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What Is Internationalization?
Internationalization describes the process of designing products to meet the needs of users in many countries or designing them so they can be easily modified, to achieve this goal. Internationalization might mean designing a website so that when it's translated from English to Spanish, the aesthetic layout still works properly. This may be difficult to achieve because many words in Spanish have more characters than their English counterparts. They may thus take up more space on the page in Spanish than in English.
In the context of economics, internationalization can refer to a company that takes steps to increase its footprint or capture greater market share outside of its country of domicile by branching out into international markets. The global corporate trend toward internationalization has helped push the world economy into a state of globalization, in which economies throughout the world become highly interconnected due to cross-border commerce and finance. As such, they are greatly impacted by each others' national activities and economic well-being.
When a company seeks to sell its goods abroad, it may find that there are several roadblocks in the way. Some may be technical barriers that need to be overcome; for instance, different voltages of household electricity or different plug shapes found around the world. These may be remedied via technological adaptations. Other barriers may be cultural, for instance in India many Hindus do not eat beef. This means that to internationalize, Mcdonald's must focus on chicken, fish, and other non-beef menu items that better conform to local custom and culture. Being able to flexibly adapt lends itself to greater internationalization.
There are many incentives that might inspire companies to strive for internationalization. For example, in the United States companies that pay exorbitant overhead costs can shave expenses by selling products in nations with relatively weaker currencies or in countries that have lower costs of living. Companies may also benefit from internationalization by reducing the cost of business via reduced labor costs that are outsourced to foreign markets where goods will be sold. Internationalization can thus lead to product internationalization since products sold by multinational companies are now often used in several different countries.
As of 2019, over 50% of the revenue earned by companies in the U.S S&P 500 Index came from sources outside of the United States. This is a clear sign that large U.S. companies are conducting a large amount of their business internationally.
Companies looking to step up internationalization efforts should be cognizant of potential trade barriers that may restrict their prospects for overseas commerce.
Examples of Internationalization
When a company produces goods for a wide range of customers in different countries, the products that are internationalized often must be localized to fit the needs of a given country's consumers.
For example, an internationalized software program must be localized so that it displays the date convention as "November 14" in the United States, but as "14 November" in England. Likewise, units in America are measured in feet or miles, while in Europe and Canada they use the metric system. This means that cars sold across these markets must be able to quickly interchange between miles and kilometers.Take the Next Step to Invest×The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.ServiceNameDescription