Foreign Direct Investment: ItalyWritten by: Spencer Buche, Devin Jaques, Michael Roberts and Jacob Chavez

I. CULTURAL ANALYSIS

IntroductionItaly is part of the Italian republic and spans 116,347 square miles along the

Mediterranean Sea. It has a temperate seasonal climate that inhabits 61 million people that

largely practice Roman Catholicism. Italy is the 4th most populated member state of the EU. Italy

can be known as the boot. The renaissance was a turning point for Italy where they decided to

reinvest their interest into exploration, science, and humanism to jump into the modern era

("Religion").

Relevant HistoryFar after the renaissance where cultural factor was flamed into everyday Life there was a

new king coming. Kingdom of Italy was the result of nationalists and monarchists of Italy. They

established a United Kingdom that took over the whole boot of Italy. At the end of the WW1

Italy took a loss of 650,000 soldiers and civilians. The kingdom went into bankruptcy but Italy

still gained territories promised by the peace treaties. Fears of a communist takeover lead to the

first universal suffrage electoral in 1948. In 1949 Italy became a member of NATO. The plan

that helped boost Italy’s hurting economy was the Marshall plan. In 1957 Italy was a curtail

founding member of the then known as European Economic Community which would later

become the European Union in 1993. Bettino Craxi a non-Christian leader of Europe regained

control of Italy’s economy and boosted Italy into the 5th largest industrial nation. Entering into

the G7 group launched Italy’s debt passed 100% GDP. Following the recession of the 90’s Italy

was smashed by the great recession in the late 2000’s. 42 months of GDP recession flooded

Italy. 2013, a new government was formed along with new electoral laws by Matteo Renzi. Italy

being in such economic despair wanted to jump back on the export and import trade train

("Religion").

Geographical SettingLocated in southern Europe, Italy is surrounded 75% by the Mediterranean Sea. This

allows for ships to harbor right along the coast for easy transport and unloading. Planted in-

between the Eurasian plate and the African plate, Italy has constant seismic activity along with

14 volcanoes on the peninsula. Italy has a great warm and inviting climate that people flock to

from all over the world.

Social InstitutionsItaly has a power authority structure, meaning power is allocated hierarchical from the

top down. Family’s meet up and have home cooked meals. This means Italians have a strong

family structure and respect one another. Communication within Italian families is decentralized.

People interact and grow up alongside each other. Weddings are large and families are close

("Cultural Portfolios").

Religion and aesthetics

Most of Italy practices the catholic religion. God is real in Europe so don’t act otherwise.

When trading or investing in Europe you need manners and respect. Tight relationship among

families allows for little error in respect to be made.

LanguageLiving in Italy seems expensive at first glance, but if you are not in Rome then prices are

similar to the US. In the inner city people have money as usual ("Living in Italy"). The most

widely spoken language is Italian, in Italy. People have deep roots here. Cultural sensitivity in

Italy is high so a hint will be to act local. Along with the rest of southern Europe business people

are relationship oriented ("Business meeting etiquette").

Executive summaryAll in all, Italy has everything you could ever want. Mountains, volcanoes, vineyards.

Conveniently located on the Mediterranean Sea Italy is perfect for imports and exports. Boats

can easily port on the cost and load or unload goods. Also we are surrounded by many other

countries where we can get other materials. Agriculturally, Italy is advanced, we are used to

filling demand. 1/3 of the globe's wine production comes from Italy. Also 300 + types of cheese

are made on the peninsula. Most of the pasta comes from traditional family recipes. Italy is very

family oriented and respectful. Italy is the world capital for high fashion. Milan fashion week

brings in thousands of spectators and over 137 designers. Versace and Prada are hand made in

Italy. When you see Made in Italy, you perceive excellence and quality.

II. ECONOMIC ANALYSIS

Population

The total population of Italy is 60,612,497 (51% female, 49% male). In 2015, there were

553,490 live births and 593,284 deaths. During the year of 2016, the population is expected to

increase roughly 254,000 people; however, the number of deaths will outnumber live births. For

the last three years, the growth rate has remained at 0.42%, and is projected to stay at 0.42% for

the year of 2016. Nearly 66% of Italy’s people are between ages 15 and 64 years old, which

presents a large working population. About 14% are under the age of 15, and 20% are over the

age of 65 (“Italy Population”).

Economic statistics and activity

The GDP (gross domestic product) is 2141 Billion USD, and the GDP growth rate is

0.1%. The employment rate is 56.4%, which is fairly low. However, having so many

unemployed people creates great opportunity for growth. New businesses coming into Italy

would have plenty of people to hire that would be willing to work. Current wages are

approximately 2168 EUR per month. (“Italy Economic Indicators”). The average household

income per capita is $25,166 annually (“Italy”). Overall, Italy is a wealthy country. However,

inequality is a big issue: dating back to 1998, about 2.6 million families lived in poverty. This

statistic equals almost 12% of the total population (“Italy-Poverty and Wealth”). Currently, this

is still an issue, but by providing more jobs for those people could potentially help them.

Considering Italy’s minerals and resources, iron and steel may be the most important for

these industries bring in a lot of revenue for this country. Other metals include copper, lead, and

zinc. Italy is also known for producing industrial minerals including, cement, marble, feldspar,

lime, clay, and pumice. Carrara and Sienses marbles from various locations throughout Italy are

known around the globe for their natural qualities. Despite the country's many resources, Italy

relies on imports when it comes to fossil fuels. (AZoMining Editors)

Modes of transportation in Italy are much different than the United States. Trains are

common and cheap. Other modes of transportation include car, motorcycle, taxi, bus, and metro.

In the cities, motorcyclist can drive in restricted traffic areas and it is not uncommon for

motorcyclists to drive on footpaths (“Local Transport”).

There is a wide range of communication systems in Italy. There are numerous postal

services open Monday through Friday. Similar to the United States, internet is widely available.

There are internet cafes and various places that offer Wi-Fi. At hotels and airports, there are ports

available to access the internet. Interestingly, phone booths are still common in Italy and can be

found almost anywhere. (“Communications in Italy”)

Currently attracting little foreign direct investment when compared to neighboring

countries, Italy still is 10th within global investors. Italy has many opportunities to offer,

including, a strong workforce and a reform-minded government. There are many small and

medium-sized enterprises (SMEs) that are capable of adapting. (“Italy: Foreign Investment”)

Italy is the world’s 10th largest exporting country. A large amount of their exports

include machinery, chemical products, metals, transportation, and textiles. Falling into two of

these categories, packaged medicaments makes up 4.42% of Italy’s exports, and refined

petroleum makes up 3.97%. Italy is the 11th largest importing country in the world. However,

the amount of imports have decreased 2.6% from 2008 to 2013. Some of the major imports are,

mineral products, machinery, chemical products, metals, and transportation. Two major imports

are crude petroleum making up 9.7% of Italy’s imports, and petroleum gas making up for 5.76%.

(“Exports”)

All importing and exporting and exporting activities in Italy are regulated by EC

Regulations. There is a Common External Tariff (CET) that is meant for other countries. There

are some restrictions and regulations on products that may concern health and safety. The

Common Agricultural Policy (CAP) covers imports of food and other agricultural products that

are not from the EU. Many products are subject to quotas and customs duties, and may also need

certificate or license. The EU has requirements for product labeling and packaging that all

importers must follow (“Tariffs and Regulations”).

Developments in science and technology

The country of Italy is less advanced when it comes to technology than the United States;

however, it is a rapidly growing industry. Education is important to the people of Italy, therefore,

Italians are highly capable of learning the newest technologies. Italy has nearly 50 universities

which offer courses in both basic and applied sciences. In 2001, the country had many scientists

and engineers involved in research and development. This industry made almost $17 trillion of

GDP. Italy exported $20 billion of the Italy’s manufactured exports just in technology (“Italy”).

As mentioned before, technology is rapidly growing in Italy. Internet, cell phones, and

televisions are all accessible in Italy, but have not saturated the market as it has in the United

States (“Italian Technology Growth”).

Channels of distribution (macro analysis)

Retail stores are popular in Italy. There are large supermarket outlets, malls, and other

stores. Most of the retail stores consist of smaller shops, often family-owned. The working

conditions are suitable, and the environment is welcoming. Most people who own businesses are

likely to consider it as a carrier. However, there are some chains that are popular throughout

Italy, such as, Sanda, COOP, Esselunga, Sigma, and SPAR (“Italy”).

Media

Media is made readily available in Italy, and there are various platforms involved. First,

there are newspapers. In this particular country, the popularity of newspapers is low and has

stayed low for the past ten years. Next, there is radio. This is a common platform of media in

Italy. As of 2008, radio reached 73% percent of the population ages 11 and up. There are two

public stations that are very common, including RAI, Radio Uno, and Radio Due. Radio Uno is

meant for news and politics, while Radio Due is meant for music and entertainment. Third, there

is television. Most Italians have television and take advantage of the eight free channels that are

offered. Adaption to the online media has been slower than other countries. Only 61.3% of the

population, ages 11 to 74, have access to the internet. As far as digital media goes, the Italian

population has not shown a strong interest (“Media Landscapes”). The people in Italy have

plenty of access to internet, however, residents spend very little time surfing the web. Italians

tend to not let technology, like social media, play a large role in their life. They like to focus on

family and community. Italy makes up only 33% of the European online access.

III. MARKET AUDIT AND COMPETITIVE MARKET ANALYSIS

Introduction

When looking at Italy as a product and something to sell as a Direct Foreign Investment

the first thing that comes to mind is that it is a part of the EU. This is an advantage because it

allows trading throughout other EU countries almost seamlessly. The thing that separates Italy

and makes it a desirable place is the weather that averages in the high 60’s year round. Italy is

also a very desirable country because it has multiple cities that are large in size in reference to

population that allow businesses to prosper in multiple locations.

When looking at Italy as product and something to sell as a Direct Foreign Investment the

first thing that comes to mind is that it is a part of the EU. This is an advantage because it allows

trading throughout other EU countries almost seamlessly. The thing that separates Italy and

makes it a desirable place is the weather that averages in the high 60’s year round. Italy is also a

very desirable country because it has multiple cities that are large in size in reference to

population that allow businesses to prosper in multiple locations.

The advantage of Italy is that besides the fashion industry and exotic cars the market

place is very open. With that being said Italy is built around family businesses. So much of the

money from the investment would go towards expanding

The compatibility factor is that Italy belongs in the EU and that makes it easier to work

with other countries within the EU. With this it makes Italy easily accessible, and well as it being

on the Euro allows for trade to be easily made.

Italy is complex in the sense that even with Italy as a country as a whole the regions

within Italy can almost be seen as separate countries themselves. The food and even how the

Italian language spoken is different.

The one thing that has a shadow over Italy is that expensive and luxury items are almost

seen as the norm. Italy is known for expensive cars and high end clothing lines. This relates to

trying to sell Italy as a Foreign Investment because holding a high standard is important and a

large amount of capital may be needed. With all that being said, this also an aspect of Italy that is

a selling point for the country. Many people flock to Italy for the expensive luxury items that it

has to offer.

A few areas that investments would help out the most would the tourism industry as well

as the real estate and food industries throughout Italy. The northern part of the country is where

most of the investment would be used because this is where most of the tourism takes place. In

southern Italy it is much based on families and the businesses they operate have been in the

family for generations. Some of the funds may be used in Southern Italy for infrastructure

purposes.

The regions that make up Italy are broken up into 13 separate areas. These areas include

the island of Sicily, Tuscany, and many more. Italy is surrounded by the Mediterranean Sea,

which makes it a large sea community and many of the region are controlled by the economy

that surround the ocean. This makes Italy a desirable place to invest in.

Within these regions the forms of transportation include automobiles, trains, and many

people use scooters in larger cites. Air transportation is something that may also be used to get

from one region to another. Communication includes cell phones, as well as personal computer.

Italy has many things that makes it preferable. This includes history within almost every

city. They food is very desirable. The weather and the access to the water also make it very a

place that an investment is something that will have a return.

The shopping habits of the people of Italy are very expensive. Many people prefer

luxurious brands and even prefer expensive coffee. With this sense of luxury throughout Italy it

makes it a country that has room to grow in industries outside of fashion and automotive and

with investments that would be much more attainable.

IV. PRELIMINARY MARKETING PLAN

Introduction

The purpose of a preliminary marketing plan is to create a foundation on which we can

build future marketing plans, to effectively reach Italian markets in the future. With a population

of 61 million people, of which 68.8% of is urbanized, there is wide variety of people and values

to be considered. Growing sectors in Italian market-space include textiles, shoemaking,

transportation, agriculture and energy. (“Italy: Reaching the Consumer”)

SWOT Analysis

The strengths of Italy to a Foreign Direct Investor include: the high volume of small-

medium sized enterprises, (and their aptitude for adaptation,) as well as the country’s highly

qualified workforce and technical knowledge for high quality production. (“Italy: Foreign

Investment”)

Amongst the weaknesses of the country, these include: a market dominated by small-

medium sized businesses and relatively higher procedural and administrative costs. These

processes take about sixty-two days to complete, which is an additional weakness. Furthermore,

poor infrastructure in some regions, as well as corruption and organized crime, are also concerns.

(“Italy: Foreign Investment”)

Opportunities in Italy include new EU regulations and a reform-minded government.

New EU regulations and programs will allow for new demand, while a reform-minded

government might be open to further changing policies in support of Foreign Direct Investment.

In addition to these, one other opportunity lies within Italy as host to major trade and fashion

shows, making it a popular destination for tourists, entrepreneurs and international consumers as

a whole. (“Italy: Foreign Investment”)

Threats that face Italy include other European countries, and the relatively lower costs

and obstacles to overcome in order to begin doing business as a foreign investor. Italy is

geographically surrounded by some of the most competitive and powerful countries in Europe,

including France, Germany and Turkey. (“Italy: Foreign Investment”)

Product Adaptation and Modification

In order make a product suitable for the tastes and quality expectations of the people of

Italy, some products may need to be adapted. It is well known that Italians expect products that

are well-designed, high quality and, if possible, made in Italy. (“Italy: Reaching the Consumer”)

In terms of packaging, the labels and any accompanying copy should be in Italian, as that is the

official language of Italy. Going further, Italy has close proximity to Spain, France, Austria and

Greece, and recognizes Albanian, Catalan, German, Greek, Slovene, Croatian, and French as

minority languages; it is important to remain cognizant of these languages, depending on the

product and where it will be distributed beyond Italy. Italians prefer when products with

packaging that is well labeled and has plenty of information about the product itself. (“Italy:

Packaging and Standards”)

When thinking about support services for the product, the default language of the service

representative should also be Italian, potentially with a number of additional minority languages

available as well.

Promotional Mix

To promote and advertise a new product in Italy, the goal should be to establish and grow

market share, as well as to gain brand recognition. An effective media mix would include

advertising and promotions through social media, television, public transportation

advertisements. Radio, posters and word-of-mouth. Of these television, (though expensive,) and

radio are among the most effective ways to reach Italian consumers. Promotions such as

coupons, premiums and costs are effective ways to encourage trial sales, product adoption and

brand loyalty. (“Italy: Reaching the Consumer”)

Because Italian people are partial to building and growing relationships, personal selling

is a highly effective way to reach consumers. Italian people place high value on one-to-one sales,

and is a primary reason why small-medium sized enterprises and family businesses do well in

Italy. Personal selling in Italy would require hiring salespeople who understand both the region

and the market, speak Italian, have access to extensive networks and connections, and possess a

deep understanding of Italian culture and customs. (“Italy: Distributing a Product”)

Distribution

Port selection to distribute and export goods from the United States to Italy would

involve an origin port in New York, NY, USA, with a destination port known as Port

Civitavecchia in Rome, Italy. (“Routes Explorer”) Major sea ports in Italy include Port of Genoa,

Port of La Spezia, Port of Naples, Port of Livorno, Port of Ancona, Port of Ancona, Port of

Brindisi, Port of Taranto and Port of Trieste. Italy has two major international airports that

support distribution, the Milan Airport and the Rome Airport. (“Italy: Exporting Products”)

Mode selection for distribution in Italy is varied and includes railroad, air carriers, ocean

carriers and motor (ground) carriers. Railroad carriers include Trenitalia, FNM Group, Rail

Traction Company, Del Fungo Giera, SBB Cargo and Serfer. Air carriers include FedEx, DHL

and IPS Parcel. The single ocean carrier in Italy is Kuehne + Nagel. Ground carriers include

Thruex SRL, Time Shipping SRL. (“Italy: Exporting Products”)

When packing goods for distribution, the packages should include labels and

specifications in Italian and English. Italy uses the metric system, so units should follow suit. A,

“Made In BLANK,” label is necessary, as well as standard labels such as expiry date, size and

weight on perishables. (“Italy: Reaching the Consumer”)

Channels of Distribution

To finally deliver the product to consumers, there is a vast number of options for

distribution in Italy. These options include the Italian Market as well as retailers and wholesale

outlets. The Italian Market is more suited for individualized or personalized items because it

offers one-to-one sales, meanwhile retail and wholesale outlets are somewhat limited and small.

Major retailers in Italy include Carrefour and Auchan/Rinascente. Others include Ikea, Pam,

Conad, Panorama, Dico and Lidl. The Coop Italia Group is the leading distributor in Italy, and

has more than 1,000 outlets in various locations around Italy. (“Italy: Distributing a Product”)

In Italy, methods of payment include the Euro as the main denomination, while many

retailers and enterprises accept cash, credit, Apple Pay and Samsung Pay as well as other forms

of Near Field Connection (NFC) payment methods. Scale of operations in Italy is, again,

primarily small-medium sized enterprises, as well as family owned businesses. (“Italy:

Distributing a Product”)

V. OBSERVATIONS AND LESSONS LEARNED

One the biggest aspects that our group learned from participating in the project was that

Italy has more to offer than its fashion and automotive industries. The tourism industry is

something that we didn’t realize was such a booming industry in Italy. We knew that many

people from around the world vacation to Italy year round, but we didn't know that the number is

around 50 million. This was the aspect of Italy that we never realized before.

Another piece of Italy that we learned was how different southern and northern Italy are.

The main difference is the lifestyle that each region lives. In northern Italy people mostly live in

urban areas and in the southern region, country living is the style of living that is much more

common. Also to go along with this is that the tourism industry is rampant throughout the entire

country.

Lastly, we learned what Foreign Direct Investment actually means and what it all entails.

The biggest piece with this was that these investments can either comes from a private party or

even a foreign government can invest in a certain country. With these investments they be used

can used for almost anything the country needs, communication infrastructure or even new

buildings for events. (Olympics, World Cup) Overall, our group learned a lot from this project.

Works Cited

AZoMining Editors. “Italy: Mining, Minerals and Fuel Resources. AZO Mining. 11 June 2013. 6 May 2016 <http://www.azomining.com/Article.aspx?ArticleID=105>.

"Business Meeting Etiquette." Passport to Trade. (n.d.). 10 May 2016<http://businessculture.org/southern-europe/business-culture-in-italy/meeting-etiquette-initaly/>.

“Communications in Italy.” Live Travel Help. (n.d). 6 May 2016 <http://www.livetravelhelp.com/info/italy/communications/>.

Elisa Giomi. “Media Landscapes.” European Journalism Centre. 2016. 6 May 2016 <http://ejc.net/media_landscapes/italy>.

“Exports.” The Observatory of Economic Complexity. (n.d). 6 May 2016 <http://atlas.media.mit.edu/en/profile/country/ita/#Exports>.

Finley, M. K. "Italy Family." DePauw University. (n.d). 10 May 2016 <http://acad.depauw.edu/mkfinney_web/teaching/Com227/culturalPortfolios/ITALY/Italy Family.html.>

“Italian Technology Growth, Today and the Future.” Innovazione. (n.d). 6 May 2016 <http://innovazione-arteastudio.com/>.

“Italy Economic Indicators.” Trading Economics. 2016. 6 May 2016 <http://www.tradingeconomics.com/italy/indicators>.

“Italy: Reaching the Consumer.” Santander Trade Portal. 2016. 6 May 2016<https://en.portal.santandertrade.com/analyse-markets/italy/reaching-the-

consumers>.

“Italy: Foreign Investment.” Santander Trade Portal. 2016. 6 May 2016<https://en.santandertrade.com/establish-overseas/italy/foreign-investment>.

“Italy: Packaging and Standards.” Santander Trade Portal. 2016. 6 May 2016<https://en.portal.santandertrade.com/international-shipments/italy/packaging-

and-standards>.

“Italy: Exporting Products.” Santander Trade Portal. 2016. 6 May 2016<https://en.portal.santandertrade.com/international-shipments/italy/exporting-products>.

“Italy: Distributing a Product.” Santander Trade Portal. 2016. 6 May 2016<https://en.portal.santandertrade.com/analyse-markets/italy/distributing-a-

product>.

“Routes Explorer.” SeaRates.com. 2016. 6 May 2016<https://www.searates.com/services/routes-explorer/>.

“Italy Population.” Country Meters. (n.d). 6 May 2016 <http://countrymeters.info/en/Italy>.

“Italy-Poverty and Wealth.” Nations Encyclopedia. 2016. 6 May 2016 <http://www.nationsencyclopedia.com/economies/Europe/Italy-POVERTY-

AND-WEALTH.html>.

“Italy.” Better Life Index. 6 May 2016 <http://www.oecdbetterlifeindex.org/countries/italy/>.

“Italy.” Encyclopedia. 2007. 6 May 2016. <http://www.encyclopedia.com/topic/Italy.aspx>.

“Italy.” Nations Encyclopedia. 2016. 6 May 2016. <http://www.nationsencyclopedia.com/economies/Europe/Italy.html>.

"Living in Italy" International Living. (n.d.). 10 May 2016<https://internationalliving.com/countries/italy/live/>.

“Local Transport.” Lonely Planet. 2016. 6 May 2016 <http://www.lonelyplanet.com/italy/transport/getting-around/local-transport>.

"Religion." Wikipedia. (n.d.). 10 May 2016 <https://en.wikipedia.org/wiki/Italy#Religion>.

“Tariffs and Regulations.” Australian Trade and Investment Commission. (n.d). 6 May 2016 <https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/Italy/Doing-

business/Tariffs-and-regulations>.