Leading electronics company may become sole supplier for FATİH-like project

Next & NextStar, a prominent electronics company that enjoys a leading position in the satellite systems market, has engaged in serious talks with a country to supply tablet devices as part of a government-initiated project to improve the use of technology in education, almost identical to Turkey's Movement to Increase Opportunities and Technology (FATİH), said Suat Yuksel, the vice chairman of Next & NextStar.

Yuksel noted that they have been in talks for some time with the officials of this country, which he declined to name due to the sensitivity of the issue, and that they are quite close to finalizing the deal. Yuksel said he would divulge the name of the country only after both sides affix their signatures to the agreement.

Launched in February 2012 and still in its pilot phase, FATİH envisages distributing tablets and smart boards to schools across Turkey to reduce disparities between the developed and the impoverished parts of Anatolia in terms leveling the playing field and receiving equal opportunities in education. The first of its kind in the world, the project is touted by many as a revolution in upgrading Turkey's education system and making it neck and neck with the developed world in transforming into an information society.

Speaking with Let's Talk Business last week, Yuksel said their first encounter with the officials of this aforementioned country was at a trade fair. “They were interested in our tablets exhibited at our stall, analyzed them, received a detailed presentation about the technical specifications, etc. and wanted to see our production facilities here. We have continued with mutual communications since then, and the process is about to be wrapped up with a happy ending. We are the only company that they are in talks with,” he said.

Tablet computers are a new member of Next & NextStar's product lineup. Next & NextStar currently has seven different models of tablets, all produced on an Original Equipment Manufacturer (OEM) basis, and the company will kick off the production of its own gadgets in its Sultanbeyli facility in a few months' time.

The company manufactures a wide array of electronic devices from LED TVs, navigators and satellite receivers to security systems and cameras. “We are starting to produce tablets here as well. Tablets are actually our most immediate target at present,” said Yuksel.

The main criteria for the tablets will be their compatibility with the minimum technical specifications required by the country which the company is in talks with. Yuksel said this will not be the only touchstone, though. The devices will also be suitable for individual needs for daily use, and they will also possess the conditions that the Turkish government has set for the eligibility of the actual FATİH project.

“I personally think that no single company in Turkey will be able to supply the devices for FATİH alone because no single company has the capacity for this. So there will be a number of providers that will be able to grab a slice of this pie, and we will be ready with our production capabilities,” said Yuksel. For the FATİH project to become fully operative, around 1.5 million devices will be needed and the government is prepared to spend around $8 billion for procurement and other distribution expenses.

Yuksel was enthusiastic while talking about the opportunities ahead of Next & NextStar in the tablet field. Sales of tablet computers have been enjoying a recent boom due to their mobility and rising quality, to the detriment of other types of computers, especially desktops. “

We have been late to the tablet business,” Yuksel confessed, asserting, however, that their ambition is not devoid of caution: “We are new to this business. Any problem, however small, may ruin our investment if we take steps without examining all the conditions in full detail and calculating every possibility. If we want to have a sustainable presence in this business, we have to take every step carefully.”

The company, however, aims to play for high stakes. Their devices will not be lacking in quality or durability for the sake of increasing sales through more affordable prices. The company will try its best to reach out to a large audience by sacrificing its profits. “

Our rivals are Apple and Samsung. We are not going to compete with the low-end, cheap gizmos in the market; our gadgets will be only incrementally less that the quality offered by the top-drawer brands,” Yuksel highlighted. He doesn't think that attaining the level of quality offered by such colossal global giants is a preposterous aim. “We hold them up as examples since this always propels us to grow further.” He cites the results of one of the most recent benchmark tests to prove the quality of its tablets. Its 10.1 inch device was listed among the top 10 devices in terms of performance, and all the better gadgets above included quad-core chips.

The company's revenues were around $100 million in 2012. Aspiring to hit big sales figures with its tablet devices, it has already set a growth target of 50 percent for this year.

A success story

Next & NextStar blossomed from a small store, Yuksel Elektronik, in İstanbul's KarakOy neighborhood in Beyoglu. In the early days, KarakOy was abuzz with audiocassette and cassette player sellers, but it later evolved into a satellite dish market hub for İstanbul. Yuksel Elektronik was one of the hundreds of small shops there selling a variety of electrical equipment and antennas along with a limited number of electronics products. According to Yuksel, what differentiated the company from the others was their commitment to always keeping in close contact with their customers.

Yuksel narrated during our interview the main cornerstones on the path of growth from a small store to a nationwide market leader. Specializing only in receivers was the first strategic turning point for the company in achieving increasing growth rates. Initially, the Yuksel brothers were selling electrical equipment and electronic devices along with antennas.

But with the launch of a second TV station in Turkey in the late '80s, the demand for antennas jumped all of a sudden. Yuksel was in heated discussions with his elder brother, “of course in a respectful manner,” to focus only on antenna sales and get rid of the others. “The supply process for the other goods was very hard.

For instance, an order sometimes included a hundred different pieces, and if we failed to find just one item in the list, the buyer would cancel the entire order. But antennas were easy. A customer would ask for three antennas and a hub, for instance, and I was able to deliver it in seconds with the goods that were available in the store.”

Besides, the profit margins for the other goods were not satisfactory and were so volatile that it was difficult to keep track of them very well. Eventually, the boom in demand for antennas with the launch of the first private channels made it obvious that the Yuksel brothers should focus all their attention on antenna sales.

Another breaking point was when they started importing antenna systems directly from overseas. “We realized, once we commenced imports, that there were enormous amounts of money in this business. For instance, we were selling a low-noise block downconverter (LNB) for $80 before we started importing them directly.

Our purchase price from domestic markets was $78. After purchasing them from outside markets at lower prices, we immediately brought down the average price of LNBs to $20.” This move, despite being to end-users' advantage, drew ire from the established players in the market, but the Yuksel brothers simply brushed off the reactions and went on doing what they believed was right.

Through their newly established trade channels, products started to flow in from mainly Iraqi and Iranian markets at reasonable prices. They were importing various brands of LNBs like Gardner and Benjamin and distributing them to domestic market wholesale. Soon, they had contacts from third countries and started exporting products in significant quantities as well. “We were raking in higher revenues from exports than from sales in the domestic market. We were chiefly working like a marketing company in those days,” said Yuksel.

The birth of a trademark

But the Yuksel brothers were still missing a brand of their own, and this was constantly creating problems for them. “As we grew stronger and bigger, the companies that were doing business with us started to hang back. Our rapid growth was worrying them because we were turning into a strong rival for them,” Yuksel averred.

Thus they had to cope with the envy of these companies, too. Their procurers started to employ methods such as cutting out the Yuksel brothers and reaching out directly to their customers by offering them much better prices or delaying the delivery of orders to Yuksel Elektronik. These dishonest approaches by some companies forced the Yuksel brothers to create their own brand.

The first trademark they obtained was Nextway, but it was later changed to Next since the latter was easier to pronounce. They had this name registered in 1995. Nonetheless, it didn't take very long for imitations of the company's trademark to pop up, and thus the company started to register hundreds of trademarks that include the word “next” in it. Yuksel noted that all these different brand names were registered in more than 100 countries.

He says that evolving into a brand opened up a lot of doors that were previously not there for the company. “We had our own network, and the companies which were providing us with goods before became our customers.

Customer is the boss

Yuksel underlined that the company's sales-oriented approach was the main contributing factor for its leading position in the sector. Zealously employing this approach, the store soon became a center for antennas in the bustling KarakOy market, he stated. “

Every day, three or four truckloads of antennas were coming in. Our store was very small and didn't have any storage room so trucks were unloading the items right onto the street and we were delivering them all to our customers on the same day without needing to store them in a warehouse,” said Yuksel.

Next & NextStar commenced production of electronics six years ago. “We attach great importance to production, especially since we have seen everything in this sector. Knowing what is good and what is bad, we are now producing quality devices with the best machinery,” said Yuksel.

As a technology company, Next & NextStar is also aware of relying on its own resources to develop software, the essence of machines. It has R&D offices in Turkey, South Korea and China. Yuksel explained the presence of R&D labs in these two foreign countries by underlining the necessity of being near to the producers of microprocessors for the company's products.

The company procures microprocessors and some basic components from large conglomerates in the Far East, which is similar to the practices of large conglomerates around the world. The technical features of its devices, their design, specifications, the replaceable parts in devices and the software are either determined or improved by Next & NextStar. Once all the details of a device are determined, production kicks off and the mechanical arms of high-tech machines start churning them out.

Yuksel becomes particularly enthusiastic when talking about the company's production facilities. He boasted of the superiority of their machinery, stressing that they pay the utmost attention to ensure the latest equipment and methods in manufacturing. But he is careful not to attribute their success to these alone. “

We are strong in production, and our R&D is robust, but our success is primarily due to our good communication with the people, our solid relations with the dealers and customers,” he noted. “You sell a device to a customer, and if he is not satisfied with it, you lose him or her. If they are happy with your product, they voluntarily promote it to their friends. So the best method of advertisement is through customers,” he added.

Its star shone more with ‘Kurtlar Vadisi'

Next & NextStar Vice Chairman Suat Yuksel highlighted customer satisfaction as the way to build up a positive brand image, but Next & NextStar has not shied away from running commercials in media outlets. It was also the primary sponsor of a number of heavily watched soap operas. The sponsorship of “Kurtlar Vadisi” (Valley of the Wolves) was a noteworthy example of the company's policy of reaching out to masses of end-users. “

Kurtlar Vadisi” is a controversial TV series that narrated and unveiled the secret shady relations and mechanism of the Turkish Gladio through fictional characters. Next & NextStar was the primary promoter of the series for six years, and this brand was ingrained in the minds of the ardent followers of “Kurtlar Vadisi,” which, in the end, resulted in its nationwide popularity.

The company was already the market leader in the satellite receiver segment by the time the sponsorship deal started, but nonetheless it earned the company coast-to-coast recognition, said Yuksel. “I remember a day when one of its episodes was airing at the same time as a do-or-die international match between Turkey and Greece in which the winner would progress on to the European championship. The rating of the series was higher than even the match. It was a terrific phenomenon; half of the entire population was watching it.”

Yuksel said that brand recognition was achieved with “Kurtlar Vadisi,” but this sponsorship was not effective in terms of advertising its products. Thus, they changed their advertising policy. Yuksel also added that they usually prefer such programs that are mostly followed by men, since they are normally the ones who make the final decision in purchasing satellite receivers.

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