Investing into a foreign country is always fraught with a range of risks, which the project concerning the analysis of the Italian business sector is a prime example of. A detailed study of the environment, which the Italian private sector has to offer for a foreign investor has shown that the state has suffered a considerable change, which presumably promotes foreign investment, yet also poses a range of financial threats to the latter. Although the overall analysis of the Italian entrepreneurship environment has resulted in rather gloomy prospects, the idea of investing into the tourism industry can be viewed as an option, since the returns are likely to cover the expenses.
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The Hilton organization has been known as not only the most successful company in the tourism and hospitality industry, but also the most successful company in the world. With a nearly centennial experience in hotel business, over 300,000 employees, 4,278 properties all over the world and 12 world-class brands to offer to its customers (Hilton Worldwide customer case study, 2014, p. 1), the organization has a huge potential for expansion into the markets of specific countries. Basing its missions and values on hospitality, integrity, leadership, teamwork, ownership and a close focus on the communities within the industry, the company is fully ready for entering a new market and attracting new customers.
It should be noted that the company has a number of strengths, its supply chains being the key advantage of the organization. In addition, the company has a solid set of strong and immediately recognizable brands, including Canopy, Curio, Double Tree, Hampton, Hilton Gardens Inn, etc. The specified facilities provide a strong foundation for the company’s future growth, therefore, it is expected that the organization has quite feasible chances for success in Italy.
Unfortunately, the risks, which the Hilton Organization will have to take into account when entering the Italian tourism and hospitality market, are truly ample. Among the key sources of potential problems for the company, the political and financial aspects of Italy’s operations deserve to be mentioned. Politically, the state has been going through a series of major changes due to its recent entry into the euro zone; as a result, the state became exposed to the negative factors, which affected the members of the euro zone as well.
However, while the rest of the states had already developed certain immunity to the aforementioned negative issues and were capable of withstanding the crisis, which hit them in 2008, Italy was unprepared for facing it. As a result of the state’s vulnerability, the profitability rates increased by 30% (Alonso-Almeida & Bremser, 2013, p. 143), whereas the service quality and, consequently, the consumption rates, shrunk significantly.
The financial issues, which the Italian private business has undergone over the past few years, are, perhaps, the most significant factors that define the key obstacles for foreign investors when considering Italy as a possible business partner. Indeed, according to the recent report, the risk indicator score that Italy has for its commercial infrastructure is very high. More importantly, the recent alterations in the tax policies, which Italy adopts for regulating the financial transactions carried out by private entrepreneurs, have become much more stringent.
The banking issue also deserves to be mentioned as the key obstacle on Hilton’s way to become the leader in the Italian hospitality industry. Particularly, the role, which the bank to be chosen by the organization is going to play in the development of the industry, may become increasingly more significant as time passes, which is rather undesirable for Hilton. Therefore, the company will have to consider the Italian banks only as the additional resource and must not rely on the banking services as the key tool for its financial transactions.
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As Evans-Pitchard explains, the aforementioned dependency on banks is what has caused the failure of numerous European companies in Italy: “the mutual dependency of the banks and the state sector has grown most in those countries where the links were already particularly high at the start” (Evans-Pitchard, 2013, par. 3). Therefore, it can be assumed that, being independent from the Italian and the EU banking systems, Hilton, as an American company, will be able to avoid being manipulated by the local banks and, instead, will be able to choose the financial strategy that will meet the company’s needs.
At this point, though, one must mention that the company has been known and widely recognized for its unique financial strategy, with the help of which the organization can afford making the steps that would otherwise be considered rather risky in terms of their financial implications. Specifically, the revenues from the 2013 IPO carried out by the company and bringing the latter a total of $2.3 billion, as well as the $27.8 billion market capitalization, the fact that the company’s stocks are currently trading at $28.15 per share, and the $10.5 billion revenue in 2014 deserve to be mentioned as the company’s key the financial strengths.
Consequently, it is reasonable to assume that Hilton is going to survive the costs, which the integration into the Italian market and the battle with the basic impediments, including the lack of financial stability and the increasing weight of bureaucracy, will require. Seeing that the company’s stocks are traded nearly all-time high and have reached their highest mark over the past five years, this is the right time for Hilton to make a potentially risky move and invest into the Italian hospitality industry.
As far as the human resource management issues are concerned, though, Hilton is most likely to meet the requirements set by the Italian government. Despite the increasing rates of unemployment within the state, the principles for the companies to hire staff members remain just as strict as they used to be before Italy joined the euro zone. Consequently, “In the hospitality sector, national federations of labour unions pensions and employers’ organisations are signatories to national collective bargaining agreements” (Norton & Giarrusso, 2014), as the existing legislation on the Italian labor dictates. The necessity to deploy the HRM approach that will allow for the maximum staff satisfaction, though, is clearly a positive factor, as it will help the organization increase its performance rates (Daniels, Radebaugh, & Sullivan, 2010).
Even with the aforementioned problems in mind, one still must admit that Italy can be considered a rather good place for investment, especially for the corporate monster dominating the hospitality industry worldwide, which the Hilton Company is. Specifically, the factors such as the success of the initiative reforms, the regulations presupposing new tax incentives in 2015 and the so-called “Destination Italy” project, which will supposedly propel Italy to reach the average level of financial stability within the EU must be viewed as the indicator of the firm’s future success in the Italian market.
More importantly, the above-mentioned characteristics may be interpreted as the basis for developing the coping strategies for Hilton to address the bureaucracy issues in Italy and the suffocating influence of the local banks (Daniels et al., 2010). The recognition of the FDI standards, as well as the necessity to support the developing market, which occurred comparatively recently in the Italian government, yet has already had its impact on the state stability, can be interpreted as the basis for the Hilton Organization to build its influence in Italy on.
More importantly, the introduction of the new reforms aimed at making the FDI regulations less rigid, is most likely to have a positive effect on the entrance of Hilton into the Italian tourism industry. It is essential that the Italian government has started recognizing the significance of the foreign investments into the key industries of the state; as a result, new opportunities for the companies such as Hilton have opened.
Specifically, the investment grants and the tax reduction as the possible measures for advancing the key Italian industries should be viewed as an essential factor facilitating the success of Hilton. As it was emphasized above, these are the taxation issues that block foreign investors’ way to propelling the Italian tourism industry; when coupled with bureaucracy, the taxation issue becomes truly unbearable. However, with the addition of tax reduction and financial incentives for investors by the state government, Hilton must consider Italy as the target location for its further expansion.
Therefore, despite the existing obstacles on Hilton’s way to expanding into the Italian hospitality market, the assets, which the company possesses, allow it to take risks and explore the new environment. More importantly, by taking chances and attempting at renovating the tourism industry in Italy, Hilton gets the chance to become the leader in the industry, which is an obviously tempting opportunity.
In spite of the fact that Italy can be viewed as a perfect place for investment and the further economic growth of a foreign company due to the wide range of tourist attractions, some of the factors that its economic, financial and political landscape incorporate, may pose a tangible threat to the wellbeing of the entrepreneurship. Specifically, significant losses can be taken when addressing specific issues in the process of establishing an organization in Italy, such as outstandingly high rates of bureaucracy and the suffocating financial climate, especially the issues related to the cooperation with the local banks.
One must admit that the tourism industry, which flourishes in Italy, can be considered a somewhat promising place for investing one’s capital because of the perfectly developed tourism industry. There is no need to stress that the key obstacles, which the state political and economic status poses to foreign investors, are rather basic and will require an elaborate strategy for avoiding.
More importantly, a significant amount of the financial resources will be used to handle the emerging difficulties; specifically, the costs for addressing some of the bureaucracy issues are going to be very big. Nevertheless, because of the huge popularity of the local resort, the owner of an investment organization will most likely cover the losses taken in the process of establishing the organization. Therefore, the options, which involve investment into the tourism sector, should be viewed as the prime area of the company’s interest.
Alonso-Almeida, M. M. & Bremser, K. (2013). Strategic responses of the Spanish hospitality sector to the financial crisis. International Journal of Hospitality Management, 32(1), 141-148.
Daniels, J., Radebaugh, L., & Sullivan, D. (2010). International business. New York, NY: Pearson.
Evans-Pitchard, A. (2013, November 18). Bundesbank says Italian and Spanish banks still hooked on home state debt. The Telegraph. Web.
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Hilton Worldwide customer case study. (2014). Success factors. Web.
Norton, J. & Giarrusso, V. (2014). Italy: buying a hotel in Italy: Legal aspects of investing in a hotel business in Italy. Mondag. Web.