Italy

Strategic recommendations

Italy is a near and key market for European companies. However, it represents a major challenge.

The strong propensity to export and the importance of imports in the Italian economy demonstrate the important degree of internationalization and opening of the country. The Italian economy relies mainly on SME and is characterized by a dynamic business environment and particularly dense. Most SMEs are grouped into “industrial districts” which promotes technical progress, a rather targeted type of production and a strong export trend.

As in many other European countries, globalization and the increasing openness of national markets have made the Italian market very competitive, which doesn’t facilitate its approach and its maintenance of market shares. Moreover, the market is very fragmented because of the strong regionalization of the country (and strong regional disparity which makes it essential to adopt a field approach.

To develop in Italy, it’s therefore necessary to develop adapted strategies, instead of simply exporting. This, in order to consolidate on the market by taking a significant market share so that they can no longer be evicted.

A virgin strategy implies, 1 an objective, 2 ways et 3 time.

  • The objective: selling abroad involves selecting innovative products or services with enough differentiation. This requires a refined analysis of its industrial capacity, of its differentiation factors, of its « excellences ».
  • The time: the conquest of market share is long due to established competition, a strong community logic for economic actors and finally, an extremely prudential approach to novelty, whether it is a new product, of a new application, Of a new supplier … Any spot action is doomed to failure. An action must be recorded in time, which means in the medium term. It should consider a break-even between 3 and 5 years and a ROI with even longer terms
  • The ways: export to hyper mature markets such as Italy can’t be considered without business investment for both a real commercial impact to market entry and the guarantee of continuity over time. The means to be implemented can be substantial. Any action plan must be properly budgeted and supported by a real financial engineering.

The supply policy

Many companies go abroad with the assumption that what is good for their nationals could also be suitable for other populations.

The aim is to define a range policy adapted on the international stage and particularly to the most favorable market segments.

This is particularly important for Italy to the extent that safety and reliability expectations ensure encourage local consumers to choose products or solutions really proven to avoid any disappointment This is a reverse attitude of some customers who search specific almost systematically.

At the stage of company’s internalization, it’s imperative to refine its marketing approach.

Why an international customer would buy us a plain product which probably already exists on its market?  It’s necessary to focus on an « excellence », a specificity, a distinctive skill instead of offer a large quantity of undifferentiated products or know-how.

 To do this, it will be necessary to predispose:

  •  A company’s SBF survey and classification (Strategic business field) then a SWOT approach and therefore:
  • An analysis for each of the company’s strengths and weaknesses
  • An analysis for each SBF of Opportunities and Threats by Destination Market
  • A Selection of relevant international SBF. Ideally the most convincing SBF.
  • Once this categorization has been completed, it will be necessary to make a second ranking for potentially recurring or non-recurring applications in order to limit the risk of dispersion.
  • A structural analysis of each possible target markets; request, competition, usual forms of distribution and of course the intercultural considerations conditioning a deployment in this market. (Usages in terms of negotiation, of sales force management, of implantation, of management, of conflict management, of change management …

Distribution policy

On the international stage, it’s no longer possible to achieve tangible without a proactive trade policy. The conventional commercial intermediaries used are often too “light” to allow the conquest of a real market share which, in fact, goes through live control of its distribution, so, commercial investments

Simple products

Products as might be marketed by commercial intermediaries: agent or wholesaler.

Recitals: for standard ranges there are;

a) Confrontation with the worldwide supply. As well as for many European markets, Italians outsource in a systematic way many sub/ half products. This has for consequences that we are in competition with local competitors, but also with the world’s reservoir of labor, i.e. globalized market.

b) Offer’s banalization. There is not enough differentiation from local suppliers.

c) Current added value. A standard market product only allows low margins, often too weak to motivate intermediaries to further activism in our favor.

If we opt for this form of marketing, this will be causing impossible choice to make in relation with:

  • Nature of distribution partnerships to implement, importers, wholesaler, commercial agents, others…
  • National network structure (nobody cares about us we are “no name” in the market) or diffuse network, which means with a multiplicity of regional players that we’ll have difficulties to boost.
  • Contractualization: range, customer, Regional perimeter, margins, stock, guarantees, exclusivity…
  • Commercial intermediaries usually have a wide range, selling in an undifferentiated way their whole range without forcing a supplier. Therefore, it’s important to not rely on a particular investment from them and provide a budget for lead generation in order to facilitate their sale. This can be done through a cash publicity-promotional contribution, but it is generally more recommended to make available a dedicated promoter for 6 months or longer, for 1 or 2 years. (nature, training, financial motivation, business commitment counterparties …)
  • Communication: fair, advertising, place-of-sale promotion, open houses…

Commercial intermediaries will therefore focus on standard products marketing to small and medium accounts, but will be moved for the large accounts approach, but also when one wants to approach these with a technological offer.

However, commercial intermediaries don’t have an economic reality to the extent that the major Italian accounts such as GMS and industry care about being in direct contact with their suppliers and therefore have reluctances about intermediation.

Finally, the commercial intermediaries using is not generally satisfying, in terms of taking market shares speed, but also in long-term strategic control terms. At the slightest competing bid, intermediaries can switch between to a competitor, even more pernicious that it will be informed of our competitive advantages, but also of our weaknesses.

Differrential products

Products based on a specific know-how if it’s intended for large accounts. 

Their commercialization requires:

  • A founded strategic reflection and an analysis of the company’s portfolio of activities
  • An extremely refined targeting and a specific business approach, but intermediaries won’t carry out specific prospecting for each of their clients.
  • A prospecting and an intense commercial follow-up to give a guarantee that the prospect solicits us in case of emergence of need, but an intermediary doesn’t commit to a specific action plan for a mandate.
  • A strong business case, which implies a very advanced technical training, but intermediaries don’t take enough time for their product training
  • A commercial approach very attractive, that once again is not the intermediary’s role which generally have a huge range and won’t harass their customers for a mandate.
  • An intensive monitoring project with individualized offers, what the intermediary will generally not do, which has the consequence that this task will be transferred to your department

 Furthermore, sales of this type are generally very long, then the intermediaries benefit only late from the revenues, which will quickly alter their dynamics.

Finally, intermediaries are generally not prepared to provide market information or detailed visit reports, which means that you have no control over your distribution, this is hardly acceptable in a strategic market such as Italy.

Commercial solutions will be:

Organic growth:

1) Assumption of broad market assumption with many targets.
We shall envisage the recruitment of a good level technical-commercial, so experimented to the product/market couple. This usually involves requesting it by direct approach, which case we must imagine an extra cost of 20% to 30% compared to the normal market price given the double risk: new supplier on the market + foreign company.
Commercial recruitment will be completed by the creation of a subsidiary for communication, service and image considerations. At this point, it can be mentioned that the subsidiary creation is a wise management act. Much more than before.

 2) Assumption of a limited number targets or uncertainty about our ability to gain market share. It will be advisable to balance investments and to conduct a full-scale commercial test by commercial approach’s outsourcing. This can be done under the condition of having in-house Italian-speaking staff able to analyze specs and then formulate a proposal.

External growth:

We can envisage a local business’ purchase, the shareholding, a JV.
This is the best decision to won quickly market share, while maintaining its presence. However, finding a target can be difficult. Ensure that the transplant with the new parent company take nor it’s clear given the differences in management from one country to another, in terms of strategic approach, organization and processes, but also decision-making, communication, conflict management, leadership …

A well-ordered search and qualification must be followed by an integration requiring the same conditions.

It should be noted that only few companies are available on the market, which is going to make the search for ideal targets very difficult, which will have for consequence high valuations.

The strategic alliance:

The intermediaries’ using being often little convincing, recruitment of commercial, creation of a subsidiary, repurchase of companies being able to be expensive, there is one last dimension of strategic thinking, this is a trade alliance with an independent industrial structure with a complementary range for cross-marketing.

For its success, it must be based on obvious synergies, which generally implies an absolute commercially complementarity to be a real interest in terms of cross selling, by means, mutual selling.

Conclusion 

Repurchase, acquisitions of holdings, and strategic alliances have two advantages, namely the positioning on the destination market but also an induced diversification effect allowing:

  • Motivate his own commercial by an additional range carrying commissions
  • Develop loyalty of its own customers by a wider variety of products.

Crossed marketing allows to agree with the partner the nature of the customers he will be exploring, the nature of the sales agents he will make available, the nature of the training that can be assured to the traders in question and proper business planning. Obviously, he will wait for the same exercise in return for the distribution of its own ranges in France.