Country Report – Italy

Marks and Spencer Group (M&S) is a leading retailer of clothing, foods and home-ware. The company operates in about 34 countries worldwide with UK as its primary market. It is headquartered in London, UK and employs about 52,700 people (approx). The company recorded revenues of i8,588. 1 million during the fiscal year ended March 2007, an increase of 10. 1% over 2006. The operating profit of the company was i1,045. 9 million during fiscal year 2007, an increase of 23% over 2006. The net profit was i659. 9 million in fiscal year 2007, an increase of 26. 2% over 2006. Italy has a growing economy with huge business opportunities, being the 8th largest economy of the world and fourth largest of Europe. It is also one of the main members of the European Union and being an open economy it has no investment restrictions especially for an EU member country. It has also adopted the euro as a currency which might come into play. Fashion being one of the main industries in Italy and this can be seen by the fact, that the trend setter fashion companies for the world like Giorgio Armani, Diesel and Benetton feels home in Italy. The clothing and fashion market is very competitive, foreign companies have not had a great success, moreover it is the only country with only one foreign fashion retailer in the top 10 and that is Zanier (on position 9th in Italy). This shows it has a mature home industry but still the market is not fully competitive and it has its own niches which might need some more exploitation. Marks and Spencer can be a suitable retailer to invest in Italy, With 760 stores in more than 30 countries around the world which shows that the company has a vast experience of doing business in foreign soil. It is one of the most iconic and widely recognized chain stores in the United Kingdom, and is the largest clothing retailer in UK and also an established food retailer. Marks and Spencer has more chances of becoming a lucrative food retailer because of the changing eating habits of Italians, as a result of globalization. The food industry in Italy is very scattered and mostly based on medium sized companies and no firm has absolute market share, this could be an advantage for a firm like Marks and Spencer which could establish its roots in welcoming Italian food market before other giants join the game. The Italian food retail market grew by 0. 6% in 2004 to reach a value of $91. 9 billion. In 2009 the market is forecast to have a value of $107. 5 billion, representing an increase of 17. 0% since 2004. Supermarkets form the most lucrative market sector, generating 64. % of the market's overall revenues. Italy accounts for 9% of the overall European food retail market. The leading revenue source for the Italian food retail market in 2004 was the supermarket sector, which accounted for 64. 4% of the market's value, generating total revenues of $59. 11 billion in 2004. The company should also do a detail market research before investing and it might need to present itself in a different way by giving it a local touch in order to achieve consumer acceptability but still the business would be competitive. The major competitors would be Coop & Conad and Interdis the company also poses threat form the German giant LIDL which already has 320 stores around Italy. The company can also experiment with its household and furniture at the same time company has a considerable success in this department in the recent past, besides that the concept of home wares is still taking its grip and it could become a cash cow for M&S. In the near future the furniture could also give a positive response if managed properly. Getting back to the clothing which is the main product of Marks and Spencer, though the market is highly competitive and market penetration is a monster of a task there are still some market niches which could be exploited to get the maximum advantage for example, the formal clothing has always been of the highest quality and has a world wide recognition. Since the product is of such high quality it is most likely to be appreciated which could result in high volume of revenue moreover, the company also has a vast experience of penetrating in foreign competitive markets which could be used in this situation. Wine is another product which could be used to attract customers, currently it is a serious competitor in UK. M&S has produced many award winning wines, this is one of the areas which could be very important as Italians are wine lovers and they will always try something new, if the standards are met. It could be a regular revenue generator. Marketing will also hold the key in this situation and retailers who market themselves well are more likely to be successful then the ones who didn't divert much of its resources in this area. Since elections are approaching in Italy so the management should also wait and see how the newly formed government changes its policies especially corporate and tax policies and the company has to see that it is suitable to invest in the country and should analyze the financial pros and cons of expansion. The firm should consider the locations of its outlets; the obvious one would be Milan, Rome and Naples. The company can also open stores in the less developed area like south of Italy, it will attract tax soaps for investing it in less developed areas and providing employment opportunities but consumers in south unlike in the north will be having lower purchasing power and this could be the decisive factor. Investment and expansion decisions are always a bit of a gamble but with the right strategy it can give rewards. One important factor is the goodwill which can come into play as Marks and Spencer's is one of the leading retailers in the world and it is a trusted brand. It is more likely to receive a welcoming response rather that loosing out. The company can use its vast experience of expansion to the maximum and can come up with a positive result. The retail market structure in Italy is also developing and if M&S adopts the right policy it can grow with and could become one of the leading retailers providing quality clothing, food, home ware and wine under one roof. Thus investing a large amount of money in a developed area or a developing area would help an individual/organization/economy to get a strong financial background and right amount of publicity which would enhance the image of the brand and the country. At the same time recognition of the brands reflects the fame of the country.