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The Internationalization Process in Italian SMES and in Particular Those of Salento Towards the Chinese Market
Language: Italian This thesis is written in Italian
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Original Italian title:
L'internazionalizzazione e le pmi salentine: analisi della loro propensione verso il mercato cinese
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Chiara Conte, Università degli Studi Ca' Foscari di Venezia, 2006-07
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Academic area
Social and Political Sciences
The internationalization process in Italian SMES and in particular those of Salento towards the Chinese market.
On the other side of the Alps as all over the Italian peninsula, decline is evident in industries such as textiles, footwear and machine tools .
Italy’s main tool for controlling costs, devaluation, was removed by the introduction of the euro in 1999 which is currently stronger than the USD.
For the Italian textile and clothing industry things have been going from bad to worse since China joined the World Trade Organization in 2001.
Foreign direct investments poured into China to build up production capacity for both fabrics and clothes once the country was free to export at will.
Italy, which had been Europe’s leading textile and clothing producer for about 25 years, felt the effect almost immediately.
EU imports from China increased by nearly half in 2004 alone. In some products, imports have grown sixfold and prices have fallen by a third.
The emergency deal of 2005 on trade restraint between the EU and China is offering only temporary relief.
We definitely entered the age of the international business management which rules the contemporary economic environment all over the world, where industry is disposing new strategies deeply linked to the so called internationalization process.
Nowadays, modern economy requires a change in route, targets and management in order to give prosperity and balance - especially in Italy, one of the most export-oriented countries in the EU with Germany.
Globalization has opened endless ways to make business and now, the time to reorganize the international trade and actors has come.
New comers, less barriers all around the world and the advantages of new location opportunities, make traditional industrial countries, most of them in the West, face difficult scenarios in the current economic environment where only the brightest management is able to give the right direction to businesses.
Chances are infinite but at this stage, there is no more time for errors and the management of knowledge in dealing with foreign cultures, possessing various and technical skills, represents the point of no return for all the firms which want to actively operate in the next centuries.
Knowledge represents the most valuable means for firms in order not to become stuck in modern international trade which requires- as already mentioned -not only good productions but a good system of skills and competences managed in that right way oriented to set continuous relationships with foreign markets in the long term.
Now the key is international business and the best firms still alive in Italy must take steps to make the utmost of this new era.
Italian SMEs and the sophisticated and worldwide appreciated Italian clusters, strongly characterize the Italian territory with their pros and cons.
Their flexibility and adaptability greatly ignite the process of changing and adjusting to the events of modern economy but, at the same time, their dimensions and their reduced availability of capital (for investments) prevent Italian SMEs from fully comprehend and manage these processes.
While dealing with the activities related to the international markets, the common SME can boast a flexible structure enabling it to adjust the productive processes to the changeable features and requirements and needs of markets.
On the other hand, this kind of enterprise representing, as we said before, the typical example of Italian entrepreneurship, as far as the deep knowledge of international contests and of complex dynamics existing in the target countries are concerned, reveals its crucial weaknesses.
Italy strongly needs a sort of advanced public assistance in those areas in which the SME alone cannot continue its path to improve international business, not only incentives but practical guidelines.
In this perspective, in particular in Apulia, public policies should go beyond the “commercial” approach that is mainly geared to supporting exports and become more oriented towards production internationalization (foreign investments and industrial cooperation) through appropriate strategies and investments. Moreover, past experience has shown that the success of policies depends on their design. A major risk factor lies in the fact that the demand of services from enterprises is often satisfied by unprofessional suppliers unable to supply them in compliance with their requirements.
As a consequence, it is essential to try to strengthen what might be considered as the weakest point in the regional system of Apulia: a sufficient supply of human resources to internationalize both enterprises and institutions.
The inadequate internationalization of small and medium-sized enterprises has to be understood in the light of its high cost, especially in terms of managerial skills and access to far-off markets (either to gain access to less expensive inputs or to broaden the sales market).
It is very relevant to observe that in the last three years we have witnessed a complete change in the international scenario of economy in Italy and all around the world as well.
After the entrance of China in the WTO, the arrival of Chinese goods and the presence of cheap labour have threatened Italian firms and Italian workers but, after 3 years of trouble, situation has dramatically turned to a serious loss of competitiveness of Italian firms which wasted time in dealing with establishing import tariffs instead of new strategies.
Today, internationalization is introduced as the magic pill that will give Italian SME a sort of relief by policy makers and some economists, but not every kind of firm is ready and mature for it.
The everlasting matter is that Italian firms often realize that they do not possess the mainstay that enables them to favourably compare with the rest of the world economy.
The time spent in imposing tariff/non tariff barriers as the safeguard mechanisms or the imposition of restrictive measures on imports, seems to have been completely wasted for most part of the Italian SMEs which now are in serious condition, as the figures of national imports and exports confirm .
To face this worrying situation, Italian firms now have to give the priority to internationalization but their results are still uncertain.
Technically speaking, international business and internationalization are terms used to collectively describe topics related to the operations of firms with interests in several countries.
It is a complex process through which firms establish continuative commercial relationships with foreign markets in the long term.
This process is made of steps which are not necessarily successive such as indirect export, direct export, greenfield investment or joint ventures, outsourcing or taking over already existing plants.
Sometimes, these steps are successive and guarantee a general widening of the knowledge of the market and of consumers, sometimes, it is common to exchange the various steps according to the entrepreneurial aims.
In Italy some firms manage the internationalization in a methodical and intentional manner but the vast majority of them do it in the “Italian way”, without a proper strategy just looking for new differentiated ways of doing business.
In order to obtain positive results from this kind of process, the Right Management Mental Attitude is strictly required because it represents the only correct starting point while evaluating the development of every different product according to its competitiveness, so that it is consequent to focus on it with all the resources the firms possess.
Moreover, only this right mental attitude enables the firm to gather and collect information about the differences in law and legal systems, language barriers, living standards, climate, the market, the consumers, the competitors and about the firm itself, in order to develop a proper marketing plan according to the different foreign countries and, at the end, to expand and refine the techniques of negotiation, thanks to the creation of a proper area of professionals.
Most firms that have reached strong success in the international business are multinational corporations but Italy – with its few but existing internationalized family companies- is the living example that even SME can follow this international route .
This research takes roots from the analysis of texts, essays, presentations, reviews and articles and real cases. It aims at understanding the present dynamics of Italian enterprises and in particular those of the area of Salento, in the south of Italy.
This work wants to analyze the attitude of some interesting entrepreneurial realities for directing abroad, in particular towards the Asian markets.
It first pays attention to the national situation and regulations, further in chapter II there is a special focus on the regional aspects of internationalization and on the main industries of the area.
Over the other chapters, it is relevant to observe that a work of survey on strategies of internationalization over the sample of firms operating in Salento has been done in chapter III showing very interesting results as far as the future is concerned.
The last chapter describes the new scenarios offered by the Chinese market with particular reference to how China has been able to interact with the international system and now owns lots of SMEs in Italy.
In fact, over the last 5 years we have witnessed a particular shift in the world economic balance. Fears and protectionism are no more useful, openness and right attitude are now the necessary requirements for firms to take part in the world game of power where the animal spirits of capitalism continue to operate.
The area of Salento should take advantage of its clusters with particular reference to the district of Casarano, with its history and present, but the production and the management themselves must be given a direction according to the international economic environment in order to develop and not to generate further social and economic issues (lack of competitiveness of Italian clusters, workers displacement).
As for the internationalization, the Apulian region may be considered as a kind of “middle land” between the dynamic regions of Central and Northern Italy, where internationalization processes are rather settled, and other southern regions less inclined to participate in international production networks. Nevertheless, the international openness of the region is still very low as against the national average, which, in turn, is among the poorest ones in Europe. Leverage together with the support of both national and local banks may play a major role at this complex of production and trade internationalization processes. In order to internationalize the production system, it is indeed necessary to envisage a synergic relationship with the banking system that has to be capable of facilitating and supporting this change by helping to reallocate resources trough the supply of intermediation and advice services. As far as the needs of the enterprises are concerned, the survey confirms the presence of a strong gap: on the one hand a very limited number of big enterprises showing a marked tendency to internationalization; on the other, a great number of small local enterprises, usually family-controlled ones, so that the local banking system runs into many obstacles to meet both needs.
Owing to their small size and limited supply of international services, local banks are unable to become a point of reference for bigger enterprises which decide to turn to national and even foreign agents.
The recent positive figures describing exports of the made in Italy products clearly testify that production, even in Salento, must seek for quality and innovation, in order to excel in foreign markets bringing together southern tradition with advanced skills.
Everyone’s hope is that the right mental attitude involves ethics and fairness in worldwide trade but these are sorts of skills that only experts and professionals, among which cultural mediators and interpreters, can fully transfer to the wise entrepreneurs and managers.