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for an adequate distribution of products throughout the market and, alt hough the Chinese authorities have invested heavily in infrastructure development, foreign companies still struggle to find the right channels to enter the country. Furthermore, the presence of Italian products is mostly reserved for the Ho.Re.Ca channel a nd not for the Chinese large-scale retail trade (GDO), where it would be necessary to increase the presence of Made in Italy by promoting the Italian gastronomic culture, which lays its foundations in tradition, dear to Chinese consumers. In recent years, the Ministry of Foreign Affairs and International Cooperation, together with other specialized bodies in the field of international exports, have engaged in the foreign promotion and internationalization of Italian companies, especially for small and medium-sized enterprises (SMEs), which constitute the backbone of the economy of the Bel Paese.


be placed on the development of globalization which has taken on economic, but also political, social and cultural meanings. From a social point of view, the birth of a new type of “global” consumer has undoubtedly constituted a real turning point as the specialization of certain sectors, in some cases, guarantees a competitive advantage.

Internationalization has therefore become necessary to ensure the success of a company and its permanence on the market. It is a process that is based on the performance of one (or more) activities through which companies open up to new foreign markets, with the aim of establishing relationships with companies, institutions and consumers in that territory. It occurs when a company produces, exports or sells its products abroad, creates alliances with foreign partners, seeks new sources of financing or builds production units in foreign countries. The factors that can push a company to expand abroad can be external or internal. External factors are closely related to environmental conditions, which generate risks or benefits for which the company decides to carry out an internationalization process;

these are unpredictable situations to which the company usually reacts to avoid losing its market position.

On the contrary, the internal factors are based on the need or the opportunity to exploit the competitiveness acquired in a product category or in a specific sector. In the first case, the intention of the company is to obtain a competitive advantage on a new market; this type of activity requires the use of many economic and financial resources, as well as a good knowledge of partners and market conditions. The main purpose is to find factors that create a competitive advantage capable of guaranteeing savings in production costs or greater access to raw materials. In the second case, the company can decide to exploit an already acquired competitive advantage by changing the aims of internationalization, in order to find new opportunities on the market, by focusing on the promotion of those products or brands that are already well-known. From this point of view, the company can develop diversification strategies to reduce risks, specifically if we refer to those particularly protected markets.

Therefore, it is clear that the company must first understand the type of market in which it intends to expand its business, analyzing political, economic, cultural, demographic and competitive aspects. Based on what emerges from the market analysis, the company must decide on the entry method which includes export activities (direct or indirect), strategic alliances (joint ventures) and finally foreign direct investments (FDI), where we


distinguish the minority or majority shareholding (acquisition) and the construction of subsidiaries (branches/sales or production structures). Firms choose the form they deem best suited to the type of market they will be dealing with.

Export is recommended at the beginning of the internationalization process, in particular in contexts where the offer is able to manage the logistical costs of production in the country of origin and when it is important to maintain the advantages derived from the specificity of the country of origin. We refer to direct export in the event that the products of the origin market are sold directly to customers of the target market. In this case, the exporting company manages all export-related activities, which guarantees control over exports but also over the marketing of the product. Direct export can take place through direct sales;

the commercial agent, who has the role of intermediary; the foreign distribution channel and finally electronic commerce, i.e. the sale of products through online channels. In indirect exports, it is not the producer who manages the export but the intermediary, which can be a local operator or an exporter who has been operating for a long time in a specific market. Usually this is the method used by SMEs, as the risks are reduced and it does not require expensive investments compared to other entry methods.

However, it is not excluded that SMEs establish strategic agreements such as joint ventures, licenses or franchises, which can accelerate the internationalization process, guarantee access to a greater number of markets, improve their competitiveness or help achieve specific objectives, minimizing risks. Finally, a further means of consolidating the position abroad is given by direct foreign investments which require extensive use of their financial resources and are more suitable in the event that exports have transnational costs, that is to say when the risks of appropriation of resources of the firm are greater. Investments can be intended to create a productive branch or s ubsidiary, or to directly manage exports. The internationalization process does not only concern multinationals, but also SMEs which in the Bel Paese represent a driving force for economic growth. When we talk about SMEs, we refer to a type of business that is classified by the European Commission in the European Union Recommendation (2003) based on economic criteria such as the workforce and turnover achieved or the total annual budget. The Article 2 of the document states:


"The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises with fewer than 250 employees, whose annual turnover does not exceed € 50 million or whose annual balance sheet total does not exceed € 43 million Euros" 92

Specifically, a company is defined as a micro-enterprise if it has fewer than 10 employees and the total annual turnover or annual balance sheet not exceeding 2 million Euros. We speak of a small business if the number of employees is less than 50 and if the total annual turnover or annual balance sheet does not exceed 10 million Euros. Finally, there are medium-sized enterprises that have fewer than 250 employees and whose total annual turnover does not exceed €50 million or the total annual balance sheet does not exceed €43 million. In numerical terms, according to ISTAT data, in 2019 Italy had over four million companies, of which 95.05% of the total is represented by micro-enterprises, 4.86% by SMEs and 0.09% by bigger enterprises.93 As far as productivity is concerned, Italian SMEs generate a value per employee of approximately 53 thousand Euros, higher than the European average of 48 thousand Euros.

This type of business has a number of potentia ls and weaknesses: first of all, Italian SMEs are characterized by good flexibility, also due to the small size of companies, which guarantee greater ability to adapt to market conditions. Secondly, companies of this kind are able to innovate the product more easily thanks to their specialized knowledge, which allows them to enter those markets where differentiation is given great emphasis. However, compared to large companies, SMEs often encounter limitations in developing their business as they have few financial resources. In addition to this, there are various difficulties concerning internationalization processes such as the liability of foreignness (Hymer, 1976; Nanut & Tracogna, 2003), i.e. all the knowledge and skills acquired in the domestic market, which, not being suitable for the international context, constitute a real obstacle to extension of its business, or the liability of newness that involves risks and challenges due to the new environment in which the company will enter (Stinchcombe, 1965; Nanut & Tracogna, 2003). For these reasons, the internationalization of Italian SMEs is mostly linked to export activities, which, although not a low-risk activity, prevents them from having to face further difficulties in implementing an effective entry strategy in more complex markets.

92European Commission, Raccomandazione Unione Europea 2003/361/CE

93Census of Italian companies, data available on:

http://dati.istat.it/Index.aspx?DataSetCode=DICA_ASIAUE1P# (last accessed 25/07/2021)


According to Grandinetti e Rullani (1996), Italian SMEs have a "natural" relationship with internationalization, since their niche skills can be enhanced simply through a worldwide extension of sales. This also applies to the agri- food sector, which can exploit the concepts of Made in Italy and territoriality to obtain a good positioning and to generate market niches with an international extension. Although the structure of the Italian agri- food chain is still rather unbalanced, it is a sector that constitutes a pillar for our country because it is recognizable and it has unique characteristics.

The ability to extend Italian food & beverage has allowed many companies in the sector to maintain their position in the market or to grow, gaining a further competitive advantage.

As we have already seen, the most critical moment for the whole sector concerns the period of the crisis, which represented a turning point. Agri- food companies may either adapt to market changes by developing renewal strategies that would guarantee survival, or remain strongly anchored to their own idea of the market, with the risk of not being able to bear the costs. With a view to promoting and creating added value, the aforementioned

"made in'' has had a positive impact on internationalization activities, as it summarizes the image of a country and ensures that the products are immediately recognized.

The universal exhibition in Milan (Expo 2015) played a fundamental role in promoting Italy and its food and wine culture as well as favoring the internationalization of many SMEs, including those in the agri- food sector. On this occasion, during the Italian-Chinese Forum for cooperation in the agri- food sector, an agreement was signed between the China Council for the promotion of International Trade (CCPTI) and the Italian Trade Agency ICE which also included negotiations on olive oil and citrus fruits, which have given a boost to the trade of these goods in the Chinese market. More recently, ICE reached a Memorandum of Understanding with the Chinese B2B platform Alibaba.com for the creation of a "Made in Italy Pavilion'', i.e. a section dedicated to Made in Italy companies and products, through which SMEs can take advantage of the possibilities of internationalization and obtain greater visibility in the market.

The Dragon represents a great challenge for many companies in a world increasingly open to commercial exchanges and subject to greater economic volatility than in the past.

Therefore, these agreements become useful tools for companies to identify opportunities for internationalization or sales abroad. In Italy, among the various agencies that deal with helping this type of activity, it is necessary to appoint SACE, an Italian insurance -


financial company specialized in supporting businesses and the national economic fabric through a wide range of tools and solutions to support competitiveness in Italy and in the world. Among the useful tools for analyzing the best opportunities in foreign markets, SACE has developed the Export Opportunity Index, in which China is one of the most promising economies, with a score of 80/100.

The scenario presented so far is useful for understanding how exports of Italian food products to China have evolved over the years. The new tools available to companies guarantee concrete help and make it possible to make the most of the opportunities for expansion in other market.


Chapter 3

Research method and Results