Italy Analysis Essay, Research Paper
COUNTRY ANALYSIS
GENERAL
Italy covers a land area of 301,230 sq km (116,306 sq mi). Comparatively, the area occupied by Italy is slightly larger than the state of Arizona. Italy has high unemployment and a relatively complicated and young market oriented government.
To get an idea of how Italy’s culture compares to that of the Unites States, we ran a Hofstede.
United States Italy
Individualism 94 78
Power Distance 41 48
Uncertainty Avoidance 45 74
Masculinity 62 68
Individualism versus collectivism focuses on the relationship between the individual and his or her fellows. In individualistic societies, the ties between individuals were loose and individual achievement and freedom were highly valued.
Power distance focuses on how a society deals with the fact that people are unequal in physical and intellectual capabilities. Low power distance cultures were found in societies that tried to play down such inequalities as much as possible.
Uncertainty avoidance measures the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Members of high uncertainty avoidance cultures placed a premium on job security, career patterns, retirement benefits, and so on. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.
Masculinity versus femininity looks at the relationship between family and work roles. In masculine cultures, the job is as important or more important than the family.
After comparing Italy with the United States the only possible problem or threat in relation to cultures that Philips should note is uncertainty avoidance. This means that Italy is not quick to adopt new ideas. If Web TV is introduced into Italy, it will take more time for it to become accepted than it did in the United States.
SOCIOCULTURAL
PENETRATION
The Internet has just started to make an impact in Italy. A recent study by Eurisko (a very reliable research company) indicates that 1.8 million people say they use the Internet. They also found that 1.1% of Italian families (216,000) have an Internet connection at home as compared to 16.7% (40 million) in the USA. The population of Italy is around 57.3 million people, which means that only about 3% of Italians are presently online. Analysts at Jupiter Communications feel that by the year 2000 the Internet will have a 10% penetration in Italy. This means that Italy’s Internet users are climbing at a steady pace. We have termed the above data the Internet penetration factor and rated it an 8 (favorable). The main reasons for this are the rapid Internet growth and the low penetration of the common Internet.
DEMOGRAPHICS
Of those who are on the Internet, 90.62% are male. 9.38% are female. 0.12% are housewives. 12.40% are managers. 27.00% are employees. 10.21% are independent workers. 18.16% are freelancers. 1.66% are laborers. 0.95% are retired. 7.89% are policeman. 15.01% are students. 0.95% are unemployed. And 5.64% are other. Looking at age, 1.48% are under 18. 16.85% are from 18 to 25. 45.76% are from 26 to 35. 30.74% are from 36 to 50. 4.45% are from 51 to 65. 0.65% are over 65. And 0.06% of those surveyed preferred not to respond. With respect to education, 6.05% have graduated from grade school. 53.41% have graduated from advanced school. 38.52% have their bachelor’s or University diploma. And 2.02% have a doctorate. The above demographic factor has been rated a 6 (Neither favorable nor unfavorable). Even though the diversity of those people who use the Internet is positive, the lack of women may pose a threat since they are in their homes more often than men are.
INTERNET ACCESS
Currently, 69.02% access the Internet from home. 55.25% access the Internet from their office. 1.36% access the Internet from school. 17.98% access the Internet from universities. 2.73% access the Internet from an Internet caf? or something similar. 1.96% access the Internet from some where else. However, only 1.1% of Italian families (216,000) have an Internet connection at home as compared to 16.7% (40 million) in the USA. We have rated this factor an 8 (favorable). The reason for this is because of the large percentage of people who access the Internet from home.
SAFETY
At this time, 19% of Italians believe e-commerce is unsafe. 24% feel that there is nothing on the net that interests them. And 16% prefers to deal with people face to face.
Because of this, European businesses have been hesitant to go into e-commerce and advertising. I have rated this factor a 6 (neither favorable nor unfavorable). This is because the information on e-commerce has no overbearing importance to Philips Web TV.
SEGMENTS
We found three major segments: e-commerce, Internet browsing, and e-mail capabilities. Studies show that Italians currently are on the Internet mainly to browse. However, there is e-mail and e-commerce. I have rated this factor an 8 (favorable). The main reasons for the neutral rating are the lack of information on this topic and the direction the Internet will go in the near future.
E-COMMERCE
Most of the e-commerce done by the Italians is off U.S. sites. However, this is changing as Italian companies are becoming more and more interested in the Internet. By May 1998, 128,000 Italians had made an online purchase. The most frequently purchased items were software (25%), books and CDs (21%), gifts (12%), computer hardware (10%). Products growing rapidly are airline tickets (6%), show reservations (5%), and financial services (4%). We have rated this factor a 4 (threatening). The data that appears most threatening is the high percentage of computer related items purchased over the web. This shows that many of the current Internet users who use e-commerce are loyal to computers.
BROWSING
The overall sociocultural aspect rates an 6.6.
TECHNOLOGY INFRASTRUCTURE
FEASIBILTY
Web TV in Italy appears feasible. Around 98% of Italian families own a television. 95% own a telephone. 20% have a personal computer. 19% own a cellular phone. And only 1.1% have an Internet connection. I have rated the feasible factor an 8 (favorable). This is because it is very important for Philips that Italians have the necessary equipment to operate Web TV. These statistics confirm that they do.
CABLE NETWORKS & SATELLITE
Italy’s free television is causing cable and satellites to be more desirable. The reason it has become more desirable is due to cable and stalite offering a superior service. Only 1.9% of those Italians who have a television possesses cable and this expected to grow to 25%.. We rate this factor an 8 (favorable). This is because a possible competitor is currently weak.
INTERNET SERVICE PROVIDERS (CHECK FLOW)
There are currently 300 ISP’s in Italy. Of those Italians who are on the Internet, 98.46% use Netscape Navigator. Out of the 300 ISP’s in Italy, “Flat Rates” have become the standard, however, that has caused lingering, bottlenecks, and slowdowns. The standard prices are around 300,000 lire (US$185) per year, making it one of the cheapest countries in the world. Companies have been forced to lower rates to compensate for the average 960,000 lire (US$600) per year in local phone calls. Some ISP’s are raising prices to weed out users and offer better bandwidth. I have rated the ISP’s factor an 8 (favorable). This is because of the large number of ISP’s. They bring competition, which lowers the prices and encourages use.
TELEPHONE LINES
Telecom Italia controls the phone lines and currently has very high rates making the cost of surfing the web too high for many Italians, even though, the web subscription rates are cheap. The government is expected to reduce Telecom Italia’s tariffs for long-distance and international calls while increasing the cost of local calls, a move Internet users fear will sharply increase the cost of surfing the Net. The new tariffs will increase phone bills for the average family by between 4 percent and 6 percent. And although the subscriptions to Internet services are some of the cheapest in the world, the phone bills end up making it one of the most expensive on the whole. Because of these high prices, we have rated the phone structure factor a 4 (threatening).
The overall technology infrastructure rates a 7.2.
POLITICAL AND LEGAL
POLITICAL
The nation’s political system is considered one of the most unstable in the world, as coalition governments fail on a regular basis. There have been more than 50 administrations since the end of World War II. The political system was undermined further by a massive corruption scandal involving the awarding of government contracts to private firms in exchange for financial kickbacks that affected most of the major political parties and resulted in a complete reordering of the political landscape in the 1994 legislative elections. All of the mainstream political parties support privatization, although they have differing views on modalities and regulations. The Prime Minister, Romano Prodi, is a respected industrial economist with a centrist background. This has caused him to place great emphasis on developing a free market economy and as a result, the Internet is currently unregulated. There are also no direct governmental controls that keep people off of the Internet. The government has demonstrated their sincerity towards having the market handle the Internet by giving Telecom Italia more control of the phone lines. Italy has been recently accepted into the European Community proving that it has surpassed a preset level of stability. We have rated the political structure a 6 (neither favorable nor unfavorable). The rating is a combination of both Italy’s unstable government and its European Community status. We feel that the threat of the government is canceled out by the opportunity provided by the EC.
LEGAL
Italy and the rest of the world still seem to be letting the USA develop legislation to protect the people who access the Internet. Like the U.S., Italy’s constitution guarantees the freedom of speech and art. We have rated this factor an 8 (favorable). The reason for this rating is the freedom that the Internet and Web TV are guaranteed by Italy’s constitution.
The overall political and legal structure rates a 7.2.
ECONOMIC
The GDP for Italy was $998.9 billion dollars and its growth was 2.2% in 1998. Inflation fell to 3.9% in 1996 after rising to 5.4% in 1995, and is continuing its downward trend in 1997. Through June of 1997, inflation was running at a 1.4% year-on-year rate. Also, the national debt is expected to slowly decline. Its weak consumption in 1997 has hurt its imports. Unemployment is extremely high at 12.25% although 40% of Italians are part of the labor force. Research has shown the household’s propensity to save is on a steady decline. In 1997, 85.6% of disposable income was spent. This lack of saving is a result of the lowering interest rates and increasing taxes (+6.2% in 1997), after the 8% increase in 1996. As mentioned in the political structure, Italy is a member of the European Community. In order for this to have happened they had to possess a high standard of economic stability. The overall economic aspect would rate an 8 (favorable). This is because inflation rates are low, interest rates are falling, and they are adopting the EURO dollar (a stable currency).
WEIGHTS AND MEASURES (ADD CHART AND REASON FOR WEIGHT)
Enablers Factors Rating Multiplier Weight Weighted Average
Social Culture penetration 8 0.3 2.4
demographics 6 0.2 1.2
internet access 8 0.1 0.8
safety 6 0.1 0.6
segments 8 0.2 1.6
total 6.6
Tech. Infrastructure feasibility 8 0.3 2.4
cable and satellite 8 0.3 2.4
ISP’s 8 0.2 1.6
telephone line 4 0.2 0.8
total 7.2
Political and Legal political 6 0.4 2.4
legal 8 0.6 4.8
total 7.2
Economy economy 8 1 8
total 8
External Environment Rating 7.25
Reasoning for Factor Weight (in weight ed order greatest to least)
Economy
Economy- this the only factor that was rated 1.0 for obvious reasons
Technical Infrastructure
Feasibility- the reason is due to presence of complementary products
Cable and satellite- expansion possibilities are superior in relation to Italian TV
ISP’s- due to market concentration and fragmentation
Telephone lines- because their infrastructure exist but next generations will use other means to send the digital signal
Political and Legal
Legal- keeping the Internet free from regulation implies expansion and usage
Political- it is lower because of the security of trade added once Italy joined the EC
Social culture
Penetration- due to potential market expansion
Demographics- it is the key to understanding our market
Segments- it closely fits with are value of demographics but is not as strong
Internet access – majority of users are by computer and we are looking at the TV web browsing market
Safety- this received a low weight because of the advanced encryption
Overall country rating was 7.25
CONCLUSION
After carefully looking at all of this data, we can answer some initial questions for Philips. Yes, Italy is capable of having Philips Web TV. Yes, the market for the Internet is growing. And yes, the phone bills are extremely expensive and act as the biggest barrier keeping Italians from the web. With cellular technology moving into Italy, there appears to be many different ways that Philips can turn this barrier and threat into an opportunity. Overall, Italy as a country appears to have many more opportunities for Philips and Web TV than it does threats.
INDUSTRY ANALYSIS
COMPUTER
The Internet has become the driving demand for computers and communications services. The computer industry is difficult for small companies to compete with top named producers like IBM, COMPAQ, DELL, APPLE, and HP. At the end of 1997 it is estimated that 82 million PC’s will be connected to the Internet. 20 % of Italians own a personal computer. Over 300 ISP’s in Italy offer Internet service via the PC. Telecom Italia and Infostrata, (Omnitel), are the two major competitors. The telecommunication industry is looking into using satellite and cable lines in the future to access the Internet. Italians are accessing the Internet mainly with Personal Computers through landline, dedicated phone lines, ISDN digital lines, and PSTN analog lines. The competition for personal computers is very competitive. The threat of new entrants is very low because of Italians strong brand loyalty.
DIGITAL TELEVISION
Digital Television is available in Italy. Telepiu currently dominates it, which is a subsidiary of Canal+. Stream Digital Cable Service, a parent company of Telecom Italia, has been introduced into this industry through an alliance with RAI, the Italian public broadcaster. Strong market growth in digital television is expected due to the demand for premium sports and film programming from the Italian public. Deregulation of the broadcasting industry allows pay-television operators to control premium programming rights. RAI plans to expand its Italian network penetration from the present 2.5 % to 25%. There are fewer than 20 million television households in Italy with only 1.3 million of them connected to cable and satellite services. Italy has provided more free television than other country in Europe making consumers reluctant to pay for digital service. This divided market means greater risks for all participants.
SATELLITE TELEVISION
Satellite television has recently been introduced to the Italians. As of November 1998, Telecom Italia and RAI have been working together with “Skyplex, ” a multimedia satellite transmission system, to broadcast digital TV via satellite. Canal+ introduced their line of satellite services in April of 1998, called Canalsatellite Numerique Service. This system allows you to connect directly to the satellites thus eliminating the need to build large transmission stations. TV networks and Internet content providers can therefore broadcast information at much lower costs. The demand for satellite communications is growing very rapidly. We know that at present, 1.3 million of the (under) 20 million households have either cable or satellite services. This industry is very consolidated because it is such a new market; the threat of entrants is very high. Competition is likely to increase in this industry due to the increase in demand for advanced technology.
SET TOP BOX
We have only seen one company who is offering a product similar to WEBTV, called PLAYWEB. This is a set top box that is offered by Telecom Italia. Telecom Italia provides the service and also sells the set top box. We were unable to obtain information on what the current demand is for such product. The growth rate in set top boxes is unpredictable at this time. The demand for Internet and e-mail services is suppose to increase by 210%, therefore increasing the demand for Internet/E-Mail access products. We don’t see this as a threat to Philip’s. The market is new and Philip’s name has been established. The Italians that are loyal to Philip’s brand are more likely to buy a set top box made by them over another company like SONY.
MOBILE PHONE
The mobile phone industry has proven to be very popular in Italy, with over 14 users per 100 inhabitants, with a total number of 8.2 million subscribers. This should rise to over 30 users per 100 inhabitants in 1998, reaching target penetration in the year 2000 at 40 users per 100. There are over 300 companies who provide mobile services in Italy. The two major companies are Telecom Italia SpA and Omnitel Pronto Italia. Omnitel announced in August of 1998 that it was implementing wireless Internet technology services via the mobile phone. Omnitel will use software called UP.Link™, supplied by Unwired Planet™. This gives mobile phone users access to e-mail, interactive information services, Internet / Intranet applications offered on standard WEB services. The trial was to have taken place at the end of 1998. The demand for this service is expected to be very high. Italians pay less money to use their mobile phone, which charges a flat rate, verses the telephone, which charges on a per minute basis. No data was available regarding the growth rate for this technology. This industry is very fragmented and with technology increases more companies will enter in this market further fragmenting it. We don’t see new entrants as a threat.