Italy is a medium-high level consumer market with a 60 million people within the Euro currency zone. Most international companies establish a subsidiary or acquire a company in Italy simply because one has to be there. What a mistake: there are great opportunities but you need to understand the Italian business culture and have a “GLOCAL” strategy to grab them. Let's see how to do business in Italy.
We often come along with corporate clients that either are willing to expand their business in Italy or they just want to close it down. Most amazing, the key factors of success (and failure) seem to be always the same. For an effective management in Italy the following are the DOS and DON'TS based on the Italian business culture.
We often come along with corporate clients that either are willing to expand their business in Italy or they just want to close it down. Most amazing, the key factors of success (and failure) seem to be always the same. For an effective management in Italy the following are the DOS and DON'TS based on the Italian business culture.
Get to the right size
Most international companies pretend to do business in Italy through a too small entity. You either remain thin or as alternative you have to get big enough. The “thin” way of your management in Italy is with no structure at all and you use a local dealer or a local business partner. The alternative is to establish an appropriate vehicle, getting fast to a size that represents a critical mass on the market compared to your competitors'. But do not stand in the middle.
Motivating the people
Despite what not-Italians may think, Italians do not like singing, hate the mandolin and work hard. However, Italians have a strong individual attitude and they like to work as entrepreneurs: therefore an effective management in Italy knows that people has to be motivated especially if working for a foreign corporation. Motivating is not only a matter of salary and bonus, it involves being part of a long term strategy. Which is different from making some money in Italy and then walk away.
Have a local partner
We all know that the global strategy must meet the local culture. In Italy this aspect is crucial to your success. Establishing a company together with a local Italian partner may often be the easy and safe way to enter this market. Once the business will be sufficiently developed, you will then retain the whole company. Remember to set clear rules between you and the local partner and get appropriate financial control.
Have sufficient financial resources from the beginning
As a corporate finance advisor we often came across with international companies that completely miss their financial plans and then have to invest additional financial resources into the business. A successful strategy requires a much higher upfront investment then you may believe and almost none additional cash drain thereafter. A little additional financial analysis before starting will allow you to avoid surprises.
Be introduced and use connections
In Italy “who” you know matters more than “what” you know. Just accept it, and insert into your organisation people that have good local connections, both in your industry and in finance and banking. Remember that Italians are friendly with foreigners but do business with relatives.
Monitor the market for consolidation
In Italy many industries are under consolidation. This means that during the period in which you are running your business in Italy you will have the opportunity to acquire a domestic competitor. It is an opportunity to broaden your activity and market share but sometimes it may be a thread as one of your competitors might acquire that business before you do it.
Understand the Italian business culture
Italians love looking good, wearing nice clothes, being part of a respected social circle. In Italy fashion and status matter more than elsewhere. Should you enter this market thinking that you deserve respect for anything that your company might have done elsewhere, that does not work. Your company might be a world leader, but this means very little in Rome.
Use appropriate financial control systems
International accounting principles are now commonly used in Italy but small companies may require additional financial control techniques. Be sure that your Italian entity is fully equipped with the type of financial analysis and financial control that you require and always use an external manager and an external auditor to monitor what's going on.
Ask yourself why should you be successful in Italy
Do not underestimate how difficult this market may be. Spend some additional effort in studying and understanding the market and creating an appropriate strategy, do not copy and paste the slides that your marketing department has prepared for France.
Listen to what Italian managers tell you and bring their ideas at headquarters
Managers in Italy are used to handle problems in a difficult and multi cultural environment and they are generally more creative and prompt to reaction in rapidly changing industries. They may be a great HR resource for an international company, don't miss this opportunity.
In conclusion: there are great opportunities to do business in Italy but you need a “glocal” strategy to grab them. Did we miss anything?