Release Date: Thursday, May 27, 2010
The State Journal
by Brynn Crotty
The Master of Business Administration Leadership program at the University of Charleston's Graduate School of Business, has given us a great opportunity to study and work in Varese, Italy, as part of our international study practicum.
During May, five groups of graduate students are developing marketing and export plans for five small Italian manufacturing businesses that seek to introduce their products into the North American market.
In just the week and a half that our teams have been in Italy, we have gained considerable knowledge and insight regarding the products and operations of European manufacturing companies.
In particular, we have observed the importance of organizations such as the Association of Small and Medium Size Companies,or CONFAPI, in promoting the interests of their members. While in the aggregate such companies represent 95 percent of the industry in Italy, individually the firms are quite small.
On the first Monday of our visit, we spent the day at CONFAPI Varese, the regional branch of the countrywide CONFAPI organization. We met with several CONFAPI staff, two University of Insubria professors and a number of business leaders who discussed the European Union, the recently passed European Small Business Act and the role of CONFAPI relative to small and medium-sized enterprises in Italy. In short order, it became apparent that the Italian business environment differs in a number of ways from the American experience.
While businesses in all countries operate under different regulations, taxes and so forth, the role of government in Italy is significantly greater than in the U.S. One of the CONFAPI executives, Pasquale Catalfamo, described Italy as being in an "overprotective situation."
Mr. Catalfamo has lived with the differences first hand as the owner Catalfer srl (Varese) and as a member of the executive committee of CONFAPI (Varese) with responsibility for international commerce.
One of the things that struck us as particularly unusual was the existence of national contracts for all employees. These contracts fix the minimum wages that be paid, the number of weeks of vacation, the procedures for dismissing an employee and even the length of the lunch hour.
The contracts are created every three or five years and are binding on all employers in a sector (manufacturing, retail, financial, etc.) regardless of the specific circumstances facing individual businesses. In other words, when a firm hires a new worker, that person's employment is governed by a fixed national contract based on the company's industry.
We were not surprised to learn that these contracts also make it quite difficult for an employer to fire or lay off an employee -- as Mr. Catalfamo explained the situation: "Once you hire an employee, you are married to him for life."
As a consequence of these national contracts, the role of CONFAPI and other business associations takes on greater significance than similar organizations in the U.S. Individually, the small Italian firms wield little influence in the contract negotiation process. Collectively (through CONFAPI), however, the needs of the small and mid-sized firms can be better represented at the bargaining table.
While the national contracts are designed to protect workers from the ups and downs of a market economy, they make it much more risky for companies to create jobs when business is good. Italian employment rates have now decreased significantly as more and more businesses are looking either to automate their manufacturing systems or expand abroad, as they are fearful of hiring a new employee "for life." In addition, Italian businesses also are moving to other countries to take advantage of attractive tax incentives offered for new business development.
Not only do these Italian companies have the experience necessary to export successfully to the United States, but they also have the language skills that are critical for effective communication.
In an interview with Pasquale Catalfamo, he told our team that "many European managers speak many different languages, and this is a definite advantage to European companies. In the United States, not many people learn to speak two or more languages fluently, and thus it makes it much harder for a business to become international in a foreign-speaking country."
In fact, during one meeting with Mr. Catalfamo, he took two brief calls from his distributors. One call was conducted in French and other in German after which he returned to our conversation in English.
Brynn Crotty, Qiting Yang and Apinya Anglomekleio are students in the Master of Business Administration and Leadership at the University of Charleston.