What Is Internationalization?
Let me explain to you what internationalization really means. It's the process of designing products to meet the needs of users in many countries, or making them easy to modify for that purpose. For instance, if you're building a website, you design it so that translating it from English to Spanish doesn't mess up the layout—Spanish words often have more characters and take up more space than English ones.
Internationalization in Economics
In economics, internationalization refers to a company increasing its presence or market share outside its home country by entering international markets. This trend has driven the world toward globalization, where economies are deeply interconnected through cross-border trade and finance. As a result, one country's economic activities directly affect others.
Key Takeaways
- Internationalization means designing a product so it can be easily used across multiple countries.
- Companies use this to expand their global footprint, recognizing that foreign consumers may have different tastes or habits.
- It often involves modifying products to fit a country's technical or cultural requirements, like adapting plugs for various electrical outlets.
Understanding Internationalization
When you as a company want to sell goods abroad, you'll encounter roadblocks. Some are technical, like different household voltages or plug shapes, which you can fix with adaptations. Others are cultural—for example, in India, many Hindus avoid beef, so McDonald's focuses on chicken, fish, and non-beef items to fit local customs. Flexibility like this is key to successful internationalization.
There are strong incentives for companies to pursue this. In the U.S., firms with high overhead can cut costs by selling in countries with weaker currencies or lower living costs. You can also reduce expenses by outsourcing labor to foreign markets where you'll sell the goods. This leads to product internationalization, as items from multinational companies get used in various countries.
As of 2019, more than 50% of revenue for U.S. S&P 500 companies came from outside the United States. This shows how much business large U.S. firms are doing internationally.
Important Considerations
If you're a company aiming to boost internationalization, stay aware of potential trade barriers that could limit your overseas opportunities.
Examples of Internationalization
When a company makes goods for customers in different countries, those products often need localization to match local needs. Take software: an internationalized program must be adjusted to show dates as 'November 14' in the U.S., but '14 November' in England. Similarly, units differ—America uses feet or miles, while Europe and Canada use the metric system, so cars sold there need to switch easily between miles and kilometers.
