Upgrading in the Global Clothing Industry: The Transformation of Boyner Holding
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Competition & Change
Vol. 8, No. 2, 173– 193, June 2004
Upgrading in the Global Clothing Industry:
The Transformation of Boyner Holding
NEBAHAT TOKATLI1 AND YONCA BOYACI ELDENER2
1
Milano Graduate School, New School University, New York, USA
2
Dia Supermarkets, Istanbul, Turkey
ABSTRACT The authors examine the complexity of the structure and corporate practice
of Boyner Holding, a Benetton supplier in Turkey as well as a manufacturer and a retailer
in its own right. Their analysis has implications concerning the fluid, intricate and
dynamic power relationships within the global clothing industry, as well as concerning
the availability of upgrading opportunities for corporations in peripheral places such
as Turkey. The analysis also points to the current blurring of the traditional distinctions
between production-based and distribution-based firms, between full-package manu-
facturers and original brand name manufacturers and, in fact, between lead firms and
their suppliers.
KEY WORDS : Clothing manufacturing, Full-package production, Brand-name manufactur-
ing, Clothing retailing, Globalization, Networks, Power relations, Upgrading, Firms, Turkey
Introduction
The existing debates on economic globalization have a lead-firm bias. This is especially true
for industries such as clothing in which lead firms have come to play an increasingly import-
ant role in the organization of global production and distribution systems. Consequently,
more attention is given to lead firms such as Marks & Spencer, the Benetton Group of
Companies, Levi Strauss & Co., VF Corporation, Burlington Industries, JCPenney Corpor-
ation and Galeries Lafayette (see, for example, Gibbon 2001; Gereffi et al. 2002a; Palpacuer
& Poissonnier 2003). A key issue in this literature is the question of which activities and tech-
nologies lead firms keep in-house and which are outsourced to other domestic or overseas
firms (see Gereffi et al. (2004) for a comprehensive account). In these discussions, supplier
firms in places such as Turkey, Pakistan and Morocco are usually left relatively unexplored;
and, more often than not, are lumped together in one category of anonymous low cost over-
seas manufacturers. Even though there is an extensive literature that discusses conceptually
Correspondence Address: Nebahat Tokatli, Milano Graduate School, 72 Fifth Avenue, New York, NY 10011,
USA. Fax: +1 212 229 5354; Tel.: +1 212 229 5311; Email: tokatlin@newschool.edu
1024-5294 Print=1477-2221 Online=04=020173–21 # 2004 Taylor & Francis Ltd
DOI: 10.1080=1024529042000276376
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how these manufacturers (suppliers) are increasingly finding themselves in asymmetrical
power relationships with the dominant players (Glasmeier et al. 1993; Gereffi 1994), empiri-
cal studies are rare and not geographically broad (see, however, Gereffi et al. 2002a; Smith
2003; Hassler 2003a, 2003b; Tokatli & Kizilgün 2004). A more recent observation that the
power balance is becoming more symmetrical under certain circumstances (Gereffi et al.
2004) requires even more empirical backing.
The lead-firm bias is understandable since global buyers now not only have a major
influence on the sales of their suppliers but also on the type of upgrading strategies
open to them. While lead firms allow manufacturers to upgrade within production, they
discourage them from upgrading into higher value-added activities since this sort of
upgrading encroaches on their own core competence. Hence, it is expected that manufac-
turers working for global buyers enjoy upgrading along the dimensions of quality, flexi-
bility and productivity but usually encounter barriers when it comes to moving into
design, marketing, branding and retailing. What really enhances a firm’s position in the
global market is the latter (functional upgrading) because activities such as branding
and retailing are the most profitable areas (Gereffi 1994, 1997, 1999; Humphrey &
Schmitz 2001, 2002; Bair & Gereffi 2002; Gereffi et al. 2002b). Consequently, globaliza-
tion is believed to make exclusively already powerful lead firms more competitive in their
own markets and to keep supplier firms trapped in the role of manufacturing for the lead
firms who collect the real rents (Mortimore 2002).
Recently, more attention has been given to the differences between ‘core suppliers’ who
maintain stable relationships with the lead firms and ‘peripheral suppliers’ who operate
through short-term links (Palpacuer & Poissonnier 2003). In addition, more attention
has been given to the fact that some of these core suppliers have already turned into
national-champion companies in a few high-performing economies such as
South Korea, Hong Kong, Singapore and Taiwan, after acquiring enough autonomy to
develop and exercise their own strategies and upgrade their operations independently of
the leading firms in the global chain (Gereffi 1997; Mortimore 2002; Skov 2002). More
often than not, however, upgrading is seldom expected from domestic firms in peripheral
places such as Turkey. Even when the scholarly interest is geographically broadened, the
focus is rarely on the traits of the supplier firms themselves, such as their institutional
backgrounds or business strategies (however, see Hassler 2003a, 2003b), but rather on
their workers who are conventionally discussed through ‘sweatshop tropes’ (in the
words of Smith (2003: 29)), which dominate the literature (see, for example, Bonacich
& Applebaum 2000; Webber & Weller 2001).
To confine the discussion on globalization solely to the lead firms is to miss an import-
ant development: for some time, even in peripheral places, some of the manufacturers of
these lead firms have been building and commercializing their own brand names and col-
lecting some of the real rents. Some firms, in countries such as Indonesia, Slovakia and
Turkey, have already upgraded into high value-added activities such as brand name
manufacturing (Hassler 2003a, 2003b; Smith 2003; Tokatli & Kizilgün 2004). Moreover,
as Sturgeon and Lester (2002) explain, acquiring or creating own brands is only one of the
options available concerning functional upgrading. Upgrading is an unending and compli-
cated process that requires consideration of a variety of ways in which firms can balance or
replace manufacturing with higher value-added activities (Sturgeon & Lester 2002). Some
of the alternatives to own-brand development include the following or any combination of
the following: investing in products under buyers’ labels with features that allow the sup-
plier firm to command higher prices; specializing in process-specific technologies; moving
to a different tier of the supply base; and shedding the manufacturing functions entirely,
following the same strategy as the lead firms (Sturgeon & Lester 2002).
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The fact that there is not a single path to upgrading, but a variety of routes and combi-
nations of these are available, poses a challenge to a number of established notions. For
example, some theoretical distinctions become meaningless when suppliers move into
retailing, without withdrawing from production for lead firms, by opening stores to carry
their own and others’ brands (a high value-added activity). Similarly, a supplier may
assume the role of a buyer of, for example, firms in Vietnam, while continuing to supply
firms in Europe. The result is a blurring in the production-based and distribution-based
distinction as well as in the buyer –supplier distinction. This is worthy of exploration
because there is now scepticism in the literature concerning the clear-cut distinctions,
which requires empirical backing. See, for example, Palpacuer (2002) for the distinction
between production-based and distribution-based firms; Hassler (2003a, 2003b) for the
distinction between buyer-driven and producer-driven relationships; Hassler (2003b) for
the distinction between branded clothes and their brandless fabrics; and Tokatli and
Kizilgün (2004) for the distinction between full-package manufacturers and original
brand-name manufacturers. A critical exploration of these distinctions accords with a
recent theoretical agreement that more attention has to be paid to the fluidity, complexity,
variety and dynamism of the power relations between lead firms and their suppliers
(Dicken et al. 2001; Humphrey and Schmitz 2001, 2002; Henderson et al. 2002; Smith
et al. 2002; Smith 2003; Gereffi et al. 2004). It is also in accordance with the
observation that the mainstream debate within economic geography has a ‘deeply rooted
productivist bias’, in the words of Wrigley and Currah (2002), which results in a neglect
of the distribution firms that now play important roles in the global economy.
This article examines closely a well-known Turkish manufacturer, Boyner Holding,
looking for clues concerning the above-mentioned arguments. Boyner Holding was
established by the Boyner family under the name Altinyildiz in 1952. For a couple of
decades the firm was a small-scale, family-owned manufacturer of pure woollen fabrics
and wool blends. It became a core Benetton supplier in 1985 and, in 1991, reorganized
itself as a holding company which now consists of 11 companies.1 Recently, Boyner
has been providing manufacturing services for several large European and US
branded manufacturers and intermediaries, as well as producing for sale under its own
and licensed brand names in the Turkish and regional markets. The firm is a successful
brand developer, not only in clothing (its major brands are Beymen, Altinyildiz,
NetWork and Fabrika), but also in textiles (Boyner’s Altinyildiz fabrics have also
reached the status of a consumer brand both domestically and in export markets).
In addition, Boyner is the largest non-food retailer of the country, serving almost all seg-
ments of the domestic market by operating in the full spectrum from fashion to discount
clothing. (The brand development and up-scale retailing activities of the firm can be
traced, respectively, to 1965 and 1971 – long before its engagement with Benetton.)
Boyner, especially after becoming a holding company in 1991, has been playing a dual
role: in the domestic market, it is the developer and retailer of several exclusive fabric and
clothing brands of its own, most of which have high fashion content. In the global market,
on the other hand, Boyner is the loyal supplier and student of Benetton. (The owner and
CEO of the firm Cem Boyner recently stated that the firm was following the ‘Benetton
model’). Here, this article looks at this relatively large corporation operating multiple
lines of business, including manufacturing and retailing, and discusses how the firm has
found a way of balancing its manufacturing activities with higher value-added ones.
An attempt is made to locate the firm (which reportedly had 4,380 employees in 11 com-
panies and a total turnover figure of almost US$500 million in 2003) on the map of the
global clothing market as one of the low-cost overseas manufacturers of a global buyer
(Benetton). The dual roles that Boyner plays, together with its size and power, highlight
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the potential complications that this specific manufacturer of a lead buyer can bring to
the theoretical discussions concerning power relationships within the global clothing
industry, as well as related upgrading issues.
Conceptual Issues
One way to approach globalization is to view the global economy in terms of complex
network relations, as formulated by Dicken et al. (2001). The complexity of these rela-
tional networks requires a look at three levels of relationships: intra-firm, inter-firm and
extra-firm. Focusing on the internal dynamics of a firm is an example of the first level
where there is a real gap in the literature because, in the words of Humphrey and
Schmitz (2002: 11), the emphasis on inter-firm relationships ‘crowds out the concern
with what goes on inside the firm’. The nature of decision-making processes within
firms (such as decisions to upgrade or expand geographically) is especially poorly under-
stood (see Currah & Wrigley 2004).
The complexity of inter-firm relationships in the global economy (the second level) has
been explored more thoroughly. For example, see Hughes (2000), Henderson et al. (2002),
Dicken et al. (2001) and Gereffi et al. (2004). However, despite the richness of the
theoretical studies, the empirical studies are not geographically broad and, thus, not satis-
factory in the context of examining ‘contrasts’, in the words of Wrigley and Currah (2003),
which might exist across international markets (see also Currah & Wrigley 2004).
Firms should also be examined through their extra-firm relationships (the third level),
where the focus is on the ‘firm –place’ linkages (Dicken 2000). This, in the terminology
of Currah and Wrigley (2004), requires detailed interrogations of firms that have the
power to manipulate geographical space and to insert places into their organizational
structures in innovative ways as part of their strategies. This is not an easy task even in
advanced capitalist economies and is especially challenging in unpredictable, volatile
and weakly institutionalized (‘particularistic’ (Whitley 2001)) economies, where econ-
omic crises and resulting uncertainties push firms towards complex and interesting
strategies. A recent contribution by Wrigley and Currah (2003) is an example of a firm-
based study of inter- and extra-firm relationships in a weakly institutionalized
particularistic business environment (see also Hassler 2003a, 2003b; Currah & Wrigley
2004). The usefulness of examining firms in particularistic economies is obvious since,
in this age of ‘alliance capitalism’ (Dunning 1997, cited in Currah & Wrigley 2004),
even firms in such economies – plagued by hyperinflation, devaluation and other econ-
omic crises – are increasingly functioning as parts of networks of interrelated groupings.
The clothing industry has already been scrutinized through lenses which primarily look
at the interactions stemming from functional contacts among firms (rather than at those
stemming from geographical proximity and shared regulatory and institutional frame-
works). See, for example, Gereffi’s commodity chain approach (Gereffi 1994, 1995,
1999; Gereffi & Korzeniewicz 1994; Gereffi et al. 2002a), which has been especially
praised (and criticized) by economic geographers (Dicken 1994; Dicken & Malmberg
2001; Dicken et al. 2001; Henderson et al. 2002; Smith et al. 2002; Palpacuer & Poissonnier
2003). For example, several essays in a recent monograph by Gereffi et al. (2002a) address
the clothing industry by taking a firm-centred approach within the complex North
American production and trade landscape. These essays identify the links between a
number of transnational firms (some production-based and some distribution-based lead
firms, such as Levi Strauss & Co., VF Corporation, Burlington Industries and JCPenney
Corporation) and a range of Mexican, Central American and Caribbean partners, and
document collectively the evolution of the strategies and organizational behaviours
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adopted by these networked firms in response to globalization and regulatory changes
(Carrillo et al. 2002; Gereffi et al. 2002b; Mortimore 2002; Peters et al. 2002; Spencer
2002; van Dooren 2002; Vangstrup 2002). In the same monograph, there are also clues
concerning how insights with regard to firms can be utilized within discussions of the pol-
itical economy of development (Bair et al. 2002) and how economic geographical research
might approach the firm-territory question (Spencer et al. 2002).
In most of the studies inspired by Gereffi’s (1994; 1999) original formulation, the start-
ing point of the analysis is the asymmetrical power relationships in networks (see also
Crewe & Davenport 1992; Crewe & Forster 1993). Power can be corporate, political or
social and determines how much of the created value a firm can capture as rents for its
own benefit. (See Henderson et al. (2002) for a discussion on enhanced versus captured
values; and Kaplinsky (2000), Gereffi (1999) and Henderson (2002) on rents.)
However, power relationships are not set in stone but relational (the exercise of power
by one party depends on the powerlessness of other parties in the network) and dynamic.
For example, as the complexity of inter-firm relationships is increasingly being mitigated
through well-defined grades, standards and certifications (‘codification’ (Sturgeon 2002)),
the power balance is becoming more symmetrical (Gereffi et al. 2004). Similarly, as some
highly functional and financially powerful suppliers are increasingly becoming more and
more competent (partly through ‘learning by doing’ as in Gereffi’s original formulation)
and managing to function without a great deal of input by lead firms, the power is shifting
away from lead firms. The result has been an increasing geographical and output-related
agility in the global market (Sturgeon 2000). Also, there are fragilities in the power
relationships that can be exploited by suppliers with strategic intent which contribute to
the changing power relationships (Dicken et al. 2001; Humphrey & Schmitz 2002;
Tokatli & Kizilgün 2004). For example, the production of counterfeit versions of
leading brands has proved to be one of many such fragilities (Sturgeon 2000; see
Tokatli & Kizilgün 2004 for the Turkish case).
In addition to linking firms, networks also connect societies with distinct social and
institutional characteristics. Once these connections are established, firms try to extract
the maximum benefits from the societies in which they are embedded, just as societies
try to derive the maximum benefits from the firms’ local operations (Dicken 2000).
When predictable and collaborative business environments are connected with others
which are unpredictable, volatile and weakly institutionalized, new challenges arise and
complex firm strategies emerge. Even when all these environments are essentially ‘capi-
talist’ (Whitley 1999, 2001), the differences between them can be sufficiently distinct to
turn firms functioning in these environments into more complex and differentiated organ-
izations. For example, Wrigley and Currah (2002) detail how retail transnationals face
very different embeddedness issues and regulatory topologies in different countries and,
consequently, become more complex and differentiated organizations as a result of their
international investments. In particular, those which are engaged in ‘particularistic’ and
volatile economies are constantly exposed to the need to reshape their networks as they
grapple with maintaining and re-creating their ‘firm – place’ relationships in unpredictable
business environments (Wrigley & Currah 2002).
Turkey is one such unpredictable, volatile and weakly institutionalized business
environment in which managing risk is a major issue for all firms.2 Consequently, there
are certain patterned ways of behaving which most actors understand and abide by
(especially in the area of dealing with the chronic instability of the economy, and the
unique relationship between industrial and commercial/financial capital). Boyner will
be examined as the supplier of a few global buying firms (such as the Benetton Group
of Companies and Levi Strauss & Co.) within this context.
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Background on Boyner
Turkey is now the European Union’s second largest clothing (textile and apparel) supplier.
As expected, therefore, a large number of Turkish domestic firms are now functioning as
the assembly or full-package manufacturers of European (as well as American) lead firms
(Tokatli 2003; Tokatli & Kizilgün 2004). Boyner Holding is one such supplier – originally
a manufacturer of pure woollen fabrics and wool blends. In 1956, the company started
exporting textiles and, in 1965, entered into the manufacturing of clothing by extending
Altinyildiz’s activities into the manufacturing of men’s classic garments. In 1971, retailing
was added to the portfolio when Boyner established Beymen, a men’s clothing retailer. A
few years later, in 1978, Boyner also branched into footwear manufacturing through its
footwear factory Alboy, which was established with the transfer of Italian know-how
and operated until its closure in 2000. Despite these attempts to expand the portfolio,
during the pre-1980 period, Boyner remained a conventional and domestically orientated
textile manufacturer with a few clothing stores on the side.
The company opened itself to the outside world to a larger extent in 1981 when it estab-
lished an international trade link by opening an import/export marketing department.
Later on, Boyner signed licensing agreements with Benetton and Divarese of the Benetton
Group in 1985 and 1986, respectively, which meant the establishment of some degree of
integration and co-ordination with a global buyer. A few years after joining what Perulli
(1999) calls ‘the three-tiered structure of the Benetton Group of Companies’,3 in 1989,
Boyner also established a partnership with another domestic company with the purpose
of manufacturing and selling jeans under the brand name Levi Strauss & Co.,4 thus,
gaining more access to global networks of production, consumption and information.
Since these strategic decisions, Boyner has been transforming itself cautiously and
gradually from a modest manufacturer into a large, powerful and somewhat diversified
corporation, with a new emphasis on branding, retailing and consumer financing. Today
the company is an established national retailer affiliated with a backward linkage to
textiles and clothing production. In 2003, it was reported that Boyner had 4,380 employees
in 11 companies and a total turnover figure of almost US$500 million (Boyner 2003).
The authors believe that Boyner’s transformation from a modest industrialist in the pre-
1980 period into a corporation with a new emphasis on commercial activities in the post-
1980 period can only be understood when the dynamic competitive context is taken into
account. For this purpose, the state of the clothing business in Europe and the USA in the
post-1980 period will be explored first. The investigation makes it clear that the manner
in which Boyner has evolved recently has been in accordance with the business model
(with a focus on brand development, marketing and distribution) that the Europeans
and Americans consider successful. Secondly, an attempt will be made to understand
the Turkish business environment, since the manner in which Boyner has progressed
during the last few decades has also been symptomatic of pronounced structural
changes in the Turkish economy. The political economy of the country and the resulting
particularistic business environment have conditioned the relationships between Boyner
and the global buyers and also added another important actor to the scene: the state.
The competitive context is discussed along two dimensions:
1. the transformation that the clothing business has been experiencing globally during the
last few decades;
2. the unique domestic conditions within post-1980 Turkey, including the chronic
instability of the economy, the particularities of the state –business interactions and
the shift of power from industrial to commercial/financial capital.
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The Recent Transformation of the Global Clothing Business
Even though the clothing industry in the West had been subject to trends rooted in the pro-
cesses of globalization since the late 1970s (Fröbel et al. 1980), the palpable impacts
became noticeable especially in the 1980s (Glasmeier et al. 1993; Essletzbichler &
Rigby 2001; Scott 2002). During the late 1980s, the period in which Boyner exposed
itself to more competition and technological know-how in the global markets, the clothing
industry had already been operating as a dense network of domestic and foreign firms
organized on the basis of contracting and sub-contracting agreements (Scott 2002). For
the lead firms of these dense networks, the clothing business had already become less
about manufacturing and more about design, control of product quality, price, distribution,
display and exposure (Agins 2000; Kaplinsky 2000; Anon. 2002a). This was the beginning
of the time when the European and American business community had come to believe
that what mattered more in the clothing business was creatively executed and high-
caliber marketing and retail management. It was believed, especially at the top end of
the quality spectrum, that only those who could combine the management of a pipeline
of brands at different stages of development with cost-effective manufacturing, effective
distribution and well-executed retailing would be successful. Success belonged to focused,
careful, disciplined and powerful companies who could insert themselves appropriately
into global markets (by shifting production abroad, for example, and reaching customers
all over the world) and could devote considerable resources to brand development, adver-
tising and distribution. To stay powerful, it was crucial to control costs at the manufactur-
ing level (sometimes by restructuring away from manufacturing), organize distribution
efficiently, look for growth outside the home countries, communicate with global custo-
mers directly via their own advertisements and connect successfully with the masses
everywhere. As part of this strategy, it became necessary to own and operate their own
stores. For example, Gucci, Hermés and Louis Vuitton now sell most of their products
through directly owned and operated stores (Anon. 2002a).
All of these strategy changes on the part of the lead firms required financial resources
that only the capital markets could supply reliably. It became a necessity to raise
money on the stock market in order to devote considerable resources to commercial
activities and to issue stock options in order to attract the necessary management
talent. Consequently, many designers turned themselves into publicly traded companies.
In the USA, for example, Liz Claiborne went public in 1981; and a large number of
retail and fashion companies followed, starting in 1992, including 40 such companies
between October 1995 and November 1997 (Agins 2000: 207). The new rules dictated
that it was now commercial capital (retailers, marketers and buyer manufacturers) that
had the power, while firms at the point of production had little control in the industry
(Gereffi 1994).
In sum, when Boyner opened itself to the outside world, the successful model was
considered to be neither the sprawling manufacturing conglomerate of unrelated multi-
brands nor the retailer selling others’ brands or its own single label. Rather, the idea
was to focus on developing several brands simultaneously so that there would be no
temptation to overexploit and, thus, destroy a single label. The stress was put, first, on
the management of a pipeline of brands at different stages of development (making
heavy investment in the creation of new products a necessity) and, secondly, on effective
marketing and distribution (Anon. 2002a). The implication was that upgrading within
production (along the dimensions of quality, flexibility and productivity) was not
enough anymore. Rather, upgrading into higher value-added activities such as design,
brand-name manufacturing, marketing and retailing had become a necessity.
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The Unique Characteristics of the Domestic Economy, Including the Relationship
Between Industrial and Commercial/Financial Capital
When Boyner signed its licensing agreement with the Benetton Group of Companies5 in
1985, Turkey was just starting to experience a phase of internationalization, as a conse-
quence of both the ambition of European and American clothing makers to expand into
new markets (under the pressures of global competition), together with the need of
Turkish firms to find foreign alliances (under the pressures of the customs union with
Europe). As the European and American clothing makers were successfully bringing
together firms, countries and regions through joint ventures or, more often, franchising
and licensing arrangements of various kinds,6 large Turkish corporations were worrying
over the impending customs union with the European Union, which was expected to
reshape the country’s economy starting in 1996. The consensus was that after the
customs union, Turkish firms with alliances with foreign companies would be more com-
petitive, while those with no outside links would suffer (Tokatli & Boyaci 1997).
Meanwhile, the government had started to implement a new and decidedly outward-
orientated industrialization policy. During this period, the more liberal, outward-looking
and export-orientated government policies confirmed the perception of many large corpor-
ations that establishing partnerships with foreigners was, indeed, a good measure. Conse-
quently, quite a number of Turkish corporations looked for ways of inserting themselves
into the international market in one way or another. Certainly not all corporations in all
sectors wished, tried or were able to find ways of embedding themselves within global
webs to the same extent or in the same ways, but some of those who did, including
Boyner, met with a positive response from foreign firms.
During the time period when Boyner signed licensing agreements with the Benetton
Group of Companies, Turkey was experiencing an export-led growth (as manufacturing
exports grew at double-digit rates, in response to favourable exchange rates and
massive incentives in form of tax rebates) which resulted in an average GDP growth
rate of 6.5 percent per year during 1983 – 1987 (Voyvoda & Yeldan 2001; Akyüz &
Boratav 2002). However, the 1980s was also a high inflation period in Turkey and,
towards the end of the decade, the economy seemed to run out of steam as a result of
macroeconomic imbalances and an accelerating inflation. The government responded
by liberalizing the financial system through measures such as the deregulation of interest
rates. The hope was that large inflows of foreign capital would restore economic growth.
During the period of financial liberalization, inflation remained high, with an average
rate of 65 percent. Furthermore, following the deregulation of interest rates at the end
of the 1980s, very high interest rates also accompanied these high inflation levels. The
overnight interest rates soared to almost 110 percent in 1991 and stayed over 90
percent during 1992– 1993. Businesses eventually learned how to survive and thrive in
a high inflation and high interest-rate environment. The entire society became interested
in short-term investments. The Turkish Lira Repurchase Agreements (repo transactions),
for example, became very popular because of the very high real overnight interest rates.
The result was a growth in non-operational profit opportunities, especially for large
firms, creating the unnatural situation of firms increasingly acting as rentiers (Boratav
et al. 1996; Akat 2000). Rentier profits were so enormous that banks became heavily
dependent on earnings associated with rapid inflation and, in fact, tied their viability to
very high interest rates (Akyüz & Boratav 2002).
However, growth did not bring stability to the economy, a fact which became especially
evident in the 1990s. In fact, the most distinguishing feature of the post-1980 Turkish
economy turned out to be chronic instability, since the economy seemed to be trapped
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within mini cycles of boom and crisis (Voyvoda & Yeldan 2001). The standard deviation
of the average growth rate of GDP was six percentage points during the 1990s (Akyüz &
Boratav 2002). The high and fluctuating inflation rates and erratic changes in the value of
the domestic currency (Turkish Lira) also pointed to a chronic instability: the standard
deviation of the annual average rate of inflation was 15 percentage points during
the decade (Akyüz & Boratav 2002). Similarly, the high and fluctuating rates of exchange
in the value of the Turkish Lira were so severe that they resulted in a decreased
confidence in the domestic currency and a high level of currency substitution, indicated
by the opening of foreign exchange kiosks in even the most remote cities of the country
(Akat 2000). Oh and Varcin (2002) pointed out another element that increases the level
of uncertainty in the environment: the majority of the business leaders that they inter-
viewed in 1997 claimed that the state was the most important business environmental
factor, making changing state policies another source of uncertainty.
This chronic instability and uncertainty coming from state –business relationships
makes the manner in which businesses deal with such an environment a crucial part of
any analysis. In other words, it is necessary to understand the swings that the economy
and the government policies have recently been going through in order to understand
the business strategy of any firm during the last decade or so.
The mechanisms with which businesses respond to instability and uncertainty can be
very different from one firm to another. However, there have been some widely
adopted responses throughout the society which, to a certain extent, help one to understand
the specific strategies of individual firms. First of all, businesses have been adopting a high
degree of diversification, which might even be called ‘eclectic (or incoherent)
diversification’, by which is meant a ‘get-involved-in-everything-profitable’ mentality,
in the words of Bugra (1994). The model of a centralized corporate ownership with a
high degree of diversification (in which there is direct family ownership and the control
of subsidiaries through holding companies) has been dominant among the big businesses
of Turkey since the 1960s.7 There are claims that businesses aim to neutralize state
hostility by means of the growth of their size and power through diversification. Oh and
Varcin (2002) write that without the support of the state (which they call a ‘mafioso’
state since it demands extracted payments from market actors for its regulatory interven-
tion), not only is it impossible to accumulate capital in Turkey, but it is also impossible to
survive in the market. An alternative explanation is also possible: the ‘corrupt’ holdings
use diversification for financial shufflings in order to deceive the state or intimidate
other businesses.8 These arguments aside (the ‘mafioso’ characteristics of the state or
the ‘corrupt’ tendencies of the businesses), diversification is also simply a reliable way
for large corporations to deal with an erratic and unpredictable business environment in
which a high and chronic inflation, very high real interest rates and drastic devaluations
are part of daily life. Those who are simultaneously involved in many activities hope
that when one specific industry degenerates during an episode of extreme volatility,
another industry will balance the situation for the corporation.
In addition to diversification, the most common response, especially for large
businesses, seems to be to defend profits by acting as rentiers. Economists calculated
that in 1995 nearly half of the total profits of the largest 500 firms in Turkey were from
non-operational sources such as interest (Erzan & Filiztekin 1997). High cash-flow
businesses are especially suitable for rentier activities. For example, retailers can act as
rentiers because they are usually supplied by credit but can turn over their stock well
before their suppliers have to be paid (see Marsden & Wrigley 1995). This practice
provides them with cash that can be invested in the money market for as long as 90
days before the suppliers are paid. The advantages are obvious in an environment of
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very high real overnight interest rates (for details see Tokatli & Eldener 2002). The result
has been a power shift from manufacturers to traders. As the power balance has changed,
manufacturers branched into retailing so that, in addition to other reasons, they could also
act as successful rentiers. For example, Dogus Holding and Sabanci Holding entered into
retailing by forming partnerships with the French retailers Promodes and Carrefour,
respectively.
For manufacturers, entering into retailing is, indeed, a business strategy that seeks to
take full advantage of the negative working capital cycles in the particularistic business
environment of Turkey. Another strategy is to rely on ensuring state support through
giving in to whatever the state demands in exchange for protection: political contributions,
bribery or extortion (see Oh & Varcin 2002). These last two strategies may explain largely
some of the recent and impressive growth patterns belonging to some large firms in
Turkey, however difficult it may be to back up the claim with firm-specific information.
Boyner’s Transformation in the Post-1980 Period
Boyner’s transformation, in the post-1980 period, into an established national retailer
affiliated with a large number of retail stores (also with a backward linkage to textiles
and clothing production) should be looked at within the context discussed above. On
the one hand, the firm had to take into account the global focus on brand development,
marketing and distribution within the clothing business. On the other hand, this tendency
was reinforced by the institutional background of the firm, together with the unique
attributes of the post-1980 Turkish economy with its roller-coaster ups and downs, the
changing power balance between manufacturing and commercial/financial interests and
the persistently uncertain business environment.
Boyner’s changing relationship with Benetton and Levi Strauss & Co., since the signing
of licensing agreements in 1985 and 1989, respectively, indicates the extent to which the
decisions taken by Boyner, Benetton and Levi have been symptomatic of the swings of the
economy. In 1992 Boyner’s agreement with Benetton was turned into an equal partnership
when Benetton bought a 50 percent share in the ownership of the Bogazici subsidiary,
which was manufacturing Benetton clothes for the Turkish market. A similar arrangement
in 1993 also transferred 51 percent of the ownership in the subsidiary which had been
manufacturing Levi jeans since 1989 to Levi Strauss & Co. When Benetton and Levi
Strauss & Co. made these decisions, the economy was experiencing a period of a
strong recovery (with a 4.8 percent average annual rate of growth of GDP during the
1992 –1993 period) and Boyner was thriving, as indicated by the increase in the
number of its Benetton stores, as well as its growing need to raise money in order to
grow still further. In 1993, for example, Boyner opened a sourcing/sales office in Frank-
furt, Germany. However, the boom was followed by a bust in 1994 when the economy
went into a deep recession. The dollar sharply increased its value against the Turkish
Lira, inflation reached triple-digit levels and interest rates soared. The economy shrank
5.5 percent in 1994 and inflation grew to 106 percent. Following this financial crisis,
both Benetton and Levi Strauss & Co. sold their recently acquired shares in the Turkish
factories back to Boyner. Clearly, the Turkish business environment was too ‘particular-
istic’, in the words of Whitley (2001), for both corporations.
It was during the 1990s that Boyner made the very important decision to focus its
attention on developing labels. Here, it is crucial to recall that the brand development
and up-scale retailing activities of the firm can be traced, respectively, to 1965 and
1971 – long before its engagement with Benetton. However, Boyner seemed to
understand thoroughly the relatively newer idea of successful management of a pipeline
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of brands at different stages of development only after establishing a partnership with
Benetton. This is one of the areas that indicate the extent to which the essence of the
company’s development has been ‘learning by doing’ from Benetton. Benetton devotes
considerable resources to brand development, its major brands including United Colors
of Benetton, Sisley, Nordica, Rollerblade, Prince, Killer Loop and PlayLife. Following
Benetton’s example, Altinyildiz started to produce its own brands of men’s clothing
under the obvious brand name Altinyildiz in 1997. In 1998 Boyner launched its new
(women’s) label NetWork (named with the idea of sounding like a global label), a
development that took three years and US$4 million, of which US$1.6 million was
spent on advertising, another US$1.6 million on 17 NetWork Stores and the rest on
brand development (Hürriyet 1999). In 2000, Boyner acquired a successful domestic
firm Limon Company, together with its brands. The same year, it announced the
development of another label Fabrika, a relatively less expensive brand compared with
Beymen (Boyner’s upmarket retail chain), designed for younger customers. Today, the
focus on brand development continues. Çarsi’s (Boyner’s department store) own brands
are Cotton Bar, Pi, Mammaramma, Belle de Jour, Asymmetry and CasaClub; while
Beymen’s own labels consist of Beymen, Beymen Kids, Beymen Studio, Beymen Club
and Beymen Casa Club.
In Turkey, the business community believes that the transformation into branding and
retailing is merely a natural progression from full-package manufacturing. ‘Turkey has all
the components of branding’, claims the director general of the Turkish Clothing
Manufacturers’ Association (cited in International Herald Tribune 2003), ‘now it is just
a question of bringing it all together’. However, even though virtually every full-
package manufacturer eventually learns the product and understands where the real
rents are, only a very small number of manufacturers actually create successful brands.
As Humphrey and Schmitz (2002) point out, taking advantage of the opening of new
opportunities requires strategic intent and substantial investment by the manufacturing
firms. In order to understand who becomes successful at branding and who does not, it
is necessary to explore what goes on inside the firm – a very difficult task. In explaining
Boyner’s success, a few points can be made here. First, the firm’s institutional background
has been important: as mentioned before, the brand development and up-scale retailing
activities of the firm can be traced, respectively, to 1965 and 1971 – long before
its engagement with Benetton. Secondly, Boyner’s diversified activities within the entirety
of textiles and clothing manufacturing and retailing – in which one activity balances
the situation for the firm when another activity degenerates during an episode of
extreme volatility – provided the firm with the financial resources necessary for the
substantial investments required for brand development. Diversification also helped
when Boyner reorganized itself as a holding in 1991 and opened two of its companies
to the public. Altinyildiz (the textile subsidiary) became a public company in
1991. Çarsi (the department store), which was established as a discount store in 1981
with the purpose of marketing the end-of-season clothing of Beymen, was separated
from Beymen, reorganized as a department store and turned into a publicly traded
company in 1996. Within the Turkish context, reorganizing itself as a holding company
means significant tax advantages, as holding companies can pay their taxes a year
later, which constitutes an important advantage in an environment of high inflation.
Also, holding companies have the ability to allocate costs and benefits among
affiliated enterprises, thereby minimizing their tax burden. Finally, becoming a holding
company makes capital increases possible through the revaluation of the shares of
affiliated companies, which are then transferred to the central holding firm (Bugra
1994: 184).
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However, it remains an open question why Boyner was able to develop a succession of
successful brands, while other suppliers of global companies were unable to enter into the
area of brand development. Two additional factors may help to explain further the success
of the company concerning branding. First, it is possible that manufacturing clothing
exclusively for Benetton made it easier for Boyner to break out of the lock-in. For
example, another Turkish company, Nergis Holding, manufactures to the tight
specifications of over 30 diversified global companies and, so far, has not become involved
in own-brand development. An exclusive concentration with a small number of lead firms
may put a core supplier in a better position than those suppliers preoccupied with
satisfying the needs of a large number of lead firms. Secondly, from the beginning,
Boyner has been involved basically in fashion-orientated manufacturing that provides
sophisticated products to an exclusive clientele in Turkey. Despite strong competition
from international brand names, Boyner’s sophisticated clothing brands, such as
Beymen, have always maintained their appeal to an exclusive domestic body of customers.
It is almost impossible to know exactly how Boyner managed this, partly because what
went on inside the firm is unknown, and partly because success plays out in curious
ways in clothing industry. The consumption of clothing has a logic which is very distinct
from that of production, which makes whether firms succeed or fail very difficult to
predict. However, it is clear that owning and maintaining brands within changing
market environments demands some highly sophisticated entrepreneurial skills;
somehow, Boyner has possessed those skills for some decades now.
Despite the obvious success of its own labels, Boyner continues to be a core supplier to
Benetton. The authors believe that being a licensee of already strong brands, such as
Benetton and Levi’s, on the one hand, while developing its own brands on the other, is
a protective measure against the uncertainties of the economy. Even though retailing
the brands of others is a low margin business, it is less risky for Boyner to sell already
powerful brands by the side of its own, rather than concentrating all its energy on the
development of a few brands and hoping that, somehow, they will not lose their
‘groove’, in Agins’ (2000) words, too soon. In return, Boyner’s detailed knowledge of
the Turkish market helps Benetton to reach a reasonably sized consumer market
(60 million) in Turkey. Benetton seems to be content with its partnership with Boyner,
because, in 1999, it suggested that Boyner open stores in Iran and Egypt (Pazar 1999).
Another lesson clearly learned from Benetton is the virtue of licensing and franchising.
For example, letting others run its stores is a special sort of upgrading which gives
Benetton its enviable flexibility. Boyner took the same route when, in 2003, it introduced
the idea of franchising to its own department store. Çarsi department stores in cities such
as Diyarbakir, Afyon, Mersin and Trabzon (all outside the affluent and less risky part of the
country: Western Turkey) are run by franchisees. During the opening ceremony of a Çarsi
Department Store in the city of Diyarbakir in the south-eastern part of Turkey, Cem
Boyner, the owner and CEO of Boyner, openly stated that they were following the
model of Benetton: the model of an operator who uses low-cost networking via informal
and flexible agreements with a large number of partners. Playing the role of a franchisee
for Benetton and, at the same time, emulating Benetton by offering franchising rights of its
own store to others in the relatively less developed parts of Turkey is a clear example of
upgrading by modelling after a lead firm.
Çarsi, the department store, is now becoming a leading retailer, with visible financial
success. Its total sales in 1996 were an impressive US$107 million, at a time when its
market capitalization was US$44 million. (The next year, in 1997, Boyner, as a holding
company reported a turnover of US$488 million.) In 1998, another public offering by
Çarsi resulted in its market capitalization reaching US$180 million, when its total sales
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were US$154 million. The most recent turnover figure for Çarsi is US$183.7 million in
2003, when the overall turnover for all 11 companies was reported to be US$500
million. The increasing share of Çarsi in the total turnover figure of the holding indicates
that the department store is probably the locomotive for the growth of the entire group
now. (Çarsi’s number of stores increased from three in the 1981– 1984 period to 24 in
2003. It is supplied by around 450 –500 sources in several categories, clothing being
the most important one constituting 71 percent of total sales.) The new emphasis of the
holding, indicated by the success of Çarsi, is now clearly on commercial activities
rather than productive ones.
Playing the role of a franchiser of Çarsi has not undermined Boyner’s role as a franchi-
see of Benetton. It seems that the company is content with playing both roles at the same
time and that Boyner’s experience as Benetton’s licensee is a lasting relationship: Boyner
is still Benetton’s partner in Turkey (where there are 193 Benetton sales points today – six
of which are owned by Boyner and the rest owned and operated by independent retailers
whose only obligation is to carry Benetton brands). The total sales of Benetton in Turkey
today reaches US$100 million. Boyner also works as Benetton’s agent in a few former
Soviet Turkish republics, where 14 store owners place seasonal orders for their similarly
designed stores, pay when the merchandize is sold and return the unsold stocks at a dis-
count price (up to 5 percent) to Boyner at the end of the season.
As a retailer, Boyner serves almost all segments of the domestic market by operating in
the full spectrum from fashion to discount clothing and covering both price-driven and
quality-driven markets: Beymen exclusively serves the élite, while NetWork turns out
clothes for those who are willing to spend some money on good clothes but find
Beymen too expensive. Fabrika is also less expensive than Beymen and geared towards
the younger generation; while Çarsi and Smart remain as options at even lower price
levels. The idea, on the surface, is to make fashion widely available at every price
level. (Boyner was unsuccessful only at a genuine discount level: Tati, a French partner-
ship, did not do well and was closed down basically because of the availability of other
options, including open bazaars in Turkish cities.) Simultaneously serving a number of
income groups carries a complementary advantage, with different brands representing
economic as well as generational market segmentation.9
Another indicator of the shift from industrial capital to commercial and financial capital
is that, in 1998, Boyner’s own credit card, reorganized under the name Advantage Card,
began to serve third parties: starting with chains such as Park Bravo and then eventually
reaching thousands of other stores. In 2001, Boyner’s interest in finance looked even more
serious when there was an attempt to enter into a partnership with Fiba Holding’s bank
Finansbank. However, in June 2002, Boyner made the surprise announcement of the
sale of its consumer finance operations (Benkar) to the HSBC Bank. The sale was finalized
in September 2002 and brought US$75 million to Boyner, some of which will be paid over
the next five years. The decision to sell its consumer finance subsidiary, which has been a
profitable activity since 1989, seems to be a set-back. It is, however, a very new
development whose implications are yet to be seen. Moreover, the decision may not
mean a long-term change in the corporation’s strategy of turning to commercial and
financial activities, but simply a short-term response to the liquidity crunch that arose
after the latest financial crisis. The HSBC Bank, which bought Benkar, announced recently
that Boyner will be providing them with service through its newly established marketing
subsidiary Bofis, thus, it seems that Boyner’s interest in finance will continue in one way
or another.
At the end of the 1990s, there were 30 Beymen, 17 NetWork, 7 Smart, 7 Altinyildiz, 6
Benetton, 1 Fabrika and 20 Divarese stores owned and managed directly by Boyner. In
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2000, Boyner merged its Beymen, Benetton and Divarese stores under one company
name: BBA (Beymen Bogazici Alboy Magazacilik) and announced that the new
company was expected to carry 258 global labels and have 230 sales points, with an
annual turnover of US$200 million (Milliyet 2000). The reasons behind the merger
seemed to be the company’s plan to go public, together with the synergies that the
merger would provide. When a financial crisis broke out in the country towards the end
of 2000, Boyner reportedly cut its operational expenditures by 30 percent and postponed
some investments, including going public with BBA. It also decided that unprofitable
stores would be closed down, with the emphasis shifting towards more profitable areas.
(Hürriyet 2001). However, the emphasis on retailing and distribution continues, indicated
by the opening of a sales office in New York in 2000, with the purpose of marketing cloth-
ing to large stores; and the opening of a mega Beymen store in Istanbul in 2003, which was
presented as ‘a dream of 20 years’. The new outlet is a seven-storey store, which cost BBA
US$4.5 million and is expected to carry, in addition to own Beymen brands, collections
from Dolce & Gabbana and Prada (NTVMSNBC 2003). Benetton’s influence is also
clear here: starting in 2000, Benetton had already decided to start building a global
network of much larger ‘mega-stores’ which would eventually be owned and operated
directly by Benetton. (At the end of March 2000, Benetton operated directly only 29 of
its 117 mega-stores. In aggregate, Benetton owns or leases 160 of its stores world-wide,
92 of which are operated directly.)
Despite the clear shift towards retailing, a commitment to manufacturing remains. The
public probably recognizes the holding as a retailer partly thanks to the Benetton-like
advertising campaigns of Boyner retailers. For example, Boyner’s visibility was clearly
increased by the NetWork advertising campaign during the late 1990s, in which four
large buildings in Istanbul were wrapped with photographs of models in NetWork
clothes taken in New York. However, the manufacturing arms of the firm, Altinyildiz
and Bogazici, are still strong: Altinyildiz produces textiles for the domestic market as
well as for international firms such as Ann Taylor, Ann Taylor’s Loft, Hugo Boss,
Dewhirst, Marzotto and May Company; and Bogazici produces clothing for the Benetton
Group of Companies (Radikal 2002).
In addition to being a textiles manufacturer, a clothing manufacturer, a retailer, a
franchisee and a franchiser and a developer of its own brands, Boyner is also an importer
and an exporter at the same time. This is a very important advantage in a business environ-
ment where the value of the domestic currency keeps fluctuating, causing either a surge in
imports or in exports, depending on the economy’s position on the roller-coaster ride of
mini booms and busts, and on the government’s short-term response to the current situation
at that specific point in time. For example, the share of exports within Altinyildiz’s total pro-
duction fluctuated between 32 percent and 52 percent between 1999 and 2001.10 The
company makes it clear that the amount that they will export or import at any point
depends very much on the value of the Turkish Lira. Given the erratic nature of exchange-
rate movements, it helps to ‘wear the hats’ of an importer and an exporter at the same
time. Depending on the strength of the Turkish Lira, therefore, the company is able to
switch back and forth between importing and exporting and between outside sourcing and
its own textile production.
Clearly there is no single path to upgrading and the choice is not to be either a
production-based or a distribution-based firm. A more realistic way to upgrade is to
take on the role of manufacturing for others without being completely trapped in that
role, and manage to collect some real rents as well. This dual role means encroaching
on the core competence of lead firms, such as Benetton and Levi Strauss & Co., and
requires constant attention and investment in learning from the lead firms. The dynamics
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