Italy: Business Environment at a Glance - Essay Example

Executive Summary This presents an insight into the Italian economy, its legal, technological and political basis. And presents a review of relationship between Australian and the Italian counterparts at the higher level which are likely to be facilitative in allowing the business relationships to occur between the two countries. 1.0 The company The company under the analysis is Bio Concepts Pty Ltd. Bio Concepts is an Australian owned company which for last twenty years has been formulating high quality Practitioner Only products. The product categories that it manufactures and formulates and specializes include Natural Health Care Media, Nutritional supplements, Practitioner Products, Sports Foods & Supplements, Training & Education, Vitamin & Mineral Products. Its popular brand name under which it sells the product is Dr Vera’s Pure Innovation, Dr Vera’s Formulation, Orthoplex, and Nordic Naturals. The current export markets that Bio Concept currently serves include New Zealand and Singapore. 2.0 Political Environment in Italy The constitution of Italy was adopted in 1947, following a referendum on 2 June 1946 that abolished the Italian monarchy and established Italy as a parliamentary republic. The constitution took effect January 1, 1948. The 1948 constitution created the position of President to fulfil the ceremonial roles of the Italian monarchy. The country is divided into regions, provinces and municipalities. The are 20 regions, which are divided into 95 provinces.  For quite a long time Australia and Italy has good relations with each other which are underpinned by strong community ties which has led to the development of strong trade and investment and cultural links amongst the two countries. Many bilateral agreements have been concluded between Australia and Italy covering many areas such as culture, double taxation, air services, economic and commercial cooperation, reciprocal social security and health care benefits, and film co-production. Many memorandums of understanding (MoUS) have been signed in areas such as science and technology cooperation, defense materiel, defense industry, motor vehicle safety certification, game meat exports and trade cooperation. The relations between the two countries can be proved by the number of high level visits made by the country representatives. Foreign Minister Alexander Downer visited Rome for bilateral meetings with Foreign Minister Massimo D’Alema, the Minister for European Policies and International Trade, Emma Bonino, and the Minister for the Interior Giuliano Amato.  An Australian Parliamentary Delegation headed by President of the Senate, Senator the Hon Paul Calvert, visited in 2005, and met with the Italian Presiding officers. The Speaker of the House of Representatives, Neil Andrew, met his Italian counterpart Pierferdinando Casini in Rome during the summer of 2003. The Prime Minister, John Howard, visited Italy in July 2002, meeting then President Ciampi and then Prime Minister Berlusconi. Other recent high level visits include: Minister for the Arts and Sport, Senator Kemp, for the Torino 2006 Winter Olympics (February 2006), Attorney General Phillip Ruddock for the Paralympics in Torino (March 2006). State Premiers and a range of Federal Cabinet ministers visit Italy regularly.  On the Italian side, the Deputy Foreign Minister for Italians Abroad, Senator Danieli, visited Australia in October/November 2006 to meet with Italian communities in major capital cities. High level visits from Italy include then Foreign Minister Dini (February 2001); then Undersecretary of State for Foreign Affairs, Margherita Boniver (December 2002). In 2003 an Italian Parliamentary delegation visited Australia at the invitation of the Australian Parliament. In 2004, Mr Roberto Formigoni, President of the Lombardy region, visited Australia accompanied by a large business delegation. In late 2004 Mr Claudio Martini, President of the Tuscan Region, visited Western Australia as part of a trade mission which included a major promotion at the Perth Royal Show. In January 2005, a delegation of the Italian Senate led by the President of the Constitutional Affairs Committee, Senator Andrea Pastore, visited Australia to research voting by Italians abroad. In November 2005, an Australian Business in Europe (ABIE) trade mission visited Melbourne, Sydney and Brisbane. 3.0 Legal environment Italys legal and political system doesnt have a sound tradition of understanding technology, science and innovation. Of course there were, and there are, leading personalities in the world of science and technology. And there are Italian companies, large and small, with strong technological advancement in their specific fields. But in the world of politics and law, and in a large part of the academic establishment, there never was an osmosis between the development of science and technology and the perception of government, legislation and society. Old-fashioned ideas, dating back to Italys pre-industrial culture, still influence the thinking of people in government and parliament – as well as schools, the intellectual élite and a large part of the citizenship. This environment has favored the lobbying pressures by major economic forces that have been able to influence legislation (and, to some extent, public opinion) in favor of their private interests, at the expense of civil rights and freedom of expression. (Monti, A. 2000) 4.0 Socio cultural environment Many Australians live in Italy’s sub communities; both countries have cultural agreements since the starting of the year 1975. The agreement covers language teaching, scholarships, institutional exchanges, academic links, performing and visual arts, literature and publishing, cinema, radio and television, sport and tourism and youth exchanges. country Individualism/ collectivism Power Distance Uncertainty Avoidance Quantity Of life Time orientation Australia Individual Small Low Strong Short term Italy Individual Small High Strong Short term The Geert Hofstede’s analysis shows the high level of individuality Australians hold dear. This is reinforced in their daily lives and must be considered when traveling and doing business in the Country. Privacy is considered the norm and attempts at personal ingratiation may meet with rebuff. Uncertainty avoidance is relatively low with a family centered culture and a stable society. Power Distance (PDI) is relatively low. This is indicative of a greater equality between societal levels, including government, organizations, and even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment. In Italy great emphasis is placed on individualism, masculinity, and uncertainty avoidance, while power distance is ranked considerately lower than the others. Italy’s lower power distance score shows that Italy is working to de-emphasize the differences between its citizen’s power and wealth. (Hofstede, G). Similarities in both the cultures represent that they are more likely to do well in business relationships, but, they differ on uncertainty avoidance then business contracts may take time to enter into. Australians are low, but Italians high on this dimension. Thus an Italian might take time in entering a contract and would want to analyze each and every step. 5.0 Economic Environment The Italian economy has changed dramatically since the end of World War II. From an agriculturally based economy, Italy has developed into an industrial state ranked as the worlds seventh largest economy. Natural gas is the most important resource. Most raw materials needed for manufacturing and more than 80 per cent of the countrys energy sources are imported. Italys economic strength is in the processing and manufacturing of goods, primarily in small and medium-sized enterprises. The majority of these enterprises are family-owned and are focused on the domestic market. Italys major industries are tourism, precision machinery manufacturing, textiles, chemicals, pharmaceuticals, food processing, motor vehicles, electrical goods, clothing and footwear. Around half of Italys trade is with the EU, particularly Germany, France, the UK, Spain and the Netherlands. Addressing Italys budget deficit and public debt has been a priority for the new Prodi government, resulting in a significant commitment in its first Budget to meet the 3 per cent of GDP Maastricht target under the EU Growth and Stability Pact in 2007, having exceeded the ceiling in the four previous years. Managing the size of the public debt, however, seems a more intractable problem and the debt to GDP ratio remains stubbornly over 100 per cent against an EU target of 60 per cent. Italian GDP growth averaged 0.6 per cent a year in the period 2001-05, but recorded 2 per cent in 2006, a figure that may be repeated in 2007. Inflation is expected to remain steady at around 2 per cent in 2007. Following a fall in 2005, manufacturing production recovered in 2006, especially in those traditional sectors that have been the most exposed to competition from emerging economies e.g. textiles and clothing. Foreign Direct Investment in Italy remains well below the levels achieved by its benchmark competitors and likewise Italian FDI overseas is limited in the key markets of Asia, although is healthier in the Balkans and Eastern Europe generally. Unemployment stood at 7 per cent at the end of 2006, a figure that hides a gulf between the near full-employment enjoyed in the north and double-digit rates in the south. The economic environment seems good and facilitative for the foreign goods and thus, for Bio Concepts offers many opportunities. 6.0 Technological environment Since technology has not much to do with the exports therefore, this is not of much concern for Bio Concept. 7.0 SWOT Strengths The product of Bio Concept itself is the strength and a strong brand name. The strong expertise and the experienced management the company possess. Italy has stable in fact good relations with Australia as evident from the fact that many high level visits have been taking place between the two countries Weakness It has to expand the production capacity Old-fashioned ideas, dating back to Italys pre-industrial culture, still influence the thinking of people in government and parliament – as well as schools, the intellectual élite and a large part of the citizenship; some of the systems are thus reflective of status quo and hence bureaucracy still prevails in many areas Opportunities Opportunities exist in the areas of hair care products, pre- and after-shave products, perfumes, eau de perfume, eau de toilette, and eau de cologne, lip care products, moisturizers and cleansers as well as personal hygiene (soaps, deodorants, etc) Since Italy imports virtually all its raw materials, it is possible to supply Italian manufacturers with ingredients such as aloe Vera, lavender, and essential oils. There are also good prospects for products that distinguish themselves from what is already available on the Italian market, e.g. tea-tree and eucalyptus-based products. However, the packaging must be of good quality and stylish design. Threats More foreign competition may come up Conclusion I think Bio Concepts should move into the Italian market as the market is still growing but on the other hand it is important that market development should focus on promoting well; using culture specific dimensions when promoting the products and services. Since Italy has a developed market which is not much integrated, hence raw material supplying can also open new avenues for future forward integration as well. References http://www.bioconcepts.com.au/ http://www.cyborlink.com/besite/italy.htm http://www.cyborlink.com/besite/australia.htm Monti, A (2000) The network society as seen from Italy http://www.doir.wa.gov.au/exportandtrade/66D8FF491A984927897705F553D19EFD.asp Italy: Business environment at a glance(2002) Country Views Wire Italy January Merlo, A., Bargaining over Governments in a Stochastic Environment, Journal of Political Economy 105 (1997), 101-131 Read More