Business Practices in Italy

Doing Business In Italy

U.S. Commercial Service Italy Market Overview Italy has a diverse, industrial economy, the seventh largest in the world and fourth largest in the European Union. With a population of 58.1 million, and a GDP of $2.1 trillion, Italy represents a market comparable in size and wealth to that of the United Kingdom and France, while ranking larger in GDP than Brazil, India, and Mexico. Italys GDP grew 1.4 percent in 2007 but is expected to show a slight decline for 2008 due to recent financial market turbulence and recession in major export markets. This decline is expected to deepen in 2009 with official Italian projections of -2.0 percent.

Industrial activity is concentrated in the north in a swath that runs from Turin in the west through Milan to Venice in the east. This is one of the most industrialized and prosperous areas of Europe, and accounts for some 50 percent of national income. By contrast, Italys southern region, or Mezzogiorno, is less developed. As in other industrialized countries, the role of the services sector is growing. Nevertheless, Italy maintains the highest proportion of manufacturing jobs among the G7 economies. Numerous Italian companies are famous worldwide, but it is the small and medium-sized firms (almost 90 percent of all Italian firms) that dominate the economy.

Italy is a major U.S. trading partner. In 2007, U.S. exports to Italy totaled $14.1 billion, an increase of 12.8 percent over the previous year, and U.S. imports from Italy reached $35.0 billion. U.S. exports to Italy through November 2008 totaled $14.5 billion, an increase of 12.6 percent over the same period in 2007. The U.S. is Italys 11th largest supplier. The top four supplier countries are Germany, France, the Netherlands, and China.

U.S. cumulative investment in Italy was at $28 billion in 2006, putting the country number 11 in Europe as a destination for U.S. investment. In comparison, cumulative U.S. investment in the Netherlands and France was $370 billion and $68 billion, respectively. Approximately seventy percent of U.S. investment is in manufacturing and information technology, with the remainder in services.

Market Challenges

Page 1

More information at www.globaltrade.net

U.S. exporters in Italy face strong competition from local and other EU companies. In addition, Italy can be a surprisingly complex market for new entrants. Italys regulatory environment is complex and sometimes lacks the transparency, clarity, efficiency, and certainty found in other developed economies. Products that involve health, safety, or environmental concerns are likely to be highly regulated. While EU-wide regulations often apply, Italian laws sometimes go beyond the basic EU requirements. More effective enforcement of intellectual property laws and more stringent corporate governance are needed. The continued dominance of small, family-owned companies and regional differences and disparities add to the challenges of doing business.

Market Opportunities Chapter 4 of this guide spells out in detail some key market opportunities for U.S. products and services in the leading sectors of the Italian market. U.S. firms enjoy good opportunities in sectors where new regulations or programs (often imposed or initiated at the EU level), are creating demand; with new products/services where there is little or no domestic competition; and/or where the American product offers clear technological advantages. Best prospects that respond to these factors include the information technology, security, healthcare, and environmental sectors.

Italys changing demographics and lifestyle also create opportunities. Italys population is aging. More women are entering and remaining in the workforce. An influx of immigrants from Africa, Asia, Eastern Europe, and Latin America is creating identifiable ethnic markets to be served. Pet ownership is rising. U.S. higher educational programs are in demand.

Italy hosts major trade shows in many sectors that attract buyers from throughout Europe and beyond. This includes events in best prospect sectors such as information technology, health care, franchising, travel and tourism, safety and security, pets, automotive, and marine recreation, among others. The Commercial Service offers onsite support for U.S. exporters at most of the major international shows, or by request.

In the agricultural sector, bulk and intermediate commodities (such as durum wheat -- used as ingredients for Italian value-added products), seafood, fruits and nuts, hardwood and softwood, and consumer-oriented products are in demand.

Market Entry Strategy The cultivation and maintenance of personal relationships are a vital part of doing business in Italy. This is even truer for foreign businesses that lack an intimate understanding of Italys business culture and regulatory environment. Finding the right Italian business partner is therefore an essential part of establishing a business presence in Italy. The ideal candidate should already have

Page 2

More information at www.globaltrade.net

a network of relationships that will open doors in the market. They should also have a keen understanding of local business practices and applicable regulations. For technical products, the potential partner should have the ability to provide Italian customers with after-sales service.

The U.S. Commercial Service offers services to help U.S. firms identify an ideal partner, from customized Gold Key matchmaking to participation in U.S. Pavilions at leading trade exhibitions. The U.S. Commercial Service also maintains a list of Business Service Providers consultants, accounting and legal advisors, and others who offer valuable assistance to U.S. exporters.

Read the full market research report

Page 3

More information at www.globaltrade.net