This article will take a keen look into the major survival techniques adopted by manufacturing industries.
Since 2007 the Italian economy has been going through trying moments. Think of all characteristics of a performance challenged economy such as unemployment, inflation, stagnation, consistent reduction in GDP, increasing public debt and general reduction in turnover for almost all industries in the economy. All in all, most industries have shown a lot of resilience.
Exporting seems to be the only therapy to thrive in the turbulent Italian economy.
Basically, this article zeroes in on the impact and fruits of the involvement of manufacturing industries in international trading.
1) Exporting industries benefit from minimal unit costs
During times of economic crisis, most of the firm’s production capacity is idle. However, international involvement stimulates efficient utilization of idle facilities such as staff, factory and machines. The overall effect of this is reduced unit costs. Consequently, reduced unit costs lead to a firm’s product becoming more competitive in the international markets and hence increased profitability.
2) Exports increase sales
The Italian local market alone is not enough to buy all products manufactured by its industries. It therefore becomes crucial for Italian manufacturing firms to export some if not most of their products so as to expand their sales.
3) Economies of large scale
There are various ways of enjoying the economies of scale. An excellent way is through exporting. Involvement in international activities makes a firms products gain global acceptance with minimal adaptation.
4) Reaching out to untapped markets
The Italian manufacturing firms have an opportunity to introduce their products to other parts of the world. The newly untapped markets are likely to turn out to be the primary drivers of the firms exporting activities.
5) Exporting is seen as the only way of overcoming slow growth in the local economy
During times of poor performance in the domestic market, it would be necessary for firms to make their way into the export markets. The assumption is that there are greater opportunities offered by the international markets.
6) Exporting is a good way of reducing the impact of seasonal fluctuations
The Italian economy has become so unpredictable such that firms are not certain of whether their sales forecasts will come true. In such conditions, firms will look for ways of streamlining their sales through engaging in export activities.
7) Exporting boosts profits
Firms operating in turbulent economies like the Italian market are either struggling to increase their profits or just operating at their break-even points. For this reason, firms will seek foreign markets so as to boost their profits through increased sales.
8) Exports help a firm to mitigate risks and balance growth
Relying on the domestic market alone is very risky. It is always prudent to spread risks by venturing into several markets, most of which are foreign. This is because different countries experience different growth rates at any given season. Therefore, the danger of stagnation in one or more country will be` covered by increased growth in other economies.
It is therefore evident that exporting industries perform fairly well and have a higher chance of survival than non-exporters. Internationalization is thus justified for Italian manufacturing firms. .