Mustafa Latif Topbas is a Turkish entrepreneur and founder of BiM. BiM is a discount convenience store, similar to CVS or a smaller WalMart. It first opened its doors in 1995 with 21 stores. Its main principle is to offer consumers basic food items and consumer goods at the best prices and highest quality. BİM, pioneer of the hard-discount model in Turkey, limits its product portfolio to approximately 600 items and aims at having diverse private label products. BİM, acting on the vision to be an international company, continues to explore new potential market opportunities in the other countries. BİM maintains its Moroccan operations by opening 59 new stores in 2014 and reached 223 stores in total. In 2014, BİM opened 46 new stores and reached 81 stores in a short time in Egypt which is the second foreign operation of the company. Topbas is the owner and CEO of BiM. Rarely making public appearances, Topbas is well connected behind the scenes. He has many ties to the billionaire Ulker family; his daughter is married to Ahsen Ozokur’s son Ali Ulker, and he has close ties to with President Recep Tayyip Erdogan. This shows the economic divide in Turkey, as well as the corruption and entanglement of the government in business.
The types of products BiM sells is very specific. It only sells 600 items in its stores, as to not burden their customers with extra costs derived from advertising and promotions. Instead, they offer their own private label products which live up to the same quality as the leading branded products. Their ultimate goal is to offer their customers their private label products at the best prices and quality that can compete with market leaders while we continue to stock only a limited number of branded products. The BiM website and other websites do not say the price for any of the goods BiM sells, but the average cost of a bunch of bananas in Turkey is 1.45 Turkish Lira. One can assume that from BiM’s “discounting pride,” the average cost of a bunch of bananas at BiM would be close to 1.15 Turkish Lira.
BiM’s fixed costs include the rent for all of the stores, repairs for cash registers or refrigerators, property taxes, and some of the salaries of the workers who work at the stores
BiM’s variable costs include the cost of produce, cost of meats, labor (depending on the number of workers).
The costs for variable and fixed costs are lower for Turkey in the past. Due to the reasons listed in #6 as well as foreign investment, Turkey’s economy is peaking. So, costs are low because the government is subsidizing the manufacturing and farming industries, the industries that benefit BiM the most.
BiM relies largely on the agricultural and manufacturing markets to supply BiM with produce and goods. Agriculture is the largest industry in Turkey and as per the figures of 2015, Turkey is the world’s biggest producer of hazelnuts, figs, apricots and raisins, the 4th biggest producer of fresh vegetables and grapes, the 6th biggest producer of tobacco, the 8th biggest producer of wheat, and the 10th biggest producer of cotton. However, the rapid industrialization of Turkey after 1930’s and government policies caused agriculture’s share to decline in overall income, causing the supply curve of agriculture to go to the left. The share of the agricultural sector in the GNP was almost 50% in 1950, 25% in 1980, 15.3% in 1990, 11% in 2005, 7.4% in 2014. This caused the fall of economic standards of the farmers and contributed to emigration from rural to urban areas. But in 1990’s, the State encouraged the farmers to adopt modern techniques with the mechanization and has provided infrastructural conveniences for irrigation and cultivation contributing to the development of the agricultural sector. Thus the Turkish government provided the agricultural industry with subsidies so they could continue to produce at a lower cost. This shifted the supply curve for the agricultural industry back to the right. BiM was founded in 1995, which was after the 1990 beginning of government subsidies in the agricultural industry, so the price and supply of agricultural goods have been steady for BiM. These steady and predictable prices are why BiM can sell its produce at a low cost. The future of the agricultural industry in Turkey looks bright. According to projections developed by PwC using its long-term economic growth models, Turkey’s GDP per capita (in terms of PPP, constant in 2009 USD) will more than double by 2041 compared to its current level and exceed USD35,000. The country’s economy will narrow the income gap between it and developed countries over the next 30 years. The report also focuses on Turkey’s potential centres of excellence in the coming decades. Turkey’s economic performance has been strong over the last 15 years. Also, Turkey’s plentiful natural resources create an opportunity for its food processing industries to grow and expand into new export markets. Due to this, people in Turkey have more money in their pockets because of the economic prosperity. They have more money so they will be willing to spend more money on goods, so suppliers will be incentivized to supply more, continuing the demand curve to the right. This is very beneficial for a company like BiM for the current and future economic market of Turkey. The picture below shows the BiM stock has grown rapidly and steadily over the past decade
Even if the factories and suppliers that supply BiM with its goods are producing at the most profitable output (where marginal revenue equals marginal cost), low market prices can cause the producer’s revenue to be less than the cost. BiM should keep its factories open even if it’s losing revenue if the total revenue from the goods BiM’s factory produces is greater than the cost of keeping the factories open. For example, if the price of BiM brand bottled water drops from 1 Lira to .75 Lira and the factory still produces at the profit-maximizing level of 300 bottles per hour, the total revenue can drop 25%. However, if the operating cost of the factory is still low, BiM should continue to sell bottled water. It does not seem that BiM will be facing the threat of shutdown any time soon. As stated above, the agricultural and manufacturing markets in Turkey are booming, so operating and production costs will be staying low. This allows BiM to maximize their profit. However, BiM prides itself on being a discount store. If the price of goods changes even rise slightly, BiM’s products will cost more to manufacture. But, they cannot raise their prices in stores that much because people will no longer buy goods that are not discounted. So, BiM’s goods are elastic and BiM is in danger of shutdown if prices rise drastically. For the near future, BiM looks like it has a great chance of thriving in the Turkish market.