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May 31st 2012, Milan

Training Session

Strategic marketingInternationalization

Industrial associations and districts in Italy delivered by

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Areas of expertise SME and entrepreneurship developmentFemale & Youth entrepreneurshipAdult learning and links with labour marketRegional developmentTraining and HR developmentPublic administrationFair TradeOrganization of international internships & study visits

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Geographical areas Eastern Europe & BalkansRussian Federation & Central Asia Mediterranean region, Middle East, Africa South East AsiaLatin AmericaOther countries

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FORMAPER - Agency of the Milan Chamber of Commerce, Industry, Craft & Agriculture

Via Santa Marta 18Milan, Italy 20123www.formaper.it

Carlos TalamasHead of International RelationsTel: + 39 02 8515 5282 // 5346

Fax: + 39 02 8515 5793 E-mail:carlos.talamas@mi.camcom.it

Olga NogaevaInternational Project Manager

Tel: + 39 02 8515 4244 // 5346Fax: + 39 02 8515 5793

E-mail:formaper.int4@mi.camcom.it

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May 31st 2012, Milan

Training Session

Strategic marketingInternationalization

Industrial associations and districts in Italy

Marta Jakob

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Strategic marketing

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What is marketing?

“Marketing is the delivery of customer satisfaction to a profit.”

Philip Kotler “Principles of marketing”

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What is marketing? (2)

“Marketing is changing to meet the changing world. Marketing remains the business activity that identifies an organization's customer needs and wants, determines which target markets it can serve best and designs appropriate products, services and programmes to serve these markets. However, marketing is much more than an isolated business function - it is a philosophy that guides the entire organization…”

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What is marketing? (3)

“(…) The goal of marketing is to create customer satisfaction profitably by building valued relationships with customers. The marketing people cannot accomplish this goal by themselves. They must work closely with other people in their company and with other organizations in their value chain, to provide superior value to customers.”

Philip Kotler “Principles of marketing”

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Selling, advertising, promoting, what else?

Selling and advertising are only the tip of the marketing iceberg, the most visible part, but: “The aim of marketing is to make selling superfluous. The aim is to know and understand the customer so well that the product or service fits, and sells itself.” (Peter Druckler)

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Which philosophy underneath?

Marketing choices could be driven by different philosophies:production concept: big quantities at the lowest possible prices;product concept: attention to quality, performance, innovation, etc.; selling concept: no sell without promotion, but productive capacity rules.

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The marketing concept

Achieving goals depends on determining the needs and wants of targeted markets and delivering the desired satisfactions more effectively and efficiently than competitors do.

If a company decides to use a marketing approach, it will use an outside-in perspective: it will produce what consumers want.

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A step forward: societal marketing concept

The companies should respond to the identified requests of targeted markets, exactly as in the marketing concept and, moreover, improve the consumer’s and society’s well being.

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A step forward: societal marketing concept (2)

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Evolving marketing challenges: what’s new?

Companies in 21st century have to face new challenges, like, for example:growing non profit, IT boom, globalization, need for social responsibility.

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Planning in enterprise

Many companies operate without formal plans.New company often don’t plan, because people are just too busy.Small companies often don’t plan, because managers think planning is for corporations.Mature companies often don’t plan, because they had done well without any formal planning in the past.

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How can strategic marketing affect SMMEs?

Looking at small companies, often it seems all about producing and selling, as though strategies were a sole field for big and corporate companies.

Despite impressions, every actor on the market needs strategy to meet fast changing requests.

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There is no one strategy good for all companies; each of them must consider situation, opportunities, objectives and resources.

Every single entrepreneur has a defined strategy, which guides him in the market, but often he is not used to collect and explain these information, keeping them like secrets.

How can strategic marketing affect SMMEs? (2)

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Strategic planning

Companies could develop a lot of different plans, like:strategic plans,long-range plans,annual plans.Moreover, companies have to develop plans at different levels, global, regional, national and so on, which should be coherent with the mission statement.

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Some brief tools for evaluate strategiesSWOT analysis draws the critical strengths, weaknesses, opportunities and threats of a company or a product; the number of items should be small.

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BCG growth-share matrix

Stars High growth, high share businesses or products, often require heavy investment to finance their rapid growth.Cash cows low growth, high share businesses or products, established and successful, need less investment to hold the market share.Dogs low growth, low share businesses and products, may generate enough cash to maintain themselves.Question marks low share businesses or products in a high growth market.

Some brief tools for evaluate strategies (2)

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Internationalization for SMMEs

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How is it possible to go abroad for an SMME?

Looking at the EU study on internationalization of SMEs there is a direct link between the level of internationalization and the size of the company, but, on the other hand, the smaller the country the more its SMEs are internationalized.

http://ec.europa.eu/enterprise/policies/sme/market-access/files/internationalisation_of_european_smes_final_en.pdf

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Why should SMMEs go abroad?

To survive, because, for example, often inner market is not enough to absorb productive capacity, so companies need new customers.

To reach well-balanced dimension, because, for example, mass product for an area could represent niche product for a different area.

To diversify, reducing risks, working with a variety of different countries.

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Why should SMMEs go abroad?

To optimize investments, because once we decide for an investment it becomes vital to be able to find a path for the ROI.

To compete, because different markets present different levels of maturity.

To conquer new market shares, because we want to grow.

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Steps of internationalization

Subcontracting: companies start selling abroad via their clients.

Export: companies go abroad to sell. Internationalization: companies have a international

marketing strategy.

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Opportunities offered by internationalization

Customs are gradually decreasing. Many consumptions are becoming global. Many emerging countries are enriching global

markets not only as competitors, but also as new customers.

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Threats of internationalization

Companies must compete with a larger number of competitors.

People working in the company don’t always perceive the internationalization as positive.

The company is forced to engage in a financial exposure.

Inner procedures often get more complex. The company risks to neglect home market. Planning is even more important than on domestic

market.

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Industrial associations and districts in Italy

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Peculiarities of Italian economic structure

A low number of big firms, a reduced number of medium firms and an enormous amount of small and micro firms.

The average number of employees per company is close to 3 units, and has a descending trend in the last years.

In Italy you can count more than 60 companies every 1,000 people.

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How could Italian firms be successful on international markets?

Traditional Italian industry structures sees a huge number of SMMEs, mainly family owned; often one of the strongest values is their artisan trait, mixed with flexibility and specialization, often reached them to success. Moreover, Italian SMMEs often operate in industrial districts which represent special contexts where they can profit of economies of scale.

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What are industrial districts?

Industrial districts are homogeneous local systems, collecting a big amount of SMMEs, specialized in a specific production (or industry) over a defined territorial area.

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Whose was the idea of industrial districts?

The concept of industrial districts was first introduced by the English economist Alfred Marshall in 1920; the reasons for companies to agglomerate in Marshall’s opinion are:knowledge spillovers,decrease of transaction costs,easier access to skilled labor.

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Industrial district peculiarities

Specific product or supply chain. Close network of relationships between companies

and institution of the area. Presence of competition close to cooperation. High level of flexibility, for a prompt response to

changes in demand. Strong export vocation.

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Reason for success

Economies of scale High level of specialization Highly responsive environment

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Actual strengths of Italian districts

Having a look at last Activity Report of the Osservatorio dei Distretti, we can see in 2011 companies part of ID grew a little bit better than others, and in particular their export ratio had grown. Moreover, the subcontractor network had strengthen their activities, innovation is growing (not only in products or processes, but also in services); social responsibility and sustainable activities are growing, too.

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Actual weaknesses of Italian districts

Poor interactions between companies and bureaucracy, which is still too slow in replying to requests.

Access to financing still presents problems for SMMEs (Basel I, II)

Generational turnover is often hard to happen.

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Is there any future for industrial districts?

In Lombardia region, Italy’s main industrial area, for example, OECD stated industrial districts still represent a key feature of production framework. Local both with central government is trying to stimulate ID to specialize and to work in a closer network with local institutions (universities, but also private and public foundations).

http://www.oecd.org/dataoecd/55/57/49001152.pdf