ITALY COUNTRY REPORT
RYANNE FRAZIER FASM 420 PROFESSOR CANEPA
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socio-political LANDSCAPE
ECONOMIC LANDSCAPE
42 50 N:12 50 E Italy is a country located in Southern Europe. It’s boot-shaped Italian peninsula is accompanied by two of the largest islands in the Mediterranean Sea, Sicily and Sardinia. There are many neighboring countries to Italy including Austria, France, Holy See, San Marino, Slovenia, and Switzerland. Italy itself has a very strategic location that dominates the central Mediterranean as well as the southern sea and air approaches to Western Europe. Since 1946, the country has become a unified, Democratic Republic. In 1999, Italy became a founding member of the European Union.
COUNTRY TRAITS CHIEF OF STATE - President Sergio Matterella
HEAD OF GOVERNMENT - Prime Minister Matteo Renzi
COUNTRY SIZE - 301,340 sq km
GDP PURCHASING POWER - $2.066 Trillion
TIME DIFFERENCE - +6 hours from US eastern time
GDP PER CAPITA - $34,500
LANGUAGE - Italian, German, French, Slovene
GDP GROWTH RATE - -0.2%
RELIGIONS - Roman Catholic, Muslim, Agnostic
LABOR FORCE - 25.52 Million
POPULATION - 61,142,221
POVERTY - 29.9%
MEDIAN AGE - 44.7
INFLATION RATE - 0.1%
POPULATION GROWTH RATE - 0.3%
CURRENCY - Euro
EDUCATION EXPENDITURE - 4.5% of GDP
EXCHANGE RATE - 0.7489 euro per US dollar
LITERACY RATE - 99%
MINIMUM WAGE - 2,167.84 euro/month
SCHOOL LIFE EXPECTANCY - 16 years
WORKING HOURS - cannot exceed 48 hours/week
LIFE EXPECTANCY - 82.03 years
UNEMPLOYMENT RATE - 12.5%
Italy has a capitalist economy, well known for their innovative business sector, industrious agriculture, and high-quality automobile, industrial, appliance, accessory, and fashion products. Although Italians transformed their economy during the postwar period, they still have many challenges. Today, the country faces a shrinking economy. The government’s overall strategy has caused exceptionally high public debt and structural impediments to the growth of the economy because of the vulnerable financial markets. The exchange rate between US dollar and the Euro has changed drastically over the years with a current conversion of 1 EUR to 1.12 USD. Right now, Italy has a record-low inflation rate at -0.1%. Consumer prices are falling, as well as fuel prices and petrol prices. With the decrease in these prices, transport and utilities costs continue to be dragged down.
The politics of Italy take place in a framework of a parliamentary, democratic republic, and multi-party system. The country has been plagued for years with unstable governments. With its diversified economy between the more developed North and highly subsidized South, the industry and economy are strongly influenced by government involvement. The current government has a highlighted interference in the economy, corruption, and a slow court system that offers a lack of judicial effectiveness. This lax system has caused many disputes and attacks against major investment projects, which in turn represent a significant additional cost of doing business in Italy for other countries. Today, Prime Minister Matteo Renzi has sought to put energy behind key economic reforms, and engage in efforts to mitigate the global financial crisis that’s affecting Italian households and businesses.
gdp growth rate
Trading Economics
environmental LANDSCAPE Italy’s strategic location in the central Mediterranean makes them a dominating country for sea and air trade. Although they offer a positive geographic standpoint, there are many environmental issues caused by production that need to be noticed. These problems include air pollution from industrial and agricultural emissions such as sulfur dioxide causing coastal and inland rivers to be polluted, acid rain damaging lakes, and inadequate industrial waste treatment and disposal facilities. These topics are being addressed through international agreements that are fighting against air pollution, hazardous wastes, marine dumping, environmental modification, and various other topics. Italy has also become one of the world’s largest producers of renewable energy, ranking it 84th in the world for ecological sustainability. World Fact Book.com
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Infrastructure The Italian peninsula is well connected through an extensive system of railways, expressways, national roads, airports and seaports. Most of the infrastructure was rebuilt after the ravages of World War II, and is subject to constant improvement and upkeep. Historically, the development of infrastructures contributed to modernize Italy as well as to emancipate the country from an economic point of view, helping to move from a rural to an industrial society.
transit times AERMAR: FROM VENICE to Newark: 22 days to Savannah: 24 days to Los Angeles: 45 days
WILLY COPS : FROM GENOA
environmental hazards
holidays
to Newark: 19 days to Savannah: 21 days to Los Angeles: 41 days
In addition to 4 weeks vacation time a year, Italians receive 10 national paid holidays. Summer holidays are usually taken during August, when most large industries are closed. The period between Christmas, New Year’s Day and the Epiphany are also characterized by reduced business activity.
COMETA SRL : FROM LIVORNO to Newark: 19 days to Savannah: 21 days to Los Angeles: 41 days
January 01: New Year’s Day January 06: Epiphany April 05: Easter Day April 06: Easter Monday May 01: Labor Day/May Day June 02: Republic Day August 15: Assumption of Mary November 01: All Saint’s Day December 08: Immaculate Conception December 25: Christmas Day December 26: St. Stephen’s Day
transit costs COSTS : FROM LIVORNO PORT To Newark: $3,358.13 - $3,711.62 To Savannah: $3,375.97 - $3,731.34 To Los Angeles: $4,177.28 - $$4,617
Natural hazards that could affect the leadtime of production within the region include landslides, mudflows, avalanches, earthquakes, volcanic eruptions, and flooding. Flooding is the most important natural hazard in Europe in terms of economic losses. In 2002, over EUR 20 billion was lost due to flooding of the Elbe Basin. This flood affected the economies of Italy, France, and the Swiss Alps. As of 2010, volcanism has also become a significant risk. The volcano Etna (elev. 3,330 m), is Europe’s most active volcano with flank eruptions that pose a threat to nearby Sicilian villages and the area of Naples. This eruption made a huge impact on air traffic in Europe because of the critical dust concentration levels that made air transpiration unsafe.
lead-time production 19 export days, 18 import days World Freight.com
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5. sea Italy is a major power in container shipping in the Mediterranean. The Italian merchant fleet consists of over 2,000 ships. The 2,400 km of waterways that are used for commercial purposes and have become the most popular alternative mean of transportation especially when shipping across boarders thanks to the project of “sea highways” in the framework of the development of the trans-European transport network. The most economically important international ports are located in Venice, Cagliari, Trieste, Genoa, Naples, Taranto, Augusta, Gioia Tauro, and Livorno. ANSEPUNIAM is the government organization in charge of sea transportation.
air Italy has 136 airports, with its national carrier, Alitalia, having a fleet of 166 planes that connect Italy to 60 other countries. Every year, 750,000 tons of freight transit via the two international airports of Roma Fiumicino and Milano Malpensa. The ANAMA (National association of air freight agents) is the government organization in charge of air transportation.
road Road transpiration within Italy is highly developed with an efficient network of interconnected highways covering 487,255 km. The main routes at the hub of the road system are Turin-Milan-Venice-Trieste, Milan-Bologna-Florence-Rome, Milan-Genoa, and Rome-Naples
rail The countries rail system is not only a preferred means of travel for commuters and tourists, but also for shipping across boarders. It is one of the most important parts of the infrastructure of Italy covering 20,255 km. Trenitalia, a subsidiary of FS (Ferrovie dello Stato Italiane) the National network, is the main line operator for both passenger and freight transportation. The CESIGER (center for rail company safety certification) is the government organization and technical management in charge of rail transportation.
suppliers Boemos SpA Industria Calzature Website: http://www.boemos.it Clients: Burberry, Barney’s, Inc. Marshalls Specialties: mens and women’s footwear Capacity: 56 employees, $27,352,497 revenue Maurizi S.R.L Website: http://www.antoniomaurizi.com Clients: Barney’s, Pinnacle Brands, Gilt Group Specialties: men’s leather shoes Capacity: 30 employees, $4,598,786 revenue Calzaturificio Criloga Website: http://www.criloga.it/ Clients: Rag & Bone Industries LLC, Leoffler Randall Inc.
Franc Maestri Calzaturieri Website:http://www.francshoes.com/en/men_ shoes.html Clients: Cole Haan, Ralph Lauren Specialties: men’s and women’s leather shoes Mectex SpA Website: http://www.mectex.com/index.php/en/ Clients: SFO Apparel, Jade Swimwear, L.P, Specialties: woven fabric mills, wool, swimwear Capacity: 21 employees, $5,620,765 revenue Lcb Co. S.R.L. Website: http://www.lcbcompany.com Clients: J. Crew, Levi Strauss Co. Specialties: Apparel and accessories Capacity: 62 employees, $22,050,641 revenue
Panjiva.com
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Business etiquette
investment risks
The business culture in Italy is characterized by: business communication, business etiquette, business meeting etiquette, internship and student placements, cost of living, work-life-balance, and the social media guide in Italy. In order to overcome possible language barriers, written forms of communication are preferred for a first approach in planning a business meeting. The ability to use the right language and gestures when communicating business in Italy is important. Hand gestures, eye contact, tactile introduction and personal contact are features of the Italian conversation. Italians are often guided by their feelings and trust is very important in establishing a good business relationship with them. Negotiations are a lengthy because Italians like to carefully evaluate advantages and risks. Handshaking is common on all business and social occasions. Management structure and style in Italy is commonly a pyramidal hierarchy; final decisions are centralized and taken by the persons positioned in the upper levels of the pyramid. Meetings a more analysis-oriented congregation then a decisionoriented one. The use of professional titles is required. Punctuality is not a priority for Italians.
Weak recovery driven by exports Low record level public sector debt Unstable economy
communication
High pubic debt
Social networking such as Facebook, Linkedin, and Netlog have become key communication tools in Italy. The trend is that businesses are turning their attention towards promoting themselves through Social Media.
Tax evasion Number of small financial businesses Drop in productivity Insufficient research and higher education
Internet Country Code: .it Internet Hosts: 25.662 million Internet Users: 36.2 million
Backwardness of the south
Italy’s telephone system is also very well developed with fully automated telephone, telex, and data services. A series of submarine cables provide links to Asia, Middle East, Europe, North Africa, and the US to offer high-capacity coverage. International Country Code: +39 Mobile Cellphones: 141.07 per capita Main Lines: 21.656 million
investment Benefits Important role in the industry Increasing production Highly profitable niche products Low household debt and high saving capacity Wealth of tourism assets
Multitasking is normal, which can cause interruptions in lead-time. Dress and presentation plays an important role in Italian culture. Fashionable style is considered a sign of wealthy social status and success. Formal attire is generally expected for business meetings.
Strengthened legitimacy of the Prime Minister
Italians try to reconcile work with private life, reserving enough time for family and private interests. Business Culture.com
Business Culture.com
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9. trade agreements Transatlantic Free Trade Area (TAFTA): A proposal to create a trans-Atlantic free-trade area covering Europe and North America. This agreement could result in multilateral economic growth, as well as lower tariffs, and add stricter adherences to intellectual property of the textile, apparel, and footwear industry. Transatlantic Economic Council (TEC): A body set up between the US and EU to direct economic cooperation between the two economies. The council is tasked with helping to meet economic partnership objectives and harmonize regulations. Some priorities related to the apparel and footwear industry that are included are technologies, cooperation while trading, and petrol conservation. EU-US Open Skies Agreement: This agreement provides for all transatlantic routes to be opened up to European and American companies without restrictions on the number of flights, aircraft or routes. It also includes an arrangement to develop the agreement further on matters such as airline ownership. This agreement could benefit trading in the apparel and footwear industry because it would eliminate any restrictions on air transportation, and could increase import and export lead-time because there would be more options and accessibility for air transport. General Agreement on Tariffs and Trade (GATT): This is a multilateral agreement regulating international trade. Its purpose is to reduce or eliminate tariffs and other trade barriers which would benefit the potential buyer as well as the supplier. Today GATT is in effect under the WTO framework.
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textiles
Manufacturing
The backbone of Italy’s manufacturing sector is a few internationally known multinational operations in company with large numbers of small and medium enterprises, many being family owned. Most manufacturing firms are located in the north of the country, with very few large factories in Southern Italy. Fashion houses in particular tend to outsource their production to small, family-run businesses in Southern Italy where workers are more flexible. This is where they specialize in the manufacture of leather for clothes, handbags, wallets, shoes, and purses.
Italy is only a small manufacturer of fibers and other raw materials for the production of textiles and apparel, which obviously results in the significant role this sector plays in the domestic trade balance. It’s been a pioneer in exporting yarns and woven fabrics, accounting for a global export share of 28.6%. Italy ranks second worldwide in products such as silk (share 14.1%), apparel (6.7%) and hosiery (10.7%). In this respect, production activities in the textile sector depend on the situation in the global market.
labor
state of apparel and textile industry Italian products of the textile, apparel, and footwear industry are known worldwide. The textile and clothing sector account for 10% of the total added value of Italian manufacturing and 14.2% of jobs. The sector also accounts for around one-third of textile and clothing sales revenues within the 28-Member EU, and about 28% of companies are Italian. The condition and functioning of this industry are essential for the European Union and countries on a global scale. The high-quality processed products are created with innovativeness, advanced technologies, and renowned craftsmanship that give the tag “Made in Italy” a distinct recognition. Italy belongs to the leading global exporters of both textiles and apparel. Since the 1990’s, this sector has continued to grow and become one of the leading manufactures and exporters of textiles, occupying the second position in Europe behind Germany, and third on a global scale behind China and India as of 2014. The famous fashion sector is the most important of all Italian textiles, with a total turnover of EUR 50.5 million in 2012. Although Italy boasts some of the world’s best-known fashion designer labels, such as Valentino, Armani, Versace, Gianfranco Ferré, and Krizia, the more casual clothing market accounts for the financial success of the textiles and clothing industry. The strength of this sector lies in the efficiency of its distribution networks, and the long-lived status symbol of Italian products. JustStyle.com
challenges
With an average unemployment rate of 12.5%, and 42% between the ages of 15 to 29, the Italian economy remains obstinately static. This drastic drop has created labor shortages throughout the country, affecting the apparel and textile industry. Over 86,000 jobs, mostly lowskilled, have been lost in Italy’s textiles and clothing businesses because work has moved to lower-cost countries. This has given young Italians the impression that there is no longer any secure employment to be had in industries such as textile and apparel. Italy does not have a unified labor code, and labor legislation is wide ranging, with a number of laws, regulations and statutes. As of 2015, the government has passed changes to the Workers’ Statute Act of 1970, under the new Jobs Act. The act is one of a series of regulatory reforms aimed at reinvigorating the economy and is intended provide the labor market with a different, more flexible structure, without ignoring the importance of the social support to the unemployed.
Today, Italian textile manufacturing enterprises contend not only with economic problems resulting from the international consumption crisis but also with structural problems stemming from the concurrent changes in customers and the emergence of new competitors. One major factor that Italy faces is that since the 1970’s, the Italian textile and apparel industry has faced a challenge posed by countries with low labor costs and a high investment level, allowing them to increase production quality and thus compete effectively in the global market. The textile industry in Italy has been undergoing employment reorganization to compete against these countries with lower labor costs and search for more effective production methods. As of 2012, Italy imported high-techt extile machinery at a value of EUR 459 million to help boost new methods of manufacturing. Almost half of the machines came from abroad and Germany was the major supplier (EUR 140 million)
Nations Encyclopedia
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state of the footwear industry
government support In 2015, the government will invest EUR 36 million in the country’s fashion system. Since the textile district is of top importance in Italy, the government’s goal is to set up a plan to help the development of the textile and apparel industry both nationally and internationally. This plan includes the launch of the Milano Unica textile show, the yarn fair Filo, leather trade show Mipel, Lineapelle, footwear fair Micam, as well as Florentine children’s wear show Pitti Bimbo.
Italy exports of manufacture of footwear
As a leader of shoe manufacturing in Europe, Italy represents the third largest exporter of footwear in the world. The sector has more than 110,000 employees and accounts for more than 7,500 companies. The Italian footwear industry is constantly innovating and provides advanced quality products for a demanding market. Today, the competition with Eastern Europe and Asia is driving down wages and working conditions in Italian footwear factories. As of 2013, Chinese workshops have integrated into Italy, with their operations making up 8.8% of all firms in the country’s textile and clothing sectors. Based on workers interviews conducted across Italy in 2013, factory workers’ wages at entry level in the legal industry do not exceed EUR 1,200 net per month. A family would need at least EUR 1,600 to afford a decent standard of living, according to calculations made for Northern Italy by ISTAT, the Italian national statistics institute.
Trading Economics
Besides these challenges, the success of the Italian footwear industry can be explained by Italian entrepreneurship. The most important districts to this industry are located in the Lombardy, Veneto, Marche, Emilia Romagna, Tuscany, Campania, and Puglia regions of where sub-suppliers of raw materials, tanneries, and manufactures of components, accessories and shoe making machinery settle down to produce these quality products. Made in Italy.com
Trading Economics.com
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