In 2013 the Italian export towards China increased by 8.1% in comparison with the previous year, while they are consolidating the entrepreneurial initiatives of several enterprises that are going to control with local productive sites the Asian markets characterized by the strongest growth.
The market globalization, whose starting can be positioned at the half of the Nineties and which finds its most complete development in November 2001 when China joined the World Trade Organization (WTO), represents the most important evolution of economic systems after the industrial revolution that developed in the course of the last two centuries. And it is for this reason that the most suitable term for defining what had been anticipated as “post industrial society” should more likely become “global society”. A globality that has extended from finance to trades and production, establishing a comparison among the competition capability of the different Country systems on a world scale.
In that context, more parts have raised doubts about the capability of a Country with manufacturing attitude like Italy, whose industrial structure is formed, by over 97%, by small and very small enterprises, of surviving against the double challenge constituted on one hand by the most advanced Western Countries in terms of technology, organization and investments in research, such as Germany, while on the other hand prevail the scale dimensions and the low labour cost of the Asian market and in particular of China, whose economic and technological development is unequalled in the history by duration and intensity, neither referring to what happened in Japan in the years from the Seventies to the Nineties.
The setback phase and the recovery starting
While China, after joining WTO, continued its forced march on the industrialization road and developed, besides export, internal services and consumptions with the aim of becoming the leader Country of the world economy in the successive twenty years, Italy seemed unable to react to the changes that were taking place owing to the globalization. Changes that the financial and economic crisis started in 2009 had enhanced, with the result of throwing into a crisis that original manufacturing model, known as system of industrial districts, which had formed in Italy in the first postwar period and which had reached its biggest expansion in the course of the Nineties.
The crisis particularly struck the household appliance sector in which Italy ranked as the primary European producer, as well as world product leader. Around the productive sites of the main household appliance brands, in Veneto, in Lombardy and in Marche, important industrial districts had in fact developed, formed by small and medium enterprises strongly integrated one another in supply chains characterized by high specialization. In the last four years, however, the production of household appliances in Italy, which in 2009 had reached the peak of 30 million pieces, has more than halved due to the convergent effect of the economic crisis, of the productive delocalization and of the competition of the new Asian players.
Half of the about 20 factories producing household appliances that existed in the Country shut down, with heavy repercussions for the districts that around those same factories had formed and grown in time. Numerous small and medium enterprises that composed the supply chain of the sector, devoid of their reference element, remained wrongfooted on the market, also because they seemed unable, owing to the sizes of the corporate structure and the absence of managerial culture, to find an alternative outlet to their production. Then, slowly, the most dynamic of these enterprises undertook some actions, lavishing investments and developing entrepreneurial initiatives addressed both to the product diversification and to the search for new markets.
This happened not only in the household appliance industry but also in other fields, like fashion, furniture and agri-food. In this recovery period particularly active were the small and medium engineering companies, with an important contribution to the Italian export that on the whole recovered what it had lost in the period included between 2009 and 2012, in 2013 reaching 20 billion dollars, with the 8.1% rise in comparison with the previous year, which has allowed the Italian export to recover the values preceding the crisis. It is also worth noticing how that increment has mainly focused on the second half of the year, witnessing a strong acceleration in course in the Italian foreign trade, in particular towards China.
According to the forecasts, the trades with China are going to develop in the next five years with strong growth rates. At the same time Italy’s investments towards this same Country have grown (+ 28.9% in 2013) and the presence of Italian companies in the Chinese territory has significantly grown, in particular in the Eastern part of the Country. They estimate, in fact, that in the Shanghai Municipality and on the whole in the three most important provinces of Eastern China (Jiangsu, Zhejang and Anhui) today operate more than 900 Italian companies, of which 516 registered in the lists of FTI – Foreign Trade Institute, while the Italian community residing in this same area and enrolled in Aire (Registry of Italian Citizens Residing Abroad), which in 2004 amounted to 426 people, over the last ten years has grown up to reaching 2,750 units in September 2013.
Concerning this, it is also worth noticing that, adding to this number the Italians not registered in Aire but stably operating in this same area, we would reach a value that is at least twice the official one. Not to mention the other municipalities and provinces of Eastern China, from Beijing ones to those belonging to Guangshou (Canton), equally important in terms of industry and international trade. Likewise, Italian operators’ travels have significantly increased, to the extent that from 2010 to 2012 the number of visas released in Shanghai doubled and still in 2012 Italy was the first Country of the Shenghen area for the issue of visas in China, with 285,000 visas, witnessing the attention that the Italian entrepreneurial world is paying to this market.
Fourth capitalism enterprises
The importance of exports for a manufacturing Country like Italy in this particular historical phase, with the fall of domestic consumptions and the contemporaneous competition of foreign products, is clear if we think that, in these years of crisis, the only companies that have withstood the financial and market difficulties are the exporting enterprises. Among them, they particularly stood out those enterprises that some years ago, in a study carried out by Mediobanca on the Italian economic system, were called “Fourth Capitalism enterprises”.
They are small-medium enterprises, anyway characterized by a good product brand, by high managerial culture and by the proprietary domain of technologies that take part in the implementation of their productive processes. They are enterprises nimbly moving on the global market, successfully competing with big international Groups thanks to their higher characteristics of creativity, productivity, fast response and service level. Someone has defined them “pocket multinationals”, meaning with this term that these companies can compete, in terms of performances, with big multinationals, even with inferior business sizes by some orders of magnitude.
They are just these “pocket multinationals” that, seventeen centuries after Marco Polo, have rediscovered ancient Venetian merchants’ bent for the travels and the trade exchanges with distant Countries. Some of these enterprises are leader companies in the production of household appliance components that do not only firmly maintain their presence in the European market of high-end products, collaborating for this with the main Western brands of household appliances, but also participate with their supplies in the production of household appliances directly manufactured in the new rising markets, in Eastern Europe as well as in Asia and especially in China, but also in Brazil, Turkey, South America and North Africa.
Among these enterprises, it is worth mentioning two very successful cases, respectively in the field of the components for cooking products (Sabaf Group) and in the segment of the components for washing products (Rold Group). Two manufacturers of household appliance components that stand out for the excellence characteristics of products and their high business culture, as well as for the internationalization level of their activities. As a matter of fact, long time before the first symptoms of the economic and market crisis were felt in the household appliance industry in Italy, these two enterprises had already turned to the foreign market to consolidate their world leadership in the respective production sectors.
The Sabaf case
Sabaf Group, which in 2013 was awarded for the second time with the prize “Balance Oscar” for small and medium businesses released by Ferpi – Italian Federation of Public Relationships (the same award was obtained by Sabaf in 2004), since its foundation has been pursuing a strategy aimed at privileging the investments in research and technological development of the product and of the productive process. In particular, thanks to the high automation level of production sites and to the innovative aspects of products, it has succeeded in consolidating its world leadership position in the field of the components for cooking appliances.
Strongly rooted into the national territory, Sabaf Group has however promoted a series of initiatives aimed at satisfying the rising markets with local productions, referring in particular to Brazil, Turkey and more recently to China. We had the opportunity of talking about these initiatives with Alberto Bartoli and Nicola Belpietro, respectively Managing Director and Sales Manager of the company.
How has the world market of household appliances changed in the last years?
In comparison with the past, when the market was prevailingly formed by the Countries relying on the most ancient industrial tradition, today the driving element is constituted by rising Countries, not only due to political and economic reasons, but also to their strong demographic development, which in its turn boosts consumptions.
What are the elements that characterize the competition in the household appliance sector?
For an enterprise like Sabaf, which has invested a lot in the high automation of productive processes in extra-big volume manufacturing, the labour cost is not a determinant competitive element. The intensive-work production, on the other hand, is not compatible with the quality and safety of our products. The coverage of different territories is more important for us than the labour cost, referring in particular to fast developing Countries.
How do you grant such coverage?
In numerous Countries, we directly supply products from Italy, anyway assuring a high service level, both in terms of logistics and of pre- and after sale service. But for some nations, like Brazil, Turkey and China, we deemed it was strategic to be present on the territory with local productive sites.
What are the characteristics of these investments that you have made?
The productions implemented abroad are intended for local markets. In the Countries in which we have invested, we have doubled the productive processes with the same high-automation technologies already used in Italy and this is due to product quality reasons.
What are the Countries in which you have realized local productions?
The first Sabaf productive site abroad was established in Brazil, built in 2003 for the production of gas burners. It employs one hundred employees and includes fully automated die-casting isles. Afterwards, we implemented a factory in Turkey, at Manisa, in the outskirts of Smirne. Also this factory, which needed an investment of 8 million Euros, is dedicated to the production of gas burners. Built on a surface of 10,000 m2, this factory started its production in 2012 and today it employs 60 workers. Finally, more recently, we have decided to start the burner production also in China, where on the other hand we had already been present for years with exclusively commercial and representation activities.
What were the most significant aspects of this experience?
In ’97 we had set up in Shanghai a representation office that in 2008 was transformed into company. Since 2008, for some years, we just sold from Italy and we collected information about the local market, which was characterized by particular conditions, with product standards differing from those generally in use in Western Countries. In 2009 the introduction of a new protectionist regulation prevented, in fact, the aluminium use in the flame spreaders of burners, which is instead at the base of our traditional products. Then, in 2011 we created some specific products to satisfy new standards and we established our trading company, with which we started selling our products, strengthening our network of industrial relationships. We are planning to start the local production of such burners within the end of the current year.
How much is the Chinese market important for you?
It is an enormous market, especially for cooking appliances. In 2013 they produced in China 26 million cooking hobs, of which 19 millions intended for the home market. But future prospects provide for an exponential growth, if we consider that the Government’s plans provide for the urbanization of 300 million individuals, whose primary need will naturally be cooking their foods.
What are the difficulties and the opportunities for Sabaf in entering this market?
Concerning troubles, we must consider that local producers are accustomed to having their component supplier close to their door. For this reason it is essential to be present on the territory. Another source of difficulty is constituted by the Chinese bureaucracy, together with language problems. But at the same time Sabaf is favoured by its technological supremacy, which is unequalled in China, together with its competence in product problems in the most different application markets.
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The Rold case
Like Sabaf, also Rold Group produces components for household appliances and it is a world leader company in its production sector, in particular concerning the field of the components for washing appliances. This sector, for which Rold Group produces doorlocks and rotary switches for washing machines, in Italy has seen the almost total disappearance of production sites, progressively delocalized to low labour cost Countries, while new Asian players progressively entered this same market.
Under such conditions, Rold could maintain the totality of the production in Italy thanks to two strategic elements: its absolute leader position on a world scale for its typology of components, with more than 60% of the global market, together with the complete domain of the functional and technological aspects of the product and of the related production processes, characterized by high automation and big volumes. The relatively small sizes of the market where operates Rold, which, concerning the doorlocks, can be considered a niche one, together with the modest margin on products, which to be profitable require very high production volumes and extremely cutting-edge manufacturing systems, constitute for Rold an effective barrier to the entrance of new players even if it requests, for maintaining its market position, constant attention and continuous investments in research and development. We talked about these aspects and the medium-long term strategies of the Group with Laura Rocchitelli and with Paolo Barbatelli, respectively President and Strategic Management Responsible of Rold SpA Group.
According to what motivations has Rold Group maintained its entire production in Italy?
Concerning the main household appliance brands, all of them our customers, these enterprises can easily buy products manufactured in Italy, for which Rold however assures a high service level and pre- and after-sale service of absolute excellence. The matter might be different for the small local household appliance producers that might prefer suppliers next to their production sites. Concerning this, we are operating in the main markets just to create an effective technical-commercial presence.
As far as this aspect is concerned, towards what directions are you going?
Markets are objectively different and we must take this into account. In the United States, for instance, we must operate with a typically channel market. In this case we are represented by Rold America, a company headquartered at Belmont in North Carolina and operating with full autonomy, following an approach that provides for the selection of a sale network formed by indirect collaborators. Likewise our presence in Brazil, with offices in Sao Paolo and in England, with headquarters in Birmingham, is mainly targeted to the sale.
And what about the Chinese market?
The Chinese market, where already today we are exporting from 10% to 20% of our production, shows particular needs, also due to the cultural and linguistic differences that characterize it. For this reason, starting already from 2009 we have created in Shanghai Rold Electronic Trading, with targets of consolidation of the presence on the territory through not only sales and marketing activities but also with the creation of strategic agreements and alliances.
More in particular, how does this company operate from the operational point of view?
The targets of this structure include the implementation of an effective interface with local brands. Considering all that, we have provided for a Business Manager figure able to solve both the commercial and the technical-linguistic problems, not only in the pre-and after sale phases but also in the design stages regarding the new products. For this reason, we have also provided for the creation of a laboratory supporting local activities.
Concerning the future, what are your long-term goals?
In relation to our current products, we are paying utmost attention to rising markets and they undoubtedly include also India. But in more general terms, our business strategies provide for development horizons in the order of 5-10 years, also with the target of diversifying our production. For this reason we have created Rold Elettronica, with the target of developing advanced solutions of electronic and computer-based control. Likewise, Rold Lighting is developing LED lamps and innovative lighting systems. Concerning innovation projects, we can rely also on the support of Rold Research, a Research Centre that we have created with other partners and that operates in the ambit of the Milan Polytechnics Foundation.
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