The new challenges for Italian foreign trade

In what direction are the challenges of Italian foreign trade going? How important is the internationalization process, which is increasingly vital and strategic in the global economy, for Italian SMEs?

The growth of the “advanced emerging” and so-called “emerging emerging” markets, the crisis of the past three years that particularly affected the Western world have brought about a radical change in the global economy. Growing 1% cannot be enough when other countries instead have a GDP growth of 8%: therefore, it has become absolutely necessary to look for new ways, new markets, increase exports, implement a process of ’strategic relocation.’ The delocalization implemented by many Italian companies, has turned out to be a wrong choice: so in order to be able to keep up with today's dynamics, it becomes absolutely appropriate to internationalize one's business, by implanting elsewhere, in other foreign countries, in order to attack the markets that are experiencing a sustained pace of growth. The Western consumer is experiencing a process of progressive impoverishment, unlike that of the BRICs: it is estimated that by 2050, India and China alone will make up 50% of the world's consumers. Relocating also means creating prospects for development and improvement, not only in the markets where one sets up, but also in the investing country.

Considering the peculiar structure of Italian industry and business, which is characterized by a myriad of SMEs unable to penetrate foreign markets on their own, it is deemed appropriate to find suitable solutions: therefore, it is necessary to create mergers, aggregate, create consortia, create Enterprise Networks. In short, unite. Fundamental then should be the support of the government and institutions. It would be enough to take an example from France: to revitalize the agonizing wine sector (including champagne), a government delegation, headed by Sarkozy himself, went to China with the most important producers in the sector to promote their products. Thanks to this move, China single-handedly managed to lift an industry that had experienced a 50% slump in consumption. The role of the manufacturing industry in Italy, for example, is proving to be as crucial as ever: with 31% of Italy's total exports, the 135,000 companies (with 1.3 million employees) in the sector manage to generate a turnover equivalent to 112 billion euros. Thus, supporting this sector in internationalization would grow the entire Italian economy. Here, too, the logic that moves Italian companies must be aimed not at mere exporting, but at a real process of relocation, which would also play an important role in the so-called “currency wars.”.

After the slump of 2009, world production and trade have returned to growth: obviously the role of countries such as China, India (a country to which Lombard companies export more than to China) and Brazil, but also Vietnam, Nigeria, Thailand, Turkey and Russia has been more than relevant. Asia, in particular, presents many opportunities in different commodity sectors: from food to textiles, from chemicals to mineral processing, from mechanics to electrical and electronics, from infrastructure to manufacturing. Diversifying into different countries and markets therefore becomes a strategic choice, considering that the Italian product, thanks to its psychological substrate, is a particularly expected type of product: the Chinese themselves say that they imitate us because we are masters at what we do, and in Chinese culture imitation has a positive meaning. International trade rebounded in 2010, with growth of 18.4%: Asia and Latin America are the macro-regions that have experienced the most sustained development, although GDP growth rates are lower than in the pre-crisis two-year period.

Analyzing imports of Italian products to all continents, we can say that the space for penetration into new markets is there: Italian exports at the moment reach a 30% only in France, Germany and the United States; those to Asia reach 6.9% and those to Latin America just 1.7%. In the coming years, in addition to China and India, countries such as Mexico, Argentina, Chile, Tunisia, the Philippines, Taiwan, South Korea, Indonesia, Malaysia, Vietnam, and Thailand represent more than just a gamble. In Asia, for example, the growth of the middle class will go from 23% to 40% in the next few years with a consequent increase in demand for consumer goods. More generally, global opportunities in the electricity sector for Italian companies are particularly attractive: investment in the sector has grown by 35% in Asia, 18% in Africa, and 17% in Latin America.

So what are the strategies for Italian companies that want to internationalize their business?

The challenges of Italian foreign trade

First of all, there is a need to make a qualitative leap, there is a need for more help from the Country System, and Italian companies need to understand that it is important to receive support from consulting companies or designated bodies, etc. Many times entrepreneurs think they are able to do it on their own, but the enterprise can yield greater results if accompanied. So assistance takes on an important role. Aggregation and union among enterprises is another key step considering the structure of Italian industry (characterized by a strong presence of SMEs), which cannot rely on large retailers like France, for example, to place its products. There is a need for greater coordination, between the political and economic worlds, and more generally in the business world: companies should not feel alone in their internationalization process. Accompanying Italian entrepreneurs on the ground, in addition to promoting the country's image, proves to be an important tool in order to promote their products and weave those ties that are important for relocation. Foreign policy must therefore support trade policy.

Moreover, Italy can count on its brand: made in Italy still constitutes a reason for fascination. So focusing on quality, on design, which have always distinguished Italian products still remains a must as well as a winning strategy for Italian foreign trade.

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