The importance and opportunities to be present in the global market
Today’s market is increasingly connected and full of development opportunities for companies that produce Made in Italy goods.
Digitalisation, global supply chains and the development of new technologies have removed many obstacles to international trade by reducing transport costs (the transport situation in 2021 is very different, but for special reasons that should be dealt in another article), and encouraging an exchange of information and knowledge never seen before.
This has contributed to increasing the benefits of export.
The main outcome of this process is that small and medium-sized businesses, such as ASTRA VERNICI, can look beyond the domestic market.
Today we’ll talk with Gianfranco Oberti, CEO of ASTRA VERNICI S.r.l.
What is the current export situation for your company ?
Today, ASTRA VERNICI is a consolidated company in over 40 different countries with an export share of sales equal to 2 thirds of the total (about 66%).
Namely, every 3 litres of products we sell, 2 are designed for export.
The interesting thing is that of these 2 liters, one is sold within the EU, and one outside.
So, basically, today we make virtually equal sales in this ratio:
- 1/3 in Italy
- 1/3 in EU
- 1/3 in the rest of the world
Besides that, we have important growth programs outside Italy that will materialize, reasonably, this year and these will increase the foreign sales of our Italian products.
When and how did the internationalization process in ASTRA VERNICI begin?
Our export performance was neither sudden nor happen by accident.
But they are the result of years of evolution.
In fact, it’s necessary to remind the stages that led us to this result, which began towards the end of the 1990s when, after completing my studies, I entered the family business.
At the time export was not considered as a real opportunity, in the sense that there was no real organized strategy to deal with cross-border sales and therefore there was no growth in the foreign market.
One wondered: “Why export? What are the benefits of export when domestic performance is good and the domestic market is constantly growing?”
“Why waste resources in researching and managing clients who require attention and live far away, and do not speak our language…”
These were the objections I had to face on a daily basis, but I do not blame those who asked me these questions.
Sales outside the national territory were seen more as a form of covering fixed costs.
The world in which the company had grown up until then was that one. It was not yet understood that limiting ourselves to the domestic market was a poor mentality but it was thought instead as a solid business, in the sense that our products were constantly growing in volumes thanks to the domestic demand expanding.
Let’s think how difficult it was for a small business in those days to export: just imagine the problems of exchange rates.
There was no EURO back then, right?
Exactly, so every sale had to be done at a rate that drained most of the company’s margins and the fluctuations in the exchange rates of some countries sometimes compromised the many efforts to acquire customers that, perhaps, after a few months, were no longer able to buy because of the devaluation of their currency.
It rarely happened, as it was more our “lira” (Italy’s old currency) to give us a hand …
What do you mean by that?
The Lira, with its strong devaluation helped the exporting companies because foreign customers, having to convert their coins into Lire to pay, they paid less each time!
That’s happening today to countries like Turkey, whose exports, thanks to the weak currency, are flying.
On the contrary, for Italian companies that bought products from abroad (typically in dollars), there were troubles, because for them, from time to time, purchases were increasingly expensive.
However a true entrepreneur, in my opinion, must also be visionary, in the sense that he must foresee future opportunities where they do not seem to be there. He must read the dynamics of the market and know how to anticipate the times.
It was with this spirit that I already felt that our typical customers, the producers of wooden articles in the Imagna valley, where we realized most of our turnover, near Bergamo, would have a difficult life in the future.
We did not yet speak of Asian competition, but the kind of our buyers was already too small and little innovative and culturally reluctant to change in order to think of surviving.
They were in fact mainly subcontractors, put in competition with each other, who all produced articles with low added value, without any control of the distribution chain. Without any concept of design, innovation.
So it was pretty obvious that, soon, we would find ourselves without customers because the ones we had would inevitably close.
We had to do something, change strategy, look for new markets.
From there we started with the idea of creating a small and primordial website, open an email account, from which to start sending emails. And to travel, move, visit countries, clients, look for new channels.
Open new distributions, contact potential new customers and/or resellers,
I can’t remember all the car trips throughout Europe!
At that time there were no satellite navigators, you traveled with the paper map: let’s talk about the early ’90s…
Today all this, told to a young man, can make him smile, but I assure you that it was not easy, but it was still exciting. Acquiring a customer under these conditions is even more rewarding.
How many trips, how many nights in the hotel.
I must admit that the good luck of having the low-cost airport of Bergamo, 2 km from the company, helped us a lot.
And then it was all a crescendo.
But believe me, it wasn’t easy at all.
What were the main challenges and changes you had to undertake ?
A cultural and organizational of the whole company change was necessary.
One thing is to deliver to customers in Italy, which can be reached through couriers or our decentralised warehouses.
Another thing is shipping by sea, where the goods can reach the customer even after 6 weeks from departure. Facing “stress” of humidity and temperature: in containers, on some equatorial routes, it can reach even 90 º C of internal temperature for a long time and this can also compromise the characteristics of products that can get altered.
Not to mention the saltiness and the dampness, which can lead to very bad results.
English has become the main language in corporate communications, entire business processes have been re-written.
The packaging has also been specially designed, as well as the palletizing of the products and the labels of technical and multi-language safety data sheets.
Among other things, we had to get our hands on the product formulation. Ours, in some ways, were too sophisticated because they were intended for professional clients very skilled in use.
But in some countries, workers do not have the background and training that we consider to be obvious.
They are not culturally and organizationally prepared for the use of professional products.
And then the climates (temperature, humidity) are completely different from ours.
In all this, however, we have undoubtedly been greatly helped by the push given by the “made in Italy” trademark. We’re grateful for that and for working in the furniture industry, so related to design, which is an undisputed well-liked reputation for abroad.
The Made in Italy in the world is a guarantee of quality. It plays a fundamental role in the world economy and in the creation of new employment opportunities for the import and export of everything that is produced in Italy.
It is true that Italian products, in general, have an excellent reputation and appeal abroad, the wood varnishes have even more and are in great demand!
So, one thing led to another and over the years, the requests have multiplied so much that today that, to follow the many countries that we serve, we hired 2 export managers.
Can you give us any more reason why a company have to structure for foreign markets ?
It is simple, because going back to the initial speech, the companies that export get on average more performing results in terms of growth, competitiveness and profitability.
- Growth: According to CERVED data, SMES most open to international markets are growing at a higher rate. On average 17% more than those with a lower degree of opening. The explanation is quite simple: limiting oneself to the national market reduces the possibilities of discovering new profitable markets and new outlets for one’s own goods or services.
- Competitiveness: Companies operating abroad are more competitive than those that limit their activity only in the internal market. In addition, the skills acquired in different markets make companies more productive and structured. Skills that are also exploited in the home market.
- Return: Even in terms of profitability, companies with an international vocation show better performance.
To simplify further, why is it necessary to export Made in Italy products ?
Mainly for these reasons:
- Stagnation of the internal market
With a market growing less and less, competition becomes more fierce. To avoid price wars, the focus towards emerging countries becomes a necessity. A must-do.
- Congestion of production capacity and lengthening of product life cycle
Does your company have more production capacity than the domestic market can absorb? Then that is a good reason to find new market outlets.
Sooner or later all products and services go through a phase of maturity and then decline within their life cycle: exporting also means finding markets where your product was not yet present or has a wider reference market.
- Risk diversification
Betting on a single market exposes you to many risks. The current economic climate, characterised by tensions and instability, could lead to higher prices, political tensions and recessions. If the market in which it operates presents the problems mentioned above, the risks of sudden reduction of turnover will increase. Focusing on different countries mitigates this risk by reducing losses.
- More middle class welfare in emerging countries
After a first phase of development, the middle class of emerging countries has now changed their purchasing model, moving from mere satisfaction of need to the search for more sophisticated products.
Let me give you a concrete example: in India, we sell high-end products.
Our customers don’t ask us for “entry level” products, they know how to make them and there is no reason to buy them, at a higher price, overseas.
We are asked only for high-end products, “made in Italy”, that meet more specific, refined and higher quality needs.
This is the right opportunity for Italian companies to intercept new needs in countries with high potential.
- Strengthening of the brand awareness and brand reputation
The existence of products in different markets has the inevitable consequence that more people will come in contact with your brand. They’ll learn to recognize it and it’ll gain loyalty. The international presence will also give you the image of a strong and stable brand with positive effects even in the home market.
Of course, I’ll ask you one last question about the future, how do you see it for the export of your company and in general for Italy ?
Personally I see it in a positive way. Export is strategic and it’s a cornerstone of our development plan. We obviously do not forget the domestic market.
However, because of the dynamics that I outlined earlier, our horizon is beyond national borders.
On a global level, as a country, I think that we are doing quite well, but sometimes a little too chaotic across the various organs of the state. It seems to me that the institutions have also been aware of this and I must admit that SACE–SIMEST and ICE have undergone a profound transformation precisely in order to pursue the general goals of the country through the support of small-medium enterprise which is the “backbone” of the nation.
Qualche anno fa non si poteva fare la stessa affermazione. Certo, se mi guardo intorno, abbiamo concorrenti agguerriti che quando si muovono per esempio in missioni internazionali, si muovono forti di un “sistema paese” molto più coeso e con meccanismi più rodati dei nostri (per esempio la Francia o la Germania).
Ma noi, come Italiani, abbiamo una credibilità internazionale e un appeal molto forte.
E come imprenditori, una marcia in più.
A few years ago we could not make the same statement. Of course, if I look around, we have fierce competitors that when they move (for example in international missions) they move as a “country system” . They are much more cohesive and move with more sharpness than us (for example France or Germany).
But we, as Italians, have an international credibility and a very strong appeal, and as entrepreneurs, a higher gear.
