for its lack of any PR despite its major influence in world markets).  It was truly an impressive experience to be able to speak with some of the most important people in the world of institutional investing.

The group in front of the Abu Dhabi Palace Hotel

Afterward we were treated to a truly amazing lunch at Al Dhafra, followed by a tour of the city and the Sheikh Zayed Grand Mosque provided by the Abu Dhabi Tourism Authority.

Boeing

Fakher Daghestani, Boeing’s Director of Corporate Communications for the Middle East is an old school salesman.  It’s because he has to be in an area of the world where relationships are paramount to product specs or speed of delivery.  One wrong word, one screw up, and deals are lost forever.  Mr. Daghestani explained, in the United States, decisions are generally made by boards and committees, where here in Dubai, for instance, there is typically one decision-maker.  Usually this person has no interest in the details, as he usually has an advisor for that stuff, so the conversation is typically steered towards approval of his accomplishments, a discussion about family, and/or other pleasantries.

Such is the nature of doing big business in this part of the world, where often times a personal relationship is the only way a customer will spend with you.  At Boeing, however, there is a strong corporate emphasis on ethics, which Mr. Daghestani explained makes it extremely difficult to compete when his deals must be done in black and white in a market that is often very gray.

Emirates Airlines

With planned trips to Emirates Airlines, Boeing, and Turkish Airlines, we came away from the trip with a 360 view of the airline industry.  On Tuesday morning we met with the Vice President of Network Passenger Sales Development for Emirates Airlines, Matthias Schmid.  He ushered us into a room befit for airline strategists, complete with a full view of the new terminal 3 being built in the background, our facility for the next 2 hours was something out of Mad Men, but only if it took place in a small airplane hangar.

Mr. Schmid had prepared a 70 minute presentation on the airline industry as a whole, covering a full case analysis of environmental influences affecting the industry, key success factors, and specific strategic decisions that have led Emirates Airlines to become the #1 international carrier in the world holding a 45% market share in Dubai alone, all in just 25 years of operations off of an initial (and single) investment of $10 million USD from the Dubai government.

One of the most prevalent themes in this discussion centered around the rapid growth and sustainability of this particular airline over its regional and global competitors.  First, it enjoys the strategic advantage of existing in one of the world’s best and most central locations, where the majority of the world’s growing population (and growing middle class) is less than an 8 hour plane ride away.  Second, it’s focus on technology has established the company as a leader in long-haul passenger travel, with the largest fleet of planes that have the capacity to fly for long distances, up to 18 hours at a time.  Finally, the airline is one of the only of its kind that treats its brand as a primary asset, with a strong focus on brand management and sports promotions, which it hopes will help establish an awareness synonymous with that of McDonald’s (fast food) and Coca Cola (beverages).