The Italian enterprises that produce components for the household appliance industry have created in time the conditions to face the global market challenge successfully.
There is a scarcely known industrial sector in Italy, despite its importance in terms of turnover, employment and contribution in the equilibrium of the balance of payments, as well as for the level of innovation that it generates and spreads transversally in other productive fields. It is the industry of the components for household appliances, a sector formed by hundreds of medium and small enterprises with a global turnover comparable to that of the finished product companies in this sector. The majority of these enterprises was established starting from the Fifties when, around the main finished product brands in Italy at that time, such as Ignis, Candy, Indesit, Merloni, Zanussi and Zoppas, were set up aggregations of minor firms to which the producer of household appliances entrusted some machining processes.
With the passing of time these same enterprises, starting form simple subcontracting activities, began to produce components and afterwards subsystems for the finished product industry, while the strict supplying relationship that they had established with their customers allowed them to gain competences about the functions and the technologies of the finished product the component was intended for. At the same time they improved their management, concerning the production quality and the service level, to satisfy the more and more demanding requirements that customers themselves required.
From many points of view it was a tutoring process for which the household appliance producer, which in time had increased its sizes and had started trading on a world scale, provided to transfer not only simple machining operations but also specific managerial, functional and technological competences to its induced activity enterprises. In the successive years the evolution saw therefore the aggregation of these enterprises, forming real supply chains, structured and specialized in increasingly complex productive processes, up to generating that industrial phenomenon of great success, typically Italian and unique of its kind, which is indicated by organization scholars as “the system of industrial districts”.
The golden age
The model of the Italian districts for the production of household appliances, with its manufacturing poles in Lombardy and Piedmont, in Veneto and in Marche, proved to be winning in the international competition for the whole period extending from the end of the Fifties to the first ten years of 2000, when over half of the European production of household appliances came from the Italian factories, while the big brands headquartered in Italy took over other historical brands of the sector with factories in various Countries, mainly European.
This success was undoubtedly ascribable to the great entrepreneurial capability of the national “white good” industries that had imposed the structure and the style of a strongly innovative product all over the world. In refrigeration products were winning the technological innovations obtained with the furniture made of expanded polyurethane moulding, by Borghi and Ignis, while in the washing ambit the developments achieved by Candy with front-loading washing machining were of great relevance.
These product structures, together with the innovations produced by the other brands in other fields such as cooking, suction and professional products, soon diffused successfully as standard at international level, with the result of conferring great prestige to the Italian industry. But equally important was the styling contribution provided by product designers, to the extent of generating on a world scale a phenomenon of imitation of what was defined the “Italian style” in the household appliance sector.
In some fields, such as the industry of suction hoods for cookers and of automatic espresso machines, the Italian industry has even invented new products from zero and has introduced them on the market, conquering positions of real world monopoly, thus witnessing its capability of producing innovation and of transforming an idea into a world successful product.
The process industry
Besides the product innovation, to grant success to the Italian household appliance industry, which in the early 2000s had reached a production capacity of over thirty million pieces, the development of process technologies gave a determinant contribution. Italy was leader in the world also for this aspect, thanks to a mechanical and machine tool industry that had specialized in integrated automation solutions starting from the applications in the automotive industry and that had become afterwards available in the household appliance industry, too.
It was still in Italy, then, that were born innovative process solutions, specific for the volume manufacturing of household appliances, from the integrated systems for the sheet metal working up to the refrigerator furniture moulding through polyurethane foaming, up to the automatic lines for the production of washing machine drums and the handling systems for the logistics inside factories. All these systems, physically integrated one another to form productive lines with high working rates, use forefront automation and robotics technologies both for machining operations and for the handling of materials and of finished products.
Moreover, the main product brands have turned to sophisticated systems based on information technologies for the control of operations and the speeded up testing of household appliances in line, as well as for the identification and the traceability of the finished product. Also these systems were produced by specialized enterprises, which gained high product and process competences not easily available in other Countries and not easily replicable. The strict integration between product and process technologies, together with the experience and the high competences attained in the implementation of several production solutions, has led to the formation in Italy of a design and technical pole of the “white good” industry of absolute excellence.
This pole, which includes the technical offices of the main household appliance brands together with the suppliers of technological solutions, was maintained on the territory also after important takeovers of Italian enterprises accomplished by foreign multinationals, as in the case of Whirlpool, Electrolux and Faber. Today, with the market globalization, the enterprises that are part of this pole are the main source for the diffusion of the product and process knowledge and the supply of technologies to rising markets, which at the beginning of 2000 are the new frontier of the household appliance industry.
The role of the component
If the role of process technologies was important to assure the success of “made in Italy” household appliances, equally important was the contribution given by the enterprises that produce components. Also because the added value of their production has grown in time. This happened in a first time for the simple aggregation of accessory parts to the main component, such as elements of mechanical fixing and electrical connection.
In that context it is worth underlining that, once acquired a sufficient competence in the functions of the household appliance by attending the technical departments of their customers, the producers themselves of components have become an important source of innovation. This transformation of the supplier into design partner was on the other hand favoured by the household appliance manufacturers themselves, interested in concentrating the available resources into their “core business”, which they identified in the initial and final part of the product life cycle.
Setting production aside, they are more and more often considered by the household appliance industries as a simple commodity and for this reason entrusted to rising low labour cost Countries, the main interest of the primary brands is in fact focused, upstream, on the activities of marketing and of definition of the technological platform of the household appliance while, downstream, more and more resources have been destined to marketing and distribution activities of the product, by now widespread on a world scale.
The design space left free by finished product companies was then progressively taken up by supplier firms. Some of them, more dynamic, have so increased the value of their product, turning the component into a complex technological subsystem. For this reason they have invested in research, both in terms of functions and of innovative materials and in what pertains to automated machining processes, which have reached very high complexity levels to obtain those exclusive characteristics of quality, productivity and flexibility that were demanded by volume manufacturing.
The component manufactures were favoured in this by the presence in Italy of a thick industrial engineering fabric that includes not only automation and machine tool companies but also those that produce moulds and dies, as well as those specialized in all most innovative mechanical machining, including the most different finishing and surface treatment operations.
Being favoured by their location in a territory with a strong and articulated industrial presence and with a rooted manufacturing culture, the component manufacturers have made huge investments in technological production systems, thus succeeding not only in neutralizing the differential in the labour cost with the competing businesses that operate in rising Countries but also in heightening the level of the competitive barrier that hinders the entry of new players.
For the advanced component producer, in fact, the product innovation is not easily highlighted because it is intrinsically integrated into process technologies, which in their turn are rigorously kept proprietary, in order to make imitation difficult. Imitation that, especially when done by Asian producers, can be opposed with difficulty as it acts on the standard mechanisms of patents, even if they have been internationally recorded.
The production delocalization to low labour cost Countries and the appearance of the new Asian players on the market, together with the effects of the economic crisis in Europe, in the last four years have produced the halving of the Italian production of household appliances. Consequently, the main finished product brands headquartered in Italy have turned their attention more to the market integration and to the commercial and distributive coverage in the various territories rather than to the efficiency of their productive systems and to the production chain of their suppliers.
In this situation, the component manufacturers have been deprived of their natural reference points, which were their customers, when the national finished product industry absorbed the totality of their production. Having to face the order decrease on the home market, they have then tried to compensate such drop with initiatives on foreign markets, proceeding to a progressive internationalization of their activities. Some sector enterprises were already following that way and nowadays they have intensified their initiatives. Other medium-small size enterprises have joined them, relying however on cultural and organizational characteristics able to support such a widening of the horizon of their business.
Despite the numerous criticalities such high taxes, scarce institutional support to internationalization, high labour and energy cost, together with the lack of a national policy oriented to the professional training, these enterprises, which the economist Giuseppe Turani had defined with the term “fourth capitalism enterprises” have gained an economic weight and a relevant role in the Italian productive system. They are enterprises with a turnover that ranges from ten to two hundred million Euros and a labour force that goes from thirty to one hundred-fifty employees. Their success has been determined by the capability of producing innovation, together with the characteristics of flexibility and productive specialization that already in the past had characterized their activities in the ambit of traditional industrial districts.
Once projected in the global market, these enterprises behave like “pocket multinationals” that, relying on their specialized competences and on the service level that they can offer, counterbalance the small size and the scarce available resources with economies inside the company and network economies among complementary enterprises. It is an absolutely original business model, specialized in high-quality productions addressed to market niches with high margins, with a notable capability of operating on a world scale by offering a wide range of services. Among the services offered the design advice is important, in order to establish extended commercial and partnership networks, aimed at conquering important shares of the global demand.
Nevertheless, it is worth noticing that these enterprises, even if they look at a globally extended business horizon, maintain their relationship with the territory of origin and with the technological and industrial pole of appurtenance, which was that of industrial districts, rather than to try to imitate big multinational companies. For this reason, besides the new relationships established at international level, they maintain their historical relation networks, consolidated by a common culture, by shared values and by a long collaboration.
It is in the local market, in fact, that these enterprises remain protagonist, operating to keep pace with innovation and knowledge production, while they try to reorganize their structure keeping costs and quality under control. At the same time they process commercial strategies able to intercept the new signals of the demand. With such approach internationalization does not represent a simple export opportunity but it rather constitutes a geographical widening of the supply chain and of the partnership relationships in the various markets, not only for the placing of products but also for the provisioning of materials and the most convenient allocation of productive sites.