With its incredible Roman history, Mediterranean climate, beautiful architecture, luxury fashion, exquisite cuisine and fine wine (the list goes on!), Italy is the idyllic middle class holiday, relocation or retirement destination, as proven by the 26,000 British people currently residing there. However, it is not only the country’s quality of life that is indisputably high; its business reputation is too, which is why in this article we want to demonstrate why Italy can be a great investment for British companies wishing to expand their business abroad.
In 2008, Italy boasted a GDP of over €1.7 trillion (giving it a GDP size of 4th biggest in Europe). It has a potential market similar to that of the UK with 60 million people and one of the six largest economies in the world. There is an already established UK-Italy partnership in terms of commerce, politics and defence and British exports to Italy in 2010 alone amounted to over £9bn. Moreover, Italy occupies an impressive seventh place on the destination ranking of British exports while Britain is Italy’s third largest supplier.
R&D and innovation is particularly strong in Italy thanks to the country’s large budgets and high level of productivity, output and internationalisation. Other lucrative areas include education, machinery manufacture, textiles, fashion, tourism, chemicals, wine and motor vehicles. A large slice of the manufacturing industry, like the bulk of Italian business, is located in the industrial North, especially in the areas of Lombardy, Liguria and Piedmont. Italy is especially strong in the scientific and technological fields, namely in the aerospace, biomedical technology, ICT, medicine, micro-electronics, nanotechnology and precision engineering industries and the quality of its engineering and design is internationally renowned.
In terms of current gaps in the market there are numerous opportunities across a range of sectors, including some listed above (aerospace, ICT, fashion, medicine), as well as others like communication, design, media, security, food and drink, oil and gas, telecommunications, defence and security, environment, finance, healthcare, construction and creative industries. Education can also be thought of as a prosperous business venture given the global popularity of the English language and therefore the demand for native language teachers.
It is important to note that a significant majority of the Italian population studies in further education (there is an average of 300,000 graduates each year), resulting in the presence of highly-qualified and specialised human resources. This factor, added to the fact that Italian business people possess the utmost professionalism, knowledge and discernment, translates into a very appealing local workforce for British businesses wishing to set up shop in Italy. The country’s location is also highly advantageous, being geographically at the heart of the European Union and therefore opening the door to a potential market of a further 436 million people.
On top of this, the country can be seen as a launch pad for further expansion into Northern Africa (which promises a further 240 million possible customers) and into the Middle East thanks to its extensive road and rail networks and sea and air transport links. With regard to the latter, the presence of low cost Easyjet and Ryanair flights between a range of Italian and UK locations is surely yet another big incentive to invest, as thanks to this, export and travelling costs can be hugely reduced.
It appears that British investors wishing to expand into the Italian market (very) conveniently have a distinct advantage over other nationalities, firstly because Italy has recently taken to embracing the British approach of public/private partnerships and secondly because within the country British products are greatly esteemed and sought after. Professional services in particular are required by Italian SMEs for international growth and Italians regard British technology, equipment and components very highly. In general, quality always triumphs over price in Italy, with consumers being prepared to pay more for top quality. This is reiterated by the fact that Italy has one of Europe’s highest per capita income rates and a high level of consumer spending to match. This trend really differentiates Italy from other Western European countries such as Britain and Spain, where as suggested in one of our previous articles (Go Global with Wolfestone Translation: Destination Spain, 13/04/2012), businesses at the lower end of the market which compromise on quality for the sake of price have done well.
With regard to market entry, Italy hosts a large number of trade fairs and with the advent of the 2015 Milan Expo, for eco-friendly UK businesses in particular there could not be a better time to invest given the fact that the Expo theme is “Feeding the Planet, Energy for Life”. Of course, Italy will need global help with its preparations for this exhibition and Britain’s expertise in construction as manifested in the infrastructure of the London Olympics and Glasgow Commonwealth Games should put us in good stead to be able to collaborate on such projects. Within the banking industry, the new trend of business strategy fortunately seems to be international mergers. In fact, as is the case with other Western European countries, partnerships are often the preferred method of entry into Italy for all sectors. However, that is not to say that “going it alone” is impossible, as the Essential Italy example below positively demonstrates.
As if all of the above was not enough of a temptation, Italy has an economic climate which actively promotes the creation of business, thanks to all the governmental schemes that are in place with the aim of attracting and providing business advice for foreign investors. Indeed, there is general help available from the British Embassy, Consulate and Ambassadors while the British Chamber of Commerce for Italy can offer commercial and legal aid as well as suggest Italian properties where British investors can base themselves in the early stages of expansion. The principle goals of the UK Trade & Investment body (UKTI) are twofold: to encourage British-based businesses to identify overseas growth opportunities as well as promote Britain as a business partner to foreign companies. Moreover, R&D Partnerships is an initiative sponsored by the British government to create alliances between the world’s most innovative technology-led organisations and their UK counterparts in order to encourage mutual growth and development. Only this year the Partners in Growth pact between the UK and Italy was established between the countries’ two Prime Ministers, with the aim of promoting collaboration between and the economic growth of both parties, as well as celebrate the historic bond they share with one another. From an Italian perspective, there is an equal amount of assistance on offer, for example from the Invest in Milan programme, responsible for attracting foreign investment to Milan and Lombardy and the governmental organisation Invitalia which assists foreign businesses in all phases of the investment process. Another organisation is Sviluppo Italia and its subsidiary, Invest in Italy, whose goal is to help obtain information on Italian subsidies and grants that are available for foreign investors (these are conveniently also available in English) and on a local level, Italy has a number of legal, business management, financial and taxation advice services.
There are currently more than 1000 British companies operating in the Italian market in both the manufacturing and service sectors (particularly in the fields of retail, wholesale, ICT, R&D and advertising). According to last year’s figures, machinery & transport equipment was Britain’s biggest export to Italy (£4,024bn), followed by chemicals & related products (£2,014bn) and thirdly miscellaneous manufactured articles such as clothing and scientific instruments and appliances (£1,214bn). Manufactured materials (£1,123bn) also sold well along with mineral fuels (£610,761bn), food and livestock (£418,051bn), crude materials (£352,983bn) and drinks and tobacco (£99,783bn).
Many Italian banks have trading arrangements with British counterparts and exported British rock and pop music has always proved to be extremely popular.
Within the retail industry, a decade ago Accessorize, the London-based accessory and jewellery shop, opened branches in Rome and British cosmetic companies Lush (known for its handmade products) and Body Shop (famous for its firm stance against animal testing) also have outlets in the country. The fact that these middle of the range products (in terms of quality and price) have done well in Italy echoes the above argument that within the country quality carries far more importance than cheapness.
In the financial market, Deloitte, Barclays, AXA and Allianz all have Italian branches while UBI Banca (the fifth largest banking group in Italy) and the British insurance group Aviva have announced the renewal of their commercial partnership until the end of 2015. Aviva’s affiliation with UBI Banca involves the distribution of Aviva life insurance products through 1,151 branches of UBI Banca’s subsidiary banking companies. In the field of science, the BioBOX Project can be described as a successful Italian-British alliance, being a collaboration between Hull University and a Milan-based bioreactor team, founded thanks to the synergies the two parties share in their activities of creating cutting-edge drug-testing systems. Essential Italy is another British success story. The property rental company was founded in 2002 by brother and sister Helen Forbes and Ian Styan, who saw an opportunity for a small specialist agency hiring out high-quality villas and apartments and that delivered exceptional customer service, across the Italian regions of Tuscany, Sardinia and Umbria. The entrepreneurs themselves attribute their success to their team of local staff and Ian Styan’s personal knowledge of the country and the language, having previously worked in Italy as a manager of a travel company. These factors would have certainly resulted in a better understanding of the market and its needs whereas the ability to communicate effectively in Italian must have facilitated business negotiations to no end. In the energy and utilities market, top Cardiff-based utilities consultancy Utility Partnership Limited (UPL) opened up a Milan branch in 2010. The said firm is the only of its kind in the UK to provide a complete service of utility infrastructure and multi-site energy management, the latter of which is in high demand in Italy. Interestingly, the firm announced that they specifically chose Saronno for their headquarters as they believe it has a strategic positioning with easy access to both the rest of Italy and to surrounding European markets.
Let us not ignore the inconveniences however. Italy, unfortunately, is notorious for its local, regional and national bureaucracy but if we look on the bright side of the matter there exist no barriers to foreign investments or private enterprise. Furthermore, there is an ongoing governmental liberalisation programme, especially in the energy and telecoms sectors. Geographically speaking, there is a marked North/South divide, with Southern Italy being significantly less developed than the industrial North, harbouring deep-rooted structural problems. Having said that, there are some areas of rapid growth in the South, for example in the electronics industry. Italy, like most countries, was hit hard by the economic crisis of 2008/09 and is still recovering. Industries which suffered the most were the construction industry, ICT, telecommunications agriculture and the health sector. As a result, unemployment and temporary contracts rose. However, the shortage of jobs in industrial production, specialist technical sectors and sales as well as the lack of skilled seasonal staff (these include chefs, waiters, receptionists and vineyard labourers) means there are gaps in the market which British businesses can take advantage of.
When moving abroad it is crucial not to ignore cultural issues which will undoubtedly have an influence on business activity. British investors must respect and adapt to local customs if they wish to receive Italian custom in return. For example, establishing good personal relationships and networking are imperative in Italy, as is making an effort to greet employers face-to-face and employing local staff who would be more culturally aware of what the consumer wanted and who would be able to liaise with the client in their mother tongue. With reference to the latter, English is not generally widely spoken by the older generation, despite the young being enthusiastic learners. Basically, for all jobs other than English teaching and perhaps ICT, a good knowledge of Italian is essential although it is also important to note that German, French and Slovenian are spoken in the regions of Italy that border those respective countries. It cannot be stressed enough how important it is to ensure that all communication made in a foreign language is received as it is intended. Schweppes unfortunately neglected this aspect and had to pay the price when on their tonic water bottle labels they lazily failed to translate “water” into the Italian equivalent “acqua”. Little did they know that the English word “water” is interpreted as “toilet” by Italians! Needless to say this error made the drink much less appealing in the Italian market. This is a glaring example of the common mistake that English speakers make of presuming the whole world speaks English and understands English in the same way as we do.
For the above reason, it is highly advisable to use a professional and experienced translation agency such as Wolfestone when expanding to Italy and other overseas destinations. We can offer you a range of language services to make the transition that much smoother. These include a translation service to take care of your business correspondence and publishing material (e.g. promotional documents, labelling etc.), an interpreting service to ensure efficient and hassle-free communication in business meetings and a transcribing service to decipher Italian phone calls you may receive from possible business clients, suppliers etc. In addition to the above we offer voiceover and subtitling services for audio and audiovisual advertising and, as extra features of our translations, a Desk Top Publishing service to make that promotional poster all the more eye-catching, in addition to a proofreading service should you already have a grasp of the Italian language but wish to verify that your text reads well. Our translators and interpreters are highly qualified and our prices competitive so you can rest assured that your company will not make the same faux-pas that Schweppes did.
In summary, Italy seems to be a very promising investment opportunity given the exhaustive list of industries with room for growth, its highly qualified and professional workforce, the possibilities it can offer of further expansion into Europe, North Africa and the Middle East and its endless list of government aid organisations in place to encourage foreign business. If this were not enough there is also the existence of budget aeroplane flights between the UK and Italy to consider and the fact that UK businesses will have an edge over other foreign firms due to the fact that Italy has a great admiration for specifically British products and services. However, product is not everything. As suggested above, there are also cultural and linguistic factors which come into play and disregarding these could seriously harm your business. In relation to the linguistic element, this is where Wolfestone comes in. We can help eliminate the possibility of miscommunication with our complete range of high-quality and affordable language services, to ensure your business expansion in Italy every success.
CLARE JENKINS & MARTINA CECINO
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