PESTEL analysis of Italy
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.
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.
Though Italy is famous for many things, it has a history of tortuous political crisis. This political crisis has deep roots in its post-WWII history, as it struggled to rebuild its economy and establish a stable democratic system.
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 it in the last few years. In fact, the political system has been very fragile with a political leadership crisis there for a long time (Orlandi, 2022).
Though it has made a lot of progress over the years, it is still seen as one of the most corrupt countries in Europe. In fact, it ranks 41st out of 180 countries in the Corruption Perception Index (Transparency International, 2023).
Despite these challenges, Italy remains an influential player on the global stage, working closely with its European and international partners to address pressing issues such as climate change, migration, and economic inequality. Its political future remains uncertain; however, its long history of resilience and innovation suggests that it will continue to adapt and evolve in the face of adversity.
Economic factors affecting Italy
The next element to address in this PESTEL analysis of Italy is the economic environment. Italy is one of the top 10 economies in the world. Its nominal GDP in 2021 was $2107.7 billion (Trading Economics, 2023). It is a part of the Eurozone; however, its relations with Brussels have been bitter over its controversial budget plans.
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, 2023).
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 Italy deals with by importing large amounts from its trading partners. The main causes are the increasing demands, regional and global conflicts, and climate change.
Italy is a leading producer of machinery, textiles, and luxury goods. It is particularly renowned for its high-quality craftsmanship in the fashion and automotive industries, with iconic brands such as Ferrari, Lamborghini, Gucci, and Prada all hailing from the country.
Italy has long been a global leader in fashion and design, with its iconic brands and designers influencing trends and styles worldwide. From the elegant simplicity of Milanese fashion to the bold colours and patterns of Rome, Italian style is synonymous with quality, innovation, and sophistication.
Italy is one of the largest agricultural producers and food processors in the EU (ITA, 2023). Its fertile soil and favourable climate support a diverse range of crops. It is a leading producer of wine, olive oil, cheese, and pasta, with its agricultural products enjoying a reputation for quality and excellence worldwide.
Tourism is another major industry, with millions of visitors flocking to Italy each year to explore its rich history, stunning landscapes, and vibrant culture. It is home to an impressive 55 UNESCO World Heritage Sites, more than any other country in the world, making it a top destination for tourists seeking a taste of European history and culture.
Despite its economic strengths, Italy has faced significant challenges in recent years, including high unemployment, sluggish growth, and a large public debt. The Italian government has implemented various reforms aimed at boosting economic growth and addressing these issues; however, the path to recovery remains a long walk ahead.
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 Italy. Likewise, many Asian and African travellers also shared their experience of racist encounters they faced.
Italian cuisine is famous worldwide for its simplicity, rich flavours, and emphasis on fresh, high-quality ingredients. From hearty pasta dishes to delicate pastries and pizza, Italian food is a celebration of regional flavours and culinary traditions, with each region offering its unique take on classic Italian dishes.
The current population of Italy is around 58.8 million. The life expectancy for men is 79 years, while 84 years for women. Italian is the major language, while Christianity is the major religion (BBC, 2023). Other notable religions in the country are Islam and Buddhism.
Italy has one of the oldest populations in the world. The elderly population has been severely hit by a number of health and socio-economic challenges. Other social challenges facing the country are organised crimes, high rate of youth unemployment, and rise in hate crimes.
Technological factors affecting Italy
The next element to address in this PESTEL analysis of Italy is the technological environment. 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.
Italy 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. Indeed, it is becoming more attractive to investors as there is more government support and funding for venture capitals and the tech start-up ecosystem (Power, 2022).
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, Italy faces several 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 this PESTEL analysis of Italy is the country’s legal landscape. The Italian legal system is characterized by its complexity and slow pace, with cases often taking a long time to resolve.
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.
Employers are prohibited to discriminate against employees on the grounds of race, religion, gender, disability etc. They are required to ensure the reasonable and practicable health and safety of their employees. Harassment is also prohibited.
Summary of PESTEL analysis of Italy
In conclusion, Italy is a country with a rich history, diverse culture, and stunning natural beauty. From its ancient ruins to its modern cities, it is a land of contrasts that continues to captivate and inspire visitors from around the world.
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Last update: 10 April 2023
BBC (2023) Italy country profile, available at: https://www.bbc.co.uk/news/world-europe-17433142 (accessed 10 April 2023)
ITA (2023) Italy, available at: https://www.trade.gov/country-commercial-guides/italy-agricultural-sector (accessed 10 April 2023)
OEC (2023) Italy, available at: https://oec.world/en/profile/country/ita/ (accessed 09 April 2023)
Orlandi, G. (2022) Analysis from Italy: A political crisis that nobody wanted, available at: https://www.euronews.com/my-europe/2022/07/29/analysis-from-italy-a-political-crisis-that-nobody-wanted (accessed 09 April 2022)
Power, S. (2022) The Italian Tech Start-Up Industry is on the Rise, available at: https://www.eurocompanyformations.com/blog/italian-tech-start-up-industry-on-the-rise/ (accessed 10 April 2023)
Trading Economics (2023) Italy GDP, available at: https://tradingeconomics.com/italy/gdp (accessed 09 April 2023)
Transparency International (2023) Corruption Perception Index, available at: https://www.transparency.org/en/cpi/2022 (accessed 10 April 2023)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.