Innovate MedGUIDE FOR JOINT PROMOTION

Naples, October 2009

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TABLE OF CONTENTS

1 INTRODUCTION...........................................................................................................32 TOOLS IN SUPPORT OF BUSINESS DEVELOPMENT AND

INTERNATIONALIZATION..........................................................................................33 THE MANUFACTURING SECTOR IN THE PROVINCE OF NAPLES WITHIN THE

DOMESTIC AND EUROPEAN SCENARIO................................................................64 OPENNESS TO FOREIGN MARKETS: TRENDS AND EXPORT-ORIENTED

MANUFACTURING SECTORS.................................................................................104.1 THE MANUFACTURING INDUSTRY IN THE PROVINCE OF NAPLES: IDENTIFYING KEY

SECTORS.............................................................................................................124.2 MAIN EXPORT MARKETS FOR THE FOOD AND BEVERAGE AND FASHION SECTORS IN

THE PROVINCE OF NAPLES...................................................................................17

5 EUROPEAN SMES: CURRENT SITUATION AND PROSPECTS.............................206 THE EXPERIENCE OF CLUSTERS AND NETWORKS WITHIN THE SME

ENVIRONMENT.........................................................................................................237 STRENGTHS AND WEAKNESSES OF SMES IN THE PROVINCE OF NAPLES ON

FOREIGN MARKETS................................................................................................268 POTENTIAL OF SMES IN THE MEDITERRANEAN AREA......................................299 THE FOOD AND BEVERAGE AND FASHION SECTORS IN THE PROVINCE OF

NAPLES.....................................................................................................................309.1 TRADITIONAL PRODUCTS FROM THE PROVINCE OF NAPLES....................................32

10 MANUFACTURING CLUSTERS IN CAMPANIA AND THE PROVINCE OF NAPLES...................................................................................................................................3310.1 RESEARCH, DEVELOPMENT AND INNOVATIVE CLUSTERS.........................................35

11 COMPETITIVE SCENARIO........................................................................................3812 TARGET MARKETS...................................................................................................4013 BUYING BEHAVIOUR................................................................................................4214 INTERNATIONALIZATION STRATEGIES AND SUPPORTING ACTION PLAN......4315 CONCLUSIONS..........................................................................................................47LIST OF SOURCES...........................................................................................................48

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1 Introduction

The Italian business sector is highly fragmented with a large number of firms, almost all of which are small enterprises. Until very recently, small size counted as a strength for Italian firms as it provided flexibility and the ability to adapt quickly to external environmental conditions. However, in today’s modern economy where markets have become globalized, being small can constitute a handicap and an impediment to competing on international playing fields.

This report examines the business sector in the Province of Naples within the wider economic landscape of the Mediterranean area. It presents an analysis of the manufacturing sector with the aim of identifying an integrated system capable of fostering the development of competitive competencies among traditional firms operating throughout the province.

The aim of the report, and indeed the aim of the Innovate-Med project in general, is to identify local manufacturing clusters of firms producing products with potentially strong international appeal but unable to seize the opportunities offered by the global marketplace.

The challenge is to combine “tradition” and “innovation” by implementing the right development drivers to activate the local manufacturing sector, which, like most areas in the Mediterranean, has for years been forced to operate within a globally competitive environment without being able to exploit the opportunities it offers.

2 Tools in support of business development and internationalization

The framework of Community policies on the development and structural reinforcement of regional economies offers major opportunities for firms in Campania and consequently for enterprises in the Province of Naples. The general objective of the Campania Regional Government’s Regional Cohesion Policy 2007-2013, as set out in its Regional Strategic Document, is to stimulate economic development and reduce social marginality using funding allocated by ERDF and ESF Operational Programmes, the Programme for Rural Development, and the Fondo per le Aree Sottoutilizzate (Fund for Underdeveloped Areas).

The Campania ERDF Regional Operational Programme 2007-2013 is divided into seven priority axes identifying specific and operational objectives. For the Naples business sector it constitutes the regulatory framework providing tools for the implementation of direct support measures.

The second axis, “Competitiveness of the regional manufacturing system”, is of particular relevance to firms as it is specifically concerned with increasing the competitiveness of manufacturing systems and supply chains. It refers particularly to sectors considered strategic for the regional economy, sectors of excellence and internationalization strategies.

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As previously mentioned, one of the key objectives of the Regional Operational Programme concerns small and medium-sized firms (SMEs). SMEs are the focus of actions aimed at strengthening competitiveness, supporting the process of internationalization, attracting foreign capital and encouraging openness to global markets, particularly in the Mediterranean area.

In order to increase the competitiveness of manufacturing sectors, regional-wide actions focus on specialist products, innovative projects, and strategic sectors and geographical areas for the regional economy with a view to supporting processes of clustering and consolidating manufacturing supply chains in order to stimulate the local economic network.

The repositioning and promotion of traditional yet strategic sectors in the regional economy is being guided by a systemic vision. In particular, SMEs are one of the main targets of business linkages aimed at setting up strategic manufacturing chains as well as identifying and implementing tools supporting traditional quality products.

Small firms have difficulty competing on the global market and need support to strengthen their strategic and financial resources. For this reason, support measures are principally aimed at large-sized or “group” beneficiaries formed by the creation of consortia or technological and organizational supply chains, following the logic of clusters/districts.

Policies in support of firms are also aimed at strengthening the manufacturing sector by fostering the adoption of IT-based tools, the use of ICT, and the development of industrial logistics services to reduce running and operational costs and improve organizational efficiency.

Firms are encouraged to adopt a model of market presence rather than focusing simply on exports. To this end, incentives are directed at activities providing “collective support” by enhancing managerial competencies and developing clusters in order to increase firms’ competitiveness and strengthen their ability to access and/or consolidate their position in international markets. Specifically, priority is given to actions aimed at strengthening links between research and manufacturing and between manufacturing and logistics.

The aim of supporting processes of internationalization is therefore to concentrate resources in highly innovative sectors and on markets considered most advantageous for the regional economy, identified in line with the competitive capacity of the regional manufacturing industry as well as opportunities for future growth. Particular focus will be given to developing traditional “Made in Campania” sectors and strengthening their international positioning.

The main regional programmes for the internationalization and clustering of SMEs are summarized below.

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Figure 1 Measures in support of firms in Campania: incentives for supply chains and internationalization

Programme / Project / Fund

Objective / Priority / Measure

Intermediary and final beneficiaries

Available resources

Expected results / Indicators

Campania ERDF ROP 2007-2013

2.b

DEVELOPINGCOMPETITIVENESS,MANUFACTURING CLUSTERS, AND INDUSTRIAL LOGISTICS

2.3 – MANUFACTURING SYSTEMS AND SUPPLY CHAINSIncentivize the development of manufacturing systems and supply chains, giving priority to forms of clustering, to strategic, innovative and highly-specialized sectors, and at the same time encouraging the strategic repositioning of sectors and firms more disadvantaged by international competition

Campania Regional Government, central government bodies and authorities responsible for national legislation, provincial councils, local councils, public and local authorities, agencies in charge of managing the process of appraising, approving and allocating funds, firms

€220 m Specific objectives:>1,200 new jobs created (AWU) in beneficiary SMEs within three years of completion of the investment

50% exports of high / increasing productivity products (current value 45.9% – 2005 data)

Operational objectives: 600 beneficiary firms awarded incentives

Increase the competitiveness of the manufacturing system at global level in highly specialized sectors, giving priority to sectors and sites considered strategic for the regional economy, by supporting the development of manufacturing systems and supply chains, rationalizing manufacturing sites and increasing access to credit and capital.

2.4 – CREDIT AND INNOVATIVE FINANCEIncrease access to credit and capital for firms in the region, including the use of innovative financial instruments

Campania Regional Government, provincial councils, local councils, public and local authorities, foundations, NGOs,consortia, firms

€130 m Specific objectives:>1,200 new jobs created (AWU) in beneficiary SMEs within three years of completion of the investment

50% exports of high / increasing productivity products (current value 45.9% – 2005 data)

Operational objectives: 350 credit and innovative finance projects

2.5 – INDUSTRIAL AND ECONOMIC INFRASTRUCTURES Regenerate, redevelop and/or complete existing industrial sites, giving priority to sites located in peripheral urban areas and to the conversion of abandoned buildings, and create integrated manufacturing clusters subject to assessment of the real need for new industrial infrastructures

Campania Regional Government, central government bodies and authorities responsible for national legislation, provincial councils, local councils, public and local authorities,ethical financial institutions, consortia, firms

€240 m Specific objectives:>1,200 new jobs created (AWU) in beneficiary SMEs within three years of completion of the investment

50% exports of high / increasing productivity products (current value 45.9% – 2005 data)

Operational objectives: 81 actions in infrastructural areas

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(Cont.) Measures in support of firms in Campania: incentives for supply chains and internationalization

Programme / Project / Fund

Objective / Priority / Measure

Intermediary and final beneficiaries

Available resources

Expected results / Indicators

Campania ERDF ROP 2007-20132.c

INTERNATIONALIZATION AND INVESTMENT ATTRACTION

Develop the level of internationalization within the manufacturing system and encourage the attraction of international capital, competencies and consumption flows

2.6 – OPENNESS TO INTERNATIONAL MARKETS

Support the internationalization of firms, processes and products, giving priority to more competitive sectors and strategic areas for market penetration, and encourage the attraction of international capital and consumption flows

Campania Regional Government, SPRINT Campania network (chambers of commerce and/or special agencies, Unioncamere)

€75 m Specific objective:Increase in the number of international economic partnership agreements: 1,000(compared to the objective reached during the previous round)

Operational objectives:500 actions in support of processes of internationalization

Source: Campania Regional Government, ERDF Regional Operational Programme 2007-2013; Regional Council, Resolution no. 26 dated 11 January 2008, ERDF ROP 2007-2013, Approval of financial plan by operational objective.

3 The manufacturing sector in the Province of Naples within the domestic and European scenario

According to a report published by the European Union1, in the European business economy there are over 20 million enterprises, of which more than 99% are small and medium-sized enterprises (SMEs), that is to say firms employing fewer than 250 persons. Within the universe of SMEs, 92% are micro enterprises, employing under 10 persons. The typical European firm is therefore a micro firm.

In Italy there are over 4 million SMEs, corresponding to 99.9% of the total number of firms. Micro firms alone account for 94.8% of the entire universe of enterprises.

Table 1 Distribution of local units in 2006 by number of employees: Naples, Campania and Italy Naples Campania Italy

Local business unitsemploying 1-9 persons 96.1 96.2 94.8employing 10-19 persons 2.5 2.4 3.2employing 20-49 persons 0.9 1.0 1.4employing 50 or more persons

0.5 0.4 0.6

Total 100.0 100.0 100.0Source: own calculations based on data from Unioncamere – Istituto Tagliacarne, Atlante della competitività delle Province e delle Regioni, 2009.

1 European Commission, Directorate General Enterprise and Industry, “First Section of the Annual Report on EU Small and Medium-sized Enterprises”, January 2009

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From an analysis of the manufacturing sector and the distribution of firms by number of employees in the Region of Campania and the Province of Naples, the picture that emerges is very similar to that of Europe: the overwhelming majority of firms are small. The number of micro firms in the Province of Naples is even higher than at national level. Only 3.9% of Neapolitan firms employ at least 10 persons, slightly under the national figure (5.2%). Generally speaking, the small size of these firms is a structural attribute that until recently had been one of their strengths, making them flexible and adaptable. Today, however, being small is also an impediment to competing in international markets.

At the end of 2008 a total of 473,117 firms were active in Campania, corresponding to 8.9% of the 5,316,104 firms active in Italy. Neapolitan firms accounted for 48.1% of the total number of regional enterprises2.

Table 2 Naples: active firms by business sector – 2008

2008 ACTIVE Sector Number %Agriculture, hunting and forestry 12,648 5.6Fishing, fish farming and incidental services 216 0.1Mining and quarrying 74 0.0Manufacturing 23,944 10.5Prod. and distr. of electricity, gas and water 178 0.1Construction 25,840 11.3Wholesale and retail trade 97,347 42.7Hotels and restaurants 12,179 5.3Transport, storage and communication 8,829 3.9Financial and monetary intermediation 4,607 2.0Real estate, renting, computer activities, research

18,388 8.1

Education 1,253 0.6Health and social work 1,971 0.9Other community, social and personal service activities

10,589 4.6

Unclassified 9,664 4.2TOTAL 227,740 100

Source: Bollettino di statistica published by the Naples Chamber of Commerce – Rapporto 2009

In 2008 there were 227,740 active firms in the Province of Naples, a significant proportion of which were in the wholesale and retail trade (42.7%), construction (11.3%) and manufacturing (10.5%).

2 Campania Regional Government, Servizio Statistica “Le imprese in Campania – anno 2008”, June 2009.

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Table 3 Demographic trend of Neapolitan firms in the period 2003-2008 (absolute values)

YEAR BIRTHS DEATHS(1) NET CHANGE GROWTH RATE(2)

2003 16,938 11,721 5,217 2.12004 18,454 13,083 5,371 2.12005 17,985 13,341 4,644 1.82006 19,223 15,619 3,604 1.42007 19,355 17,203 2,152 0.82008 17,821 17,953 -132 -0.05

(1) Removals from the company register between 2006 and 2008 include voluntary and involuntary strike-offs(2) The growth rate is given by the ratio between net change during the period under consideration and the total business stock registered at the start of the period.

Source: Bollettino di statistica published by the Naples Chamber of Commerce – Rapporto 2009

The global financial and economic crisis has had a major impact on the dynamics of the business sector in the Province of Naples. In 2008, the number of deaths exceeded the number of births by 132 units. A comparison between the net change in 2008 and in 2007 reveals an extremely sluggish growth rate of just -0.05%, about half a percentage point lower than the national figure. However, the number of firms that closed in 2008 was the highest since 2002.The demographic growth of Neapolitan firms in the five years leading up to 2008 suffered a downturn as a result of the international economic crisis. This is indicated by the fall in the number of new firms, down 8% compared to 2007.

Table 4 Active firms in the Province of Naples: distribution by sector and average annual rate of change 2008-1998. Comparison Naples – Campania.

Sector NaplesAverage annual % Naples /

1998 2008 rate of change Campania 2008Agriculture, hunting and forestry 7.6 5.6 -2.4 16.8Fishing, fish farming and incidental services 0.1 0.1 -0.5 67.5Mining and quarrying 0.1 0.0 -6.1 28.7Manufacturing 12.8 10.5 -1.6 50.0Prod. and distr. of electricity, gas and water 0.0 0.1 - 55.3Construction 10.6 11.3 0.6 45.3Wholesale and retail trade, repair of personal and household goods 44.5 42.7 -0.4 56.1Hotels and restaurants 4.7 5.3 1.3 50.9Transport, storage and communication. 4.0 3.9 -0.3 56.9Financial and monetary intermediation 1.6 2.0 2.4 53.3Real estate, renting, computer activities, research 6.0 8.1 3.1 57.9Education 0.5 0.6 0.9 52.5Health and social work 0.9 0.9 -0.3 57.0Other community, social and personal service activities 4.6 4.6 0.1 51.1Unclassified 2.0 4.2 10.2 79.9TOTAL 100 100 2.1 48.1

Source: own calculations based on data from the Naples Chamber of Commerce – Bollettino di statistica Rapporto 2009

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Looking at the dynamics of firms by business sector, the advanced service industry (real estate, renting, computer activities, and research) grew by 3.1% in the period 1998-2008. Positive growth was also registered in intermediation (+2.4%) and tourism (+1.3%), while negative growth was recorded in agriculture (-2.4%), manufacturing (-1.6%) and wholesale/retail (-0.4%).

Table 5 Value added 2007, total and by business sector: Naples, Campania and Italy

Naples Campania ItalyValue added € millions % € millions % € millions % agriculture 476 1.1 2,235 2.6 28,341 2.1 total industry 7,965 17.7 17,008 19.9 379,377 27.5

- manufacturing 5,346 11.9 11,259 13.2 295,256 21.4- construction 2,619 5.8 5,749 6.7 84,120 6.1

Services 36,517 81.2 66,006 77.4 972,407 70.5Total 44,959 100.0 85,249 100.0 1,380,125 100.0% Total Italy 3.26 6.18 100.00

Source: Unioncamere – Istituto Tagliacarne, Atlante della competitività delle Province e delle Regioni, 2009

In 2007 the value added of enterprises in the Province of Naples amounted to approximately €45 million, equivalent to 3.26% of the national value added. Naples accounted for over half of the regional value added. The provincial economy was heavily based on the service industry (81.2%), which exceeded the national average by 10 percentage points. The industrial sector produced approximately 18% of value added in the Province of Naples, with manufacturing accounting for 70% of industrial value added (€5,346 million out of a total of €7,965 million). However, at national level, the incidence of industry on overall value added was 10 percentage points higher than the figure recorded by the Province of Naples.

Table 6 Sectoral distribution of firms in the Province of Naples by legal status: % weight 2008

COMPANIES

PARTNERSHIPS

SOLE TRADERS

OTHERS

Business sector percentage valuesAgriculture, hunting and forestry 2% 2% 95% 0%Fishing, fish farming and incidental services 13% 15% 27% 46%Mining and quarrying 46% 27% 20% 7%Manufacturing 26% 28% 44% 1%Prod. and distr. of electricity, gas and water 76% 12% 6% 7%Construction 28% 17% 47% 8%Wholesale and retail trade, repair of personal and household goods 14% 24% 62% 0%Hotels and restaurants 2% 56% 40% 1%Transport, storage and communication 23% 23% 47% 7%Financial and monetary intermediation 16% 18% 64% 1%Real estate, renting, computer activities, research 40% 24% 31% 6%Education 25% 24% 31% 20%Health and social work 31% 47% 4% 18%Other community, social and personal service activities 2% 23% 68% 8%Unclassified 52% 33% 6% 9%Total 21% 24% 53% 3%

Source: own calculations based on data from the Naples Chamber of Commerce – Bollettino di statistica Rapporto 2009

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In 2008, only 21% of active firms in the Province of Naples were companies. This figure indirectly confirms that firms tend to have a small organizational structure and a low level of capitalization. Looking at the data in terms of sector, it emerges that the only sector in which the business stock is made up almost entirely of companies is the production and distribution of electricity, water and gas. The fact that only 26% of manufacturing firms are companies clearly points to a weakness in this sector, particularly given the global environment in which firms are competing today.

4 Openness to foreign markets: trends and export-oriented manufacturing sectors

Table 7 Exports from the five provinces in Campania, 2005-2008 (€ thousands)

Province 2005 2006 2007 2008 % weight % inc. AARC2008 08-07 08-05

Avellino 1,032,684,2 1,174,473,3 1,212,226,7 998,529,8 10.8% -17.6 -1.1Benevento 88,923,0 80,438,0 107,901,7 126,492,4 1.4% 1.5 12.5Caserta 817,871,5 924,419,9 1,148,037,6 1,278,904,1 13.8% 10.8 16.1Naples 4,228,948,3 4,540,718,6 5,009,752,5 4,822,708,3 52.0% -15.4 4.5Salerno 1,410,755,1 1,671,998,0 1,966,718,5 2,044,686,1 22.1% 6.4 13.2Campania 7,579,182,0 8,392,047,8 9,444,637,0 9,271,320,7 100.0% -14.3 6.9

Source: own calculations based on data from the Naples Chamber of Commerce, Servizio Statistica, and from ISTAT, 2009

Looking at the trend in exports from Campania, Naples traditionally represents the lion’s share, and in 2008 accounted for 52% of regional exports. The average annual rate of change in the value of regional exports increased by nearly 7% in the four year period in consideration. However, a double-figure decrease (-14.3%) in regional exports was recorded for the first time in 2008 after many years of positive growth, with Naples down by -15.4%. This negative result was partly offset by the positive performances of Salerno and Caserta.

Table 8 Exports from Italy and South Italy, 2005-2008 (€ thousands)

Area 2005 2006 2007 2008 % weight

2008

AARC 08-05

Campania 7,579,182,0 8,392,047,8 9,444,637,0 9,271,320,7 2.5% 6.9Southern Italy 22,691,524,0 24,479,864,0 27,119,469,0 27,294,342,0 7.5% 6.3Islands 11,075,132,0 12,284,067,0 14,386,282,0 15,636,722,0 4.3% 12.2Total South Italy 33,766,656,0 36,763,931,0 41,505,751,0 42,931,064,0 11.7% 8.3

ITALY 299,923,416,0 332,012,885,0 364,743,919,0 365,806,089,0 100.0% 6.8

Source: ICE, online statistics, calculations based on data from ISTAT, 2009

In 2008, Campania accounted for 2.5% of Italian exports. Regional exports during the period 2005–2008 reflected national trends, though Campania did lose positions to other Southern Italian regions. While exports from the Islands grew at a 12.2% average annual rate of change between 2005 and 2008, exports from Campania increased by 6.9%, in line with other regions in South Italy. The average annual rate of change in total exports from South Italy was 8.3%, indicating that Campania lost competitiveness compared to the

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positive performance of the Islands, especially Sicily (where exports were worth €9.9 million in 2008 compared to €7.2 million in 2005).

Table 9 Exports: major trading partners for the Province of Naples and Campania, 2006-2008 – in € thousands and percentage change

2006 2007 2008 % 2008 AARC 08-06Province of Naples

France 687,353 640,741 655,708 13.6% -2.3Switzerland 334,856 438,316 654,531 13.6% 39.8United States 597,136 581,714 622,901 12.9% 2.1United Kingdom 364,021 377,971 327,925 6.8% -5.1Germany 428,269 349,413 313,854 6.5% -14.4Spain 285,993 303,618 208,892 4.3% -14.5Belgium 169,174 149,407 108,259 2.2% -20.0Russia 74,313 124,490 94,703 2.0% 12.9Greece 95,776 96,026 77,282 1.6% -10.2Japan 62,559 63,658 77,022 1.6% 11.0Netherlands 96,069 98,909 71,139 1.5% -13.9China 46,938 60,654 69,926 1.4% 22.1Austria 86,017 90,288 65,234 1.4% -12.9Poland 40,222 60,368 53,868 1.1% 15.7Australia 46,126 50,465 49,087 1.0% 3.2TOTAL EU 2,540,095 2,519,134 2,311,866 46.5 % -4.6WORLD 4,540,719 5,009,753 4,822,708 100.0%

CampaniaFrance 948,978 979,486 1,019,338 11.0% 3.6Germany 1,141,890 990,482 998,881 10.8% -6.5United Kingdom 805,585 842,748 858,336 9.3% 3.2United States 771,851 748,064 787,375 8.5% 1.0Switzerland 407,477 517,531 748,707 8.1% 35.6Spain 497,130 547,119 451,309 4.9% -4.7TOTAL EU 5,072,528 5,454,488 5,220,012 55.3% 1.4WORLD 8,392,048 9,444,637 9,271,321 100.0%

Source: ICE, online statistics, calculations based on data from ISTAT, 2009

France and Switzerland were the main export destinations for Neapolitan products in 2008, with a share of 13.6% each. The United States was the third largest export market with a share of 12.9%, followed by the United Kingdom, Germany and Spain.The top six destinations for provincial exports were the same as for regional exports, though ranked differently. France and Germany were Campania’s main export markets in 2008, with shares of 11% and 10.8% respectively, followed by the United Kingdom, the Untied States and Switzerland. The European Union accounted for a significant share of exports both at provincial (46.5%) and regional (55.3%) level. However, in terms of exports to Europe the Province of Naples lost positions compared to the other provinces in Campania.

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4.1 The manufacturing industry in the Province of Naples: identifying key sectors

Analysing the manufacturing industry in the Province of Naples and comparing the data with national figures, it emerges that the dynamics and behaviour of different manufacturing sectors vary significantly

Table 10 Manufacturing firms in the Province of Naples and Italy, % composition, average annual rate of change 2008-1998

Naples ItalySector Active

firms% % AARC % % AARC

2008 1998 2008 08-98 1998 2008 08-98Manufacture of food products and beverages 4,909 16.2 20.5 2.5 12.7 16.6 2.9

Manufacture of tobacco products - 0.0 0.0 -5.7 0.0 0.0 -4.2Manufacture of textiles and textile products 599 2.2 2.5 1.2 5.9 4.4 -2.2

Manufacture of wearing apparel; dressing and dying of fur 2,873 15.0 12.0 -1.7 8.5 7.2 -1.4

Tanning and dressing of leather; manufacture of luggage 1,580 7.5 6.6 -0.9 4.4 3.7 -1.4

Manufacture of wood and products of wood, except furniture; manufacture of articles of straw and plaiting materials

1,437 7.6 6.0 -1.8 9.2 7.2 -1.9

Manufacture of pulp, paper and paper products 263 1.0 1.1 0.4 0.8 0.8 -0.6

Publishing, printing and reproduction of recorded media 1,437 5.7 6.0 0.6 4.7 5.1 1.1

Manufacture of coke, refined petroleum products and nuclear fuel 48 0.3 0.2 -1.4 0.1 0.1 -2.5

Manufacture of chemicals, chemical products and man-made fibres 335 1.8 1.4 -1.8 1.3 1.2 -1.1

Manufacture of rubber and plastic products 383 1.5 1.6 0.6 2.0 2.0 0.2Manufacture of non-metallic mineral products 1,030 4.6 4.3 -0.5 4.6 4.6 0.1Manufacture of basic metals and fabricated metal products 192 1.0 0.8 -1.0 0.9 0.7 -2.2

Manufacture of fabricated metal products, except machinery and equipment 3,520 13.3 14.7 1.1 16.4 17.7 0.8

Manufacture of machinery and equipment 886 3.2 3.7 1.4 7.3 7.6 0.6Manufacture of office machinery and computers 96 0.3 0.4 3.0 0.3 0.6 7.1

Manufacture of electrical machinery and apparatus n.e.c. 575 3.8 2.4 -3.4 3.3 3.0 -0.7

Manufacture of radio, television and communication equipment and apparatus 144 1.0 0.6 -3.5 1.5 0.9 -3.5

Manufacture of medical, precision and optical instruments 862 3.0 3.6 1.7 4.4 4.5 0.3

Manufacture of motor vehicles, trailers and semi-trailers 48 0.3 0.2 -1.6 0.4 0.5 2.7

Manufacture of other transport equipment 503 1.2 2.1 6.8 0.8 1.3 5.7Manufacture of furniture; other manufacturing n.e.c. 1,963 8.8 8.2 -0.5 10.2 10.0 -0.1

Recycling 239 0.7 1.0 3.5 0.3 0.5 7.4TOTAL 23,944 100 100 0.1 100 100 0.1

Source: Bollettino di statistica published by the Naples Chamber of Commerce – Rapporto 2009

In 2008, 20.5% of active firms in the Province of Naples came from the food and beverage sector, making this Naples’ single largest manufacturing segment. This

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percentage is higher than the national figure, where the sector accounted for 16.6% of the total business stock.

As regards the fashion industry as a whole (textiles, clothing, footwear and leather), firms in the Province of Naples represented 21.1% of total manufacturing enterprises. In this case too, the provincial figure was higher than the national figure, where the percentage weight was equal to 15.3% of the total.

Two other important sectors in the provincial economy in terms of the number of firms are fabricated metal products and furniture. In these two sectors active firms accounted for 14.7% and 8.2% of the total respectively.An analysis of the dynamics of active firms over a ten-year period starting from 1998 reveals a number of interesting factors. In this timeframe, the food industry registered a positive average annual rate of change, with an increase of 2.5% in the number of active firms at provincial level, just below the national figure of 2.9%. In the same period, the average annual rate of change in the fashion industry was negative both at provincial and national level except for Neapolitan textile firms, which grew by 1.2%. Although leather manufacturing in the Province of Naples recorded an average annual rate of change of -0.9%, this segment held up better than at national level (-1.4%). Active firms involved in the manufacture of fabricated metal products registered an increase of 1.1%, slightly above the national figure. The number of firms in the furniture manufacturing sector fell by 0.5%, almost half a percentage point higher than the national figure.

Table 11 Composition by sub-sector of manufacturing value added in 2006 (1) – % share: Campania and Italy

CAMPANIA ITALY

Food products, beverages and tobacco 16.1 9.7

Textile products and wearing apparel 7.4 8.4

Tanning and dressing of leather, manufacture of leather, leather products and the like

4.2 2.5

Printing and publishing 6.1 6.0

Coke plants, refineries, chemicals, pharmaceuticals

6.7 8.8

Manufacture of non-metallic mineral products 6.0 5.8

Manufacture of fabricated metal products 13.3 17.2

Electrical and optical machinery and apparatus, transport equipment

30.5 30.1

Wood, rubber, other manufactured products 9.7 11.6

Total industry (in a narrow sense) 100.0 100.0

(1) Value added to base prices, referring to the previous year’s prices % Naples manufacturing value added compared to Campania and Italy

47.5 1.8

Source: Bank of Italy, Regional economies – L’economia delle regioni italiane nell’anno 2008, 2009; own calculations based on data from Unioncamere – Istituto Tagliacarne, Atlante della competitività delle Province e delle Regioni, 2009

In order to determine which manufacturing sectors make the largest contribution to the region’s economy, particularly in terms of value added produced, Table 11 shows the

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percentage weight of each sub-sector compared to the regional total. The largest contribution in terms of value added (30.5%) came from mechanical machinery/ apparatus and transport equipment. This figure, in line with national data, can be explained by the presence of automotive and aerospace production plants affiliated to large industrial groups (such as Fiat Group and Alenia).Accounting for 16.1% of regional value added, the food industry had a higher relative weight at regional than at national level, where the sector represented 9.7% of value added. The value added of the fashion industry (textiles, clothing, footwear and leather) accounted for 11.6% of regional value added. This figure is also higher than that of the fashion industry at national level, where value added was 10.9%.Table 12 Exports from the Region of Campania by sector 2006–2008, in € thousands

CAMPANIA 2006 2007 % Inc. 2008 % Inc. % of tot

AA – Agricultural, fishing and forestry products

260,863 302,118 15.8% 308,573 2.1% 3.3%

BB – Mining and quarrying products 8,192 12,856 56.9% 8,545 -33.5% 0.1%

CA10 – Food products 1,448,195 1,657,045 14.4% 1,876,654 13.3% 20.2%

CA11 – Beverages 26,802 33,995 26.8% 38,988 14.7% 0.4%

CA12 – Tobacco 1,675 1,648 -1.6% 1,928 17.0% 0.0%

CB13 – Textile products 100,859 93,731 -7.1% 86,924 -7.3% 0.9%

CB14 – Wearing apparel (including leather and fur)

338,720 361,130 6.6% 339,027 -6.1% 3.7%

CB15 – Leather goods (excluding clothing) and similar products

431,274 454,443 5.4% 394,633 -13.2% 4.3%

CC16 – Wood and products of wood and cork (excluding furniture); products of straw

43,570 48,762 11.9% 35,912 -26.4% 0.4%

CC17 – Paper and paper products 319,387 314,511 -1.5% 317,796 1.0% 3.4%CC18 – Publishing, printing and reproduction of recorded material

158 54 -65.8% 5 -90.7% 0.0%

CD19 – Coke and refined petroleum products

12,526 17,386 38.8% 24,937 43.4% 0.3%

CE20 – Chemical products 129,947 126,488 -2.7% 133,501 5.5% 1.4%

CF21 – Basic pharmaceutical products and pharmaceutical preparations

383,117 440,017 14.9% 712,169 61.9% 7.7%

CG22 – Rubber and plastic products 400,650 424,041 5.8% 413,553 -2.5% 4.5%CG23 – Other non-metallic mineral products

144,454 166,642 15.4% 151,103 -9.3% 1.6%

CH24 – Manufacture of basic metals 204,646 267,267 30.6% 249,541 -6.6% 2.7%

CH25 – Fabricated metal products, except machinery and equipment

265,752 293,949 10.6% 310,027 5.5% 3.3%

CI26 – Computers, electrical and optical equipment; electro-medical apparatus, appliances for measuring and watches

399,939 578,678 44.7% 542,000 -6.3% 5.8%

CJ27 – Electrical equipment and non-electric domestic appliances

353,432 398,973 12.9% 627,311 57.2% 6.8%

CK28 – Machinery and equipment n.e.c. 339,063 418,603 23.5% 377,840 -9.7% 4.1%

CL29 – Motor vehicles, trailers and semi-trailers

1,828,520 1,746,897 -4.5% 1,016,066 -41.8% 11.0%

CL30 – Other transport equipment 759,075 1,064,500 40.2% 1,077,676 1.2% 11.6%

CM31 – Furniture 63,449 56,775 -10.5% 61,886 9.0% 0.7%

CM32 – Other manufacturing n.e.c. 76,831 81,385 5.9% 74,338 -8.7% 0.8%DD35 – Electricity, gas, steam and air conditioning

           

ZZ – Other products and activities 50,951 82,747 62.4% 90,384 9.2% 1.0%

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Total 8,392,048 9,444,637 12.5% 9,271,321 -1.8% 100.0%

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

Looking at the values of exports from Campania during the period 2006–2008, the regional food industry showed a high degree of openness to foreign trade. The relative weight of food exports was 20.6%. Trends in this sector in the period 2006-2008 indicates a steady growth in exports, with an increase of just over 14% in 2008. The fashion industry is also traditionally a strong sector in terms of exports. In 2008 fashion exports accounted for 8.9% of regional exports as a whole. However, an analysis of trends in the period reveals a contraction resulting from the effects of the international crisis and a general decline in worldwide demand. Although the combined transport equipment manufacturing sectors accounted for 22.6% of Campania’s exports in 2008, there was a dramatic decline in the motor vehicles, trailers and semi-trailers segment (-41.8%), while the trend in exports of other transport equipment remained positive.

Table 13 Exports from the Province of Naples by sector 2006-2008, in € thousands

Province of Naples 2006 2007 % Inc. 2008 % Inc. % of totAA – Agricultural, fishing and forestry products

83,495 106,954 28.1% 109,070 2.0% 2.3%

BB – Mining and quarrying products 3,837 5,229 36.3% 7,104 35.9% 0.1%CA10 – Food products 443,088 515,167 16.3% 522,332 1.4% 10.8%

CA11 – Beverages 8,298 12,246 47.6% 14,874 21.5% 0.3%

CA12 – Tobacco 11   -100.0% 128   0.0%

CB13 – Tetxtile products 58,228 60,007 3.1% 54,698 -8.8% 1.1%

CB14 – Wearing apparel (including leather and fur)

299,675 312,376 4.2% 299,568 -4.1% 6.2%

CB15 – Leather goods (excluding clothing) and similar products

198,582 199,595 0.5% 199,130 -0.2% 4.1%

CC16 – Wood and products of wood and cork (excluding furniture); products of straw

24,829 28,258 13.8% 18,749 -33.7% 0.4%

CC17 – Paper and paper products 253,135 233,023 -7.9% 227,509 -2.4% 4.7%

CC18 – Publishing, printing and reproduction of recorded material

151 19 -87.4% 5 -73.7% 0.0%

CD19 – Coke and refined petroleum products 8,060 13,351 65.6% 22,271 66.8% 0.5%CE20 – Chemical products 62,926 63,546 1.0% 68,458 7.7% 1.4%

CF21 – Basic pharmaceutical products and pharmaceutical preparations

372,397 424,244 13.9% 687,827 62.1% 14.3%

CG22 – Rubber and plastic products 78,506 91,112 16.1% 97,328 6.8% 2.0%

CG23 – Other non-metallic mineral products 44,003 54,131 23.0% 42,590 -21.3% 0.9%CH24 – Manufacture of basic metals 37,521 41,459 10.5% 22,701 -45.2% 0.5%

CH25 – Fabricated metal products, except machinery and equipment

91,219 95,117 4.3% 117,291 23.3% 2.4%

CI26 – Computers, electrical and optical equipment; electro-medical apparatus, appliances for measuring and watches

150,910 138,816 -8.0% 137,969 -0.6% 2.9%

CJ27 – Electrical equipment and non-electric domestic appliances

158,281 209,246 32.2% 230,326 10.1% 4.8%

CK28 – Machinery and equipment n.e.c. 138,357 217,329 57.1% 195,406 -10.1% 4.1%

CL29 – Motor vehicles, trailers and semi-trailers

1,174,093 1,036,960 -11.7% 574,768 -44.6% 11.9%

CL30 – Other transport equipment 723,235 1,012,928 40.1% 1,030,371 1.7% 21.4%

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CM31 – Furniture 34,880 24,390 -30.1% 22,242 -8.8% 0.5%

CM32 – Other manufacturing n.e.c. 56,656 61,589 8.7% 49,738 -19.2% 1.0%DD35 – Electricity, gas, steam and air conditioning

           

ZZ – Other products and activities 36,346 52,661 44.9% 70,255 33.4% 1.5%

Total 4,540,719 5,009,753 10.3% 4,822,708 -3.7% 100.0%

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

An analysis of foreign trade at provincial level also shows the importance of the food industry and the fashion industry in terms of exports. In 2008, food and beverage exports accounted for 11.1% of total exports. In the same year, the Naples fashion industry likewise represented 11.4% of provincial exports, slightly higher than at regional level.

Trends in exports at provincial level in the food and fashion sectors were in line with the regional performance and reflect the negative impact of the international crisis on exports in general. The food sector managed to hold up, with exports increasing in 2008 albeit at a considerably lower rate than the previous year, while exports in the fashion sector slowed down.

In order to identify the major and most dynamic manufacturing sectors in the Province of Naples, three key parameters were analysed: number of firms, value added and export potential. In terms of number of firms, in 2008 40% of the total number of enterprises in the province came from the food and beverage and fashion sectors. At regional level the two sectors accounted for approximately 30% of total value added. The importance of these sectors both numerically and in terms of their contribution to regional value added can be explained by the fact that food and beverage and fashion products have traditionally been manufactured in this area. Over the course of time, products have attained high quality levels recognized both at home and abroad. Data on foreign trade indicate that firms in the food and beverage and fashion sectors have strong export potential. Together they represented over 22% of the province’s total exports in 2008. In particular, by comparing provincial data with national figures it emerges that the export potential of the Naples food and beverage sector was well above average, accounting for 11.1% of total provincial exports compared to the national figure of 5.7%. In the fashion industry, the provincial performance of 11.4% was in line with the national figure of 11%.

On the basis of the above observations, the food and beverage and fashion industries are clearly crucial for the provincial economy and its development. In addition, firms in these two sectors are the direct expression of local manufacturing and entrepreneurial skills deriving from competencies rooted in the local area. Local firms have succeeded in creating manufacturing supply chains independently and without having to rely on expertise and capital from outside the region. The wealth created by these two sectors is the result of local entrepreneurship and, as a resource, is re-employed in the firms producing it, now a stable presence in the province.

For the reasons outlined above, both in numerical terms and in terms of quality, the food and beverage sector and the fashion industry are to be considered the most suitable targets of actions envisaged by the Innovate-Med project in line with regional policies in support of local products.

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4.2 Main export markets for the food and beverage and fashion sectors in the Province of Naples

The food and beverage and fashion sectors in the Region of Campania and the Province of Naples have been trading on international markets for many years. However, globalization has opened up new competitive scenarios for Neapolitan firms, both in terms of export countries and competitors.

Table 14 Food and beverage exports from the Region of Campania 2006–2008 by destination, absolute and % values, average annual rate of change 08-06

Food and Beverages Campania

2006 2007 2008 % 2008 AARC 08-06

United Kingdom 286,088 336,236 429,709 22.2% 22.6Germany 169,051 210,945 236,083 12.2% 18.2United States 162,169 173,518 169,054 8.7% 2.1France 104,916 127,328 137,722 7.1% 14.6Japan 72,366 76,970 96,365 5.0% 15.4Australia 43,714 48,567 63,157 3.3% 20.2Libya 12,813 27,845 51,728 2.7% 100.9Spain 44,165 53,052 45,952 2.4% 2.0Netherlands 27,105 31,879 37,521 1.9% 17.7Angola 29,771 27,178 36,289 1.9% 10.4Switzerland 27,810 28,877 34,386 1.8% 11.2Belgium 36,007 27,594 33,306 1.7% -3.8Nigeria 20,879 24,780 26,804 1.4% 13.3Canada 22,940 24,946 24,195 1.2% 2.7Austria 16,526 16,692 23,293 1.2% 18.7TOTAL EU 814,647 958,205 1,111,204 57.3% 16.8WORLD 1,474,998 1,691,039 1,937,731 100.0% 14.6

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

The United Kingdom, Germany and France were the top three European export countries for Campania’s food products in 2008, while the leading non-European markets were the United States, Japan and Australia. All these countries showed a positive average annual rate of change in terms of exports in the period under consideration and all registered double-digit growth, except for the United States. This fact should be interpreted in the light of the onset of the financial crisis in the USA in 2008.In Campania, the share of food and beverage exports to the European Union was higher than the average share of other sectors, and accounted for 57.3% of total exports. The average annual rate of change in the period 2006–2008 shows that the average growth in food and beverage exports to the European Union was over 2 percentage points above the average growth in regional exports.

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Table 15 Food and beverage exports from the Province of Naples 2006–2008 by destination, absolute and % values, average annual rate of change 08-06

Food and Beverages Naples

2006 2007 2008 % 2008 AARC 08-06

United Kingdom 88,827 102,101 126,198 22.8% 19.2United States 80,478 94,447 86,846 15.7% 3.9Japan 16,550 26,541 38,413 6.9% 52.3France 41,328 44,329 37,847 6.8% -4.3Germany 35,909 38,356 36,626 6.6% 1.0Spain 27,311 34,046 27,142 4.9% -0.3Angola 4,792 7,314 12,931 2.3% 64.3Belgium 11,275 9,791 12,489 2.3% 5.2Austria 9,393 9,898 12,223 2.2% 14.1Australia 9,687 11,196 10,841 2.0% 5.8Russia 3,721 5,877 8,544 1.5% 51.5Netherlands 9,431 10,098 8,183 1.5% -6.9Sweden 8,090 9,869 8,078 1.5% -0.1Greece 11,370 11,122 7,995 1.4% -16.1Portugal 8,033 10,399 7,600 1.4% -2.7TOTAL EU 274,522 308,093 314,131 56.7% 7.0WORLD 451,387 527,413 554,183 100.0% 10.8

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

In 2008, the United Kingdom and the United Sates were the top two export markets for Naples food and beverage products, with a share of 22.8% and 15.7% respectively, followed by Japan, France and Germany, each with a share of around 7%.Looking more closely at the main export countries, trends in exports during the period under consideration behaved differently. In addition to being Naples’ leading export destination, the United Kingdom registered an average annual rate of change of approximately 20% during the three-year period. Japan’s importance as an export market for the Naples food and beverage industry grew considerably, with an impressive average rate of change of over 50%. Two other emerging countries were Angola and Russia.While accounting for 56.7% of food and beverage exports, the European Union recorded a growth rate of 7%, below the world average (10.8%). This figure, compared with regional data, indicates that Neapolitan firms lost competitiveness on European markets.

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Table 16 Fashion exports from the Region of Campania 2006-2008 by destination, absolute and % values, average annual rate of change 08-06

Fashion Sector Campania

2006 2007 2008 % 2008 AARC 08-06

Russia 58,851 74,009 76,965 8.8% 14.4France 63,413 58,058 67,910 7.8% 3.5United States 81,789 72,241 63,218 7.2% -12.1Tunisia 40,210 48,989 45,120 5.2% 5.9Germany 40,555 38,820 42,474 4.8% 2.3Spain 35,037 44,953 41,880 4.8% 9.3Greece 34,340 35,177 40,305 4.6% 8.3Hong Kong 48,578 53,733 39,707 4.5% -9.6Switzerland 22,266 26,666 30,994 3.5% 18.0Japan 30,585 28,786 23,139 2.6% -13.0Turkey 45,329 37,993 22,264 2.5% -29.9Poland 11,832 22,855 20,413 2.3% 31.3South Korea 26,670 24,354 19,942 2.3% -13.5Ukraine 11,745 25,431 19,086 2.2% 27.5Portugal 11,312 14,896 17,834 2.0% 25.6United Kingdom 21,794 16,236 17,092 2.0% -11.4Netherlands 15,365 13,865 15,919 1.8% 1.8EUROPEAN UNION 302,032 302,256 327,199 37.4% 4.1%WORLD 870,853 909,303 875,957 100.0% 0.3

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

In 2008, the European Union received 37.4% of Campania’s fashion exports. Unlike the food and beverage sector, exports were not concentrated in any one country. Russia was the top destination for regional exports with 8.8%, gaining the number one spot in 2007, when it outranked the United States. Until 2006, the USA had in fact been Campania’s largest market. The growth in exports to Russia is highlighted by the 14.4% average annual rate of change registered in the period. Double-digit growth was also recorded by Switzerland, Poland, Ukraine and Portugal.As a whole, regional exports in the fashion sector remained substantially stable. However, trends varied widely from country to country, with extremely positive performances in terms of growth being offset by dramatic downturns. As an export market, the European Union recorded a positive trend, with a higher than average growth in exports of 4.1%.

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Table 17 Fashion exports from the Province of Naples 2006–2008 by destination, absolute and % values, average annual rate of change 08-06

Fashion SectorNaples

2006 2007 2008 % 2008 AARC 08-06

Russia 51,798 65,683 68,214 11.3% 14.8 France 39,120 8,347 45,441 7.5% 7.8 United States 52,172 43,832 42,561 7.0% -9.7 Greece 29,282 18,851 36,737 6.1% 12.0 Germany 28,855 32,280 33,719 5.6% 8.1 Spain 22,123 29,563 31,055 5.1% 18.5 Switzerland 18,316 22,408 25,217 4.2% 17.3 Tunisia 18,563 21,652 17,542 2.9% -2.8 Ukraine 10,030 22,587 16,633 2.7% 28.8 Japan 22,792 27,228 16,376 2.7% -15.2 Libya 10,247 7,612 14,423 2.4% 18.6 Netherlands 13,397 11,188 13,467 2.2% 0.3 Albania 12,872 12,748 12,770 2.1% -0.4 Poland 6,693 9,654 11,676 1.9% 32.1 Portugal 8,562 9,280 11,221 1.9% 14.5 Hong Kong 12,791 31,279 10,083 1.7% -11.2 United Kingdom 11,405 8,017 10,078 1.7% -6.0 EUROPEAN UNION 217,295 201,153 238,440 43.0% 4.8 WORLD 556,485 571,979 604,842 100.0% 4.3

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

Overall, the performance of provincial exports in the fashion sector during the period under consideration was positive. The 4.3% average growth rate was higher than the regional average. For firms in the Naples fashion sector, Russia was again the main export destination in 2008, with a share of 11.3%. Exports to the United States declined steadily, falling by an average annual rate of change of approximately 10%, though maintaining a 7% share of total exports. The European market received 43% of exports from the fashion sector, and grew at a rate of 4.8%, half a percentage point higher than the world average.

Europe and the United States are traditionally strong importers of Italian food and fashion products. This is also true at provincial level, where several well-established Neapolitan firms produce products of excellence. In both sectors the success of these products has been greatly favoured by the presence of Italian communities overseas.

The intrinsic characteristics of products from both sectors position them on the mid-high end of the market. They can therefore be successfully targeted at countries with advanced economies, where consumer patterns are complex and the market is highly segmented.

One of the major emerging export markets for traditional Naples food and beverage products is Japan. In 2008, Japan was the top third destination for provincial exports, moving up three positions in only three years and recording an average annual rate of change of 52.3%.

5 European SMEs: current situation and prospectsAs described in Chapter 3 of this report, the European business sector is largely made up of SMEs, which are an important source of business skills, innovation and employment. However, SMEs also present a number of structural deficiencies. Small firms have problems accessing capital or credit, especially during the start-up phase, and their low

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level of capitalization may in turn make it difficult for them to penetrate international markets and introduce new technologies and innovation. SMEs are also hindered by their reluctance to develop clustering and networking models which would help them overcome the limits posed by their small size and allow them to compete on international markets.Supporting SMEs has long been one of the priorities of the European Commission within the framework of its strategic plans for economic growth, job creation, and economic and social cohesion. The recent economic crisis, an unprecedented event in recent economic history, has undone the steady progress made over the last decade in terms of economic growth and the creation of new jobs. The European GDP fell by 4% in 2009, industrial output has gone back to levels recorded in the 1990s and 23 million people, equivalent to 10% of the working-age population in the European Union, are unemployed. The current crisis has also turned the spotlight on the structural deficiencies of the European business sector, making the implementation of Community policies in support of firms an even more pressing issue.Although the following analysis of European SMEs refers to the most recent official data available and so to a period of time before the international crisis hit the world economy, it does still outline possible prospects for firms within local and global economic scenarios.

Table 18 Number of European firms (EU-27) 2002 and 2007: SMEs and large firms, in thousands

2002 2007 % Inc.SMEs 18,348 20,409 11.2

Large firms 41 43 4.9Total firms 18,389 20,452 11.2

Source: European Commission, Report on SMEs, calculations based on data from Eurostat, 2009

As the table shows, as well as having a significant weight in numerical terms, the universe of SMEs registered positive growth and indeed stronger growth compared to large firms. In the period 2002-2007, the number of SMEs grew by 11.2%.

Table 19 Number of European firms (EU-27) 2007 by size and sector, average number of employees by sector

SMEs Large firms

Total Average no. employees per firm

Mining and quarrying of minerals 22,000 300 22,300 37Manufacturing 2,357,000 19,000 2,376,000 15Prod. and distr. of electricity, gas and water 29,000 1,100 30,100 56Construction 2,914,000 2,500 2,916,500 5Wholesale and retail trade 6,491,000 6,600 6,497,600 5Hotels and restaurants 1,729,000 1,300 1,730,300 5Transport and communication 1,243,000 3,500 1,246,500 10Real estate, renting, computer activities, research 5,625,000 8,500 5,633,500 5Total 20,410,000 42,800 20,452,800 6

Source: European Union, Report on SMEs, calculations based on data from Eurostat, 2009

After wholesale/retail trade, real estate activities and construction, manufacturing is the sector with the largest concentration of European firms. While the average number of employees per firm is 6, the average number of people employed by manufacturing firms is higher, standing at 15 units per firm. This indicates that firms in the manufacturing sector are larger than the average and that in order to operate in the manufacturing sector firms require some kind of organizational structure.

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Table 20 Value of output and value added by size of firm (EU-27) 2007, in € millions

Micro firms Small firms

Medium-sized firms

Total SMEs

Total large firms

Total

Value of output 2,607,000 2,628,000 2,836,000 8,070,000 7,363,000 15,434,000

Value added at factor cost

1,251,000 1,132,000 1,070,000 3,453,000 2,537,000 5,990,000

Source: European Commission, Report on SMEs, calculations based on data from Eurostat, 2009

SMEs make a significant contribution to determining the value of output and value added. Looking at SMEs in more detail, micro and small firms accounted for approximately two thirds of output and value added in 2007.

The above observations indicate that as well as representing a significant part of the business sector in numerical terms, European SMEs also make a sizeable contribution to the economy in terms of value of output and value added.

As regards openness to export and potential for foreign trade, the gradual enlargement of the European Union has led to an increase in internal demand and a growing synchronization of business cycles in national economic systems. The opening of member states to foreign markets is an important tool for creating internal stability, thereby making the EU economy less vulnerable to international crises.3

However, as previously mentioned, since Q4 2008 the global financial and economic crisis has impacted negatively on European exports. Trade held up in the early part of 2008 and then slowed down towards the end of the year. In 2008, the European Union became the world’s largest exporter and importer, overtaking even the United States in terms of imports at a time when the USA was being severely challenged by the sharp fall in domestic demand. However, the EU’s performance was not all positive as its growth in trade was lower than that of other areas. Since 2004, the European Union has in fact been steadily losing its share in world exports.

Focusing on the fashion (textiles, clothing, footwear and leather) and food and beverage sectors, Europe, and especially Mediterranean European countries, is well positioned thanks to its long-established history of manufacturing activities and shows good prospects for growth.

The European fashion industry managed to resist international competition longer than other sectors thanks to the Multi Fibre Arrangement of 1974 and then the Agreement on Textile and Clothing of 1995. The sector is today essentially open to free trade, and since the expiry of the June 2005 EU-China Memorandum of Understanding the EU has become wholly exposed to competition from new global competitors.

Thanks to its high quality products, design, and style, the European leather and footwear industry has enjoyed considerable success to date, both on European and international markets. The European textile and clothing industry is the second largest player at international level, ranking immediately after China4, and accounts for over 20% of world

3 ICE, Ice Report 2008-2009. L’Italia nell’economia internazionale. 20094 European Economic and Social Committee, “The future of the textile, clothing and footwear sectors in Europe”, 2008

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exports excluding trade between member states However, like the manufacturing industry in general, this sector has had to face a number of difficulties due to competition from countries where the cost of labour is low and where legislation and regulation of manufacturing activities is severely limited. The growth in imports from Asia, especially China, coupled with the strengthening of the euro, has contributed to an increase in the balance of trade deficit recorded in the past few years for all fashion sector products. In 2008, the value of exports of clothing products was €18,977 million, equivalent to 1.5% of total exports. The textile sector exported goods worth €16,476 million, with a share of 1.3% of total exports, while exports of footwear were worth €5,816 million, with a share of 0.4%. Overall, however, the importance within the EU economy of the European fashion sector (textiles, clothing, footwear and leather) as a whole in terms of exports declined. The 4.4% percentage weight of total exports registered in 2000 fell to 3.2% in 2008.5

The food and beverage sector, the second sector under investigation in this report, is one of the most important and dynamic industries in Europe, and includes a wide range of diverse and highly exportable products. Many European food and beverage manufacturers are extremely competitive both on the domestic market and at international level. The European Union is the largest exporter of food and beverage products, with a balance of trade surplus of €1,100 million in 2008. In 2008, exports were worth €58,200 million, up 6.4% compared to 2007. The United States is the leading export destination for European food and beverage products. Despite a fall of 10% in the total value of exports in 2008, the US market still represented 27% of the total sales of European food and beverage products. Exports in the European food and beverage sector continue to increase. In 2008, Ukraine and Hong Kong both recorded impressive growth rates of 57% and 36% respectively. The major challenges facing the sector today concern globalization, changes in lifestyle and consumer preferences, an increase in the demand for high-quality affordable goods, and the spread of technology. 6

6 The experience of clusters and networks within the SME environment

One of the structural deficiencies of SMEs that represents a major obstacle to competing at international level is their small size. One of the ways in which the problem can be overcome is by creating or developing linkages between firms, such as clusters.

According to their accepted definition, clusters are an agglomeration of small, independent firms located in spatial proximity operating in the same sector and highly specialized in different phases of the same manufacturing process. This type of business model allows for the development of synergy, resulting in more efficient production than would otherwise be possible in one large plant.

5 EUROSTAT, “External and intra-EU trade: a statistical yearbook”, 20096 Data taken from the official website of the European Union, www.europa.eu, “Data & trends of the European Food and Drink Industry 2009” published by the CIAA (Confederation of the Food and Drink Industries of the EU), and the proceedings of the European Agro-Food Conference “Innovation for the Agro-Food chain: the Veneto experience”, 2010.

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Clusters are a very common phenomenon in Europe and over 2,000 have been identified. 7

However, although the number of clusters is high (resulting in the establishment of the European Cluster Observatory), this does not necessarily mean they are dynamic. Few are in actual fact able to compete globally.

In Italy, the status of “distretto industriale” was legally recognized by Law 317 of 1991 “Interventi per l’innovazione e lo sviluppo delle piccole imprese”. Law 317 defined districts as local areas with a high concentration of small firms, making particular reference to the ratio between the number of firms and the resident population as well as the specialism uniting the manufacturing units involved.

A later Ministerial Decree issued on 21 April 1993 set out more specific criteria for defining districts by referring to areas classified as “Sistemi Locali del Lavoro” (SLL) identified by the Istituto Nazionale di Statistica (ISTAT). Law 140 was promulgated in May 1999 to simplify and encourage the creation of industrial districts. It introduced a new type of cluster, the “Sistema Produttivo Locale”, with a high concentration of firms operating in the same sector and a specific internal organization.

However, the framework defined by Law 317 and the subsequent Ministerial Decree of 1993 proved difficult to apply to areas with a high population density (because of the indicator referring to the ratio between number of firms and number of residents) and a scarcity of industrial areas. The lack of appropriate sites failed to foster the spatial agglomeration of firms operating within the same sector. As a consequence, some regional governments decided to adopt a less restrictive interpretation of the indicators as set out in the decree in regulating the establishment and organization of industrial districts.

The difficulties involved in enacting the law on districts and the need to think beyond geographical boundaries and sectoral limitations led to the development of other forms of business alliances.

New models of business alliances became popular not only because they were based on the rationale of manufacturing supply chains, but because of their approach to foreign markets, as is the case with export consortia. By forming an export consortium, member firms create synergy, increase competitiveness and reduce the risks and costs associated with processes of internationalization. Depending on the specific objectives and characteristics of its members, export consortia can be of different types: a) multi-sector consortia linking firms from different sectors; b) single-sector consortia linking firms from the same manufacturing sector often producing complementary goods; c) consortia of firms targeting specific foreign markets; d) regional or multi-regional consortia grouping firms from either one or a number of regions.Export consortia (which started to gain popularity in the early 1990s) have, however, come up against a number of difficulties, especially in areas of Southern Italy. The main difficulties can be summarized as follows:

The consortium, both as a contractual arrangement and a business entity, is an organizational superstructure often considered ungovernable by SMEs themselves. Consequently, firms have failed to provide consortia with the necessary financial and operational support to operate on foreign markets.

Export consortia have often been seen as a way of accessing public funds for short-term initiatives, with no definition of a long-term strategy.

7 European Commission, “The concept of clusters and cluster policies and their role for competitiveness and innovation: main statistical results and lessons learned”, 2008

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The model of the consortium dates from an age prior to the ICT revolution and was often no more than a means to create economic synergy in terms of production and in the use of traditional communication channels (trade fairs, brochures, etc.).

Technological advances, especially in the field of ICT, have in the last decade encouraged the spread of business networks. A business network is different from a consortium in that it is characterized by a “a set of relatively stable relationships which are of non-hierarchical and interdependent nature between a variety of corporate actors who share common interests and/or common norms with regard to a policy and who exchange resources to pursue these shared interests, because they acknowledge that cooperation is the best way to pursue their interests (Boerzel 1998)8. In a networked organization each individual firm is an “independent node” in the system ensuring the necessary negotiation and information flow to implement a competitive strategy. Typically in a network model both manufacturing firms and their customers act as nodes, thereby enabling the system to adapt to changing consumer patterns. This organizational model emerged at the end of the 1980s with the break-up of large firms, whose inflexibility threatened their survival in the age of globalization.The genesis of this organizational model meant that in networked organizations one partner acted as the central node, responsible for selecting, configuring and maintaining network links. This need for a central organization is precisely what has prevented the development of this model in areas such as Mediterranean Europe, where large firms are traditionally absent.

In recent years, the development of computer- and web-based technologies has profoundly changed communication models. The development of increasingly high-performance web applications has favoured the frenetic development of web communities (Facebook, Twitter, etc.), which have profoundly changed social paradigms in communication. In the wake of the success of virtual communities, an increasing number of business communities have also emerged.A business community is a group of users organized through a virtual channel, linked by common interests and interconnected via applications allowing them to manage their own business activities. Business communities eliminate geographical barriers that would otherwise be impossible to overcome without innovative communication tools and low transaction costs.Simply put, business communities are an organizational model that enables firms to benefit from the advantages of a business network without the need for a central enterprise insofar as technology allows network links to be set up between actors in the community. Anyone, anywhere, can take part in the network simply by accessing the web, posting messages on forums (bulletin boards), participating in Usenet groups (newsgroups or discussion groups), or via chat rooms and instant messaging programs.Business communities, open also to local public institutions whose mission is to develop international markets, represent a possible model of business alliance within the SME environment that can be established and developed in Mediterranean European areas where firms have significant competitive capabilities but their growth on international markets is limited because of their size.

8 Boerzel T., “Le reti di attori pubblici e privati nella regolazione europea”, in Stato e Mercato n. 54, 1998.

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7 Strengths and weaknesses of SMEs in the Province of Naples on foreign markets

As regards actions targeting the regional manufacturing industry, the strategy of the ERDF Operational Programme 2007-2013, defined in line with the priority objectives of the European Union to promote competitiveness and create jobs, is based on a SWOT analysis of the current scenario.

The overall framework identifies quantitative aspects of the manufacturing sector. Following the analysis, the variables identified were subdivided on the basis of their impact on firms’ competitiveness as strengths or weaknesses.

From a qualitative point of view, by integrating these aspects into the micro- and macro-environment in which Campania’s manufacturing sector operates, a number of possible scenarios were generated. They are indicated as either opportunities or threats depending on the potential impact of these external factors on firms’ performance.

The analysis carried out within the framework of the regional programme was repeated for the manufacturing sector in the Province of Naples, which, as described in the previous chapters, has a significant weight in Campania’s manufacturing industry, both numerically and in terms of value. Neapolitan firms account in fact for 48.1% of the total number of firms in the region (2008 data) and represent over half of regional value added: approximately €8,000 million out of a total of €17,000 million (2007 data)9.

9 Detailed data are shown on Page 8 of this report (source: Campania Regional Government, Servizio Statistica, “Le imprese in Campania”, June 2009) and in Table 9 (source: Unioncamere – Istituto Tagliacarne, “Atlante della competitività delle Province e delle Regioni”, 2009)

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SWOT analysis of the manufacturing sector in the Province of Naples

Strengths Weaknesses Opportunities Threats

General analysis of the Province of Naples with reference to internationalization and clustering of SMEs

Highly specialized and high-tech export sectors

Wealth of quality traditional products with a broad domestic market, as well as renowned DOC/DOCG wines and quality agro-food products

Network of prestigious universities, highly specialized centres of expertise and research institutes heavily involved in applied research

High-tech/ high-value industrial sectors

Multi-layered transport network infrastructure

Undersized firms, and large mass of firms providing traditional services

Low rate of capital accumulation, low capitalization and difficulty accessing credit

Few innovative financial instruments available

Low propensity to form alliances and linkages in order to create clusters, groups and supply chains

Reluctance to relocate

No integration between large firms and SMEs

Poor use of technology and innovation by firms

Low levels of expenditure and public investment in R&D

Low levels of intermodality and logistics in manufacturing sites

Traditional industry in decline with a consequent loss of competitiveness and the risk of job losses

Greater visibility of South Italy and Naples within the framework of international relations, above all in the Mediterranean area

Strong competitive impetus across Europe to encourage research and innovation, also in regions covered by the convergence objective

Large young workforce

Significant and growing patenting activity

Some of the highest levels of spend in research and development in the convergence area, and increasing opportunities for research and innovation related activities

Further fragmentation of local development systems as a result of the impact of globalization on the local manufacturing sector

Fewer opportunities of integration in domestic and European material and immaterial networks

Lack of high-speed Internet access in marginal areas

Source: own elaboration based on the Campania ERDF ROP 2007-2013, approved by Regional Cabinet Resolution no. 1921 dated 9 November 2007; Campania Regional Government, Regional Cabinet Resolution no. 1050 dated 19 June 2008

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SWOT analysis of the food and beverage sector in the Province of NaplesStrengths Weaknesses Opportunities Threats

Food and beverage sector

The Naples agro-food sector performs better than at national level in terms of value of exports

Products and quality marks recognized by the European Union

High concentration of manufacturing firms in the Gragnano cluster using traditional production techniques

Agro-food exports are stable

Lack of dynamism in the industrial sector and tertiarization of the economy

Dichotomy between the manufacturing sector – which requires flexible credit operations – and an extremely rigid financial sector.

Naples, followed by Salerno, is the richest industrial area in the region

Introduction and implementation of European and local policies supporting traditional, local products and inter-firm cooperation

Increasing popularity of the Mediterranean diet, especially in the USA and Europe

Environmental emergencies and negative repercussions on the image of the food sector

Unstable international scenario and increasing competition

Global crisis and decline in consumptions

Alternative foreign food products in the same segment (e.g. olive oil) or specialities (e.g. cous cous)

Source: own elaboration based on the Campania ERDF ROP 2007-2013, approved by Regional Cabinet Resolution no. 1921 dated 9 November 2007; Campania Regional Government, Regional Cabinet Resolution no. 1050 dated 19 June 2008

SWOT analysis of the fashion sector in the Province of NaplesStrengths Weaknesses Opportunities Threats

Fashion sector Contract manufacturing for large companies and world-famous brands

The San Giuseppe Vesuviano textile cluster – the largest textile cluster in South Italy – unites over 3,000 firms and covers the entire manufacturing supply chain

Products combine tradition, style, attention to detail and “handmade” craftsmanship

Lack of dynamism in the industrial sector and tertiarization of the economy

Contract manufacturing / make-to-order, and lack of control over business and commercial decisions

Dichotomy between the manufacturing sector – which requires flexible credit operations – and an extremely rigid financial sector

Lack of vocational training and skilled workers (particularly expert pattern makers and fashion designers)

Naples, followed by Salerno, is the richest industrial area in the region

Introduction and implementation of European and local policies supporting traditional, local products and inter-firm cooperation

Strong “Made in Italy” brand, with a carryover effect for Neapolitan products

Unstable international scenario and increasing competition

Global crisis and decline in consumptions

Aggressive marketing of low-cost products from emerging manufacturing countries

Source: own elaboration based on the Campania ERDF ROP 2007-2013, approved by Regional Cabinet Resolution no. 1921 dated 9 November 2007; Campania Regional Government Regional Cabinet Resolution no. 1050 dated 19 June 2008

8 Potential of SMEs in the Mediterranean area

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At this point in the study it is important to underline what has emerged across the board from the analysis of the business economy both at European and local level. Small and medium-sized firms have a significant weight in terms of experience, and contribute to the economic dynamics of an area with their potential for creating new jobs and stimulating growth. From an organizational perspective, SMEs are less efficient than large firms, especially in terms of productivity and value added. Their profitability is also very low, partly due to the fact that small firms are obliged to act as “buffers” on the marketplace. Their only market is often the local market and their only partners, both for selling and buying, are large firms which, unlike small organizations and especially in periods of economic turbulence, are able to find alternative markets and contain costs by relocating production or outsourcing functions. On the other hand, European SMEs and particularly micro firms contribute to the creation of employment to a much larger extent than large firms.

That said, the single market clearly offers SMEs from the Mediterranean area extraordinary opportunities for growth. Similarly, the enlargement of the European Union has multiplied their opportunities for trade.

With the support of actions now being implemented within the framework of European internationalization policies, easier access to information about opportunities in international markets as well as regulations concerning cross-border economic activity will lead to a further increase in the global presence of European SMEs. Currently, 63% of SMEs operate exclusively in their own country, only 8% of European SMEs export and only 12% of the factors of production of an average-sized SME is purchased overseas. EU actions supporting the process of internationalization in regions lagging behind in terms of economic development, which includes many Mediterranean European areas, will therefore offer SMEs more alternatives in terms of markets and purchasing policies, with positive repercussions in terms of efficiency and productivity.

The necessary capital for international expansion can be accessed through programmes currently being implemented by the European Union to improve the financial environment of European SMEs, through which even small businesses can increase their level of capitalization. In addition, the availability of credit lines and investment funds represents an opportunity for SMEs to set up innovation programmes. Innovation is now more crucial than ever for survival and prosperity in the current international scenario where competition from emerging economies such as China and India is growing. The availability of financial resources and support in terms of innovation advisory services will allow firms to invest in research and development activities and put innovative ideas into practice, thus strengthening their competitiveness.

SMEs are an important vehicle for disseminating know-how as well as business and manufacturing skills in a specific geographical area, and their knowledge base can rightly be considered a competitive advantage. This is especially true for the two sectors under examination in this study, which are strongly rooted throughout the Mediterranean area. The high concentration of European SMEs operating in the food and beverage and fashion sectors as well as the high quality of their products is the result of a virtuous circle going back centuries, and which still today generates positive externalities within the local economies. The high geographical concentration of SMEs is a key critical success factor in that it gives firms greater opportunities for developing collaborative relationships and strong, efficient networks. By operating in a specific geographical area, networks can be

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powerful drivers of regional economic growth and innovation. With the support of instruments made available by the European Union, business networks can become stronger and create new forms of business alliances, even among very small firms, aimed at increasing competitiveness on international markets and spreading innovation.

The support of EU policies also opens up other prospects for European SMEs and for firms operating in the food and beverage and fashion sectors, which are particularly vulnerable to international competition. Actions currently being implemented by the European Union aim to progressively reduce administrative burdens that impact the efficiency of the majority of small and medium-sized enterprises, and to protect SMEs from unfair practices perpetrated by other firms either from emerging countries or their own domestic market. These policies will primarily benefit European SMEs in the fashion industry. In recent years the fashion sector has demonstrated an enormous capacity of adapting to and resisting fierce global competition, especially from Asian regions, following the liberalization of trade with the expiry of the EU-China Memorandum of Understanding on 31 December 2007. European policies are committed to encouraging free trade and access to markets in conditions of reciprocity by promoting fair competition among partner states, and to recognizing the centrality of respect for fundamental rights at work. Lastly, as regards the food and beverage sector, the five drivers of innovation and new market trends at global level are predicted to be: food safety, hedonism / pleasure, healthy living, convenience, and ethical consumerism. The ability to govern these drivers on international markets will represent a critical success factor. Mediterranean SMEs in the food and beverage sector need to address this issue with the support of community polices by investing adequately in innovation, above all in terms of organization.

9 The food and beverage and fashion sectors in the Province of Naples

Data on the number of firms and their relative weight in the manufacturing sector as a whole highlights the importance of the food and beverage and fashion sectors in the Province of Naples.

Table 21 Province of Naples: registered and active firms, births and deaths – Q3 2009

Description Manufacturing sector

Food and beverages

% total manufacturing

Fashion % total manufacturing

Total firms Registered 28,653 5,573 19% 6,537 23%Active 23,978 5,069 21% 5,033 21%Births 257 99 39% 50 19%Deaths 208 44 21% 51 25%

Source: own calculations based on data from the Naples Chamber of Commerce, online data, Movimprese (www.na.camcom.it, area statistica e studi, sezione informazioni economico-statistiche)

In 2009 there were 5,069 active firms involved in the production of food and beverages in the Province of Naples, accounting for 21% of the total number of manufacturing enterprises. In the fashion sector there were 5,033 active firms, again representing 21% of the total.

Table 22 Province of Naples: registered and active firms, births and deaths by legal form – Q3 2009

Legal form No. % of total No. food % of total No. % of total

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manufacturing firms

manufacturing firms

and beverage

firms

food and beverage

firms

fashion sector firms

fashion firms

Companies Registered 9,111 32% 1,086 19% 2,370 36%Active 6,481 27% 825 16% 1,567 31%Births 93 36% 23 23% 20 40%Deaths 34 16% 3 7% 2 4%

Partnerships Registered 8,350 29% 1,551 28% 2,276 35%Active 6,762 28% 1,405 28% 1,687 34%Births 61 24% 24 24% 11 22%Deaths 45 22% 4 9% 19 37%

Sole traders Registered 10,683 37% 2,831 51% 1,830 28%Active 10,420 43% 2,778 55% 1,741 35%Births 102 40% 52 53% 18 36%Deaths 121 58% 34 77% 27 53%

Other Registered 509 2% 105 2% 61 1%Active 315 1% 61 1% 38 1%Births 1 0,4% 0 0% 1 2%Deaths 8 4% 3 7% 3 6%

Source: own calculations based on data from the Naples Chamber of Commerce, online data, Movimprese (www.na.camcom.it, area statistica e studi, sezione informazioni economico-statistiche)

The legal form of a firm is an indicator of its size. The table shows that in 2009 31% of active firms in the fashion sector were companies, more than the average number of companies in the manufacturing industry as a whole (27%). In the food and beverage sector 16% of firms were companies. Comparing this figure with the manufacturing average, it is apparent that the food and beverage sector is primarily made up of small firms.

Table 23 Exports in the manufacturing, food and beverage, and fashion sectors, Province of Naples, 2006-2008

SECTOR 2006 2007 2008 08-06 AARC

% of total manufacturing

Food 443,088 515,167 538,544 10.2 11.3%Beverages 8,298 12,246 15,639 37.3 0.3%Textiles 58,228 60,007 56,352 -1.6 1.2%Clothing 299,675 312,376 321,914 3.6 6.7%Leather goods 198,582 199,595 226,576 6.8 4.7%

Total manufacturing 4,417,041 4,844,909 4,778,680 4.0 100.0%

Source: own calculations based on data from ICE, online statistics

In 2008, food, beverage and fashion exports accounted for approximately one quarter of the province’s total exports of manufactures.Looking at the average annual rate of change in the period 2006-2008, the growth in exports of food products was over double the average growth. Exports of beverages grew by almost 40%, indicating an increasing openness of firms in this sector to international markets.As a whole, growth in the fashion sector was just slightly above the manufacturing average, with an increase of 4.3% in the period under consideration. Within this sector, leather goods performed best in terms of exports.

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9.1 Traditional products from the Province of Naples

The food and beverage sector has a considerable weight in the economy of the Province of Naples as it does in the region as a whole. The high quality and typicality of local produce and products, including wine, oil, fruit, cheese, pasta, mozzarella, tomatoes and pizza, have enabled firms in the province to compete successfully on world markets.

The Region of Campania ranks third in Italy in terms of the number of products and quality marks recognized by the European Union. Seven products have recognized PDO (Protected Designation of Origin) status and fifteen more are in the process of registration. Seven other products have been awarded PGI (Protected Geographical Indication) designation. In addition, renowned DOCG (Denominazione di origine controllata e garantita) and DOC (Denominazione di origine controllata) wines are produced throughout the region.10

Products with PDO status produced in the Province of Naples are listed below: Penisola Sorrentina – Olio extravergine di Oliva (extra virgin olive oil) Pomodorino del Piennolo del Vesuvio (tomatoes) Pomodoro San Marzano dell'Agro Sarnese-nocerino (tomatoes) Provolone del Monaco (cheese) Caciocavallo Silano (cheese) Mozzarella di Bufala Campana (buffalo milk mozzarella) Cipollotto Nocerino (onions)

Ricotta di Bufala Campana (buffalo milk ricotta) is in the process of being registered for PDO status with the European Union and is currently under transitional national protection.

Products with PGI status produced in the Province of Naples include Limone di Sorrento (lemons) and Melannurca Campana (apples).Carne di Bufalo Campana (buffalo meat) and Suino Napoli (pork) are both in the process of being registered for PGI designation, with and without transitional national protection respectively. In addition, application for PGI status for Noce di Sorrento (walnuts) and Pasta di Gragnano (pasta) has been submitted and is currently being examined by the national authority. In the Province of Naples there are also a number of products with TSG (Traditional Speciality Guaranteed) status (Reg. EC 509/06): application for Mozzarella and Pizza napoletana has been accepted by the EU. Three other specialities, Gallo Ruspante (poultry), Miele Vergine Integrale (honey), and Antico Cioccolato Artigianale (chocolate), are currently in the process of applying.

Greater awareness among consumers about the importance of a healthy, balanced diet, coupled with a renewed interest in local traditions, has led to the increasing promotion of regional food and wine products. In order to protect local agro-food products and preserve traditional processes and procedures, the Campania Regional Government has published the datafiles of over three hundred selected products in a “traditional agro-food products” directory.

10 Source: Campania Regional Cabinet – Resolution No. 1050 dated 19 June 2008 “Progetti a favore dei distretti industriali ai sensi del Decreto del Ministero dello Sviluppo Economico 28/12/2007” – Approval of the descriptive report, project applications and relative co-funding

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As regards the fashion sector, there are currently no quality marks that protect or guarantee products at either national or European level, certifying geographical provenance, manufacturing methods or style. Within the framework of activities carried out by the European Economic and Social Committee aimed at defining a European strategy in terms of industrial property rights, proposals are currently being examined with a view to recognizing the typicality of traditional, artisanal, non-food products.

Looking at the Province of Naples and its locally produced products of excellence, it emerges that the area offers a large and varied range of high-quality fashion products, including gloves, menswear and footwear. The manufacture of leather gloves is one of Naples’ oldest and most traditional sectors. Despite the current downturn on the domestic market, leather gloves are sold almost exclusively overseas in high-end segments of the market, where they are highly-regarded and considered a symbol of Italian elegance. Tailored menswear is another world-class segment of the Naples fashion industry and is renowned for its own distinctive style. Typical sartorial features include the shirtsleeve shoulder, piped buttonholes, peak lapels and hand-sewn pockets. Two other items of men’s apparel traditionally made in the Province of Naples are shirts and ties. A number of local fashion houses enjoy international prestige. High-quality workmanship is a standard feature of the footwear sector throughout the province, and Neapolitan shoes have recently come into in the spotlight at national and international level thanks to the success of well-known brands.

In more recent years, the Naples fashion sector has extended its range of products and is now also positioned on the mid end of the market. Today, workshops, artisanal firms and small factories across the province manufacture men’s and women’s clothes and related products including sportswear, swimwear, bags and knitwear.

10 Manufacturing clusters in Campania and the Province of Naples

In the past years the Campania Regional Government has officially recognized several clusters in the region. Regional Government Resolution no. 25/1 dated 15 November 1999 and published in the Bolettino Ufficiale Regione Campano no. 8 of 11 February 2000 identified the seven “industrial districts” listed below:

1. Solofra (Province of Avellino ) – A tanning cluster employing approximately 4,500/5,000 people at 160 tanneries and other related businesses, viz. 200 small firms performing some phases of the production process, about 50 laboratories or retailers of chemical products used by tanneries, and about 25 leather wear manufacturers.

2. Calitri (Province of Avellino) – A multi-sector cluster with the majority of firms operating in the textile-clothing sector. The cluster involves a slightly higher proportion of the population than the tanning district: approximately 23,500 inhabitants in nine municipalities. The cluster is made up of a relatively small number of firms: 16 local units in the textile sector and 47 in clothing. Production is concentrated in the towns of Andretta, Calitri and Bisaccia, which together account for over 65% of the cluster.

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3. S. Marco dei Cavoti (Province of Benevento) – A textile cluster with approximately 50 firms employing about 1,300 people. The majority of firms produce outerwear (45%), followed by trousers (30%) and knitwear (14%). Approximately 19% of firms produce for local clients, while 32% of firms, founded by first-generation entrepreneurs, produce for one client only. The remainder produce for several clients, one of which is “dominant”.

4. S. Agata de’ Goti-Casapulla (Provinces of Benevento and Caserta) – This cluster unites 629 firms from the textile sector out of a population of 883 firms, and provides employment for approximately 3,100 people. Activities are concentrated not only in the textile-clothing sector (mainly outerwear and trousers, followed by knitwear, shirts, and leather wear representing the final stage of the specialized textile supply chain) and in the provision of related manufacturing services (cutting, sewing, tailoring, ironing, etc.), but also in clothing subcontracting, outsourced garment manufacturing (for leading Italian designer labels) and, to a lesser degree, the manufacture of textile machinery.

5. Grumo Nevano-Aversa-Trentola Ducenta (Provinces of Caserta and Naples) – The two major sectors in the cluster are clothing and footwear, with 1,268 firms out of a population of 2,065 enterprises. Cluster firms employ approximately 7,700 people and are located in 16 municipalities in the Province of Caserta and 8 municipalities in the Province of Naples.

6. San Giuseppe Vesuviano (Province of Naples) – A cluster specialized in the textile and clothing sector, with 2,546 firms out of a total population of 3,424 enterprises employing 9,635 people. The cluster covers a total area of approximately 109 sq.km, with a population of about 112,000. These small manufacturing firms were set up as off-shoots of commercial undertakings and are almost all family-run businesses.

7. Nocera Inferiore-Gragnano (Provinces of Salerno and Naples) – This cluster operates in the food and beverage sector, particularly processed tomatoes, pasta and wine. It comprises approximately 460 firms out of a population of about 6,400 enterprises and employs about 7,600 people.11

It is apparent from this brief description that 3 out of the 7 regional clusters are partially located in the Province in Naples and that only the San Giuseppe Vesuviano cluster is entirely located within the provincial boundaries.

This fact confirms that given the wide range of world-class food and beverage and fashion products produced in the area, the methodology used to define “industrial districts”, as described in Chapter 6, was too rigid and failed to allow for the inclusion of manufacturing sectors able to penetrate international markets.

The Campania Regional Government recognized the inadequacy of the methodology and set up a process to extend the type of cluster organizations entitled to benefit from operational and financial support. No one single conceptual framework was used to identify cluster organizations in order to maximise the efforts of the regional government to support the competitive development of the area as a whole. On 19 June 2008, the Regional Cabinet resolved (Resolution no. 1050 referring to projects in support of industrial districts pursuant to the Ministerial Decree of the Ministry for Economic Development of 11 Data on clusters were taken from the website of the Osservatorio Nazione Distretti Italiani, www.osservatoriodistretti.org

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28/12/2007) that in addition to “districts” recognized by the Campania Regional Government (Regional Cabinet Resolution no. 25/1 dated 15 November 1999), the definition of “manufacturing districts” would be extended to include manufacturing clusters of excellence with a concentration of manufacturing sites in strategic sectors, as well as metadistricts and business networks, linked by type of specialism either horizontally (manufacturing sectors) and/or vertically (manufacturing supply chains), involved in related and integrated activities, and located in one or more administrative areas not necessarily bordering geographically, in other words spread across the region. The “Consorzio Napoli Crea” and the “Polo della Qualità” are two manufacturing clusters of excellence that join up many of the fashion industry’s prestigious brands in Campania. A regional ICT metadistrict has also been set up, while several integrated projects involving local industrial sectors and supply chains including “Città del Fare” and ’”Area Nolano Clanio” already exist.

However, despite the progress made by the Campania Regional Government, opportunities related to the international promotion of niche products of excellence made in the Province of Naples, which includes food and fashion products, are still not being exploited in full. As described in Chapter 6, any business alliance model that can be successfully applied to the small manufacturing firms in this area must necessarily be flexible. It should mimic the characteristics of a business community which, by its very nature, is not hierarchical and continually modifies its behaviour as the competitive scenario changes.

From this perspective, the business community may represent a valid and more flexible alternative form of alliance, based not only on specific manufacturing sectors, as with clusters, but also on organizational and marketing systems, which can provide a platform strategically linking micro firms in the area.

10.1Research, development and innovative clusters

Expenditure in research and development is an important indicator of the propensity of firms, and organizations in general, toward innovation.

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Table 24 Expenditure on in-house R&D by institutional sector and region – 2006. Absolute values in € thousands

Region Public sector

Non-profit organizations

Firms Universities Total R&D expenditure

(% GDP)Piedmont 123,723 74,408 1,608,194 329,788 2,136,113 1.8

Valle d'Aosta 694 2,070 7,695 1,528 11,987 0.3

Lombardy 218,961 337,197 2,437,356 629,523 3,623,037 1.2

Prov. Aut. di Trento 67,590 7,868 45,981 56,669 178,108 1.2

Prov. Aut. di Bolzano 1,913 15,332 47,292 4,067 68,604 0.4

Veneto 117,726 21,422 498,071 315,059 952,278 0.7

Friuli-Venezia Giulia 60,122 7,471 186,290 157,081 410,964 1.2Liguria 120,121 7,718 272,895 126,970 527,704 1.3

Emilia-Romagna 159,922 8,183 958,103 461,290 1,587,498 1.2

Tuscany 200,291 9,208 339,321 509,064 1,057,884 1.1

Umbria 19,627 493 38,466 118,499 177,085 0.9

Marche 16,824 608 111,590 116,441 245,463 0.6

Lazio 1,225,482 57,086 806,534 659,090 2,748,192 1.7

Abruzzo 50,737 877 127,449 105,818 284,881 1

Molise 3,746 4,389 4,564 19,125 31,824 0.5

Campania 200,721 34,496 383,010 540,522 1,158,749 1.2Puglia 81,667 33,247 106,061 266,502 487,477 0.7

Basilicata 31,859 18 21,769 24,098 77,744 0.7

Calabria 20,746 448 10,790 107,382 139,366 0.4

Sicily 128,514 7,156 176,930 412,322 724,922 0.9

Sardinia 46,104 537 21,972 136,831 205,444 0.6

NORTHWEST 463,499 421,393 4,326,140 1,087,809 6,298,841 1.3

NORTHEAST 407,273 60,276 1,735,737 994,166 3,197,452 1.0

CENTRE 1,462,224 67,395 1,295,911 1,403,094 4,228,624 1.3

SOUTH AND ISLANDS 564,094 81,168 852,545 1,612,600 3,110,407 0.9ITALY 2,897,090 630,232 8,210,333 5,097,669 16,835,324 1.1% by organization 17.2 3.7 48.8 30.3 100.0

Source: Osservatorio Brevetti Unioncamere based on data from ISTAT

In 2006, Campania invested more than all the other Southern Italian regions in research and development, with 1.2% of regional GDP spent on strengthening and increasing R&D activities. This figure was in line with average levels of investment in Central and Northern Italian areas, whereas the average figure for South Italy was 0.9%.

The largest contribution to expenditure in research at national level was made by firms, at just under 50%, followed by universities at 30.3% and lastly the public sector at just over 17%.

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Table 25 Number of European patents published by the EPO (European Patent Office). Period 2003-2007 – Absolute values

Province and Region 2003 2004 2005 2006 2007AARC 07-03

% total Italy

Caserta 3 3 8 16 9 31.6Benevento 0 0 1 1 0 0Naples 19 10 21 11 35 16.5 0.8Avellino 6 4 1 1 6 0Salerno 7 12 10 5 12 14.4Campania 35 29 41 34 62 15.4 1.4Northwest 1,640 1,934 1,929 2,000 1,934 4.2 45.1Northeast 1,144 1,213 1,281 1,276 1,443 6.0 33.7Centre 442 586 475 627 674 11.1 15.7South and Islands 125 111 133 153 176 8.9 4.1Italy 3,350 3,844 3,819 4,056 4,226 6.0Patents in partnership with foreigners

46 67 48 62 58 6.0

Total patents Italy 3,396 3,911 3,867 4,117 4,284 6.0 100.0Source: Osservatorio Brevetti Unioncamere based on data from the EPO (European Patent Office)

Despite an average annual growth rate of 16.5% in the period 2003-2007, the Province of Naples made a very marginal contribution to the number of patents published by the European Patent office (EPO), as did the Region of Campania and Southern Italy in general. Patents published in the Province of Naples accounted for over half of patents published in Campania, which in turn accounted for over 35% of patents published in South Italy. However, comparing absolute values with the national total, it is clear that South Italy is lagging very far behind, especially when compared to the Northwest and the Northeast.

According to a report published in 2009 by the Department for Development and Economic Cohesion at the Italian Ministry of Economic Development, firms’ expenditure in research in the period 2003-2006 increased from €7,856 to €8,210 billion. In 2006 over 70% of expenditure in research and development in Italy came from firms with over 500 employees, approximately 22% from firms with between 50 and 499 employees, and only just over 7% from smaller firms.

The size of a firm has a direct influence on its level of investment in research and development. Introducing forms of business alliances may therefore encourage innovation among SMEs. Sharing the costs and risks of investment allows even small firms and firms with low capitalization (i.e. the majority of firms operating in the Naples area) to have access to innovation projects.

The subject of innovation has been widely discussed in the literature in recent years, and it may be helpful here to clarify its meaning. Innovation falls into two categories: technological and non-technological. Technological innovation may be further subdivided into product innovation and process innovation. Non-technological innovation, meanwhile, refers to innovation in organizational, marketing and managerial systems.

As shown at European level, relating the innovation performance of a local economic system simply to public and private expenditure in technological research and

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development is the wrong approach with the business sector in Mediterranean countries, where over 90% of firms are very small and by definition lack sufficient financial strength to invest in processes of technological innovation.

In addition, the traditional approach used by the European Innovation Scoreboard (EIS) had been unable to identify the innovative thrust of very small firms that over the last few decades have demonstrated their ability to open new international markets, despite operating in regions ranking low in the EIS. For this reason, the EIS methodology for the period 2008-2010 was revised. The majority of 2007 indicators were modified and new indicators were included. The EIS now places more emphasis on the ability of firms to introduce non-technological innovations and on their level of openness to other institutions (private or public).

The food and beverage and fashion sectors in the Province of Naples are generally considered traditional and mature sectors of the local economy. Segments of these two sectors, such as traditional food and handmade fashion products, enjoy world-wide success precisely because of the “traditional nature” of their production processes, today an indicator of quality. These segments in the Province of Naples form local clusters or proto-districts that have been deeply rooted in the area for decades, uniting firms manufacturing products such as limoncello, processed tomatoes, pasta, wine, traditional cakes and pastries, tailored clothes, and high-quality footwear. For firms in these sub-clusters, technological product and process innovation is not a viable path to follow as it would jeopardize the very cultural competitive advantage that gives these products their distinctive quality

Consequently, going back to the need to encourage alliances between small firms in order to increase their potential for innovation, it is clear that efforts should focus primarily on non-technological innovation (organization and marketing).

11 Competitive scenarioFigure 2 World exports in the period 1998-2007: trends and Italy’s market share by sector

Source: “L’Italia nell’economia Internazionale” – Summary of the ICE Report 2007-2008

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In Figure 2, the size of the bubbles corresponds to the average weight of the sector in world exports during the period 1998-2007. Bubbles representing sectors in which Italy’s market share decreased over this period are coloured red, while bubbles representing sectors in which it increased are shown in green. The dotted axes refer to Italy’s market share of all the sectors and the growth of total world exports.

Italy’s market share of world food and beverage exports increased in the period 1998-2007, while its share of textile and clothing products declined. In this latter sector there was a significant increase at world level in the weight of exports from Asian and Eastern European countries, where local firms continued to improve their know-how and increase production capacity. Another factor leading to Italy’s loss of competitiveness is the high cost of labour involved in manufacturing “Made in Italy” fashion products. This has given countries in Asia and Eastern Europe where labour costs are low a distinct advantage.

Table 26 Fashion exports, 2006-2008

2006 2007 2008 AARC 08-06

Naples 556,485 571,979 604,842 4.3Campania 870,853 909,303 875,957 0.3Italy 40,682,343 42,307,814 40,911,822 0.3

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

Firms operating in the fashion sector in Campania and Italy have also lost market shares in countries where they were traditionally strong. In the last few years, China in particular has strengthened its presence in the European Union, becoming the EU’s major partner for textiles, clothing, footwear and leather goods.

Competition from Asian countries has primarily affected high-volume products, i.e. shoes, clothes, outerwear, tanned/dressed hides, and textiles. In terms of the marketing mix, competitors have pulled the price lever, positioning themselves very competitively in the distribution of large volumes. Specifically, the competition has concentrated on large retail outlets and importers, who are able to adopt effective communication strategies to reach consumers.

In terms of product, competitors have started to employ a “me-too” strategy. In addition, they now often manage intangible competencies (i.e. creativity and design) in-house by directly employing the skills of Italian professionals.

The only fashion sector products that have been able to resist the growth of international competition are high-quality products aimed at niche markets. The relatively good performance of Neapolitan firms in terms of export growth can therefore be directly correlated to the prevalence of high-quality products manufactured throughout the province that are highly regarded and well-known in high-end segments of international markets.

In order to strengthen firms’ international market presence, it is therefore important to focus on improving two aspects: innovation and communication. Innovation means both creating new products and adopting techniques and technologies for a more efficient time-to-market. Communication should be aimed at positioning “Made in Naples” fashion

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products at the high end of the market by associating them with concepts such as quality / luxury / uniqueness / style.

Table 27 Food and beverage exports, 2006-2008

Food and Beverage Exports

2006 2007 2008 AARC 08-06

Naples 451,387 527,413 554,183 10.8Campania 1,474,998 1,691,039 1,937,731 14.6Italy 17,792,935 19,149,550 20,886,758 8.3

Source: own calculations based on data from ICE, online statistics, calculations based on data from ISTAT

Unlike the fashion industry, the food and beverage sector has been less affected by competition from low-cost labour countries. In this sector, labour generally has a lower impact on the cost of the end product, whereas the incidence of marketing costs is high.Although Italy’s market share has increased, countries in the Mediterranean area (such as Spain, Turkey, Greece, Tunisia and Egypt) still represent a threat. Over the last decade they have improved their industrial systems and are implementing aggressive trade policies. Firms from these countries are in direct competition with Italian enterprises as regards a considerable proportion of local products made from the transformation of raw materials of Mediterranean provenance such as grapes, olives, fruit and vegetables.

Campania has succeeded in recovering its market share in relation to other Italian regions. However, although Neapolitan firms have performed better than the national average, they have lost competitiveness compared to firms from the other provinces in Campania.

In the current international scenario, where products traditionally made in Campania (oil, processed tomatoes, wine, pasta, bakery products) are facing increasing competition, firms in the Province of Naples and the Regional of Campania as a whole will need improved logistical infrastructures, easier access to credit and a better knowledge of advanced marketing techniques if they are going to maintain their competitive advantage.

Competitors from the Mediterranean area have pulled the price lever, taking advantage of the fact that the food products mentioned above are globally identified with the name of the product (passata, olive oil, etc.) and are rarely associated with brands familiar to the end consumer.Consequently, in terms of the marketing mix, firms in the Province of Naples and the Region of Campania need to focus primarily on distribution and communication by developing channel management policies and improving sales efforts, packaging and promotions.

12 Target markets

In order to effectively promote the food and beverage and fashion sectors in the Province of Naples at international level, it is useful to analyse data on exports, looking in detail at the individual manufacturing sectors of interest.

Table 28 Province of Naples, rankings of major export countries in the sectors under study – 2008, in € thousands

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Country Food R (*) Beverages R (*) Textiles R (*) Clothing R (*) Leather goods R (*)

United Kingdom 123,635 1 2,563 2 1,336 13 4,632 15 4,110 15United States 84,713 2 2,134 3 4 29,640 2 9,215 7France 37,591 3 257 9 2,608 7 18,248 5 24,585 2Japan 37,115 4 1,298 5 469   10,207 9 5,701 12Germany 35,741 5 885 6 1,461 12 20,820 3 11,439 4Spain 22,647 6 4,495 1 3,693 5 20,594 4 6,768 9Russia 6,959 15 1,586 4 2,884 6 38,655 1 26,675 1Greece 7,608 13     7,608 1 17,720 6 11,409 5Portugal 5,761 14 103 16 5,761 2 3,691 18    Tunisia 4,746       4,746 3 9,715 10 3,081 18Switzerland 4,793 17         4,815 14 20,020 3Poland                 9,756 6

Total exports by sector 538,544   15,639   56,352   321,914   226,576  

(*) R = 2008 Ranking Source: own calculations based on data from ICE, online statistics

In 2008, the United Kingdom was the province’s major export country for food products, followed by the United States, France and Japan. The absolute value of exports in the beverage sector was lower (€15,639 million compared to €538,544 million), and here the main export market was Spain, followed by the United Kingdom and the United States.

European countries are particularly attractive markets for food and beverage products from the Province of Naples because they are traditionally consumers of these products and because of their geographical proximity.

Naples food and beverage products are also already popular in the United States and Japan. Here further actions can be implemented to strengthen the presence of firms and increase sales.

European countries and the United States are already well-established trading partners of Neapolitan firms operating in the fashion sector. In the current turbulent competitive scenario, efforts to promote “handmade” Neapolitan products positioned at the mid-high end of the market and targeting consumers in upper income brackets should focus on these two areas.

An analysis of data on foreign trade by segment in the food and beverage and fashion sectors in the Province of Naples shows the current and future importance of specific areas in terms of quantity and quality. Within the framework of the Innovate-Med project, attention should be concentrated on these regions.

The areas identified as target markets for the food and beverage sector are Europe, the United States and Japan, while the target markets for the fashion sector are Europe and the United States.

13 Buying behaviour

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GfK Eurisko12 conducted a Delphi survey of international experts (entrepreneurs, marketing and communication professionals, journalists and researchers) from which it emerged that the distinctive features that best connote Italian products in the minds of potential foreign consumers are:

aesthetic appeal: the look, style and design of clothing, footwear, furniture and cars are particularly renowned and the phrase “natural elegance” is typically used to describe Italian products

craftsmanship: Italians “do their job well” with creativity, skill, passion and an innovative approach

culture: a cognitive and experiential heritage that recognizes the traditions and geographical area of provenance

importance of social relations: the sense of community and unique value of family-run firms

the wide variety of possible experiences ranging from landscapes to architecture, cultural traditions and food and wine

overall quality of life: highly regarded and envied overseas, this is a critical success factor of Italy’s soft economy where competitiveness is fostered by culture, human capital, and social cohesion.

The expression “Made in Italy” evokes not just a geographical area but a set of values. In the collective imagination of international consumers it is synonymous with style, quality, and traditional craftsmanship, but also with innovation, design and customer service.

Therefore, the propensity to purchase “Made in Italy” products can be taken into consideration when profiling potential consumers of Neapolitan food and beverage and fashion products. Regardless of the specific area in which they are manufactured, “Made in Naples” products will also be generally perceived as Italian.

Many research studies have shown that the socio-demographic characteristics of consumers influence their inclination to purchase foreign products rather than products made in their home country. The high levels of income and education associated with frequent foreign travel and interaction with other cultures are two factors that increase people’s preference for foreign products. This preference is, at the same time, inversely proportional to age and older age groups are therefore less likely to buy foreign products.13

The target market for food and beverage and fashion products from the Province of Naples is, in general terms, made up of individuals who are sensitive to issues such as quality consumption, intercultural relations and the importance of traditional, locally produced products. They are both male and female, aged between 30 and 55, of average or above average education, and from a medium-high income bracket (members of the professions, business people, white-collar workers). Target consumers mainly live in urban areas, where they have the opportunity to choose from different types of consumer products. They are open to other cultures, socialize on a regular basis, and are interested in local traditions.

12 Delphi survey conducted by Eurisko on behalf of Symbola and Fiera di Milano, “ITALIA, geografie del nuovo made in Italy”, 200713 Bertoli, Busacca e Molteni “Consumatore, Marca ed effetto Made in”, Università degli Studi di Brescia – 2005

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While the profile of target consumers is the same for both the food and beverage and the fashion sectors, buying habits are different.

The distribution channels for food and beverage products are primarily specialist shops, restaurants, supermarkets, the Internet and mail order catalogues.

Consumption patterns of food can be divided into two categories: Daily nutrition : the item is consumed at-home or away-from-home for nutritional

needs. It may be purchased at supermarkets and modern food chains. Special occasions : food products are associated, for example, with cultural curiosity

and with social relations. Consumption can take place at-home following purchase at specialist shops, fine food corners in large retail outlets, or online, while in the case of away-from-home consumption, foreign (Italian) and ethnic restaurants are preferred.

“Made in Italy” fashion products are purchased for two main reasons: Work : the need to dress formally and smartly with well-chosen accessories.

Preferred distribution channels are boutiques and specialist departments in large retail outlets.

Leisure : for casual clothes and sportswear, sales channels are large retail outlets, while for occasion wear and haute couture, boutiques and specialist departments in large retail outlets are preferred.

14 Internationalization strategies and supporting action plan

The quality products of the food and beverage and fashion sectors are able to satisfy the need of target consumers for non-standardized goods with a strong cultural identity.

These consumers have always had a hard time finding this kind of product. They are generally sold on niche markets and are incompatible with the purchasing policies of large retail outlets more geared to mass produced items as opposed to “specialities” and “limited editions”.

Distributors potentially interested in and able to offer quality products are often themselves small firms. Consequently they are unable to search the international market to find businesses that can supply this kind of merchandise. They are nevertheless aware of the difference in commercial value between “original” products and cheap copies produced by competing countries.

One solution to the problem is to establish a communication channel between producers and distributors that is at the same time:

lean (low transaction, communication and logistical costs) fast (able to reduce order-to-delivery time) effective (able to convey customers’ needs clearly allowing firms to respond

appropriately).

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Internationalization strategies must be based on a set of actions aimed at developing the offer and increasing the quality of the offer, strengthening the brand, fostering business alliances and seeking public sector support.

These actions can be implemented by using tools already created within the framework of the madeinnapoli project. This project was based on the creation of a business community and web portal (www.madeinnapoli.it) aimed at encouraging alliances between firms and communicating synergistically the best of Neapolitan products to international markets. The project concept behind the creation of the website was to place “Made in Naples” products within a broader framework of experiences associated with the geographical area and its cultural, traditional and artistic values. The different sections of the portal, providing access to a rich selection of products and content, were designed to showcase the area and its resources in terms of traditions, art, history and culture, based on the premise that these aspects are key to raising awareness of the products on different markets and enhancing their appeal. In terms of product type, the portal focuses almost exclusively on the food and beverage and fashion sectors, integrated according to area of provenance. It can therefore be a useful instrument in pursuing the objectives of this project.

Developing the offer and increasing the quality of the offerThe quality of the offer can be increased by enhancing managerial soft skills. The aim is to improve firms’ competence in applying international marketing techniques, to increase their knowledge of customer needs, and to develop their ability to anticipate and satisfy the needs of their customers. Providing specialist consulting services and technical assistance in support of internationalization will contribute to achieving these objectives. Developing the “madeinnapoli” Business Community will enable firms to offer customers both the “value” associated with their organization and their products and the “value” associated with a world-class community of traditional manufacturers from the Province of Naples (brand).

Developing trademarksIn order to effectively promote the products of firms in the Business Community, the two extensions of the “madeinnapoli” registered trademark, “I Sapori” and “Gli Stili”, will be used to market quality food and fashion products respectively. The role of the trademark and its two sectoral extensions will be to act as a guarantee of product quality and local provenance. The “madeinnapoli” mark is already present on international markets and will need to be supported by further actions to raise awareness of the brand, especially in target countries. Promoting Neapolitan products on target markets will therefore involve increasing the number of firms offering baskets of products compatible with the “I Sapori” and “I Stili” marks.

The action will include the following steps:

1. Update the www.madeinnapoli.it web portal and the two “Sapori” and “Stili” sections to create a showcase of quality products from the Province of Naples as well as a technological platform bringing together members of the Business Community (producers, distributors and consumers).

2. Recruit other local manufacturing firms in order to enlarge the basket of products.3. Gather communication materials (company profiles, product factfiles and photos) to

upload onto the website.

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4. Design and create web-based services for the Business Community (forums, newsletters, translation services, etc.)

5. Organize in-person meetings with firms belonging to the Business Community in order to define a common sales strategy.

If the web portal (the “place” of the Business Community) and the virtual showcases are effectively to represent an opportunity for developing the area as a whole, it will be crucial to adopt a dynamic and integrated approach providing for the progressive evolution of the offer (turnover and increase in the number of firms and their products) while maintaining consistent quality standards in the baskets presented and the services offered.

From cluster to business communityJoining up firms in the madeinnapoli Business Community goes beyond the limits of top-down cluster policies implemented at regional level to date. The community may therefore represent a way to activate a bottom-up process of linking firms, enabling them to create synergy by pooling functions in support of the value chain, such as logistics, contract management and marketing.

Promotional strategies Promotional actions will always aim to involve firms belonging to the madeinnapoli Business Community, both in the planning phase of specific actions and in the implementation of activities.

Promotional interventions in support of firms in the Business Community can be divided into joint actions involving both sectors synergistically and specific actions targeting each sector individually. Joint actions will include:

o Scouting. In this phase, marketing experts will create contacts in target countries in order to select and involve distributors potentially interested in the madeinnapoli Business Community. Scouting is vital to set the project within an institutional framework and to avoid wasting resources on unqualified or inexperienced contacts. As a follow-up to the scouting phase, a databank of contacts will be compiled by type of contact (distributors, media representatives, opinion leaders, etc.) and ranked according to the level of strategic relevance with the products of Business Community firms (very high, high, sufficient).

o Web marketing. A key role will be played by web marketing actions targeting both trade professionals and international consumers. Actions will be aimed at increasing the number of target visits to the madeinnapoli web portal, where the content is designed to communicate the “value” of quality products in the food and beverage and fashion sectors in the Province of Naples. To this end, link exchange activities will be set up with institutional web portals that have sections dedicated to local products. Ranking and keyword strategies will be implemented and regularly updated to optimize the positioning of the portal in Italian- and English-language web searches on the most popular search engines. The possibility of buying web

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advertising using pay per click agreements with the most commonly used websites and search engines in target countries will also be examined.

o International fairs. Piggybacking at international fairs where local public institutions and firms from the Business Community are exhibiting will be organized via the distribution of communication material providing information about the community and its dedicated website.

In addition to joint promotional activities, differentiated promotional actions will be carried out for each individual sector.

Promotion of the food and beverage sectorRoadshows, press tours and educational tours will be organized to raise awareness of products and, in particular, the concept of the “I Sapori” food trademark. More specifically, as part of the Innovate-Med project, a press/educational tour targeting media representatives and travel and tourism operators will be run before the end of May 2010 (focusing on the food and wine tourism, considered more appropriate for a promotional action targeting the media as well as industry professionals). The Provincial Council of Naples will use its own resources to support further activities of scouting, web marketing, participation at international fairs and a promotional roadshow in Europe and the USA in 2011.

Promotion of the fashion sectorPress tours and educational tours will be organized to raise awareness of products from the fashion sector. More specifically, as part of the Innovate-Med project, a press/educational tour targeting media representatives and European fashion industry professionals will be run before the end of October 2010. The Provincial Council of Naples will use its own resources to support further activities of scouting, web marketing and participation at international fairs, also involving the food and beverage sector.

Institutional supportInstitutions can play a key role in managing relations between firms in the Province of Naples and potential foreign clients both in gathering intelligence on the needs of the market and in creating opportunities to bring together buyers and sellers, providing an institutional setting and guaranteeing the reliability and credibility of industry professionals involved.

Local institutions, primarily the Naples Provincial Council and the Naples Chamber of Commerce, can also play an important role in promoting the “madeinnapoli” mark outside the web environment, in synergy with international communication actions promoting the provincial economic network.

In conclusion, it is important that institutions learn to listen better to the needs of firms in order to implement a process of governance and not just control, based on the assumption that firms respond much faster than the public sector machine.

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15 Conclusions

The manufacturing sector is being severely challenged both at European and local level by the current state of the economy and the international economic crisis.

Firms in the Province of Naples are also feeling the effects of the downturn. Even traditional sectors such as food and beverages and fashion that offer nationally and internationally recognized products of excellence and carry a significant weight in the provincial and regional economy have been affected.In line with Mediterranean Europe and the rest of Italy, Neapolitan firms operating in these two sectors are small organizations that are currently struggling above all as a result of internal structural deficiencies. SMEs are generally undercapitalized and have difficulty accessing credit. The presence of SMEs, and especially micro firms, on overseas markets is low compared to their actual potential. This, coupled with the scarcity of available material and human resources, means that these firms’ investment in technological and non-technological innovation is low. Non-investment in innovation risks further compromising their ability to compete, above all at international level.

Whether or not firms in the food and beverage and fashion sectors will be able to survive these difficult economic times, and at the same time address the problem of their structural limits, is heavily dependent on the existence of institutional support policies. Actions should focus in particular on increasing access to credit and funding as well as providing information and advisory services. These are key aspects for firms operating on international markets where competition is increasingly fierce.

In parallel, creating linkages among SMEs can make a significant contribution to overcoming the barriers they face in accessing international competition as a result of their small size. However, the approach to foreign markets must be developed by creating new forms of alliances, such as business communities, which go beyond the rigid rationale of clusters and are based on flexible and innovative collaborations, thanks in part to the recent spread of modern information technologies.

The objective of the Innovate-Med project must therefore be to strengthen the “madeinnapoli” Business Community of SMEs from the food and beverage and fashion sectors by promoting traditional food and non-food products at international level under the two “I Sapori” and “Gli Stili” marks. The presence of these firms on international markets can be enhanced by implementing the proposed interventions, carrying out promotional actions aimed at the target countries identified, bringing together industry professionals from the supply and demand side, and creating a lean, fast and effective communication channel between small manufacturers and small distributors.

The type of market approach and the building of business relations pursued by the project aim to provide firms in the Business Community a modus operandi. Following a period of guidance and mentoring by consultants and institutions, individual firms should be able to move forward independently, thus activating a virtuous circle allowing the two sectors to continue to increase their presence at international level.

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degli Studi di Brescia, 2005

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