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Turkey switches on to TV market

Turkish-built televisions now account for more than half of those sold in Europe.
Has the Grundig brand been damaged by its acquisition by Beko?
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ISTANBUL, Turkey (CNN) -- An historic crossroads between European and Asian cultures, Turkey is better known for the exotic bazaars and ancient monuments of old Istanbul than for its factories.

Yet Turkey now produces more than half of the televisions sold in Europe. Beko, Turkey's top home appliance maker, manufactures 20,000 a day from its headquarters outside Istanbul under more than 100 different brand names.

While different brands are kept separate on the factory floor, costs are lowered by sharing packing, distribution and staff costs.

But although Beko may have built its reputation as a bulk manufacturer, the company now has ambitions to prove that Turkish engineering can do quality as well as quantity.

Last year it bought failed German home electronics firm Grundig, a name synonymous with high quality, in a $100 million deal.

Although Grundig had previously sub-contracted some of its production to Beko, the company had run into serious financial difficulties after keeping its main manufacturing base in Austria when most of its rivals had moved to cheaper countries.

Beko opted to keep the Grundig brand name, to compliment its low and mid-range products, but moved all production to Istanbul.

"That was the best solution for us, to support our strategy in the long term," says Beko general manager Ali Sumerval.

"Instead of having the manufacturing facilities in Europe, we would rather keep the brand name, the sales organization and all patents. Creating a brand name could be a strategy, but it would be very costly. It's not the efficient way from now on to promote new brand names."

Part of that strategy, admits Beko's vice-president of marketing Eric Demircan, is to play down Grundig's relocation to Turkey.

"When we started the process of acquiring Grundig, we decided we had to manage the branding very delicately," says Demircan.

"We didn't want to emphasize the company that was acquiring Grundig as a Turkish company, because the brands have a flavor of the country they belong to. We didn't want to lose the feeling of Grundig being a German brand; solid, long life and a little big conservative, maybe."

But with Beko helping to make $11 billion in revenue in 2003 for the Koc Group, Turkey's biggest conglomerate, its boss believes Turkish industry is finally shaking off a long-standing image problem.

"Well, in the old days we had image problems," says Bulent Bulgurlu, Koc's president of durable goods.

"But in the last 10 or 15 years, all Turkish industry and manufacturers have developed themselves to a better extent and these image problems are getting less and less."

In acquiring Grundig Beko teamed up with British low-cost TV manufacturer Alba and Bulgurlu believes Beko has much to learn from the partnership.

"We have the know-how and expertise in technology," he says. "We know how to manufacturer and be competitive. Whereas Alba has great experience in marketing, sourcing and quickly adapting to the changes in the market in Europe."

Although Thomson won the battle to acquire Grundig, it faces stern competition from Chinese electronics company TCL, which pulled off a similar stunt in 2003 when it acquired French television manufacturers Thomson.

But Beko claims Thomson lost some of its shine during those troubled times, whereas Grundig has emerged with its reputation unscathed, recently trebling its market share in Germany to eight percent.

Beko is hoping for similar growth in other markets from 2006, when it puts the television with a German past and a Turkish future back on the world stage.

-- CNN's Jim Boulden contributed to this report.

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