Hi,
I've played Italy several times, trying every level of difficulty and the strategy I used was this:
Resources: Italy needs first of all rubber and oil:
-Rubber: I found an optimal source in Liberia: I province no troops and a shore to land my troops: production 40 in rubber and other raw material.
-Oil: After annexing Etiopia I built some trasport (4) joinig the 2 Italy starts with and embarking 6 of the divisions Italy has in Africa I declared war to Persia! (Rich of oil and poorly defended) and the from Persia I invaded Iraq not only managing to get a huge amount of oil but also stealing it from Great Britain:
(Don't worry about France, Great Britain and U.S.A., they won't notice you.... )
R&D:
Concentrate your efforts in discovering techs which allows you to improve your infantry (You get a lot of infantry divisions from the beginning (the famous 8 million bayonettes))
So focus in Artillery and infantry techs equipping your brave soldiers with the best guns not forgetting to discover nylon and polyurethan (Industry) in order to improve your I.C. and to develop Desert warfare equipment
Navy:
Regroup your submarines (one fleet of 9 and one of 4) your destroyers (one fleet of 12), 12 ships in genoa and ther remaining ships in one fleet of 12 in Taranto. Then move together the submarines (9) and two other fleet always together when you are in war with Great Britain in order to achieve naval superiority in the Med.
Air Force:
Move you fighters to Torino and Genoa to intercept French bomber, join your tactical bombers in a single group commanded by Balbo and send them to N.A.
Army: There are 5 vital points to fortify in Persia both to defend them from U.S.S.R: and Great Britain and they're over mountains: they've and infrascture value of 39 or better so forget the provinces with a inferior value (your soldier will lose strenght in those provinces). Build fortresses in those provinces up to level 4 and put 3 unit of Mountain troops (1 standard 1 artillery brigade and 1 anti tank brigade (or anti air)). Your precious oil fileds will be safe. In N.A. You have a lot of troops so use them to screw the british while in Ethiopia build some more infantry (and trasport maybe your tank there) to hold the British/South Africa counter attacks.
Diplomacy: Ally with the axis but NOT before having secured your oil fields in Persia and your provinces in Africa.
Sorry for the lenght of the message! You know Italians write a lot
