PESTEL analysis of Italy (Italy – country analysis)
This detailed PESTEL analysis of Italy aims to explore some of the political, economic, social, technological, environmental, and legal factors that affect Italy today. Italy is famous for its magnificent contributions to the worlds of architecture, art, opera, literature, fashion, film, religion, and many more. Vatican, the smallest state in the world, is based in Rome, the capital of Italy.
Political factors affecting Italy
Italy is a unitary parliamentary republic with a written constitution. The President of the country is the head of state, while the Prime Minister is the head of government. Italian politics is usually dominated by three political parties i.e. Five Star Movement, the Democratic Party, and the Lega. Though the country is famous for many things, it has a history of tortuous political crisis since the end the Second World War.
Italy is a founding member of NATO and the European Union (formerly known as the European Economic Community, EEC). It is also a member of some of top institutions in the world such as the UN, OECD, WTO, OSCE, and G7. It maintains good foreign relations with many countries. However, the rise of far-right politics has been a cause of major concern for the country. Likewise, political instability, tensions between the governing partners, and disagreement over policies and election pledges have affected the country in the last few years (Ellyatt, 2019). Though Italy has made a lot of progress over the years, it is still seen as one of the most corrupt countries in Europe.
Italian authorities have implemented draconian measures to stop the spread of coronavirus in the country. According to Tondo (2020), thousands of people have been pressed charges against for violating the lockdown measures. At the beginning, some people saw it a very heavy-handed approach; however, the perception had changed quickly and most people started seeing it as an appropriate response to a calamitous situation.
Economic factors affecting Italy
The next element to address in the PESTEL analysis of Italy is the economic environment. Italy is one of the top 10 economies in the world. Its nominal GDP in 2019 was $2030 billion (Trading Economics, 2020). It is a part of the Eurozone; however, its relations with Brussels has been bitter over its controversial budget plans (Winchester, 2019).
Italy is well-known as one of the largest export economies in the world. Its top exports are packaged medicaments, cars, refined petroleum, vehicle parts, and valves that go mostly to countries such as Germany, France, the USA, the UK, and Spain. On the other hand, its top imports are cars, crude petroleum, packaged medicaments, petroleum, and vehicle parts that come mostly come from Germany, France, China, the Netherlands, and Spain (OEC, 2020).
Italy is one of top manufacturing powers in Europe. The major industries that have been driving the economy are tourism, manufacturing, agriculture, service, and trade. These industries are characterised by large corporations as well as smaller, family-run businesses. However, the lack of raw materials poses a big challenge to the economy which the country deals with by importing large amounts from its trading partners.
The impact of coronavirus on the Italian economy will be damaging both in the short and long terms. However, the government’s pledge to increase spending in a ‘massive shock therapy’ to counterbalance the economic impact of the virus has been received with mostly positive reactions (BBC, 2020). Likewise, many businesses have been very swift to adopt remote working where possible to reduce the spread of the virus and minimise financial damages.
Social factors affecting Italy
Italian society has changed significantly since the Second World War. Participation of women in education, politics, and other areas of life is praiseworthy. The use of public space plays a very important role in the lives of Italians. People, particularly young Italians, love to meet friends on a daily basis. They usually meet with each other in bars, cafes, cinemas, pizzerias, and discos. However, many tourists have shared on social media their experience of bad customer service in the country. Likewise, many Asian and African travellers also shared their experience of racist encounters they faced.
As of March 2020, the current population of Italy is around 61 million. The life expectancy for men is 81 years, while 86 years for women. Italian is the major language, while Christianity is the major religion (BBC, 2020). Other notable religions in the country are Islam and Buddhism.
Italy has one of the oldest populations in the world. Approximately 60% of the population is aged 40 and over, while 23% is over 65 (Perper. 2020). The elderly population has been severely hit by coronavirus. Other social challenges facing Italy are organised crimes, high rate of youth unemployment, and rise in hate crimes.
Technological factors affecting Italy
Italy has made significant progress in the digital arena over the years. In fact, it is one of the top four countries in Europe in digital revolution. It has more than 105,000 high-tech companies combining all sectors together, and it is a market leader in robotics in Europe. It has also made excellent progress in Cloud computing (Fratta and Sabatini, 2020).
The use of the Internet is fast rising in Italy with companies investing heavily in scientific and technological research. However, there are some weaknesses that need to be addressed. For instance, poor provision of broadband and lack of training opportunities and facilities concerning advanced technologies are slowing down the progress of digital revolution.
Environmental factors affecting Italy
Italy is one of the most beautiful and magical places in the world. Rome, Florence, Venice, Vatican, Tuscany, and Milan offer many landmarks of world architecture. The country’s stunning landscape,cathedrals, UNESCO World Heritage sites, artistic and architectural attractions, medieval and Renaissance buildings, Mediterranean coast, and many other attractions mesmerise millions of tourists every year.
However, the country faces a number of environmental challenges. For instance, air pollution, poor waste management, climate change, water pollution, depletion of natural resources, over packaging of consumer goods, soil erosion, and flooding to name but a few.
Legal factors affecting Italy
The last and a very important element to address in the PESTEL analysis of Italy is the country’s legal landscape. The government in Italy encourages foreign direct investment by offering incentives e.g. subsidised loans, cash grants and tax credits. Setting up a business by the locals or foreign investors is relatively easy. Employees are entitled to all statutory employment rights e.g. holiday, sick leave, maternity leave, severance pay, and so on.
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Last update: 22 March 2020
BBC (2020) Coronavirus: Italy in ‘massive shock therapy’ pledge to offset virus impact, available at: https://www.bbc.co.uk/news/world-europe-51799956 (accessed 15 March 2020)
Ellyatt, H. (2019)Italy faces ‘momentous moment’ amid political fights, threats and instability, available at: https://www.cnbc.com/2019/06/04/italy-in-crisis-amid-political-fights-threats-and-instability.html (accessed 15 March 2020)
Fratta, S. and Sabatini, M. (2020) Italy 4.0: Pursuing the digital future amid macro-gloom, available at: https://www2.deloitte.com/us/en/insights/focus/industry-4-0/italy-4-0-digital-future-technology.html (accessed 20 March 2020)
OEC (2020) Italy, available at: https://oec.world/en/profile/country/ita/ (accessed 18 March 2020)
Perper, R. (2020) Italy, now under lockdown, has been hit hard by the coronavirus outbreak. It also has one of the world’s oldest populations with 60% over age 40, available at: https://www.businessinsider.com/italy-coronavirus-old-population-cases-death-rate-2020-3?r=US&IR=T (accessed 21 March 2020)
Tondo, L. (2020) Italy charges more than 40,000 people with violating lockdown, available at: https://www.theguardian.com/world/2020/mar/18/italy-charges-more-than-40000-people-violating-lockdown-coronavirus (accessed 19 March 2020)
Trading Economics (2020) Italy GDP, available at: https://tradingeconomics.com/italy/gdp (accessed 20 March 2020)
Winchester, L. (2019) EU warning: Italy ‘most likely to quit eurozone’ – Rome looks for revenge over huge fine, available at: https://www.express.co.uk/finance/city/1140562/italy-news-eurozone-euro-currency-eu-debt-fine (accessed 20 March 2020)
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Author: Jo David
Jo David has years of experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality and tourism management.