07.06.2021 – 09.40 – In 1989, the Berlin Wall fell: the “Iron Curtain”, which Churchill had defined in 1945 as running through Luebeck, Trieste and Corfu, disappeared, and with the irrevocably altered balance of power between the great powers in East and West, the world changed forever. In this context, two years later, with the State Law 19/1991 and an endowment of 300 billion old lire, the Finest financial company was founded with headquarters in Pordenone, with the aim of acting as a “bridge” and helping businesses in the Triveneto – Friuli Venezia Giulia, Veneto and Trentino Alto Adige – to grow.
The end of the two blocs left room for the birth of new economies and the increasingly urgent need to bring together what until recently were two worlds that did not communicate with each other.
The expectation at the time was to gain enormous wealth thanks to these new markets, through the development of economic and commercial relations with the countries of the former Soviet bloc, the creation of new companies, the development of commercial networks, factories, service centers, distributions and partnerships in these territories (and, as of 2016, in all the countries encompassed by the Mediterranean Sea and Austria).
An accelerator and facilitator of what is now defined as the process of internationalization of companies. But what exactly does it mean for a company and for Italy to internationalize a business? We talk about this with the president of Finest, Alessandro Minon.
First of all, what do we mean by internationalization?
“Of course, the goal of a company and the interest of the entrepreneur is to grow and make a profit. However, there are different ways to internationalize: for example, a company that has a successful product may decide that the time is ripe to sell it in foreign markets: The investment may then be a reason to build a product network. Or a firm may decide to use certain specific skills to provide services abroad; or again, it may decide to source raw materials in other countries. We can imagine as an example a company that makes furniture and makes the semi-finished product in Macedonia or in Serbia, it arrives in Italy, and here it does the machining, the design, the search and development.”
Would it be realistic to think to make everything in Italy?
“Unfortunately, it’s not easy to do everything in our country. Sometimes it’s more realistic to start from the idea of doing what you’re good at: In our case, in Italy, it’s about what we call value creation – research and development, manufacturing, design, marketing. Likewise, there are phases of the process where it is a mistake to think of being able to carry them out in our country, because they would throw the company out of the market, in a world today marked by fierce competition. A company that thought of carrying out the entire production cycle in Italy, even for the parts with the lowest added value, would become so uncompetitive that it would end up jeopardizing job stability. It is not for nothing that we speak of “global value chains” in this context.
What is the point?
“Let’s take the example of the automobile industry: at the logistical and organizational level, in order to obtain the final product, there is the involvement of dozens and dozens of companies in different countries of the world; we buy a car that may be assembled in Italy, but its components come from many other countries. To get the final product with maximum efficiency, everyone must follow the same rules in terms of quality, timing, collaboration, sharing and information. The end result is extraordinary: the quality of the goods increases and their cost decreases. These are the global value chains.”
From a company’s perspective, why would this be more beneficial than going directly to a foreign supplier by directly evaluating the best offer when it is needed?
“The subcontractor produces so-called ‘commodities’: those goods, commodities and raw materials that are undifferentiated. A ton of iron with certain characteristics remains a ton of iron, no matter who produces it, so only price matters. But in the global value chain, the company is not a subcontractor occasionally asked to bid, but becomes part of a chain of planning, investigation and organization. So, the company knows, for example, that it will have to invest in converting production in the next three years because standards may change, and it also knows the price at which it can sell the product, it makes its own assessments of the investments to be made, it has more security and higher margins, and of course more rules to comply with. In simple words, a team is formed and the final added value is distributed in a way that benefits all the companies in the global value chain, which in turn have bargaining power.”
But isn’t there a danger that a company dealing with foreign markets will at some point decide to delocalise out of sheer convenience?
“Granted, our goal as Finest is to ensure that jobs, investments and skills are created in Italy, not to mention increased tax revenue, but basically any company can do what it wants with its money and move wherever it wants. So the risk is always there, regardless. However, what we have found is that many entrepreneurs, particularly in the North East, although they are aware of the criticality and the difficulties that you often face when you are operating in our country, still have a strong desire to remain anchored in this area. Then it is clear that entrepreneurial experiences abroad also serve to provide constructive criticism; some things can be done better in Italy, others not, but I believe that this can also be seen as an opportunity”.
An opportunity in economic terms for Italy?
“Internationalization has transformed other countries into powers, I’m thinking of the US multinationals that have expanded all over the world with incredible turnovers. Certainly, proper management of internationalization generates economic growth and an increase in prestige and, why not, an increase in a country’s power.
On the other hand, internationalization in its most limiting meaning, that of delocalization, is certainly not good for a country. We can say that in such a closely interconnected world, whose borders are becoming less and less economically resilient, it is difficult to think of successful companies that grow by managing to carry out all production steps only in their own country. Given that, we need to make sure that this is doing the state good – creating jobs and growth – rather than hurting it.”
What would be necessary to change?
“In this context, I think the concept of the ‘country system’ is important: Italy can only stop losing its position and consciously regain it if there is a close synergy between the public and private sectors. The concept is that the state is no longer perceived by companies as an ‘enemy’ that takes money from them in the form of taxes, but helps them to grow, export and develop, from which they in turn benefit. Consequently, a more competitive country will be able to reduce taxes while increasing efficiency and the desire to invest in the area. I therefore believe that we should improve the functioning of the Italian “country system”, because if it is true that there are different cells, then it is also true that the organism ends up being unique. In simpler terms, if the underlying economy doesn’t grow, the country doesn’t grow either; that’s why I believe that Finest’s role is also very important: we can be a link between the state part, which works with the will to grow and be efficient, and which relates to the private, and the private, which in turn relates to the state, through dialog and not against each other”.
Internationalization “on the contrary”: is Friuli Venezia Giulia able to attract companies from outside the region?
“Each area must use its own strengths to attract companies. In our region, the quality of life is very high, there is good health care, a remarkable speed of justice, qualified technicians and researchers can be found at competitive costs compared to other countries, with a concentration of scientific institutions that also increases the efficiency of these processes, and a very high level of university education. So it is certainly an area that can be very attractive from the point of view of science and high-tech companies – in this respect we have seen the return of Neurala to the region. In addition, there are other factors, the geographical location and the proximity to the borders, the international port. In short, although we are a small region, we have potential, maybe we should find a way to use it and express it a bit more.”
Is the phenomenon of internationalization irreversible?
“We can consider it as a phenomenon that tends to be unstoppable: it is always increasing, with variations in intensity, concentration, place and mode. However, if we look at the situation today, we are witnessing a kind of reshoring – a return to one’s own country – by companies, if not directly to their country of origin, then to Europe. An example of this is the companies that produce in China and return to the old continent, or activities based in Asian countries that set up in Europe.”
How has Covid-19 affected the international scenario?
“Covid has disrupted business in many countries, putting pressure on logistics and corporate hierarchies: from transport of goods to processed goods. At the same time, the pandemic has also highlighted that a company with multiple sites and plants overseas is much more resilient to a crisis like the current one: the rules set from nation to nation were very different. For example, some countries continued to produce anyway, and thanks to this, many Italian companies could guarantee supplies to their customers. To give another example: A company that assembled in Italy and Croatia continued to assemble in Croatia at a time when Italy was blocked, thus increasing the chances of survival of its activity.”
What lessons can be learned from the pandemic experience?
“Let’s go back to the concept of ‘global value chains’, which can be a great opportunity for companies, but also a risk: if a company enters a value chain, but is unable to deliver or distribute goods, it is destined to close, because it will no longer be part of the chain. It has been fundamental, in fact, that in the worst moment of the lockdown the Italian state has allowed to the exporting companies, in derogation, to continue to operate inside the value chains in order to not interrupt the production, and this has allowed Italy to not be excluded. Besides, due to Covid the world has changed completely also from the point of view of communication and the travel: the companies that have adapted themselves, both on the technological plan and in the management and the organization, introducing new working models, have become still more efficient than before, who has not made so finds himself in serious difficulties”.
On the one hand, the world of big finance; on the other, the context of the individual company: how do you mediate effectively between the two sides?
“On the one hand, it is necessary to be able to understand the instances of the translation of the economic policy of the regions to the territories, as well as to speak the language of entrepreneurs, fully understanding their problems. At the same time, however, the mechanisms of company shareholdings must also be understood, because in providing support and investment it is also necessary to be able to discern: one of the basic principles is that Finest manages public money, and so it is fundamentally necessary to know how to maintain the delicate balance between providing the maximum possible benefit and containing risk. Which, when investing, is always there. Having said that, most people do not have an inside knowledge of big finance, and most entrepreneurs are people who operate in the field, on the front line. Therefore, we must not forget that the choices that are made at certain levels ultimately have repercussions on the private life of the individual: every person who has a good job, specifically, means a family that is well off, that can perhaps afford to take out a mortgage to buy their own house or send their children to university. This is another reason why every operation we are able to carry out as Finest, and which allows us to see a company hiring, moving forward and growing, is always a great satisfaction”.