The recent bearish sentiment on the Italian stock market caused by the concerns over its public debt is a structural issue present throughout the Italian economic system. What does it actually mean? And how can procurement navigate this scenario without getting hurt?
The Italian government in the years preceding this current crisis failed to put in place the right reforms to allow Italy to be competitive with the world's leading economies. Consistently underperforming during the last economic bubble, the government has only recently paid attention to the state of its public debt and the competitiveness of its economic system. The causes are, in my opinion, in the poor political class that ruled the country in the past decades and the minimal attention paid to politics by Italians. Emergency budgets and this or that reform were merely temporary painkillers and never a long-term solution.
It is well know and recognised that Italians have incredible individual capabilities in many sectors, high output quality, great ideas and a unique cultural heritage. But unfortunately their skills to interact with each other, collaborate and establish long-term profitable business relationships, thinking strategically and collaborating with the institutions is poor and lacking in innovation. The country doesn't work as a team, too many different local cultures are internal-looking, forgetting to be part of a nation and underestimating the consequent benefits.
Italy has historically been characterised by a diversified and fragmented business environment with excellence in small niche business sectors. This system has created an enormous pool of small and medium-sized enterprises, which are difficult to coordinate and manage together to form a solid industry able to cope with the challenges presented by the global markets.
There will be many interesting opportunities, namely, one-off transactions and bargains resulting from speculating on the difficulties of some suppliers struggling with the crisis. Given the small size of suppliers, the establishment of a solid relationship needs to be analysed with care and forward thinking. Supply chain risk in such a complex environment is very high; the country is under fire because of the high systemic financial risk given by its poor management over the last two decades. Therefore, companies must be aware of the key issues and weaknesses of the Italian economic system before entering it.