Italy has struggled to post the 2008 banking crisis and subsequent recession and now has one of the highest levels of public debt in the European Union.
These levels of debt, coupled with a difficult set of demographics, make it imperative that the country embarks on a series of painful reforms – but the complexities of Italian political life make these reforms difficult to agree up and implement. Traditions and a sense of history play powerfully on the Italian minds and both of these have heavily influenced the Italian approach to business.
Italians are famous the world over for their sense of family and it could be said that this strongly relationship-oriented approach has been taken into the world of commerce. Indeed, it is true to say that the Italian economy has a greater percentage of small and medium-sized, family-run businesses than any other European state (with the possible exception of Spain.) This is not to say that all companies are riddled by nepotism and old-style cronyism but the idea of an enterprise being an arrangement of strongly felt relationships is still very much in evidence.
Therefore, although Italian companies tend towards a high degree of hierarchy, the company organisation chart will not necessarily give an accurate guide to how the organisation functions in reality. In reality, the structures of the company will be defined by the network of relationships which percolate through the company – strict functional reporting lines taking a back seat to less tangible but stronger ties of personal loyalty and respect. Job title is not always a true indication of the level of power and influence which is more likely to be defined by who you know and who is keeping you in the loop.
Added to this complexity are such issues as long-standing political affiliations and regionalism, which continue to infuse the whole economic structure of a state which maintains a high level of nationalised industries (in comparison with many other EU countries.)
Another by-product of family orientation in business and love of region is that Italy has one of the least mobile management populations in any of the major industrialised nations which can pose problems for foreign capital companies who attempt rationalisation programmes between, for example, offices in Milan and Rome.
Italy, however, remains the 7th largest economy in the world and the 5th largest by industrial output. It boasts world-class companies in the fields of automotive, precision engineering and textiles and fashion and is a business culture that simply cannot be ignored.
Written and Produced by Keith Warburton
This country profile has been produced to give a short overview of some of the key concepts to bear in mind when doing business with contacts in Italy. It is intended to be an aid to business people who have commercial dealings with counterparties in the country but should not be seen as an exhaustive guide to this topic or as a substitute for more substantial research should there be a need.
With this in mind, we have covered the areas which are key to a better understanding of the cultural mindset underpinning business dealings in Italy and which are, quite often, extremely different from the approach and thought processes associated with business in other parts of the world.
Therefore this briefing note is broken into short, bite-sized sections on the following topics: