Analysis: Impacts on the business

Factors that influence business ventures

• Macroeconomic environment: economical growth rate is on average 1.8 % a year that is comparatively low in comparison with other economically developed countries like US 2.5%, Netherlands 2.2%, United Kingdom 2.1%
• Telecommunications infrastructure: Italy has very well developed telecommunications infrastructure and as a percentage of GDP expenditures in this sector are similar to other economically advanced countries.
• Government initiatives: The Italian government has planned many IT initiatives, incompliance with EU directives. Unfortunately, the initiatives lack enforcement capability. For example, they have announced programs to wire all Italian schools by the end of the year and to establish training programmers for their labor force but they do not have enough qualified people to train and implement these programs. One key example of the official Italian attitude toward IT related issues was their apparent disinterest in preparing for Y2K. Italy faced this challenge with their typical reactive not proactive style. In essence, they are missing the organizational infrastructure and coordination to fulfill their goals. Therefore, until these problems are addresses it seems difficult for a company to enjoy real success. Part of the new government programs call for small business to give a percentage of their revenues towards continuing their employee's education.
• IT labor force: Although their education system is advanced, they are required to study science and math, it lacks the practical training necessary for real life. There education system is based on theoretical and not experiential learning. High unemployment in the south of Italy provides for an ample of low cost labor force. The average unemployment rate for the country is 12% and in the future it will hopefully develop into a skilled labor force after the implementation of specialized IT training programs. It is important for a new company to not be taken in by the high unemployment rate as a long-term supply of low cost labor because clearly this is a cyclical phenomenon. Additionally, when the EU membership expands to include the Eastern European countries Italy will begin lose their structural funding from the EU. They will no longer be one of the worst off therefore they will have to begin to find other sources of funding.
• Other difficulties in opening up a new store would be the Italian reliance on personal connections to sell and market products. The investment in online advertising is less than one quarter of one percent of total advertising in Italy. New Italian Internet users are easily bored with uninteresting websites and feel that ecommerce robs them of the whole social experience of shopping.
• Finally, one thing we have not mentioned is "mafia" and corruption in Italy. As is to be expected in a country with a plethora of bureaucratic obstacles there are also many back doors to be opened with bribes and influence. It is difficult for companies from outside Italy to be successful with out a network of connections, to be gained only by having important local contacts.
• With all this in mind there must be some draw for companies to bring their investment to Italy because Oracle, Microsoft and IBM have all come into the country recently and are enjoying success.