Market Selection and Foreign Entry Mode: Italy

Italy is a European country situated in Southern Europe. It made up of Italian Peninsula and some islands including Sicily and Sardinia. The country’s neighbors include Austria, France, Holy See, San Marino, Slovenia, and Switzerland. Italy is an advantage due to its strategic location give it domination on the central Mediterranean as well as proximity to the Western Europe across the Adriatic Seas. The system of governance in Italy is a republic with the president as the chief of state, and the prime minister is the head of government. The industrial economy in the Italy is divided with a developed industrial north being comprised in mainly the private companies. The Southern regions are less-developed, are welfare-dependent and mostly rely on agriculture. As a member of European Union, most trade deals are with the policies of EU (Global Edge, 2017).

Positive aspects of Italy as a potential Market

In term of cultural dimensions in the country, Italy seems to have a perception of having power well distributed and the sharing of power and decision making. Such cultural values are important in promoting a stable political and social system that is favorable for business. The country also has a strong individualistic perception rated at 76 compared to the US that stands at 91. Such a system is compatible with capitalism economy which will make it possible for the organization from the US to work with other organizations (Wengryzn, 2015). 

Regarding masculinity value, Italy has a high score just like the US. This implies that the system in the country motivated people to be the best as opposed to putting out efforts towards others and improving the quality of life in the society. This implies that success is associated with personal efforts and initiatives that an organization will put. 

Italy enjoys a stable political environment thereby favorable for the proliferation and expansion of businesses. Despite having some high tax rates, the business opportunities in this country are rewarding with enough returns to cater for the costs. The legal framework in the country offers clear avenues for settling business disputes. The legal system is efficient making it possible for litigations to be shorter and less costly. 

Negative Aspects of Doing Business in Italy

Hierarchy and Decision-making

The chain of command adopted in Italy promotes a system where the high-level management will make decisions affecting the organization without the engagement of the lower level employee. For an American Organization, which follows a collaborative system of decision making, it may face quite some inflexibility in making a decision and getting this accomplished while doing business in Italy. Italy has a big number of small and medium-sized family-owned enterprises and ownership of most businesses being under family control. This further complicates the process of decision making where the decisions are made outside the boardroom without the input from the management. This means getting into a strategic alliance or a joint venture with such an organization will affect the performance of the business as the management is not given a chance in making critical decisions. 

Relationships and communication

Relationships are highly considered in this country, and therefore one should expect length business meals that may take the social path as opposed to being work oriented. The family-oriented society impedes on the mobility of most employees, where employees will rarely leave their city or region (Capuano, 2011). This may become an issue when an organization works on a method to streamline the organization by moving the employees from one office to the other. 

The mode of communication as applied in the Italian culture differs from the American culture. One thing that one should note is the manner in which the communication is handled during the meeting. The culture in Italy allows for very flexible agendas for the meetings meaning that the meeting extends beyond what it was initially intended to achieve. During the meeting, participants contribute to the meeting’s conversation and mostly by interrupting others, having side conversations, getting on and off meeting while it is still in session. This may disrupt the flow of the information and coherent conducting of the business affair (Capuano, 2011). 

Recommendation to the company

The economic set-up in Italy is convenient for investing in the country. The country has a positive current balance of payment. This is very low inflation at the rate of -0.123 there making the standards of living affordable thus investments to the luxury industry can also be made. However, the country’s growth annual rate stands at 0.88%. For these reasons, I would recommend that the organization invest in the country. 

However, in making an entry to the market in Italy, I would propose making a direct investment and opening a new store. The differences in the business culture between Italy and America will make it difficult for the organization management to take collaborative efforts in running a business through mechanisms such as joint ventures, franchises, and strategic alliances. This will at cost but will allow the organization have control over its decision-making process and involvement of all level of management. 

It will be important to note the need to make adjustments on some important issues that may impact business operations in the country. These include; punctuality, business etiquette and business dress code. 

References

Capuano, M. (2011). Challenges of Doing Business in Italy. La Gazzette Italiana.

Global Edge. (2017). Italy: Introduction. Retrieved from https://globaledge.msu.edu/countries/italy

Wengryzn, R. [AH Shaalan]. (2015, December 1). Hofstede’s cultural dimensions theory [Video File]. Education Portal. Retrieved on 25 September 2017 at https://www.youtube.com/watch?v=eV04Msn-1GY&t=8s