Italy: Land of Innovation Request Information |
Italy, just the mention of it brings to mind the concept of quality -- be it a finely tailored suit, exquisite leather shoes or even an elegant sports car. Quality, in fact, has been synonymous with Italian craftsmanship since the days of Leonardo da Vinci and his Renaissance counterparts. And over the years, this same craftsmanship has lent itself well to industries that have chosen to locate there. Quality, however, is only part of the story. Italy also has a history steeped in innovation, which is quite beneficial in today's ever-changing business world. Even during the 13th and 14th centuries, da Vinci, the painter best known for the Mona Lisa, had a scientific bent that helped him design weapons for the military as well as sketching out the first inklings of the helicopter. Examples of such ingenuity can be found throughout Italian history all the way through the 20th Century -- a time when Italian entrepreneurs Ferruccio Lamborghini and Enzo Ferrari designed the ultimate sports cars. And the inventiveness is still there today. "The design innovation and new products that are coming out of Italy are some of the reasons why a U.S. company would be looking at acquiring or doing a joint venture with an Italian company," says Richard K. Greene, a senior manager with Ernst & Young. "And the trend in Italy for U.S. companies, over that in a lot of other countries in Europe, is to invest by acquisition or joint venture. Italy has developed expertise in a lot of different areas and instead of a U.S. company building its own facilities, it can take advantage of what's already there -- the work force, the experience, the technical expertise -- by acquiring companies."
Some of the more notable deals in Italy last year were, in fact, acquisitions of or strategic alliances with Italian companies. Many automakers struggling for a top spot in the fiercely competitive European auto market have seen an incredible opportunity in the well-established Italian auto industry to serve not only the growing Italian market, but the rest of Europe as well. General Motors Corp. (GM), for example, jumped at the chance to form a US$2.4 billion alliance with Turin-based Fiat to cut costs by sharing parts and people while allowing each to maintain autonomy.
Fiat also provided an opportunity to Japanese automaker Mitsubishi Motors. Mitsubishi and Fiat subsidiary Pininfarina SpA had signed an agreement in 1997 to begin developing a new sport utility vehicle (SUV) called the Pajero Pinin -- the first of the model rolled off the Turin factory line in July 1999. But before the first Pinin hit the road, Fiat and Mitsubishi announced a new agreement to build a new four-wheel-drive SUV in Italy. Fiat will provide the design, while Mitsubishi will furnish the body and basic mechanical parts. The auto industry is only one in a line of other industries taking advantage of Italy's expertise and innovation. Another segment that's seeing a number of alliances is high-tech. Madrid-based Meta4 NV, a leading web-based provider of people and knowledge management, entered the Italian market last year through a non-exclusive agreement with Cap Gemini Italy. "Our relationship with Cap Gemini has been instrumental in the development of our solution tailored for Italy and helped us deliver the product to market in less than six months," says Joaquin Moya-Angeler, president and COO of Meta4. In a similar agreement, Autonomy Corp., a Cambridge, England-based business software developer, established partnerships with two Italian firms -- Convey and Reply -- to expand its presence in Italy. After operating in Italy for only four months, however, Autonomy decided there was enough opportunity in the market to open its own office in Milan. And Autonomy is not alone. Although acquisitions and mergers have been the preferred method of entry into the Italian market, the number of companies locating facilities there is beginning to increase. Italy saw 16 foreign greenfield investments launched in 1999 alone, reports the Italian Trade Commission, New York.
The majority of investment into Italy lands in the north, particularly in the Piedmont and Lombardy regions where Turin and Milan are located. In recent years, Northern Italy has served as home to many manufacturing operations of foreign companies. "Whirlpool had its headquarters in Milan for years, and Electrolux had its light goods manufacturing headquarters in Milan as well," says Greene. "These are strong, active companies that were able to take advantage of some of the attributes the area had to offer." Included in its attributes is an educated, highly skilled work force, says Greene. "And Northern Italy is certainly fairly close to a large mass of the population" he adds. "It is relatively easy to get through Yugoslavia into some of the Eastern European countries." And again the region's strengths in quality and innovation have made it quite appealing to the likes of telecom firms such as Motorola. Last year, the Schaumburg, Ill.-based company set forth its plans to develop a $100 million European R&D center in Turin, creating 500 jobs. The new center will serve as a base for the company's personal communication products development processes for Europe, the Middle East and Africa. Other firms finding a good fit in Northern Italy last year include Dyneon and Credit Suisse. Dyneon, a joint venture between the fluropolymer businesses of 3M and Hoechst AG, opened a new sales and marketing office in Milan to better serve its customers, while Credit Suisse implemented the first step in its "Personal Financial Services Europe" strategy. Credit Suisse Italy, a joint venture between Winterthur, Credit Suisse Private Banking and Credit Suisse Asset Management, opened in Milan last year. The distribution network of the new firm will consist of three elements: personal bankers operating throughout Italy, branch offices in major Italian towns and a call center.
Although the majority of the investment goes into Northern Italy, the government is making sure that the South gets its share of the investment pie as well. Italy is now providing a wide variety of incentives to promote development in the southern portion of the country, which can create significant cost savings, says Greene. With nine of the 16 greenfield locations that started up in 1999 locating in Southern Italy, it's obvious that companies are taking the incentive bait. In fact, the Italian airline Alitalia, in partnership with the customer care specialist 7C from Britain, has located a 1,400-job call center in Palermo, Sicily. Alitalia officials cited entrepreneurial incentives provided by the government as reasons for locating in Sicily. The new facility will provide frontline telephone bookings for Alitalia, KLM and partner airlines. Southern Italy also landed facilities from General DataComm Industries and Air Liquide. General DataCom opened a new Rome sales office in anticipation of growth in the Italian voice-data convergence and Internet markets, while Air Liquide opened a new oxygen plant near Syracuse, Sicily. Air Liquide located its $82.5 million plant in the Priolo petrochemical complex, where it will supply Isab Energy's power plant. These companies, however, are receiving more than just incentives. Labor skills and costs in Southern Italy are on par with any location in Northern Italy, according to a report conducted by AT Kearney. And the region's geographic location is good for distribution of products and materials. "The strength of the South is its proximity to Northern Africa -- Egypt and Tunisia -- some of the stronger economies and potential new sales opportunities those types of countries would offer," says Greene.
Italy is in a good location to take advantage of any opportunities arising from the expansion of the European Union and increase in trade with North Africa and the Americas. Italy is taking steps to re-establish the Mediterranean Sea as a formidable transportation asset for Southern Italy, especially with the proposed EU project called Euro-Med. Euro-Med, if approved, will create a Mediterranean Free Trade Zone within the next 10 years. According to the Italian Trade Commission, "Italy, and particularly the south, because of its strategic location and infrastructure, is particularly well-poised to take advantage of these developments, and the logistics and transportation sector will offer major opportunities for investments."
©2000 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and is not warranted to be accurate or current.
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"GM is aggressively moving ahead on our strategy to grow our global automotive business," says John F. Smith, GM chairman and CEO. "The opportunity to create an alliance with a large and technologically strong company like Fiat in a capital-efficient manner helps us strengthen our position in Europe and South America. This alliance allows us to capture significant benefits in the areas of platform and component sharing as well as cost efficiencies."
