Italy Evaluation
Institution of Affiliation:
Date:
Country Information.
Italy is a European country in South-Central Europe. With its capital in Rome, it occupies an area of about 301,340 km2., bordering France, Austria, Switzerland, Slovenia, and Vatican City. Headed by Sergio Mattarella, Italy also has a prime minister Giuseppe Conte. The prime minister must be appointed by the president of the Republic of Italy after passing a vote of confidence in parliament. It’s a member of the European Union. The citizens of the nation speak Italian. This is the official and widely spoken language. However, most Italians also speak the regional language. ‘vulgar Latin’ and roughly 29% of the population speak English. With a Mediterranean climate, the majority are Roman Catholics with Vatican City being the hub of Roman Catholicism. Italy supports marine life with the majority of Mediterranean slipper lobsters, cuttlefish and Flabellina affinis to mention a few.
Foreign Exchange
Italy is one of the countries that form part of the European Union (EU). As a member of the EU, Italy uses the Euro for most of its global trade besides the US Dollar (European Commission 2017). Over the last year, the exchange rate between the Canadian dollar to the Euro was reasonably stable, but for the fluctuations in February, March and April occasioned by the Corona Pandemic. See the Figure below illustrating the trends. Over the period the Euro exchanged at a high of 1.58 and a low of 1.43 against the Canadian dollar. Italy is among the hardest-hit countries by the COVID 19 pandemic. The effect of the epidemic on the country’s economy is likely to take longer to rectify, which means that Italy is likely to experience a foreign exchange deficit for some time due to reduction in its exports.
Source: https://www.xe.com/currencycharts/?from=EUR&to=CAD&view=1Y
Due to its current vulnerable position, investments by Canada will be strategically advantageous due to the likely profit in foreign exchange. Investing in the country will cost the Canadian college slightly reduced budget on account of foreign exchange gain.
Economic integration
Integration refers to agreements among countries in the geographic region to reduce or remove tariffs and non-tariff barriers to facilitate the free flow of goods, people and factors of production (OECD 2017). The EU has allowed students across the EU to seek education in either of the member states without imposition of taxes and levies. This means that the Canadian College will not only be competing with colleges in Italy but across the EU. However, students studying in Italy will be given all the privileges for being within the EU compared to if they were to study in Canada. Italy being part of the EU, has trade agreements with other countries being regulated under the European Union Comprehensive Economic and Trade Agreement (CETA). The treaty forbids member state to enter into the preferential agreement in contravention of EU guidelines. The CETA has not been without advantages, due to emerged new markets emanating from partnerships. Under CETA, Italy can export anything to Canada without tax being imposed while Canada can invest freely in Italy (Bendiek 2018).
Global integration has in the recent past been challenged by a wave of anti-globalization campaigns similar to those witnessed during Brexit in the United Kingdom. Italy’s regulatory environment is complex and at times lacks the transparency, clarity, efficiency and certainty found in other developed economies. Majority of the businesses are small and medium firms owned by families, and thus the corporate culture is yet to be entrenched. The low cost of education and compensation in Italy serves to keep costs low but may discourage foreign investments due to reduced profit margins. Overseas investments by countries out of the EU will attract all the taxes and tariffs that may discourage foreign direct investment (Crescentini 2012).
Market Entry Options
It will be advantageous for the college to do business in Italy because of many reasons. There is a large population of over 60.85 million. These numbers are promising because this means there will be enough potential students increasing demand for the new campus. Since 1 Euro equals 1.53 Canadian Dollar, there is an excellent opportunity for the college to offer lower pricing that will see an increase in demand for the services. However, Italy focuses on cultivating and maintaining personal relationships in business which calls for the need to hire an Italian agent because the market is very individual. This becomes an extra cost for the new campus.
Italy will be a strategic option because its location will open the college to admission from any EU member country and not just Italy. Furthermore, Italy is located in middle Europe close to France, Germany, Croatia, Serbia and Greece. The country is also close to the African Coast and may thus attract students from Africa, especially the countries of the north. The strategic goal for the college would be to provide unique Canadian courses in Italy to attract EU member students who would otherwise have to travel to Canada for education. The local campus will admit students from the EU without requiring travels and visas. More will also be saved through reduced taxes on school fees, thus making the academic courses in Italy relatively cheaper for those in the EU than if they were to take the course in Canada. The students will also pay their fees in Euro, thus shielding the college from possible losses due to foreign exchange losses.
The college should opt for an equity mode of entry into the Italian market. The local partner would be instrumental in ensuring the proper clearance from government offices is achieved. Furthermore, a local partner in the country will have more knowledge on the market that will be beneficial to the market entry exercise. The recommended mode of entry would be through an acquisition of a local college that is conducting a similar business that is offering related courses at the same level. The acquisition could retain a market share for the local entity to ensure compliance with the local regulatory environment.
Strategy and structure
Organizations may seek to expand through a number of strategies namely: concentration, integration, diversification, cooperation, internationalization and digitalisation. With regards to internationalization, a company may use a number of known strategies. The four primary avenues that companies can deploy to enter a foreign market is by way of a foreign direct investment, contractual agreement with a local partner, joint ventures or licensed franchising (Danciu 2012). The choice of strategy and structure is determined both by the nature of the product or service as well as the market. In the education sector, the globalization strategy is facilitated by similarities in product offerings in the two countries both being education. However, the regulations in the education industry limits the number of strategies that can be used in the new market due to issues of quality and adherence to standards (Bradley 2005). For this reason, the most suited structure for a university seeking to open in Italy would be through either foreign direct investment or agreeing with an accredited local partner to offer courses jointly.
The sensitive nature of accreditation of courses in the education sector requires a very centralized model of management. For this reason, the control and management of the university in Italy will still remain to be in Canada with the office in Italy being given mostly academic roles that are very essential in the management of the course. The centralized model will reduce administrative costs by reducing duplications because most of the administrative support can then be handled in the Canada office. The centralized structure will ensure that decisions are consistent with strategic objectives. However, the centralized structure is not without its own challenges (Yang et al. 2014). The major undoing is that the structure will discourage initiative in lower-level employees in Italy who will feel disenfranchised. This may be mitigated by a decision made to delocalize some of the functions from the Canada and providing a level of autonomy that is enough to ensure that there are no delays occasioned by the need for decisions to be made in Canada.
Human Resources
I recommend the polycentric staffing approach in hiring a manager to run the new campus in Italy. This type of plan appreciates the host company’s’ norms and practices. The management position here will be held by someone from the local country which is Italy for my case. This manager is referred to as a Host Country National. There are many advantages associated with this approach. To begin with, the manager has solid background knowledge about the business practices, social-economic, political and legal environment of the host country. Secondly, the cost incurred in hiring these managers is much lower than when hiring the parent company nationals or third-country nationals. (Müllner et al. 2017).
Thirdly, polycentric staffing approach provides promotion opportunities to local nationals. Promotion and advancement opportunities is a significant motivational factor that will have them focus on achieving organizational goals. This increases their commitment at work, and consequently, they become more productive. Lastly, host country nation managers are in a better position to respond to local demands since they have a sense of belonging with a better understanding of the country’s cultural and business norms. Although managing the college in Italy might prove to be a challenging task for these managers with a significant challenge in communicating with personnel from the home office in Canada, this problem can be solved if the Canadian office personnel becomes friendly and accommodating. It is also crucial that the managers undergo some training and development programs to enhance their performance. The cultural dos and don’ts both for the host and home countries are necessary. Cross-cultural awareness workshops work perfectly well to improve the relationship between the managers and just to help them appreciate their own and other people’s culture.
References
Hofstede Centre (2013). National Culture: Dimensions. Retrieved from http://geert-hofstede.com/dimensions.html
Ko, H. S., & Yang, M. L. (2011). The effects of cross-cultural training on expatriate assignments. Intercultural communication studies, XX(1), 158-174.
Peng, M. W. (2013). Global Business (3rd ed.). Mason, OH: Cengage Learning.
Müllner, J., Klopf, P., & Nell, P. C. (2017). Trojan horses or local allies: Host-country national managers in developing market subsidiaries. Journal of International Management, 23(3), 306-325.
Bendiek, Annegret. 2018. EU-Canada Relations on the Rise.
Bradley, Frank. 2005. International Marketing Strategy. 5th ed. London: Pearson Education.
Crescentini, Enzo. 2012. “Foreign Direct Investment in Italy 2000-2010 : Spatial Patterns and Implications.”
Danciu, Victor. 2012. “Models for the Internationalization of the Business: A Diversity- Based Approach.” Management & Marketing Challenges for the Knowledge Society 7(1): 29–42.
European Commission. 2017. “The CETA Agreement: Opening up a Wealth of Opportunities for People in Austria.” (February 2017).
OECD. 2017. “International Trade, Foreign Direct Investment and Global Value Chains 2017.” International trade, foreign direct investment and global value chains 2017: 1–9.
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