The Impact of Globalization in Italy

Abstract

Italy is in the midst of a huge transformation. The country is often associated with having extraordinary food and romantic adventures, but today Italy’s image is changing as it is becoming a leader in productions of machinery around the world. This is due to globalization, the process of social, political, economic, cultural, and technological integration among countries around the world. Businesses throughout the world come together to trade goods that are not easily accessible in the country they are located in.

It is a beneficial concept as evidence can be seen it causes increased levels of trade, capital flows, and migration. There are many factors which directly affect globalization including technology, trade and integration, outsourcing and offshoring, migration, transportation, and environmental pollution. Italy falls under the European Union whose main objective is to dissolve barriers regarding trade for member nations. Italy’s transactions are all fulfilled through one form of currency, the euro. As a whole, the European Union is able to manufacture goods that are high-quality for a low-cost. The European Union is also able to ship goods across Europe at no cost. Unfortunately, the EU faces the risk of becoming one huge market if it overtakes its neighbors to the east. European governments also face large deficits throughout the Union as a result of pressures brought on by economic structural conditions. Furthermore, The European Union struggles to keep its’ members together (F. Luthans, and J.P. Doh. International Management: Culture, Strategy, and Behavior, 10th Ed., McGraw-Hill Irwin, 2018.)

Technology’s Impact on Italy

Italy has some of Europe’s most environment-friendly means of production as well as being the second-largest manufacturing economy in Europe (“Italy Transforms Itself into a High-Tech Hotbed,” 2017.) There are only five countries across the world that exceed $100 billion in manufacturing trade, and Italy is one of those as it exported $9.6 billion dollars-worth of technologies to the United States in 2017, and it is the third largest exporter in Europe (“Italy Transforms Itself into a High-Tech Hotbed,” 2017.) Italy consists mainly of small and midsize enterprises, which is often viewed as disadvantage, but that is not necessarily the case. The fact that the companies are smaller poses the advantage to adapt to new technologies more quickly and efficiently. Michele Scannavini, president of the Italian Trade Agency (ITA), says, “Today, 40 percent of Italian manufacturing companies use 3-D printers for fast prototyping, and 25 percent use robotics in the manufacturing process,” (“Italy Transforms Itself into a High-Tech Hotbed,” 2017.) Italy is ranked second worldwide in global competitiveness in industrial machinery as it is one of the top three producers of machined parts. There are more than 4,600 companies in Italy which produce machinery and are responsible for employing nearly 180,000. This is a notable number of citizens to employ in a country whose population is pushing sixty million. Italy exports approximately seventy percent of the machinery it produces to other countries (“Italy Transforms Itself into a High-Tech Hotbed,” 2017.)

In 2017, the exports of machinery produced by Italian’s increased by seventeen percent, and that number is expected to keep increasing with each passing year. A considerable amount of Italy’s exports is headed to the United States, especially in machinery. Approximately twenty-five percent of Italy’s exports to America are machinery. The United States coordinates international business transactions with more than 500 Italian machinery production companies through partnerships with Ford, NASA, and Boeing and countless more companies. Italy launched a long-term strategy in September 2016 called the Industrial National Plan 4.0 which is intended to increase the digitalization of the economy in Italy by gaining money through reduction of taxes, support from investors, and other private sources in order to expand technology research (“Italy Transforms Itself into a High-Tech Hotbed,” 2017.) The government also intends to start several educational centers at colleges in Pisa, Milan, and other cities with high hopes that the centers will have trained over 200,000 students and 3,000 managers as well as distributing 1,400 PhDs on innovation, technology, and future industries within ten years of launching the centers of competence. The Italian Trade Agency also hopes to continue to collaborate with American research organizations and travel to Los Angeles, Boston, New York, Houston, and Detroit within the next two years to explore ideas aiding the advancement of manufacturing, aerospace, biotechnology, and opportunities for startup (“Italy Transforms Itself into a High-Tech Hotbed,” 2017.)

Impact of Trade and Integration on Italy

Italy is still in the process of recovery due to a lengthy recession. It is now the world’s eighth largest economy with a Gross Domestic Product of EUR1.8 trillion in 2016; Italy’s Gross Domestic Product grew by 0.9% in 2016, by 1.5% in 2017, and Gross Domestic Product is projected to grow by approximately 1.5% in 2018 (“International trade in goods and services in Italy: overview, 2018.) Employment rates rose rapidly in Italy because of the Jobs Act, a law that promotes job security, and social security exoneration. The economic state of Italy differentiates within each region of the country. The northern part of Italy is where most of the trade and manufacturing, which produces over fifty percent of the nation’s income, takes place. There is less of a need to hire people to do hands on labor in the manufacturing process now due to vertical specialization. This has been intensified in industries that use less technology because these industries are directly affected. Italy’s main export to other countries is machinery. In 2017, machinery accounted for $55.3 billion dollars out of $506.3 billion (“Italy’s Top 10 Exports,” 2018.) Articles of iron accounted for $11.8 billion, furniture, bedding, lighting, signs, and prefab buildings accounted for $9.8 billion, beverages, spirits, vinegar accounted for $7.7 billion, leather/ animal gut articles accounted for $5.7 billion, clothing, accessories accounted for $5.5 billion, footwear accounted for $5.1 billion, ceramic products accounted for $4.5 billion, ships accounted for $3.9 billion, and lastly cereal/milk accounted for $3.6 billion (“Italy’s Top 10 Exports,” 2018.) Trade and integration create many opportunities for employment as there is a need for employees to handle the transportation of products which would not exist if trade were not taking place. Furthermore, trade and integration allow countries to bring in billions of dollars because some countries have products that other countries do not have access to which leaves no option other than to do business internationally. It is also evident that international trade positively affects Italy as the country brought in billions of dollars from trading with the U.S. alone. Trade is undergone by domestic companies, workers, farmers, indigenous cultures, and different demographic groups in Italy because it helps stakeholders bring in a substantial amount of profit that would be unavailable without international business trade. There are more than 1.5 million people employed due to agricultural trade (“The Economy of Italy,” n.d.)

The Impact of Offshoring and Outsourcing

There is not much evidence to suggest that offshoring has a positive impact for stakeholders in Italy. There are many faults to this strategy. Common issues that companies face when attempting offshoring include raising labor costs, an increase in costs of transactions, and gaps in productivity. Quality has also been known to suffer as there have been multiple incidences that resulted in complaints of poor accordance to requirements met in foreign plants. Issues have also risen with timeliness since international production causes delivery to be severely delayed. Links have also been made between offshoring and a lack of dependability in products. There was next to no information to support outsourcing’s effects on Italy. However, in general outsourcing is beneficial because it provides a way to have products made my people who have an expertise in the industry. It can also be beneficial in regards to the risk factor of a company. If something goes wrong with a product and there was outsourcing involved, the blame can be placed on the outside vendor. Outsourcing can also help lower costs of operations because it saves companies from having to hire employees and pay more expenses for the operation. There are also many disadvantages to outsourcing in Italy which include the risk of private company information being leaked. There is also a risk in depending on someone else to do work for your company because they are an outside entity who does not have loyalty to you. Furthermore, there is no way to know what kind of workload the organization you are outsourcing to is dealing with and whether or not they are making your product a priority (“The Advantages and Disadvantages of Outsourcing,” n.d.)

Migration and Transportation Impact on Italy

Migrants have proven to be an ongoing issue for Italy. Italy’s interior minister, Matteo Salvini is very much opposed to migrants crowding Italy and is doing everything in his power to prevent more migrants from coming into Italy, and it is estimated that Italy spent $5 billion on migrants in 2017 alone (“Why European Tension Is Rising Over Migrants,” n.d.) Anti-immigration movements have become vastly popular in Italy. The arrival of migrants makes Italians feel uneasy as they are afraid that terrorism and a rise in crime will arrive into their country with the migrants. It affects stakeholders negatively because there are not enough jobs to offer for the Italians and the migrants. As the share of goods increases, so does the need for transportation management. When insourcing is taking place, the need for employees who can figure out how to properly manage transportation activities increases. When transportations are outsourced, the operators of transport tend to reorganize themselves and become larger. The second case is the only instance when observing an increased demand in labor in this industry is possible (“Globalisation and the rise of logistics FDI-The case of Italy,” 2011.)

How Environmental Pollution Has Impacted Italy

Regarding air pollution, Italy is attempting to lower the presence of black carbon in the air, especially within the sector of transportation. Italy has assisted in funding nearly one hundred and ninety projects with the goal of reducing emissions by paying a total of one hundred and ninety-five billion euros (“Italy: Environmental Issues, Policies and Clean Technology,” 2018.) However, despite its best efforts, there is still a reported death toll of 30,000 Italians per year who die as a consequence of air pollution (“Air Pollutions Shortens the Life Expectancy of Italians,” 2015.) The substantial amount of pollution throughout Italy has affected stakeholders by limiting their options of transportation. In 2015, the air had become so polluted that vehicles were restricted from cities for several periods in an effort to minimize the amount of pollution (“Italy, Dirty Air at Record Levels, Is Putting Limits on Traffic,” 2015.)

Conclusion

Globalization has its pros and cons, but, in Italy’s case, the pros far exceed the cons. Italy has accumulated billions of dollars due to globalization, mainly because of their manufacturing of machinery. There is a need for transportation of goods due to globalization which directly leads to an increase in environmental pollution. On the other hand, globalization has enabled Italy to be profitable in ways that would not be possible if the only people they were doing business with consumers in their own country. Technology has excelled in Italy over the past few years and enabled them to sell their products internationally. Business are considerably smaller because they are family owned in this country, but that is not a disadvantage because it enables Italians to adapt to new technologies more quickly. The billions of euros Italy earns every year through globalization make any negative impact that comes from this process worth it. Italy has been through some very tough times economically, but it is currently in the process of becoming better than it has ever been. Globalization is the reason why Italy is prospering like it has never done before. Most importantly, globalization has created countless opportunities for stakeholders to expand their businesses and enables them to bring in a significant amount of profit from all around the world.

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