Influence of National Culture on the Conduct of Different Business Practices - Italy - Case Study Example

Influence of national culture on the conduct of different business practices. Based on the Index of Economic Freedom (47),Italy is ranked the 87th economy in the world as far as freedom to do business is concerned. The Italian economy has been perennially burdened by bureaucracy, political interference, a rigid workforce market, corruption, high tax levels, a bogus judicial system, an inhibitive regulatory framework plus an unfairly high cost of doing business (Burgan & Robert 78). Nevertheless, Italy has an interesting market endowed with many lucrative business opportunities. These range from fields like life sciences, communication and information technologies, renewable energies, consumer goods of high quality, high profile design and engineering output just to mention a few. In fact, United States companies have high interest in the Italian market but also exercise a high degree of concern and skepticism since it is quite difficult for them to understand how the country’s economy operates. Italian culture, their business environment together with the legal and regulatory requirements of the country are undoubtedly unique from those of their American partners. With that, it is a challenge for any foreign company to chart out proper strategies with which to realize its business goals in Italy (Index of Economic Freedom, 2011). A deep understanding of some of these cultural characteristics in the Italian society aids companies achieve more effective and successful interaction with the Italian colleagues and also helps to tame some of the setbacks that affect foreign companies when transacting business in Italy (Burgan, Michael& Robert 111). Looking at the country’s market overview, Italy ranks number eight of world’s largest economies with an annual GDP that oscillates around USD 2.25 trillion. This shows prospects of investment ventures in the land that has a vast population of around 60.85 million. The country also rates number 17 of the top destinations of U.S exports having absorbed goods worth USD 14.1 billion in 2010. Cumulative direct investment from the U.S to Italy in 2010 was valued at USD 29 billion ranking number twelve in Europe. The major investment sectors by people and entities from the United States in Italy mainly include computer services, energy, manufacturing as well as industrial relationships of high significance in automotive and aerospace sciences. A prudent investor from the U.S should consider dealing mainly in these sectors, in Italy (Burgan & Robert 88). Not everywhere in Italy can good financial results be realized. Industrial activities are mainly concentrated in a swath in the north running from the west in Turin across Milan to the east in Venice. This area that is said to be among the most prosperous and industrialized European zones accounts for half of Italy’s national income. The southern region of Mezzogiomo, in contrast, is Italy’s least developed and, therefore, unwise to invest in (Burgan & Robert 68). Italy is part of the founder members of the European Union and, therefore, their national currency is the Euro. The country’s inflation rate is relatively stable compared to that of the United States. In January 2014, for instance, it was valued at a low of 0.7% while that of the U.S comfortably goes above 1% too often. A government of technocrats has now been constituted and is embarking on formulating strategies that can revive the country’s stagnating economy. These new policies and measures may give rise to investment opportunities if they are effected. In January this year (2014), Italian unemployment rate rose to a record high of around12.9 slightly higher than 12.7 percent recorded in the month of December 2013. This rate is the highest registered since the study was started in 1977 (Italy business forecast report, 43). The number of people without jobs at 3.29 million indicated an increase of about 1.9 percent from the month immediately before and an increase of roughly 8.6 percent from the previous year. Youth (aged 15-24) unemployment rate is at 42.4 percent up from 41.7 percent compared to the previous month. An advantage from this is that a U.S investor in Italy is bound to find cheap labor which serves to increase net income. Italy, in conformity with EU law, has established experienced firms in its locality to offer support services to investors of U.S. origin wishing to do business in Italy. These services offer support to a wide range of business aspects ranging from finance and accounting, consultation, forwarding among others. This is, however, limited to firms in the list of U.S. Commercial service available in U.S and Italy website (Burgan & Robert 78). Italy’s Hotel and Food Service Industry is very lucrative and growing. In fact, latest analysis rated it as second globally after that of the United States. Due to this, the country manages to attract around 92 million tourists annually which accounts for about 25% of the country’s national income. It is, however, too much diversified and fragmented by having too many tiny establishments ranging from youth hotels, bed and breakfast, camping’s as well as rural tourism and resorts for foreign investors . (Burgan & Robert 68). Any U.S exporter to Italy should primarily consider exporting fish and other seafood products, livestock and meats, horticultural products, grains and feeds as well as forestry products Since they fetch the highest returns in the US-Italy business. As always, Italy is the largest motorcycle and moped market in Europe with new registrations of around 400,000 recorded in 2010. In the same year, around 307,000 vehicles were bought. According to ACEM data though, these registrations declined in 2011 to almost 340,000 powered bi-wheelers and to around 253000 vehicles and 75000 mopeds. Italy’s infrastructure is modern and efficient although it is rated poor compared to other European nations of its size. It is well connected with an extensive system of national roads, railways, expressways, seaports and airports. Alitalia, its major national carrier has around 165 planes and transports around 25 million passengers every year besides interconnecting Italy with 60 other nations. The nation has 135 airports overall. Its seaports used to be a key factor in their transport system but was outdated by emergence of better transport means though they still play a significant role in transportation. Most goods are transported by road and, for that matter, the Italian government has laid mechanisms for constant upgrading of its road networks. There are about 4014 miles of expressways and about 408,815 miles of paved roads that excellently connect Italy to the rest of Europe (Burgan & Robert 68). Shift to other examples of national culture that influence business finance in Italy although too indirectly. Consider, for example, of the aspect of relationships. In Italy, relationships are highly valued. Unlike in the US, Acts of relationship building such as time consuming business parties that initially appear social than work-related are not taken as a waste of time and money (Burgan & Robert 78). In America, most businesspersons live individual lives only thinking of self and family (if any). In Italy, a person doing business has to recognize that he should co-exist well with them lest he loses customers, key employees and worthy business partners. Loss of such people obviously affects a business financially since they all result to losses (Burgan, Michael& Robert 2005). Loss of customers reduces revenues while loss of key persons increases recruitment and training costs. Remember these employees are lost to poaching rivals which give competitors competitive edge at the victim’s expense (Burgan & Robert 67). Italy is a family-oriented society. This brings forth the consequence that employees tend to be immobile and are hence reluctant to leave their areas of residence to go work from away. Of course, the problem sets in while attempting to restructure the company’s organization by relocating employees from an office in one region to another. It is important to remember that Italian labor laws vary from those operating in the United States. Collision with the harsh labor laws may attract lawsuits which are expensive to defend and injurious to a company’s finances (Doing business in Italy 27). Of equal importance is the art of communication. The way Americans communicate a little too different from the Italian culture. Italians are fond of using rhetoric while communicating, raising voices in conversations and in many cases they appear theatrical. Contradictions often emerge during interactions among colleagues. Italy, however, gets credit in that, contrary to the US, compliments given to a colleague are more accepted by others. Italians often belittle people they view as being below them in the pecking order and will tend to form peer groups based on class and address their issues in the various classes. Worse still, being informal for them comes across as impoliteness. Proper communication is key to the finance/accounts department of any firm. Accuracy and relatedness in financial reports are partially the results of proper information. That said a foreign company wishing to do business in Italy has to get psychologically prepared for this to thrive ((Burgan & Robert 88). The mode of communication in meetings also differs between American and Italian Companies. Italians are a little bit lenient with regards to punctuality may put up with a delay of about 15 minutes after the planned start time. In addition, their agendas are very flexible when they exist. When the meeting is on, all members will contribute in the debate but do so through interrupting others, they hold side conversations, come in and leave the venue when the meeting is in session or make and pick phone calls without excusing themselves (Burgan & Robert 98). . A great ingredient to this could be because the decisions reached in these meeting rooms are often overruled by those made by the owner(s) or the key decision which relegates these meetings to the level of just playing the informative function. The absolute opposite of this is what happens in the U.S. Such practices are wasteful financially since they come at a cost which is seen is not worthy. Any business person or firm planning to do business in the United States should hence take caution on this and only spend on what is relevant (Kenna & Sondra 56). Italians mostly prefer to engage in business with persons they directly know or are acquainted with. Therefore, one has got to use his networking skills to establish some common ground. In Italy, a book is judged by its cover. One has got to deal in person as much as possible. Of negative financial consequence also is that in Italy, companies rarely develop business plans or even marketing plans. For SMEs, it is uncommon to find managers having P&L responsibilities or even operating with clear targets in mind. It’s difficult to comprehend how an organization can develop and maintain a viable venture without a sound plan in place for Italians, this is normal (Burgan & Robert 78). Although still behind the US, Italy has realized remarkable development as far as e-commerce is concerned. Their Information and Communication Technology (ICT) field is undersized and continues to suffer from long-lasting structural problems. Even then, they are making notable improvements with the gap narrowing day by day. Business analysts project even better improvements in the near future, with Business-to-Business, Business-to Consumer and Consumer-to-Consumer transactions all registering solid growth (Burgan & Robert 58). Internet is expected to penetrate the economy to the tune of 36 million citizens most of whom will be using the financial elements of the internet either as buyers, payers or gathering information on the products prior to purchasing. This penetration is two-thirds for enterprises while the other third for households implying that the internet is primarily for business purposes (Italy business forecast report, 22). Italy is also considerate of security and payment technologies though still outclassed by the United States. Monetary security remains a major concern for Italian companies. Nonetheless, PayPal, credit cards, prepaid cards and bank transfer payments are playing significant roles to curb the phenomenon. Anyone aspiring to do business in Italy has got to take caution not to fall in the traps of conmen. Popularity is, however, highly building on prepaid cards issued by major banking institutions. They are being used more frequently for online transactions especially by the youths who have generally low income levels (Kenna & Sondra 66). Like any other nation, Italy has got its own import tariffs. These are, however, relaxed for goods originating in the United States. Virtually all goods from the US are allowed entry into Italy without an import license or restrictions on the quantity. Some agricultural items coming from the US, however, are still subject to Italian import regulations (Italy business forecast report, 37). Monitoring measures for certain sensitive items like dual-use items are applicable for goods from the United States. The Italian importer is responsible for the import license that is issued by the Italian Ministry of Economic Development. It is downloadable from the ministry’s website (Burgan & Robert 78). Products under control such as arms and ammunitions are usually more regulated. These licenses lack transferability though they may more than one shipment provided they fall within the entire amount authorized. While these licenses are rapidly given to goods originating from the US, it is worth noting that delays usually occur due to improper documentation and information. (Burgan & Robert 48). In conclusion, there is much that ought to be known about the Italian economy that I even find it difficult to analyze everything at this point. While there are lucrative ventures in the country, one should tread carefully with regards to all fields relating to business (i.e., finance/accounting, marketing, corporate governance, insurance, human resource among others) to ensure that their companies are everywhere healthy. This will cushion investors from financial shocks in a foreign country and even in a stronger currency (Euro), money that could have been better utilized from home in the United States (Burgan & Robert 58). Work cited The Index of Economic Freedom. Washington, D.C: Heritage Foundation, 2011. Print. Doing Business in Italy. New York: Price Waterhouse Center for Transnational Taxation, 2008. Print Burgan Michael, and Robert Asher. Italian Immigrants. New York: Facts on File, 2005. Print Kenna Peggy, and Sondra Lacy. Business Italy: A Practical Guide to Understanding Italian Business Culture. Lincolnwood, Ill: Passport Books, 1995. Print Italy Business Forecast Report. London: Business Monitor International, n.d. Internet resource Read More