Introduction
The handicraft sector can be a real gold mine for the Italian economy if exploited properly. Investing in the manufacturing industry, without distorting it, can definitely be profitable as craftsmanship is one of the hallmarks of the Italian culture and economy.
High-quality handicraft products come from woodworking and ceramics, glass processing, precious metals, textiles and embroidery. The gastronomy sector represents a second field of craftsmanship (and artistic expression) in which Italy excels, rich in manual workmanship that stands out in small, typical regional productions. However, this sector is often considered to have no future or little scope for innovation, but although it is now going through a time of crisis, the potential of this field is countless.
Within the modern economy – now almost completely industrialised – there is a tendency to forget that the competitiveness of the Italian industrial system is still intimately linked to craft skills. These skills make manufacturing flexible and dynamic, and are therefore suitable for allowing the quality of the products of the manufacturing and industrial sectors of the Italian economy to assert themselves in the globalised world. This objective, i.e. to allow the affirmation of craftsmanship activities on a broad commercial scale, if seen from an innovation perspective, should not be based solely on the link between craftwork and small-sized enterprises; in fact, we can also see craftwork providing quality and skills to many medium-sized and large enterprises, which entrust craftwork skills with tasks that are fundamental to their success on the market.
The recent economic crisis, however, has brought to light the many reasons for the structural weakness of the Italian economy, which has left, and will continue to leave, many small manufacturing businesses ‘in the lurch’. This is due to the increased pressure resulting from the globalisation phenomenon, which has particularly affected the craft economy in Italy, since it is based on small production activities driven by the Italian taste for the ‘small and beautiful’.
In fact, the handicraft sector in Italy has more than one million companies, accounting for about 30% of the national total, with a clear prevalence of micro enterprises: more than 95% of handicraft enterprises employ fewer than 10 people, while just under 80% of the sector’s employees work in enterprises with fewer than 10 employees.
The path that nowadays seems necessary to take is that of a coexistence between craft and industrial activities, while at the same time maintaining the central objective of making craft activities more competitive without distorting them.
During this last recession, there was a risk that the craft sector would also suffer a substantial collapse. It is thanks to local initiatives that it was possible to facilitate the development of handicrafts even in difficult times.
In the area of innovation and the avant-garde, however, one can also observe the thinking of conservatives, i.e. those who are not willing to make certain compromises: they will not easily appreciate the idea of having to add new hyper-technological designs to tradition, to the centuries-old work of the old master craftsmen. We are therefore witnessing the phenomenon of so-called ‘path dependency’, but however difficult it may be to accept the idea of having to combine traditional craftsmanship with innovation, it is necessary for survival in the industry. The economy does not look at history, time and cultures so, in order to save what really needs saving, the ancient arts must renew themselves, turn to the newness of the age. The process is not so radical: nothing from the past can ever be replaced by the new arts; only what actually did not work will find drastic renewal in the innovations. The rest will always remain before the eyes of those who want to produce and those who want to sustain the craft.
A brief history of CU Artigiana
Handicraft products play an important role in the Italian industrial landscape: they embody the history, culture and art of manufacturing handed down from generation to generation.
In the age of automation in which we live, only a strong passion can lead to a choice of totally manual production. CU Artigiana carries on this craft tradition, keeping the production processes unchanged.
CU Artigiana was founded in 1983 in Sant’Anastasia (NA), where master coppersmiths have been performing the art of copper working with unchanged skill for centuries. In fact, the company was already born with profound experience in the field of copper and brass working.
CU Artigiana specialises in the production of gift and furnishing items.
Of exceptional quality and refinement is the copper cookware, for culinary use; this is entirely hand-wrought and carefully tinned by fire, characteristics that make it an indispensable utensil for all those interested in haute cuisine.
The choice of material is made with the selection of accredited supplier companies, only first choice material is chosen: pure copper with the right physical qualities for perfect shaping; the brass for the handles are first choice ingots for hand-crafted casting; the tin is 100% pure tin for food use, in compliance with current international regulations, and a certificate of analysis is requested for each supply.
Shaping, for small production items, is done by hand on iron poles with wooden mallets and hammers. Hammering is also performed by hand on iron poles with special hammers.
This process, in addition to aesthetic embellishment, gives the copper a molecular hardening for greater resistance to use.
The copper pot makes food very tasty and allows for exceptional cooking because its thermal conductivity (copper 392 w/m°k steel 16w/m°k) allows the heat from the cooker to spread evenly over the entire pot, including the lid, creating on the food inside, a homogeneous spread of heat projected in all directions.
Thanks to this characteristic, once the right temperature is reached, it requires little heat and thus lowering the flame also saves energy.
In addition, the high quality of the materials – and thus of the product – results in a longer service life of the pan (compared to those made of metal), a more elegant design and better performance (copper is the best conductor of heat among metals).
Business Problem Presentation and Analysis
The business problem presented in this case study concerns the difficulties faced by the company during the business growth process. Since this is a family-run micro-business, it is interesting to analyse how this reality has been able to establish itself and survive in these 40 years of activity, what factors have determined its development and what, on the other hand, have slowed down its growth. To this end, an interview was conducted to gather information useful for the analysis. Those who provided answers were not only the founder and current owner of the company, entrepreneur Pasquale Merone, but also two (of his four) employees, who have been working in the company for 20 years.
In order to conduct an accurate and detailed interview, the entrepreneur was asked questions to gather information about the life of the company and the structure of the industry, while the employees were asked questions to understand the organisation of work, production processes and the impact on the company of factors such as sustainability, pandemic crisis, and work stress.
First of all, the idea of creating a company dedicated to the production and processing of copper stems, as emphasised by entrepreneur Merone during the interview, from the geographic area where he was born and raised, namely Sant’Anastasia (NA), an area that has always been characterised by a broad culture and passion for copper craftsmanship. Here, in the past, there were numerous craft workshops, and it was in one of them that he learnt copper working as a boy.
The experience gained over the years has allowed him to acquire very specific knowledge and skills in the sector and to start a business centred on this; through this activity he has managed to pass on his knowledge, skills, values, but above all the ‘secrets’ concerning the traditional copper working processes to his employees: it is precisely the skill, professionalism and experience of the master craftsmen that are one of the company’s main strengths, together with the use of high quality raw materials.
Specifically, one of the two employees interviewed believes that the specialisation and attention to detail – which characterise Cu Artigiana’s products – also stem from the small number of people working within the company.
These factors have strongly contributed to the survival of the company in this industry: the high degree of specialisation of the employees, the choice of top-quality raw materials (pure copper), the dedication, commitment and attention to detail of each product, the use of traditional work processes, which translate into craftsmanship (handwork) and, finally, the beauty and importance of Made in Italy in the world.
Made in Italy has been an element that the company has been able to exploit to its advantage and that has allowed it to expand further over the years. In fact, the company operates both domestically and, above all, internationally, a market to which 85% of the company’s total production is destined. Foreign countries such as Germany, England, but also America, Russia and, for the past few years, the Arab Emirates and Qatar represent countries and markets that are very attracted to Italian craftsmanship: this has allowed the company to extend its borders, expanding its markets of reference, increasing its production capacity and, consequently, its earnings.
The use of such a valuable material as copper for the production of household goods and cookware has allowed Cu Artigiana to address a target group of people and companies belonging, therefore, to a medium-high social status. Generally, in fact, such products are made from poorer materials than copper, such as steel, aluminium or iron, metals that are certainly cheaper than copper but of much lower quality: suffice it to say that a copper pot can be used for more than 20 years, as suggested by one of the employees interviewed, as well as having a more elegant design and better performance (copper is the best heat conductor among metals). The higher cost, as well as the better quality and performance design, allow the company to overprice their product and target a higher customer base.
The copper craft industry does not have a high degree of concentration, there are few companies in Italy that still produce their products by hand and most of them entered the sector before the 2000s; however, there are medium to high barriers to entry. This is dictated by several factors of a mainly technological and non-strategic nature: firstly, there is certainly the experience and high degree of specialisation required to be able to compete in the sector, since, as described above, it is essential to have the skills and knowledge to be able to apply traditional copper craftsmanship techniques. Secondly, there are a number of fixed costs that the company has to bear in order to be able to operate in the industry, such as the rental of sufficiently large sheds, the purchase and maintenance of machinery necessary for the production and processing of copper products.
Finally, a further barrier is represented, according to the interviewee, by state policies, which make entry into this industry even more inaccessible. Barriers to entry, therefore, also result in protection for the few companies already within the market, such as Cu Artigiana. The founder makes it clear that the history of this company begins 40 years ago: over time, it has faced more than one challenge in order to survive in the industry and to grow its size, both in business and economic terms.
There are a number of factors that have been crucial throughout the company’s history, in particular the experience of the master craftsmen and their high degree of specialisation, which have enabled the company not only to compete effectively in the industry, but also to attract and retain customers, thanks to meticulous and precise copper workmanship, resulting in quality, high-performance products with a unique design.
In particular, the turning point in Cu Artigiana’s corporate growth was the company’s entry into the international market. The geographic differentiation strategy adopted by the company has enabled it to achieve several advantages:
-Brand reinforcement: a company that succeeds in operating efficiently, effectively and satisfactorily on both national and international territory gains the ‘esteem’ and, above all, the recognition of its brand at an international level, making the target of businesses and people to whom the company is addressed increasingly willing to choose this company over a competitor;
-Exploitation of Made in Italy: Made in Italy is widely recognised worldwide, especially in manufacturing and craftsmanship. With its entry into the international market, Cu Artigiana has been able to export its products to several European and non-European countries with greater ease, being able to rely on Made in Italy craftsmanship;
-Enlargement of the customer base: being able to address a broader market than the national one, the company was able to obtain customers in different parts of the world, both in Europe (Germany and England) and outside Europe (America, Russia, Arab Emirates, Qatar, etc.);
-Increased production capacity and increased turnover: entering a market as vast as the international market posed a new challenge for the company, which had to expand its human resources package, hiring two additional employees, one dedicated to the production and processing of products, and another hired to take care of logistics and shipping operations. The increase in human capital undoubtedly meant an increase in costs for the company, which nevertheless saw its turnover grow, thanks to the increase in total sales following its entry into the international market, which offers greater profit opportunities than the domestic one (think of the Made in Italy label, which is recognised internationally as synonymous with quality).
Between 2013 and 2019, the copper manufacturing sector experienced significant development and the company experienced a period of significant growth for this reason as well, in particular in 2017 it recorded its best turnover ever. Constant commitment and great experience in the industry, combined with an expansive strategy, have enabled Cu Artigiana to achieve top performance and significant profits in that period.
During its 40 years of activity, the company has also faced several obstacles to its growth. In particular, there were two moments that led to a slowdown in the company’s growth, moments that coincide with the pre- and post-growth periods analysed above.
The first factor that led to a slowdown in growth was the financial crisis of 2008, preceded by a commodity theft in 2007, which represented a moment of deep crisis for the company, which also risked bankruptcy. In fact, not only during the financial market crisis of 2008 – which later spread to the real economy, banks and the business world – but also before, the company suffered a major theft of copper in mid-2007, which forced it to buy back the lost material and thus incur extra costs, which resulted in a significant reduction in turnover in the period immediately following; the following crisis did not help the company’s critical moment, which, however, thanks to the internationalisation strategy adopted in previous years and its strong experience in the sector, managed to stabilise its economic-financial situation and ‘survive’ the crisis period. The second slowdown factor for the company’s growth was the economic crisis caused by the Covid-19 pandemic of 2020. This crisis led to a marked slowdown in the growth not only of the company, but of the entire industry, mainly due to the world trade blockade caused by the lockdown. The inability for the company to export its products to foreign countries was the main problem for the company, so that in the first half of 2020 it recorded significant losses, only to see a slight improvement in the second half of the same year, due to the partial unblocking of international trade. The new challenge to the company’s growth is now the ongoing energy crisis.
Future Outlook
In order to sustain its future, Cu Artigiana has had to consider how to grow and survive in a market considered to have no future and taken less and less into consideration, with a limited possibility of innovation given that, precisely, its strength lies in the tradition and workmanship of copper handed down by master coppersmiths.
In fact, the company has expanded its boundaries, turning to new markets, even those outside the continent, implementing an internationalisation strategy. The latter not only allows it to increase its customer base and thus its turnover, but also to exploit the strength of Made in Italy, which is particularly attractive to foreign customers.
In addition, the internationalisation strategy allows the company to achieve a position of advantage over the few competitors in the sector that operate mainly in Italy, allowing Cu Artigiana both a diversification of business risk and a key player position in foreign markets.
On the contrary, should crises occur at a global level – such as the one caused by the Covid 19 pandemic – internationalisation may not be an advantageous solution due to the restrictions imposed by various governments; this could lead to a slowdown in the company’s growth on all fronts.
The company has been able to adapt to the external environment through the use of new technologies and communication channels, which have allowed it to survive within an industry where tradition and innovation inevitably have to coexist. However, with a view to the future, the company will necessarily have to implement the use of the new tools that will present themselves, in order to be able to continue to compete effectively, despite the unknown concerning the development of this market.
Finally, as noted above, the new challenge for business growth is the energy crisis we are currently witnessing. In fact, 79% of small and medium-sized enterprises are experiencing a significant impact on their production costs due to rising raw material and energy prices. Even in the case of Cu Artigiana, this would represent two main problems: the first is linked to the increase in the cost of raw materials (mainly copper), which it must necessarily bear to continue its production activities; the second is linked to the increase in utility bills that affects all companies – large and small – and which, above all, is unpredictable.