Italy – Time to Think Small!

Italy is not the easiest of European markets to understand. It is, in fact, a country of contrasts and paradoxes that can perplex the first time visitor. It has a worldwide reputation for style and high living, which is typified by the wealthy cities of the north, such as Milan and Bologna, where living standards are among the highest in Europe.

Yet parts of southern Italy suffer from some of Europe’s most relentless and devastating poverty. Also, whilst this dynamic country is without doubt one of the world’s leading economic powers, most people struggle to name more than about half-a-dozen major Italian companies.

Italy’s long history has been a roller-coaster ride of highs and lows to match its largely mountainous climate. With origins that can be traced back to the earliest times of European civilisation, the Roman Empire dominated Europe and the Mediterranean until well into the fourth century AD, and its cultural influences are still evident today.

After the devastation of the black death in the 14th century, Italy re-emerged strongly as a centre of economic power, innovation and art in an era known as the Renaissance. It is arguable that period shaped much of modern-day Italy’s characteristics, particularly its reliance on the efforts of individuals and small groups, factors that give Italy such a fragmented feel and fragile notion of unity today.

For newcomers to the Italian market, it is valuable to have an understanding of the country’s culture and in particular its diversity. If there is one common factor among Italian consumers, it is a discerning taste and a demand for quality in virtually all things.

Italian consumers have a high regard for quality British brands, and many of the leading names in fashion and household goods enjoy excellent sales there in high technology and innovative products and services. UK Trade and Investment singles out a number of sectors as priority areas for British suppliers, including aerospace, airports, ICT, healthcare and railways and equipment.

However, the disparate nature of the economy, and especially the way in which many areas of activity are conducted by small businesses, makes the market one that demands a very different strategy to most other major European countries.

In Italy, more than 90 per cent of businesses employ 10 or fewer people, and, although most sectors are represented by very active trade bodies, the task of reaching the Italian market can require considerable time and energy. Piccolo è Bello (small is beautiful) is a phrase that is often used to celebrate the importance of Italy’s vast army of small businesses, and their success in supplying a myriad of niche markets throughout the world.

Many suppliers to Italy rely on the services of commercial agents, as is common in many other European countries. In Italy, however, the position of the agent is protected in law to a greater degree than in the UK. The relationship between a principal and agent is largely defined by the Civil Code of 1942, which specifies exclusivity as the normal arrangement, as well as providing strong provisions for compensation in the event of a principal terminating the agreement.

Suppliers, therefore, need to take particular care in the selection and appointment of agents. They must ensure that a potential agent is really suitable for the business, has the appropriate resources and contacts and the right reputation in the market. In particular, it is very important to seek competent legal advice before entering into an agreement.

Personal dealings are a particular key to succeeding in Italy. With major clients especially, time and effort needs to be invested to build the right relationships at every level of the business. Many Italian business people are determined and shrewd negotiators and a strong will, as well as diplomatic skills, are essential qualities to achieving lasting success.

Italy’s economy has performed well since the Second World War, but, in recent years, has tended to underperform in comparison with the rest of Europe.

Unemployment is not as high as in France or Germany, but many observers criticise Italy for lack of flexibility in its legal processes and labour relations, which, they say, make it difficult for the country to compete on world markets.

Currently, proposals to reduce red tape and costs are stimulating a vigorous debate across Italy and have already led to a number of strikes and protests. Many complain that Italy is one of the most expensive and restrictive countries in the world in which to set up a business. The whole process of registering and establishing a new company can take anything up to 35 days, a process that can typically be completed in a less than a week in the UK.

There are also restrictive rules that prevent certain businesses from establishing themselves within a certain distance from competitors, and many sectors are subject to stranglehold regulations on registering and licensing.

The government has declared itself determined to change these rules but, in the face of opposition from a coalition of a number of political parties supported by wide-ranging interest groups, the reform process is one of careful negotiation and compromise that, at best, can be expected to achieve steady progress rather than the radical reforms that many people would like to see.

Despite these current difficulties, Italy is still a very attractive market for many British suppliers, and offers lucrative potential for newcomers who can boast innovation, quality and style. For example, Catomance Technologies, of Stevenage, has reported that it has been delighted with arrangements to introduce its road repair materials to the Italian market through a manufacturing licensing agreement.

The company’s unique products provide an innovative solution to the problem of repairing surfaces on busy roads with a range of instant repair materials that can be applied in any weather conditions and without the need for mixing or processing. Both Catomance and its licensee have been delighted by market reaction, with sales well exceeding expectations.

Meanwhile, the British Beer and Pub Association has been active in Milan, capitalising on a growing interest in traditional British ales among Italian consumers. The association recently held a dinner at the residence of the British Consul-General in Milan, which saw a unique collaboration between Italian chefs and British brewers, with each course accompanied by specially selected British beers.

Rod Grainger, business development manager for WDB Brands, said: ‘Marston’s Pedigree and Old Empire were served with two starters and both worked extremely well – this was some of the best food and beer matching I’ve ever experienced. It was a novel way to present beer to an audience.’ This initiative has shown the value of adopting new ways to reach the market in Italy, where consumers are often responsive to fresh ideas and concepts.

Achieving success in Italy invariably requires time, effort and determination. But Italian consumers and businesses tend to have considerable respect for British businesses, and newcomers will find a genuine welcome and willingness to consider new ideas and products. On the downside, decision making can be arduous, and the continuing red tape that hampers activity often means that commercialisation of a new product or service can be slow and frustrating.

But the rewards for those prepared to stay the course are excellent, and many exporters find that selling in a country where flair and originality are admired can have unexpected benefits in revitalising their businesses.

Go East, Young Man

In 1851, journalist John B. L. Soule implored his readers to ‘Go West…and grow up with the country.’ Will Asia be the new frontier for British businesses in the 21st century?

When cartographers first attempted to divide the world into continents, the concept of Asia was applied to a vast land mass, about which early explorers from the West knew very little. And yet it was by far the largest continent, representing almost 30 per cent of the earth’s land mass, and stretching from what is now Turkey to the islands that comprise Indonesia.

The continent is home to about 60 per cent of the world’s people, in 44 countries that include the giant ‘superstates’ of India and China, as well as the oil rich countries of the Middle East, Japan (the East’s economic powerhouse) and 72 per cent of Russia’s territory.

Prior to the world financial crisis, a very large proportion of the world’s economic growth was coming from Asia, and some major Asian markets already look likely to be in the vanguard in the anticipated recovery. Every economic statement seems to focus on the growing strength of India and China these days, but in this feature, we take a wider look at the other major successes, from East Asia, South East Asia, the Indian Sub-continent, the Middle East and the former Soviet states of Central Asia.

Many of these countries are among the front runners in the world economy but bizarrely, only one appears in the list of Britain’s top 10 export markets, and that’s Dubai, which creeps in at the tenth spot.

Many exporting companies have shunned the markets of Asia, considering them to be too remote, culturally difficult to access, or unreliable. But as competition intensifies, as it will if the predictions of a slow down in world economies this year hold true, the vast and diverse markets in Asia will in all likelihood prove to be a crucial opportunity to spread the net wider and beat the down-turn.

The Near and Middle East is a region that many are tempted to dismiss because of the war in Iraq, ongoing hostilities between the West and Iran, and a highly fluid situation continuing between Israel, The Occupied Territories and Israel. But some of the greatest opportunities for British businesses are to be found in that area, many just a three-hour flight away. Historically high world prices for oil and gas are a burden for many, but they are the backbone of the success that major energy producers are enjoying right now. The United Arab Emirates is in the vanguard, with an annual economic growth rate of around nine per cent, which rivals China and India.

The phenomenal programme of construction and infrastructure developments over the past few years has been a tremendous opportunity for many British suppliers.

Linac, a learning and development consultancy in Gloucestershire, has recently won new orders in the UAE. Managing director Andrew Terry explained that the company had already established business in Western Europe, and targeting a high growth market such as UAE seemed like a natural progression.

Terry took advantage of the support services provided by UK Trade and Investment, which enabled the company to very quickly win a training contract with a major hotel chain.

‘The market visits brought us success in Dubai much earlier than expected and we are also in talks with a lot of other companies out there.’

Moving further east, one reaches the region traditionally known as the Indian sub-continent, but is frequently referred to nowadays as South Asia. This massive area is home to almost one-and-a-half billion people, largely dominated by the burgeoning economy of India. Just as in the Middle East, South Asia has its trouble hot spots. Violence continues to simmer in Sri Lanka, and The Economist recently declared Pakistan to be .‘the most dangerous place in the world’. But both countries are enjoying a sustained economic boom.

Jaimie Rogers, of Airbus UK, has recently returned to Britain from a secondment with UK Trade and Investment in India, researching opportunities in the aerospace sector. ‘I was based in Bangalore working out of the British Trade Office. Probably the most cosmopolitan of India’s major cities, Bangalore is a melting pot of old India, high-tech India and the steady, growing influence of Western culture. Where multi-million dollar buildings sit next to slums and where cows still roam on the ring road.’ He feels there is a ‘wealth of opportunity’ there for UK exporters.

To the north lies the region of Central Asia, comprising the former Soviet states of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. These are still not names that roll off the tongue for many British exporters, but the emerging opportunities are real enough in the development of the region’s valuable resources such as oil, gas and precious metals. British companies are among the leading investors in the region, and opportunities abound for those able to supply those firms involved in a myriad of development projects.

Kazakhstan’s economy is enjoying a rapid boom to rival those of India and China in its intensity. As 10.5 per cent, its growth rate is among the fastest in the world.

This is not only founded on oil and minerals. Kazakhstan has risen to become the world’s sixth largest exporter of grain, and a massive programme of diversification is leading to strong growth in such wide-ranging sectors as machinery manufacture and financial services.

Further east lies the dynamic region of East Asia, which includes the tiger economy of China, as well as the established markets of Japan and South Korea. All feature among the UK’s 25 top

export markets, and are very receptive to British products. Japan and Korean consumers especially appreciate traditional British brands, which are equated with high quality.

Further south are the more diverse nations of South East Asia. A financial crisis in the late 1990s seemed to take the shine off these diamond economies for a while, but even a cursory glance shows that the region is back on track, with a vengeance.

The tiny island of Singapore, situated just one degree north of the Equator, is still the UK’s largest trading partner in the region.

Although Singapore is an important financial and services centre in its own right, it is its status as a regional trading hub, together with its excellent freight and visitor handling facilities, that make the country such an important trading post.

Ten South East Asian countries are joined in co-operation through ASEAN (Association of South East Asian Nations), an initiative that celebrated its 40th anniversary last year. Originally founded by Indonesia, Malaysia, Thailand, Singapore and the Philippines, the Association has since been joined by Brunei, Vietnam, Laos, Burma and Cambodia. (Thailand and Vietnam were profiled in detail in the previous issue of International Trade Today).

The ASEAN initiative has proven remarkably resilient, succeeding in bringing together a surprisingly diverse range of countries that includes constitutional monarchies, a military ruled state, Western-style democracies and two of the world’s last surviving Communist one-party states. The member countries also comprise the world’s most populous Muslim majority state as well those that are predominantly Buddhist and one Christian majority country.

Economically, the region covers the spectrum, too. Singapore is listed among the world’s 30 most wealthy nations, while Burma is among the poorest 30.

Malaysia is often overlooked by British suppliers, which is a pity as it is a country with which the UK enjoys very strong relations. Also confident investments in infrastructure have made the country an assertive nation.

Not surprisingly perhaps, Malaysia is one of 17 world markets that are featured in UK Trade and Investment’s High Growth Market Programme, which provides specialist help for new exporters.

So while the diversity and sheer size of Asia can be daunting for the newcomer, the 44 constituent countries appear to offer excellent opportunities for international businesses that are prepared to go the extra mile.

Trading with India

India, it seems, has really taken to the world stage in the past few years. Rarely a day goes by when there isn’t a story about a major development in trade, a large Indian company that is involved in a takeover, or an initiative expected to have repercussions far beyond its borders.

Five years ago, politicians invariably mentioned China as the embodiment of how the world economy is changing. Listen carefully now, and the name of India invariably follows, in much the same way that India’s economy is expanding and changing in hot pursuit of the trailblazing Chinese.

The effect of the sustained and rapid economic growth that has been achieved over the past 15 years is reshaping the world of trade. Since it embarked on its strategy of reform in 1991, at least one hundred million people have been lifted out of poverty, while infant mortality has fallen rapidly and both life expectancy and literacy rates have shown rapid improvements.

At the same time, a growing number of entrepreneurs have amassed great fortunes, not to mention fame. Company names such as Tata, Reliant and Infosys are now commonplace in the Western press, whilst two leading Indian banks, ICICI and the State Bank of India, have extended their presence in Britain’s major cities. In fact, some 76 Indian companies chose to locate or expand their business in the UK last year, creating almost 1,500 jobs.

Perhaps the best news of all for British businesses is that relations with India are as warm as ever, and this is paying dividends in sales. Combined business between the two countries has more than doubled since 1993, reaching a huge value of some £6bn.

of the exotic and the familiar for a first-time British visitor. In a country that recognises no less than 18 official languages, and where at least 800 different dialects are spoken, it is a huge advantage for British suppliers that English is the language of business. Furthermore, there is a very strong cultural bond that has caused many Britons to report a surprising feeling of being at home in India.

However, a visit to India can be a shock. The country is one of unparalleled extremes in wealth, and in some ways the visible distinction between the ‘haves’ and ‘have nots’ has grown in the last four years. While one recent report found a record rise in the number of millionaires in India, at the same time the federal government is having to alleviate increased hardship for some of India’s poorest people as divergence between supply and demand has led to rapid price increases for some basic food products.

One of the most startling experiences for many new visitors to India is the way in which the very rich live and work so close to some of the country’s poorest, but this is normal in India’s major cities. Around the outskirts of Delhi and Mumbai (formerly Bombay), some of the most aesthetic, state-of-the-art business parks and science parks stand like palaces, while some of India’s poor live and work in makeshift housing close to the gates. That India’s economic miracle is helping to fight poverty fast is not in doubt, but there is still a very long way to go before it is finally eradicated.

It is the sheer size of India, as well as this bruising pace of change that can make it difficult for a newcomer to know where to start. The country is, perhaps, better viewed as a continent, and, therefore, approached as a number of distinct markets, each with its own unique features.

It’s Delhi for deals, Mumbai for money and Kolkata (formerly Calcutta) for culture,’ quipped Vicki Treadell, the UK’s Deputy High Commissioner in Mumbai during a recent trade mission. Mumbai is regarded as the nearest thing India has to a commercial centre (a quarter of all incoming shipments land there), whilst Delhi, being the seat of government, is the place where large public sector deals are concluded.

As for Kolkata, a massive city in India’s north eastern state of West Bengal that is frequently overlooked by visitors, it is a place where economic growth has kicked in more recently, but is now occurring at a phenomenal pace even by contemporary Indian standards.

As many of India’s best known boom towns (such as Bangalore, the renowned IT centre of the south) struggle to keep up with the pace of demand for premises and people, Kolkata is reaping the benefits as a ready-made alternative.

Even the experience of travelling to India is changing. As recent agreements to extend the choice of airlines between the UK and India have come into force, new carriers such as Virgin Airlines, British Midland, and the reputed Indian-owned line, Jet, have given passengers greater choice and driven down prices. New arrivals in India are likely to realise quickly that the country has much to do to catch up with China, its major Asian rival, but India has shown that it is capable of meeting the increasing demands of world business, and ambitious programmes of investment in roads, rail and airports are beginning to take shape.

Businesses seeking help in cracking this extraordinary market can expect to find welcome guidance from the London-based Indo-British Partnership (IBPN). Established in 1993, this specialist organisation has helped numerous companies in the UK and India to find new business. Now the Partnership has been rewarded with a major increase in funding from the British government, and is currently planning a major expansion of its services.

A productive visit to India requires careful planning and research. The country is vast, and it is important for a first-time visitor not to try to do too much. The climate is gruelling at many times, and, with a risk of illness, every visitor needs to take medical advice on inoculations. British passport holders need a visa to enter the country and, as demand is very high at present, readers are strongly advised to allow sufficient time to complete their applications – and to keep abreast of the latest requirements.

I Hate Consultants!

I need to start this item with a polite warning:

This page may contain traces of comedy, and should not be read by anyone who has undergone a humour by-pass operation.

It’s also pretty mean to consultants, but if you are a consultant yourself, please don’t worry; I’ve written this piece nice and slowly because I know you can’t read very fast.

The growth in the number of consultants operating in Britain has now officially reached pandemic proportions. According to a report I made up, wherever you go in Britain now, you will never be more than twenty five metres away from a consultant. Or should that be a rat? Either way, it’s a pretty scary thought, isn’t it?

Speaking of rats, a different report that someone else made up has observed that clinical research laboratories are showing an increasing preference for using consultants rather than rats in their experiments. The report concludes that there are three main reasons for this trend:

1. Management consultants and now so plentiful that they are actually both cheaper than rats, and much easier to get hold of
2. Researchers have confirmed that they find they are much less likely to form any kind of emotional attachment to a consultant than to a rat.
3. Perhaps most importantly, as clinical research has become increasingly esoteric, it has become clear that rats actually have a certain degree of self-respect, and consequently there are some things that rats just refuse to do.

It isn’t all doom and gloom, though. This growth in consultancy business has led directly to a growth in the number of management consultant jokes.

Q. What do you call 100 management consultants at the bottom of the Atlantic Ocean?

A. A bloody good start

Q. How many consultants does it take to change a light bulb?

A1 How many did it take last time?
A2 How much money have you got?
A3 How many do you think it should take?
A4 What do you mean by a light bulb?
A5 What do you mean by change?
A6 We recommend that you don’t change the bulb at all, but incorporate our bespoke workaround that involves re-defining darkness as the standard for that area

The following is officially recognised as the funniest joke ever made about consultants, with the obvious exception of consultants themselves (no joke could ever be as funny as all that, surely?)

A management consultant was driving along a country road in his company BMW when he saw a farmer tending sheep in a field. An idea came to him, so he parked in the gateway and gingerly walked across the field.

“Good afternoon sir! I have a small wager for you!”

“Oh yeah?” Replied the farmer, sceptically.

“I’d like to bet that I can tell you exactly how many sheep you have in this field. If I’m right, I get to keep the sheep of my choice. If I’m wrong, you get to keep my lovely car.

“Okay, said the farmer. “You’re on!”

The consultant opened his brief case, got out his lap top, his I-phone, pressed a few buttons and announced:

“One hundred and thirty four!”

“Yup. You’re absolutely spot on. Help yourself to one of my flock.”

The consultant couldn’t believe his luck, and could scarcely wait to get to his hotel room with his new four-legged friend. He marched happily back to his car and started up the engine.

Just then, the farmer knocked on the window. The consultant pressed the down button and looked quizzically at the farmer.

“I’ve got a bit of a wager for you, if you’re interested.”

‘Fantastic!’ thought the consultant. ‘Maybe I’ll get another sheep!’

“I bet that I can correctly identify what you do for a living. If I’m right, I get my animal back, otherwise, you can have my whole flock.”

‘This is just too good to be true!’ thought the consultant.

“OK, you’re on!”

Quick as a flash, the farmer replied,

“You’re a management consultant.”

The consultant was crest-fallen.

“How on earth did you know that?”
“It was obvious. You come on to my property uninvited, tell me something I already know, and charge me for the privilege. Now give me back my sheep-dog!”

Billy No Mates

Not so long ago, the chief executive of an exporting association in some far off place lamented that exporters needed some ‘mates’.  It wasn’t, it seemed, fashionable any more to be working in the once glamorous field of exporting. Perhaps in a time when travelling to foreign places is much more commonplace, the mystique of the international traveller is not what it once was.

In any case, exporters were traditionally associated with physical products. That’s not where it’s at these days, you see. The glamour is all in services, or at least it was until the credit crunch hit us all.  But who makes these daft rules, anyway?

I heard it said that the English footballer Michael Owen, saw his European career wane because he was that unfashionable animal, a goal scorer. I realise I don’t know much about football, but hold on a minute! I do know that you win a football match by scoring more goals than the other lot, so surely some guy who has a nack for putting them in the back of the net is quite a handy guy to have around, no?

As I see it, it’s  much the same for exporters, whether they are selling goods or services, they help to reduce the country’s balance of payments deficit, which is good news for all of us, as I’ll probably expand on at another time. But something tells me this whole stigma thing goes a bit deeper than just fashion. This time, it’s personal!

If you are an exporter, perhaps you can relate with me on the feeling of gradually becoming a stranger at home, and of the somewhat disconcerting fact that whenever you return to your comfortable desk at the office after yet another sojourn, the first thing the boss always wants to know is “where are you going next?” It’s really worrying when one of your best customers calls the office and asks for you by name to be told “I don’t think he works here any more.” And when your much loved pet dog/cat/budgerigar/stick insect just growls at you when you occasionally do make it back to that strange building you laughingly call home, then surely it’s time that something was done?!

I hate to be the one to bring this up, but it’s high time we exporters looked at the facts, and the thing I can’t seem to get away from is this nagging feeling that well…

NO-ONE LIKES US!

OK, so it’s out in the open now, and I know I’m among friends. We exporters need each other. Let’s stand together and demand our rights. Thank you for supporting this blog.