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Italy Analysis Essay, Research Paper



Italy covers a land area of 301,230 sq km (116,306 sq mi). Comparatively, the area occupied by Italy is slightly larger than the state of Arizona. Italy has high unemployment and a relatively complicated and young market oriented government.

To get an idea of how Italy’s culture compares to that of the Unites States, we ran a Hofstede.

United States Italy

Individualism 94 78

Power Distance 41 48

Uncertainty Avoidance 45 74

Masculinity 62 68

Individualism versus collectivism focuses on the relationship between the individual and his or her fellows. In individualistic societies, the ties between individuals were loose and individual achievement and freedom were highly valued.

Power distance focuses on how a society deals with the fact that people are unequal in physical and intellectual capabilities. Low power distance cultures were found in societies that tried to play down such inequalities as much as possible.

Uncertainty avoidance measures the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Members of high uncertainty avoidance cultures placed a premium on job security, career patterns, retirement benefits, and so on. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.

Masculinity versus femininity looks at the relationship between family and work roles. In masculine cultures, the job is as important or more important than the family.

After comparing Italy with the United States the only possible problem or threat in relation to cultures that Philips should note is uncertainty avoidance. This means that Italy is not quick to adopt new ideas. If Web TV is introduced into Italy, it will take more time for it to become accepted than it did in the United States.



The Internet has just started to make an impact in Italy. A recent study by Eurisko (a very reliable research company) indicates that 1.8 million people say they use the Internet. They also found that 1.1% of Italian families (216,000) have an Internet connection at home as compared to 16.7% (40 million) in the USA. The population of Italy is around 57.3 million people, which means that only about 3% of Italians are presently online. Analysts at Jupiter Communications feel that by the year 2000 the Internet will have a 10% penetration in Italy. This means that Italy’s Internet users are climbing at a steady pace. We have termed the above data the Internet penetration factor and rated it an 8 (favorable). The main reasons for this are the rapid Internet growth and the low penetration of the common Internet.


Of those who are on the Internet, 90.62% are male. 9.38% are female. 0.12% are housewives. 12.40% are managers. 27.00% are employees. 10.21% are independent workers. 18.16% are freelancers. 1.66% are laborers. 0.95% are retired. 7.89% are policeman. 15.01% are students. 0.95% are unemployed. And 5.64% are other. Looking at age, 1.48% are under 18. 16.85% are from 18 to 25. 45.76% are from 26 to 35. 30.74% are from 36 to 50. 4.45% are from 51 to 65. 0.65% are over 65. And 0.06% of those surveyed preferred not to respond. With respect to education, 6.05% have graduated from grade school. 53.41% have graduated from advanced school. 38.52% have their bachelor’s or University diploma. And 2.02% have a doctorate. The above demographic factor has been rated a 6 (Neither favorable nor unfavorable). Even though the diversity of those people who use the Internet is positive, the lack of women may pose a threat since they are in their homes more often than men are.


Currently, 69.02% access the Internet from home. 55.25% access the Internet from their office. 1.36% access the Internet from school. 17.98% access the Internet from universities. 2.73% access the Internet from an Internet caf? or something similar. 1.96% access the Internet from some where else. However, only 1.1% of Italian families (216,000) have an Internet connection at home as compared to 16.7% (40 million) in the USA. We have rated this factor an 8 (favorable). The reason for this is because of the large percentage of people who access the Internet from home.


At this time, 19% of Italians believe e-commerce is unsafe. 24% feel that there is nothing on the net that interests them. And 16% prefers to deal with people face to face.

Because of this, European businesses have been hesitant to go into e-commerce and advertising. I have rated this factor a 6 (neither favorable nor unfavorable). This is because the information on e-commerce has no overbearing importance to Philips Web TV.


We found three major segments: e-commerce, Internet browsing, and e-mail capabilities. Studies show that Italians currently are on the Internet mainly to browse. However, there is e-mail and e-commerce. I have rated this factor an 8 (favorable). The main reasons for the neutral rating are the lack of information on this topic and the direction the Internet will go in the near future.


Most of the e-commerce done by the Italians is off U.S. sites. However, this is changing as Italian companies are becoming more and more interested in the Internet. By May 1998, 128,000 Italians had made an online purchase. The most frequently purchased items were software (25%), books and CDs (21%), gifts (12%), computer hardware (10%). Products growing rapidly are airline tickets (6%), show reservations (5%), and financial services (4%). We have rated this factor a 4 (threatening). The data that appears most threatening is the high percentage of computer related items purchased over the web. This shows that many of the current Internet users who use e-commerce are loyal to computers.



The overall sociocultural aspect rates an 6.6.



Web TV in Italy appears feasible. Around 98% of Italian families own a television. 95% own a telephone. 20% have a personal computer. 19% own a cellular phone. And only 1.1% have an Internet connection. I have rated the feasible factor an 8 (favorable). This is because it is very important for Philips that Italians have the necessary equipment to operate Web TV. These statistics confirm that they do.


Italy’s free television is causing cable and satellites to be more desirable. The reason it has become more desirable is due to cable and stalite offering a superior service. Only 1.9% of those Italians who have a television possesses cable and this expected to grow to 25%.. We rate this factor an 8 (favorable). This is because a possible competitor is currently weak.


There are currently 300 ISP’s in Italy. Of those Italians who are on the Internet, 98.46% use Netscape Navigator. Out of the 300 ISP’s in Italy, “Flat Rates” have become the standard, however, that has caused lingering, bottlenecks, and slowdowns. The standard prices are around 300,000 lire (US$185) per year, making it one of the cheapest countries in the world. Companies have been forced to lower rates to compensate for the average 960,000 lire (US$600) per year in local phone calls. Some ISP’s are raising prices to weed out users and offer better bandwidth. I have rated the ISP’s factor an 8 (favorable). This is because of the large number of ISP’s. They bring competition, which lowers the prices and encourages use.


Telecom Italia controls the phone lines and currently has very high rates making the cost of surfing the web too high for many Italians, even though, the web subscription rates are cheap. The government is expected to reduce Telecom Italia’s tariffs for long-distance and international calls while increasing the cost of local calls, a move Internet users fear will sharply increase the cost of surfing the Net. The new tariffs will increase phone bills for the average family by between 4 percent and 6 percent. And although the subscriptions to Internet services are some of the cheapest in the world, the phone bills end up making it one of the most expensive on the whole. Because of these high prices, we have rated the phone structure factor a 4 (threatening).

The overall technology infrastructure rates a 7.2.



The nation’s political system is considered one of the most unstable in the world, as coalition governments fail on a regular basis. There have been more than 50 administrations since the end of World War II. The political system was undermined further by a massive corruption scandal involving the awarding of government contracts to private firms in exchange for financial kickbacks that affected most of the major political parties and resulted in a complete reordering of the political landscape in the 1994 legislative elections. All of the mainstream political parties support privatization, although they have differing views on modalities and regulations. The Prime Minister, Romano Prodi, is a respected industrial economist with a centrist background. This has caused him to place great emphasis on developing a free market economy and as a result, the Internet is currently unregulated. There are also no direct governmental controls that keep people off of the Internet. The government has demonstrated their sincerity towards having the market handle the Internet by giving Telecom Italia more control of the phone lines. Italy has been recently accepted into the European Community proving that it has surpassed a preset level of stability. We have rated the political structure a 6 (neither favorable nor unfavorable). The rating is a combination of both Italy’s unstable government and its European Community status. We feel that the threat of the government is canceled out by the opportunity provided by the EC.


Italy and the rest of the world still seem to be letting the USA develop legislation to protect the people who access the Internet. Like the U.S., Italy’s constitution guarantees the freedom of speech and art. We have rated this factor an 8 (favorable). The reason for this rating is the freedom that the Internet and Web TV are guaranteed by Italy’s constitution.

The overall political and legal structure rates a 7.2.


The GDP for Italy was $998.9 billion dollars and its growth was 2.2% in 1998. Inflation fell to 3.9% in 1996 after rising to 5.4% in 1995, and is continuing its downward trend in 1997. Through June of 1997, inflation was running at a 1.4% year-on-year rate. Also, the national debt is expected to slowly decline. Its weak consumption in 1997 has hurt its imports. Unemployment is extremely high at 12.25% although 40% of Italians are part of the labor force. Research has shown the household’s propensity to save is on a steady decline. In 1997, 85.6% of disposable income was spent. This lack of saving is a result of the lowering interest rates and increasing taxes (+6.2% in 1997), after the 8% increase in 1996. As mentioned in the political structure, Italy is a member of the European Community. In order for this to have happened they had to possess a high standard of economic stability. The overall economic aspect would rate an 8 (favorable). This is because inflation rates are low, interest rates are falling, and they are adopting the EURO dollar (a stable currency).


Enablers Factors Rating Multiplier Weight Weighted Average

Social Culture penetration 8 0.3 2.4

demographics 6 0.2 1.2

internet access 8 0.1 0.8

safety 6 0.1 0.6

segments 8 0.2 1.6

total 6.6

Tech. Infrastructure feasibility 8 0.3 2.4

cable and satellite 8 0.3 2.4

ISP’s 8 0.2 1.6

telephone line 4 0.2 0.8

total 7.2

Political and Legal political 6 0.4 2.4

legal 8 0.6 4.8

total 7.2

Economy economy 8 1 8

total 8

External Environment Rating 7.25

Reasoning for Factor Weight (in weight ed order greatest to least)


Economy- this the only factor that was rated 1.0 for obvious reasons

Technical Infrastructure

Feasibility- the reason is due to presence of complementary products

Cable and satellite- expansion possibilities are superior in relation to Italian TV

ISP’s- due to market concentration and fragmentation

Telephone lines- because their infrastructure exist but next generations will use other means to send the digital signal

Political and Legal

Legal- keeping the Internet free from regulation implies expansion and usage

Political- it is lower because of the security of trade added once Italy joined the EC

Social culture

Penetration- due to potential market expansion

Demographics- it is the key to understanding our market

Segments- it closely fits with are value of demographics but is not as strong

Internet access – majority of users are by computer and we are looking at the TV web browsing market

Safety- this received a low weight because of the advanced encryption

Overall country rating was 7.25


After carefully looking at all of this data, we can answer some initial questions for Philips. Yes, Italy is capable of having Philips Web TV. Yes, the market for the Internet is growing. And yes, the phone bills are extremely expensive and act as the biggest barrier keeping Italians from the web. With cellular technology moving into Italy, there appears to be many different ways that Philips can turn this barrier and threat into an opportunity. Overall, Italy as a country appears to have many more opportunities for Philips and Web TV than it does threats.



The Internet has become the driving demand for computers and communications services. The computer industry is difficult for small companies to compete with top named producers like IBM, COMPAQ, DELL, APPLE, and HP. At the end of 1997 it is estimated that 82 million PC’s will be connected to the Internet. 20 % of Italians own a personal computer. Over 300 ISP’s in Italy offer Internet service via the PC. Telecom Italia and Infostrata, (Omnitel), are the two major competitors. The telecommunication industry is looking into using satellite and cable lines in the future to access the Internet. Italians are accessing the Internet mainly with Personal Computers through landline, dedicated phone lines, ISDN digital lines, and PSTN analog lines. The competition for personal computers is very competitive. The threat of new entrants is very low because of Italians strong brand loyalty.


Digital Television is available in Italy. Telepiu currently dominates it, which is a subsidiary of Canal+. Stream Digital Cable Service, a parent company of Telecom Italia, has been introduced into this industry through an alliance with RAI, the Italian public broadcaster. Strong market growth in digital television is expected due to the demand for premium sports and film programming from the Italian public. Deregulation of the broadcasting industry allows pay-television operators to control premium programming rights. RAI plans to expand its Italian network penetration from the present 2.5 % to 25%. There are fewer than 20 million television households in Italy with only 1.3 million of them connected to cable and satellite services. Italy has provided more free television than other country in Europe making consumers reluctant to pay for digital service. This divided market means greater risks for all participants.


Satellite television has recently been introduced to the Italians. As of November 1998, Telecom Italia and RAI have been working together with “Skyplex, ” a multimedia satellite transmission system, to broadcast digital TV via satellite. Canal+ introduced their line of satellite services in April of 1998, called Canalsatellite Numerique Service. This system allows you to connect directly to the satellites thus eliminating the need to build large transmission stations. TV networks and Internet content providers can therefore broadcast information at much lower costs. The demand for satellite communications is growing very rapidly. We know that at present, 1.3 million of the (under) 20 million households have either cable or satellite services. This industry is very consolidated because it is such a new market; the threat of entrants is very high. Competition is likely to increase in this industry due to the increase in demand for advanced technology.


We have only seen one company who is offering a product similar to WEBTV, called PLAYWEB. This is a set top box that is offered by Telecom Italia. Telecom Italia provides the service and also sells the set top box. We were unable to obtain information on what the current demand is for such product. The growth rate in set top boxes is unpredictable at this time. The demand for Internet and e-mail services is suppose to increase by 210%, therefore increasing the demand for Internet/E-Mail access products. We don’t see this as a threat to Philip’s. The market is new and Philip’s name has been established. The Italians that are loyal to Philip’s brand are more likely to buy a set top box made by them over another company like SONY.


The mobile phone industry has proven to be very popular in Italy, with over 14 users per 100 inhabitants, with a total number of 8.2 million subscribers. This should rise to over 30 users per 100 inhabitants in 1998, reaching target penetration in the year 2000 at 40 users per 100. There are over 300 companies who provide mobile services in Italy. The two major companies are Telecom Italia SpA and Omnitel Pronto Italia. Omnitel announced in August of 1998 that it was implementing wireless Internet technology services via the mobile phone. Omnitel will use software called UP.Link™, supplied by Unwired Planet™. This gives mobile phone users access to e-mail, interactive information services, Internet / Intranet applications offered on standard WEB services. The trial was to have taken place at the end of 1998. The demand for this service is expected to be very high. Italians pay less money to use their mobile phone, which charges a flat rate, verses the telephone, which charges on a per minute basis. No data was available regarding the growth rate for this technology. This industry is very fragmented and with technology increases more companies will enter in this market further fragmenting it. We don’t see new entrants as a threat.


Personal Digital Assistants are available in Italy. The most popular had held devices are Palm Pilots and personal organizers. We were unable to obtain any growth rates in this industry. There are authorized dealers throughout Italy where you can purchase palm pilots. They can also purchase various personal organizers at local computer retail stores. At this time, Italians do not access the Internet via personal digital assistants. 3COM, maker of the palm pilot, recently announced Internet access through their device in the United States with worldwide rollout following. This industry is very fragmented because there are several companies who offer these devices. The threat of new entrants is very high because of rising technology.


Telecom Italia sells a product called PLAYWEB. This is a set top box this allows Internet access via the television. This is a threat because it’s already an entrant in the market. Omnitel sells the mobile phone, which will offer software that allows you to access e-mail, interactive information services, internet/intranet applications offered on standard WEB services. This is a threat to Philip’s because of the hand held capability and ease of use along with convenience.


Canalsatellite and Skyplex offer satellite services in Italy. Consumers purchase a satellite dish and pay monthly fees for service. RAI is a local broadcasting company that offers television shows for local residents viewing. This service is free to Italians who have the proper reception, but RAI chooses the shows that are broadcast. Stream Digital Cable Service and Telepiu offer Digital Television to Italians. Consumers purchase a set top box from the company and pay monthly service charges. Because this is a substitute product it is a threat to Philips because the likelihood of consumers buying more that one set top box or service is highly unlikely.


The threat of new entrants is two fold; one if you are referring to the new technologies being invented and offering an alternative and superior product, the threat is great. The Internet and entertainment markets are large, new and volatile. New technologies are continually being positioned to gain market share. The main difficulty will be barriers to entry such as extreme cost, and access to distribution channels.

If you are referring to the country of Italy and who exist there and who doesn’t. And will there be any threats of entry and computation to local markets. Yes there is a threat because the market in Italy is trying to catch up. The country leaders want to have more web usage and now the usage is so low, as stated in pervious sections. The potential is great and Italy being part of the EU will have to open its doors to competition, which will come from all areas and come hard. From all the big players.


The Internet TV segment is consolidated in Italy. There is only one company that we are aware of who offer a product similar to Philip’s WebTV. Since Philip’s has already established their name in Italy, we see that introducing WebTV as being very favorable. We feel that Philips should form an alliance with a local Internet Service Provider, such as, Infostrada to help market its product.


PLAYWEB was the first to be introduced in Italy, we feel that this can be an attractive market for Philips because of the lack of market saturation and maturity. Lack of competition adds another positive aspect for Philip’s WebTV. There currently are no barriers to keep new entrants from the market and costs of substitute product are high. The overall assessment of Philip’s WebTV going into Italy is favorable.



The main world competitors of the licensed Web TV are Philips, Sony, Mitsubishi, Toshiba and Panasonic (Matsu*censored*a). These companies are major worldwide competitors in many different markets and span many different products. They all compete in the set- top- box arena globally. There exist no Italian producers of WEB TV. However there does exist European, American, and Italian firms that compete in or sell a set top box in Italy. These companies include NetGem, Telecom Italia (Play WEB), WebSurfer, Network Computer (an Oracle and Intel joint venture), Motorola, and Samsung. All of these competitors do not have the “WEB TV” but have either analog or digital set top boxes that connect to the web via a TV and telephone line, cable, or satellite.

In this realm of living room web surfing there are many substitute products and many are already in the pipeline to be rolled out. The first substitute product of course is the personal computer with a modem. The computer companies are an obvious substitute but they are more an alternate solution. Many companies produce these computers; IBM, Hewlett Packard, Compaq, Dell, Gateway, and a host of others. The other substitute products that are actually fighting over who will be in control of the TV are: interactive TV firms, cable companies, satellite provider companies, telephone companies, ISP’s and digital TV manufacturers. This is an ominous and confusing list of substitute competitors. The reason for the confusion is due to the technology aspect and the combination of providing alternative TV usage. But due to joint ventures and alliances between firms that create a new or comparable service that is provided through a TV many previously non competitors are now competing for that TV time. For Instance now a cable company and software firm can form an alliance and now compete against WEB TV.

Possibly, the greatest competitor is inter-active TV systems. These systems are different technologies that allow real time communication between the viewer and the producer of the service.

The next competitor is going to be cable providers. The cable provider with the advent of new digital technologies will be able to provide a multiple amount of services that will compete with set top boxes. They will be able to provide online banking, Internet browsers, and the like but all through a cable service.

The remainder of the competitor’s for the TV will all be in some sort of combination or alliance with each other. For example, an Internet browser, a telephone company, and some new form of technology will form a company. Alternatively, a satellite broadcasting firm and a large computer firm. As long as similar services are provided, competitors exist.


Critical success factors are the key factors in succeeding in a given industry, market, and country. While analyzing Italy as a potential market, a list has developed of the major Critical Success Factors (CSF). Along with this list is an explanation.

Name recognition- Italians already familiar with a firm are more likely to believe in other products that company produces

New technology- A company that has a new, better and cheaper product will be able to outpace the competitors.

Technology leadership- If a firm is leading in a sector it will be looked upon as the best and a benchmark which people will want or expect.

After-sales service- Service in Italy is in high demand especially in a field as new and complicated as web browsing.

Market position- A firm that positions itself in one market can easily go to the next or if it can be first to offer a product it has a better chance of making that product a leader.

Advertising program- Advertising is key to Italy as long as it is designed for Italians and their different segments of users.

Cultural competence- This is the ability to understand your consumer based on who they are as a culture and nation.

Product in working form- If the product is ready to be shipped to Italy and no major technical problems exist this is good. WEB TV is only for the American, Canadian and Japanese parameters of TV.

Comparative Strengths of Competitors in Italy

Critical Success Factors Philips Sony Mitsubishi Toshiba

Name recognition 10 8 7 9

New technology 8 8 7 9

Technology leadership 8 8 8 8

After-sales service 9 9 9 9

Market position 8 8 8 9

Advertising program 8 8 8 8

Cultural competence 8 7 7 8

product in working form 0 0 0 2

TOTAL 59 56 54 62

AVERAGE 7.375 7 6.75 7.75


Name recognition- The two leaders are Philips due to Philips being a European company, and Toshiba being a market mover and better known than Sony and Mitsubishi.

New technology- Toshiba is the leader in this because of their announced expansion in digital equipment and digital set-top-boxes, which will work in Europe. Where as Philips and Sony are digital, they have not announced actions for expansion. Mitsubishi is a close third because of their digital systems.

Technology leadership- In terms of overall leader ship in technology no one has the lead between these firms all are on the cutting edge, and it changes so rapidly on whom is the leader.

After sales service- All these companies under stand the need for continuing service after the purchase and all scored the same.

Market position- Toshiba has the market position in Europe as well as Philips but when discussing Italy they are all some what well established in that area except Italians are a few years behind in their demand for cutting edge products. However, Toshiba is making the move.

Advertising- All these companies spend millions on advertising a year and once they decide to enter Italy with WEB TV or an alternate they will be ready to go.

Cultural Competence- Philips and Toshiba ranked one point higher in this factor only because Philips is a European company and Toshiba actually has a plan for entering Europe and then Italy.

Product in working form- None of the licensees has a WEB TV product that will work in Europe. Only Toshiba has actually started manufacturing next generation digital set-top-boxes for the UK and Italy.


There are two ways to divide the competitors. The reasons are that competition over the TV involves different industries that are now converging on the individual viewing the TV. They are able to combine technologies to provide these different services such as online banking and smart card technology, email, web surfing, e-commerce and a like. So to say, that the only competitors to Philips are WEB TV licensees is not a very wise decision especially when referring to the European and Italian markets.

The three main competitors are 1. Cable Companies like Canal+ (the huge French Euro wide cable company with 2 million subscribers in Italy alone). 2. ISP’s like AOL (the worlds largest Internet Service Provider with multiple services for the home user) 3. Telephone Companies like Telecomm Italia (Italy’s largest telephone, cellular provider). Each one of these competitors has a huge advantage in part of the product chain. They each can be a major player by providing an essential function to compete with the Web TV and the set top box in general.

sub categories, insert page break then place graphic

Understanding the major categories of the competition take a more focused look at the main set top box/ WEB TV competitors in Italy. We will only focus on the WEB TV manufactures but take notice of the set top box manufactures, Net Gem and Telecomm Italia. These two producers of set top boxes have strong footholds in Italy. Their technology will operate on Italian TV’s with current technology where as WEB TV will be forced to change its technology in order to become compatible.

1. Sony

2. Toshiba

3. Mitsubishi

4. Telecomm Italia

5. NetGem

Sony, Toshiba, and Mitsubishi are global producers of electronics. They compete worldwide in multiple markets: consumer electronics, computing, wireless, and semiconductors. In there consumer electronics division, they produce TV, VCRs, DVD, Camcorders, and Digital versions of these products. Of course, they are all licensee of WEB TV. They all have a presence in Europe and can be considered main competitors. In Italy, all these companies are well known as consumer electronic manufactures. They are all focused on expanding interactive TV across Europe and Italy. As of today, Toshiba has announced a plan of action, where by they will offer digital set top boxes and integrated digital TV for all European networks and parameters including cable, satellite and terrestrial venues. Toshiba’s plan is to offer it first in the UK and then move into France, Germany and Italy. Therefore, out of these main competitors, Toshiba is the main threat but you can never tell what will happen with future generations of a product.

The interesting thing about these competitors is that they are all licensees of WEB TV. They are also scrambling to find that ultimate next generation item that duplicates WEB TV and more. These companies are trying to gain market share in the alternate and substitute products. For instance Philips is a leading manufacturer of digital TV and if they could align with a cable company around an ISP then they will compete against their own WEB TV.

Philips can compete in Italy. The question is can they do it with Web TV. The answer is no. WEB TV can not operate in conjunction with the specs of European TV. Therefore, they will need to change the WEB TV and make it work or form a partnership with a new product. This market moves fast and each of these competitors could end up on top, and win the Italian market. They need the working combinations of a product that serves the Italian community and serves the new European union.

Considering all the available information we give Philips a rating of 7.375 for competitiveness.

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