THE FEATURES OF THE DOMESTIC MARKET AND THE DEVELOPMENT OF THE TWO FIRMS' STRATEGY

It is of some interest to understand why and how these two companies have developed such a strategy. The hypothesis we shall argue is that the constraints of the domestic market have determined the most important choices that led to the definition of such strategy. In order to do that, it is necessary to highlight the basic features of the Italian steelwork fabrication industry. The Italian steelwork fabrication industry includes some 2500 firms. Between them, we can identify a small portion of industrial companies (little less than 400) and a larger part of artisan firms (about 2100). In the first group, almost the half of them work steadily in the construction sector. The Repertorio della produzione, published by the sector trade association - the Associazione tra i Costruttori di Acciaio Italiani (ACAI) - classifies just 31 firms of national relevance. Of these, just 17 operate in the infrastructure sector. Very few companies for a small market: the steelwork fabrication industry represents just 7-8% of the whole Italian construction market. According to ACAI data, steel is hardly used in residential buildings (0.29%), while it represents 15% of all the other segments of the construction market. This modest exploitation of steel in the construction industry is explained by two barriers. The first depends on the system of interests of the actors involved. Because the general contractor has been the key actor in the realisation of works - in the residential sector as well as in the non residential sector - and traditionally controls the entire process, subcontracts have concerned only those parts of the works the general contractor could not really handle, and traditional technologies, particularly reinforced concrete, have been historically privileged, because they represented the true source of value. Well connected to this first barrier, it is possible to identify a second one: a cultural barrier, typically Italian, against this material. The structural design practice has always preferred the reinforced concrete for any kind of building, using steelwork just in those cases where it was strictly necessary. Of course, these two barriers are intertwined. So today, excluding the large size industrial plants for which there is no technical alternative, the use of steelwork in industry remains negligible in the building sector (residential and non residential), and limited for road and railway infrastructure. Furthermore, if we consider the trend of the domestic demand (see graph. 1), we can observe that in the industrial submarket as well as in the construction industry related one, the slope is downward since the beginning of the decade. This slope can be easily explained if we consider the general trend that has marked the construction industry: since 1991, the trend has been constantly negative and only for 1995 a slight increase in investments is forecasted. The progressive down-sizing of the domestic market has pushed all the firms of the industry to the international market, forced them to export their products and their know how. And this has been the case the case for both Cimolai and CMF. During the 1980s, Cimolai worked mostly in Italy: 80% of its revenues came from the domestic market while just a fifth of them were from foreign clients. From the beginning of the 1990s, the share of revenues coming from the domestic market fell while exports rose strongly. In 1993, 80% of Cimolai revenue came from the export, while just the 20% wer from national clients: the declining domestic market forced Cimolai to turn out and look for international clients. It is important to notice that the export revenues come from large size infrastructure projects, while the domestic demand concerns is mostly fragmented. In an analogous way, from the middle of the 1980s, CMF tried to implement a strategy to raise the share of exports in its revenues, both through contracts with third world countries, and also from west and east European countries (e.g. Algeria, Russia). In conclusion: the particular conditions that mark the Italian domestic market have paradoxically favoured the strategy analysed above. In fact, the domestic conditions that have been just discussed are not naturally favourable for the Italian companies. The two constraints - the limited size of the domestic market and the difficulties in marketing structural steelwork in the construction industry - became opportunities since they pushed managers and technicians towards innovative solutions. It is then important to underline that such a strategy is not the result of a mechanical or "natural" process. To the contrary, it comes out from an unfavourable context: innovation has been the key to transform constraints into tools for a competitive strategy.