Understanding Internationalization: Definition, Benefits & Key Examples

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 involve designing a website so that the layout still functions well when translated from English to Spanish. This can be challenging because Spanish words often have more characters than their English equivalents. They may thus take up more space on the page in Spanish than in English.

In economics, internationalization refers to a company expanding its market share internationally beyond its home country. The trend of internationalization has interconnected world economies through cross-border trade, leading to globalization. As such, they are greatly impacted by each others' national activities and economic well-being.

How Internationalization Impacts Global Markets

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. To internationalize, McDonald's focuses on chicken, fish, and other non-beef items to suit local customs. Being able to flexibly adapt lends itself to greater internationalization.

There are many incentives that might inspire companies to strive for internationalization. In the U.S., companies with high overheads can cut costs by selling in countries with weaker currencies or lower living expenses. Companies can reduce business costs by outsourcing labor to foreign markets where they plan to sell goods. 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.

Real-World 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.