When companies decide to do international business, they have a wide variety of methods they can use to actually enter the market. This lesson will discuss those different methods and analyze how they work in an international context.
Internationalization is the designing of a product in such a way that it will meet the needs of users in many countries or can be easily adapted to do so. Internationalization might mean designing a website so that when it is translated from English to Spanish the layout still works — many words in Spanish have more characters and therefore 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 client base outside of its country of domicile and into international markets. The global corporate trend toward internationalization has helped push the world economy into a state of globalization, where economies throughout the world are highly interconnected due to cross-border commerce. As such, they are greatly impacted by each others’ activities and economic well-being.
BREAKING DOWN ‘Internationalization’
Economic internationalization can often lead to product internationalization since products sold by multi-national companies are often used in multiple countries. As of 2017, 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.
When a company produces products for a wide range of clients in different countries, the products that are internationalized often must be localized to fit the needs of that country’s users. For example, an internationalized software program would need to be localized to display the date as November 14 for use in the United States and as 14 November for use in England. A company that makes hair dryers or other beauty appliances will need to ensure that their products are compatible with the different wattages used in client countries’ outlets and appropriate plug fixtures can be affixed to their products.
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