Economic Environment in Italy - Assignment Example

Business Research Report Customer’s Name Grade Course Tutor’s Name (May 9, 2012) Outline I. Introduction II. Business environment III. Culture IV. Government intervention V. Conclusion VI. References. Introduction Italy is positioned in Southern Europe. It has a population of approximately 58.2 million. Italy has much to offer to its visitors as well as its citizens. Italy is surrounded by the four seas of Mediterranean. It is well known for its coastline activities (Howkins 2001 p.158). Political environment Italy is a nation that is divided into provinces, municipalities and regions. The legislative body of Italy is parliament which comprises of a chamber of delegates and a senate. Its members serve for five years in office. They are elected by voting. Ministers hold administrative power. Parliament delegates power to ministers for various matters in the defined limit. Regional administrations have governmental powers in some areas for instance local taxes, health services, hospital services, transportation and urban planning. Italy consists of a large population. It has roughly 57million inhabitants. A large population in Italy is Roman Catholics. The capital city of Italy is Rome which is the industrial center in the country. Alongside this city, there are Milan, Turin, Genoa and Naples which are large cities. Turin, Veneto, and Milan are the core business centers of Italy Economic environment The economy of Italy is built primarily on the conversion of raw materials. The raw materials are imported into refined products to fulfill foreign and domestic demand. Regions, provinces and government offer enticements that embolden industrialization in Italy (“Economist” 2005 par 3). The economy of Italy fluctuates from region to region. The North part of Italy is vastly industrialized. It has virtuous infrastructures and trained labor force that facilitating industrialization. The South part is still under development. It lacks the quality environment for industrialization. Italian economy consists of three main sectors. These sectors are small businesses, large private companies and public segments. Italy is among the seven most developed nations in the diaspora The Italian business industry entails many small and medium enterprises and few large industries that specialize in various activities. 60% of domestic product represents service activities. The service activities include transportation, property rental, commerce, communications, insurance and banking. 30% of gross domestic products represent manufacturing industries. These industries include chemicals, machinery, pharmaceuticals, textile and construction. The transportation of vehicles and non-metal minerals are also in the manufacturing industries brackets. 4% of the gross domestic products signify agricultural industry. The main crops grown Italy are cereals, vegetables, olive oil, fruits and in addition, dairy produce (Mallory & Adams P.27). Moreover, Italy Is filled with a quality employment environment. However, employment environment lacks skills and unemployment for others especially in the south Italy. Social environment The social business environment of Italy is their living, education background, working conditions, income level and their community at large. There is a wide gap between the poor and the rich, educated and not educated, professionals and workers. Italy is divided in to the South and the North. The North part is highly developed while the South part is not developed. The North part has a strong business environment for instance employment, decent salaries and in addition, a pleasant working environment. The North is also highly industrialized hence the living condition of the people are conducive. This boosts business. This is because people focus on making additional funds than they already have. Good infrastructures facilitate the transportation of raw materials. Good communication network is also in the North part of Italy. The availability of health centers in the North of Italy facilitates the health of the society. The social environment in the North Italy is highly conducive for entrepreneurship. The income of those working in this place is tremendously encouraging hence motivates people to work. In addition, in the North of Italy people are well educated. They have a legitimate education background that provides both skilled and unskilled labor to businesses. The people starting their businesses or rather industries have the knowledge and skills (“Report for Selected Countries and Subjects" 2006 par 2). In the South of Italy, business environment is not very conducive. The people here are not educated. Without education, availability of skilled and unskilled laborers is reduced hence dragging business down. Their income levels are low hence their living conditions are poor. Health conditions of people here due to lack health facilities are also poor. Consequently, they are not energetic enough to work. This crafts a significant gap between rich in the North and the poor in the South. This creates a high competition in business (Jean 1977 p 147). Environment factors The environmental factors are economy, legal aspects, government and technological advances. In addition, there are internal environmental factors that include the distributors, employees, suppliers, shareholders, labor supply and partners. There are certain laws preventing businesses and companies from producing certain products and doing certain things. Technology in Italy is breaking the boundaries with respect to what is produced and made. This is giving the organizations a lot of freedom (“Unification of Italy” 2003 par 1). Italy has a lot of focus on adapting features in order to cab the damage of financial funding. Organization are achieving optimal function due to having internal factors rights, this rely on the company controlling the factors and ensuring they are working to required standards of the company. The environment factors of Italy make business possible. The county has strong leadership that makes it a stable country hence facilitate economic development. Technology in Italy is highly used that is also a factor to promoting business Legal aspects Italy consists of various legal aspects that facilitate business. Feb 2007, government of Italy approved arrangement and criteria to embolden generation of electric energy by use of solar photovoltaic plants. This has given Italy an opportunity to be an enthralling photovoltaic objects. Safety of employees at work place is a paramount concern of business owners. This act is ethical and legal. It encourages more people to venture in to business. In addition, there is a fair trading to avoid injury of the economy. Fair trade embraces unfair competition which is very high in Italy. It also includes copy infringement and false advertising. There are laws that govern trade in Italy hence promoting business. The government tax policies are high in Italy. However, for foreigners, one can choose to be a tax payer in Italy or at their homes. This encourages more investors in the country. There are serious penalties for ignoring the legal requirement and regulations. Culture Culture is a belief, objects or behavior and other physiognomies that are common in a particular community or group. It comprises of various aspects for example, norms, rules, technologies, languages, values, organizations, institutions and products. According to Dr. Geert (1980 p.10), “culture is more often a source of conflict than of synergy. Cultural differences are nuisance at best and often a disaster” Hofstede frame work categorizes culture into individualism, uncertain avoidance, masculinity and power distance. Power distance ranked lower than others. The power distance index which emphases on inequality or equality between nation’s societies. A high power distance point out that inequality of wealth and power has been permitted to develop in a society. A low distance illustrate that it does not emphasize on wealth and power. Italy is working hard to eliminate the emphases on variances between its wealth and citizen’s power (Hofstede 1986 p. 9). Individualism is also an impact of culture on business. Individualism concentrates on the gradation at which the culture emphasize collective and individual’s interpersonal relationship and achievement. High individualism explains that privilege of an individual in a society is dominant in the society. Low individualism means that the making decisions in the society is communal. Individualism is more collective in Italy (Hofstede 1986 p. 9). Masculinity is the rate at which the society emphasizes or does not emphasize on traditional masculine work of male control, achievement and power. High masculinity indicates that a country is facing gender differentiation. In this incident, men dominate wealth and power. low means that men and females are treated equal. Masculinity is remarkably high in Italy (Hofstede 1980 p.11). Italian culture has played a vital role in modern business world. Some of contribution is insurance, double-entry bookkeeping and banking. Italians are darned well at time keeping. They use the axiom “time is money”. Foreign Business women and business men ought to be punctual for business appointments (Hofstede 1986 p 9). Women have a minor role in business. Masculinity is high in Italy hence it does not allow women own power and wealth. Women form a high percentage of Italy work forces. However, women in senior managerial position are pretty small. Women have a high profile in some of the family owned companies (Hofstede 1980 p.11). Female entrepreneurs in Italy have been on the rise for the past few decades. Women, in their quest to liberate themselves have established business. This has been motivated by the high level of joblessness. Women entrepreneurs have their driving force embedded in the urge to be financially independent of their male counterpart. Generally, this has significantly contributed to the gross domestic products of the country (“The Italian Colonial Empire” 2010). The cultural expectations applied to business operations in Australia. Australia has a population of approximately twenty million people. A large population is situated in main urban centers. The most spoken language is English. The largest population practice Christianity as a religion. Australia has an open friendly culture. Their work speaks for themselves. It is a humble country. There is high individuality in Australia. Privacy is a norm in this country. Individuality is demonstrated in Australia’s day to day lives Power distance is low. This is due to sheer equality between families, government, societal levels and organization. Australians are good at time keeping. They are punctual when doing their business. People in Australia will go to work in time. They are never late for a meeting. When in a meeting, they are attentive and also maintain eye contact when been addressed. What has the government done to promote or discourage foreign firms forming joint ventures with local companies? Government policies on business taxes do not serve as a viable incentive for foreign companies to form partnerships with the Italian government. This is because taxes are quite high and this scares the potential foreign depositors in Italy. However, there exist foreign companies which ignore the high taxing rates. The main issue arising from the partnerships is the high prices of locally produced goods in the local markets. This is a business strategy by the firms to forward the tax strain to the end consumer. The Italy government does not allow for 100% ownership on subsidiaries. The allowed foreign firm’s ownership percentages in various industrial sectors are not welcoming to the foreign firms to attain subsidiaries and work in partnership with the companies. It is in every company’s best interest to maximize on their overall profit margins. Government carbon duties are reasonably low in Italy. Several companies have started to adopt the use of cleaner fuels like solar radiation to produce energy. But, Auto gas is generally the most widely used. This translates to a high effluent level hence the government has introduced carbon taxes to safeguard the manufacturing companies keep reducing their effluent levels. This carbon tax is reasonable. It has encouraged foreign firms to venture into the business world in the country, mainly through partnerships (“solar energy” 2011 par.1). The prices of locally available raw materials in Italy have been hiking over the years. Buying raw materials is becoming hugely expensive. This has caused the industrial prices to rise significantly. This has caused some of the foreign companies to relocate to other countries. In a move to try to subsidize the prices of raw materials, the government has introduced tax cuts on the manufacturing industries. This has caused a positive reception since several foreign companies have renewed their partnerships contracts with the local companies. New partnership contracts have also been signed by new foreign companies in the market. The government has ensured that the available work force is highly skilled. This has been achieved through an efficient and field work oriented education system which the government has invented. The government has set up world class universities and colleges which provide quality education producing well qualified graduates. These graduates become competent employees thus the foreign companies are enticed by the availability efficient workers. The government has also put in place the required proper infrastructures to facilitate efficient running of the local and foreign companies’ processes. For instance, the government has deposited in construction of modern roads, airports and it also contains constructed hi-tech harbors. This elaborate means of transport has promoted fast and efficient delivery of raw materials and goods. Subsequently, the availability of world class infrastructure has attracted foreign investors to partner with local companies (Smith& Denis 1997 p 3). The government financial companies in Italy offer loans with reasonable and fair interest rates. For instance the unicredit Banka gives a financial means with auspicious interest rates through the credit line that is approved by Government republic of Italy. This is a great incentive to both the local and foreign companies that are established in the country. It is easy for such companies to expand their facilities and production capabilities through the acquisition of these loans. Many foreign companies have been lured into investing in Italy due to the availability of such loans (“Is taxation in Europe high” 2012 par.1). Because of lack of local venture, the Italy government motivates foreign business investments through tax concessions. Foreign ownership is however limited by law. For example foreign investment in a bank is narrowed to less that 5% of a company’s capital. The government has mobilized campaigns to motivate women to venture in to the business world. In addition to this, the government has devised various incentives aimed at encouraging women to adopt entrepreneurship. Consequently, more job opportunities for women have been created. Female entrepreneurship has gone against all cultural odds. Women have liberated themselves from the discriminative cultural beliefs that women cannot be successful entrepreneurs. . Conclusion The business environment of Italy is quite conducive. The stable government and its policies are a contributing factor to the receptive business environment. The economic, social and cultural environments are also quite appealing and they provide incentives to entrepreneurs to establish their businesses. Culture has been changing opening more opportunities to business. Women are able to venture in to the business world. Equal opportunities for both men and women are all in place. Women can own as much power and wealth as men. This in return improves the country’s entrepreneurs The government also contributes a lot to the business world. The stable leadership of the country has also heavily promoted the business. Italy is among the most developed countries in the world. The core purpose of business is to maximize profits while minimizing cost. Italy is a real viable business environment to achieve this. The availability of raw materials and the overall low production cost as compared to other countries is a motivating factor. Many investors are looking into venturing into the Italian market. The country’s economy will benefit from the increase in business processes. The Italy government should uphold the current policies and modify the relevant parts in order to motivate local firms and international companies to expand their businesses. Italy has a lot of untapped resources hence any company that ventures into the business sector in the country has a high chance of success. The government also ought to reduce the tax policies so as to ensure efficient profits. The government tax is way too high in the country in the South of Italy. As a results, the prices of goods in the country rise. Very high prices of fuel for example, make the transportation of raw materials difficult. This is a turn off to the investors. Due to the high tax, the investors also withdraw their investment. Italy is an industrious nation in raw materials. Proper utilization of them will make the country more successful in business. Italy also ought to cover the space between the rich and the poor, educated and not educated in order to promote the country’s economy effectively. This could be done by bringing up more health facilities and business in the South. Good infrastructure ought to be put in place to ensure a healthy business environment in Italian South. The income of the people should be reasonable so that everyone in the society is able to meet their daily need and also venture in business. Italy is an industrious country and is also a developed country. Involving female in the business world will continue raising its economic status. References Hofstede, Geert 1980, culture consequences: international differences in work related values. New York Park, ca: sage.p.10 Hofstede, Geert 1986, cultures and organizations: software of the mind: intercultural cooperation and its importance for survival, Newyork,MCgraw-hill. P.9 Howkins, John 2001, The Creative Economy: How People Make Money From Ideas, Penguin, p.155-158. Jean Ladrier 1977, The Challenge Presented to Culture, UNESCO, p. 147. Mallory J.P and Adams DQ 1997 Encyclopedia of Indo-European Culture (London: Fitzroy and Dearborn. p24. “Report for Selected Countries and Subjects". Imf.org. 14 September 2006. Retrieved 11May 2012. "Report for Selected Countries and Subjects". Imf.org. 14 September 2006. Retrieved 11 May 2012. Smith Mack, Denis 1997 Modern Italy; A Political History. Ann Arbor: The University of Michigan Press. ISBN 0-472-10895-6 The Economist Intelligence Unit’s quality-of-life index, Economist, 2005 The Italian Colonial Empire". All Empires. Retrieved 30 October 2010. Unification of Italy". Library.thinkquest.org. 4 April 2003. Retrieved 11may 2012. Is tax in Europe high 2012 .viewed in 10th may 2012. encyclopediabofthenations>Eurrope>Italy.www. Unicredit.rs/?jez=EN&p==1055> Is solar energy used in Italy, 2011, viewed on 10th may 2012. Read More