Are intermediaries necessary
Italy is an adjacent and important market for European companies. However, the country poses a major challenge.
The strong tendency towards exports and the importance of imports for the Italian economy show how important the internationalization and opening of the country is. The Italian economy is mainly based on SMEs and is characterized by a dynamic and particularly dense corporate structure. The majority of SMEs are mostly grouped into "industrial areas", which promotes technical progress, a preferred type of production and a strong tendency to export.
As with countless other European countries, globalization and the increasing opening of national markets have made the Italian market highly competitive, which makes it easier to start or secure market shares. In addition, due to the strong regionalization of the country (and a strong regional imbalance), the market is very fragmented, making it necessary to adapt the approach.
In order to be able to develop further in Italy, it is therefore necessary to develop adapted strategies and not just to pursue a simple export approach. This is necessary in order to consolidate oneself in the market and thereby to secure a considerable market share in order not to be able to be displaced.
An initial strategy implies (1) a goal, (2) means, and (3) time.
- 1) The goal: Selling abroad implies the selection of innovative and successful products or services that offer sufficient differentiation. For this purpose, a refined analysis of the industrial capacity, the differentiation factors and the excellences must be carried out.
- 2) The time: Securing market shares is a lengthy process due to the established competition, a strong social logic of the economic players and finally due to an extreme caution before the new, regardless of whether it is a new product, a new area of application or a new supplier ... every action is doomed to failure. An action must be viewed in terms of time, i. H. be planned in the medium term. A break-even between three and five years and an ROI with an even longer period can be expected.
- 3) The means: Exporting to overripe markets such as Italy cannot be considered without trade investments which at the same time have a real business impact on market launch and guarantee survival over time. The budget for implementation can be substantial. Any action plan must be properly budgeted and supported by real financial instruments.
The supply policy
Countless companies venture abroad on the assumption that what is good for local customers cannot be bad for other countries.
A supply policy must be defined that is adapted to the international market, especially the most suitable market segments.
This is particularly important in Italy, as expectations of safety and reliability mean that local consumers are more inclined to opt for proven products or solutions in order to avoid any disappointment. This is an attitude that is different from certain customers who systematically look for specific products and solutions.
With regard to the internationalization of the company, it is particularly important to refine your marketing approach.
Why should an international customer buy an everyday product that is probably already on their market? You have to concentrate on an “excellence” - a special feature, an individual competence - and not just offer a large number of products or undifferentiated know-how.
For this reason, the following measures must be taken in advance:
- Elaboration of a list and classification of the SGF (strategic business areas) of the company as well as a SWOT approach, and thus
- Conducting an analysis for each of the company's strengths and weaknesses;
- An analysis for each of the SGF, the opportunities and threats by target market;
- A selection of the relevant SGF for the international market. Ideally, the selection of the most coherent strategic business area.
- After this categorization has been carried out, a second classification with regard to the potentially recurring or non-recurring areas of application must be carried out in order to limit the risk of dispersion.
- A structural analysis of any target market; Demand, competitors, common forms of distribution and, of course, intercultural considerations that represent the conditions for use in this market. (The customs related to negotiation, leadership of people, implementation, management, conflict management, change management, etc.)
The distribution policy
Abroad, it is no longer possible to achieve tangible results without a resolute trade policy. The use of classic middlemen is often too “light” to ensure the securing of a decent market share, which actually depends on direct control of sales and thus on trade investments.
Products that could be marketed through an intermediary: agent or wholesaler.
Reason: With standard product offerings, there are
a) a confrontation with the global market supply. As with many other European markets, the Italians outsource countless sub / semi-finished products. In addition, you are not only in competition with local competitors, but also with a global pool of qualified workers. H. with a globalized market.
b) Generalization of the offer. The differentiation compared to the local providers is not sufficient.
c) Current added value. An everyday product only allows small margins, which are often too low to motivate middlemen to take further measures in our favor.
If the choice extends to this type of launch, it makes decisions more difficult in terms of:
- the type of distribution partnerships, importers, wholesalers, sales agents and other contributors to be implemented;
- the network structure - national (nobody is interested in us if we are considered "no name" in the market), or a branched network, i. H. with a large number of regional actors that are difficult to dynamize.
- the contract design: offer, clientele, regional area, margins, inventory, guarantees, exclusivity, etc.
- the application. Middlemen usually have a wide range of products and sell their products equally without pushing for a specific supplier. It is therefore important not to rely on a specific investment on your part and to make a budget available for generating prospects in order to make it easier for them to sell. Although this is possible via an Internet advertising promotion, it is generally recommended that a promoter be commissioned to do this for a period of six months, if possible even one or two years. (Type, training, financial incentive, consideration in terms of economic commitment, etc.)
- The communication: trade fair, advertising, in-store promotions, open days, etc.
Intermediaries will therefore be particularly successful in marketing standard products to small and medium-sized customers, but will not be prepared for the acquisition of large customers, especially not if you want to approach them with a technological offer.
This is why commercial agents hardly play an economic role any more, insofar as major Italian customers, be it GMS or industry, have concerns about having direct contact with their suppliers and thus have reservations about intermediary activities.
Finally, the use of middlemen is usually unsatisfactory, either in terms of the speed at which market shares are secured or in terms of long-term strategic control of the market. If there is the slightest counter offer, these middlemen can be lured away by a competitor, which is all the more dangerous since he gains knowledge of both our competitive advantages and our weaknesses.
Products with a differentiator
Products that are based on specific know-how, especially with major customers as the target group.
Your launch requires:
- A strategic and comprehensive view and analysis of the company's portfolio of activities;
- A particularly refined focus and a specific commercial approach, unlike middlemen who do not make a specific acquisition for each of their clients;
- An intensive, commercial acquisition and follow-up to ensure that the potential customer chooses us when necessary, as opposed to a middleman who does not have a specific action plan for a particular client;
- A particularly structured, commercial line of argument, which requires advanced technical training, in contrast to middlemen who do not take enough time for their product-specific training;
- A very catchy marketing approach, which is not one of the characteristics of middlemen who usually have a wide range of products and would not bother their customers for a specific client;
- Intensive project support with individualized offers, which the middleman usually does not do, which means that this task falls within our area of responsibility anyway.
In addition, sales of this type tend to be protracted and the middlemen do not benefit from revenue until later, which will quickly slow the momentum.
Lastly, middlemen are usually unwilling to provide market information or detailed visit logs, which leaves you in control of your sales, which is unacceptable in a strategic market like Italy.
Commercial solutions include:
1) Large market with a large number of target groups.
We are considering recruiting a qualified technical and commercial employee who has experience with the product-market relationship. This usually implies acquiring them through direct contact. In this case, additional costs of 20% to 30% compared to the normal market price can be expected, taking into account twice the risk: new provider on the market + foreign company.
The recruitment of middlemen is done by opening a branch for communication, service and image purposes. In this phase, it should be emphasized that opening a branch is an intended step. To find out more, see above.
2) Limited number of audiences or uncertainty about our ability to secure a market share. The investments should be metered and a commercial test run should be carried out by outsourcing the commercial approach. This can be done on the condition that Italian-speaking employees are employed who can analyze the specifications and finally formulate a proposal.
Acquisition of a local company, acquisition of company shares or a joint venture can be considered.
This is the ideal way to quickly secure a market share and, at the same time, to secure your long-term presence. However, it is not that easy to find a destination. Ensuring that the merger with the new parent company succeeds is also difficult when one takes into account the differences in management from one country to another, especially with regard to the strategic approach, organization and processes, but also to the authorities for the Decision making, communication, conflict resolution, leadership, etc.
An orderly research and qualification must be followed by an equally orderly integration.
This makes it clear in advance that there are only a few companies available on the market, which, in addition to the difficulty of finding ideal targets, will lead to higher ratings.
Since the use of middlemen is often not very satisfactory, and recruiting your own middlemen, opening a branch and taking over companies can be very expensive, one last dimension of strategic reflection remains, namely a sales cooperation with a local industrial structure a complementary product offering that enables cross-selling.
In order for this to be successful, it must be based on clear synergies, which as a rule imply an absolute complement on a commercial level in order to represent a real interest in cross-selling, i.e. joint sales.
The takeover of a business, the securing of company shares and strategic alliances have two advantages: The takeover of shares in the target market, but also an induced diversification effect that enables:
- to motivate its own middlemen with a complementary product offering on a commission basis;
- Increase the loyalty of your own customers with a wider variety of offers.
Cross-selling also enables the partner to choose the type of customer he will acquire; the type of middlemen he will use; the type of training that can be offered to the intermediaries concerned; and discuss a proper business plan. In return, of course, he receives the same services for the distribution of his own product ranges in Italy.
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