The last fifteen years have seen profound economic, political, technological and social transformation, resulting in an unparalleled degree of international integration. This process of globalization, as it is commonly known, is now one of the defining aspects of our lives. In the words of UN Secretary General KofiAnnan, globalization is “an irreversible process, not an option”. Key factors driving the development of globalization include the following:

• The emergence of a single main economic and political model (free market democracy) following the end of the Cold War. This process has torn down physical barriers to world communications and trade, as well as developing a common framework for political and business leaders. Countries (and companies) previously unable to compete can now do so with relatively little upfront investment, while those previously offlimits to their competitors are now having to open up. At the same time, regional economic and political communities have emerged in the Americas, Europe and Asia.
• The liberalization and deregulation of key industries such as telecommunications and power generation, coupled with a redefinition of the role of the state. This process has fuelled private investment and global competition, as well as providing a political and economic framework for technological innovation.
• Ongoing work at an international and national level on the political and economic framework for global commerce. Key initiatives here include those of the World Trade Organization, which aims to establish ground rules for free trade in products and services and the protection of intellectual property rights, the World Bank, which aids developing countries, and the United Nations Environmental Program (UNEP), which provides leadership and encourages partnerships in caring for the environment.
• The creation of a seamless worldwide technical and logistics infrastructure based on ever-cheaper computer hardware and software and telecommunications technology. Chief among the innovations making up the new global infrastructure are personal computers (PCs), the Internet/Web, and fiber-optic, wireless, and satellite networks. The result has been an unprecedented level of business and personal interconnectivity, as distance and geography become largely irrelevant. At the same time, there has been a quantum leap in the speed at which business is conducted, and therefore in required reaction times. In particular, the Internet revolution offers companies:
  • A low-cost worldwide advertising and marketing platform. By setting up a Web site, even small companies can advertise themselves, their products and their services to a potentially worldwide audience. In addition, they can use their Web sites to gather information on customer needs direct and in real time.
  • A low-cost worldwide sales platform. The rise of e-commerce solutions enables companies to sell goods direct from their Web sites; payment is typically made by credit card or by debiting an existing offline account. In the future micropayment functionality (“electronic purses” or similar systems that allow users to pay cents or fractions of cents for goods and services) and other types of e-payment solutions will become more common.
  • A low-cost worldwide distribution platform. Any product that can be made available as “bits” (e.g., software, books and other text-based information, music, films) can also be directly distributed via the Web. This development is already well advanced in some sectors and will gather further momentum within the next couple of years. In the case of nondigitizable products such as hardware, cars, and the like—sometimes referred to as “atoms”—worldwide logistics providers now offer efficient international distribution. (However, these suppliers are themselves acutely dependent on the Internet for their new tracking and tracing services for clients, and for other forms of customer care.)
  • A low-cost worldwide support platform. Companies serving a newly acquired international customer base can minimize support issues by providing registered customers with information and contacts via their Web sites.

The Challenges of Globalization

The rise of the Internet and the Web has vastly increased potential market sizes and the speed of business, as well as slashing customer acquisition, sales and support costs. This radical change in economics has leveled the playing field, allowing even small companies to compete outside their traditional markets. At the same time, however, competitors at home and abroad—including new entrants attracted by technological convergence, new business opportunities, or the need to reposition their existing activities—can also take advantage of this technology. In other words: while the pond has grown in size, so have the number, type and size of the fish swimming in it. Companies therefore cannot assume that years of investment in a market or previous customer loyalty will protect them unless they are meeting their clients’ needs and making it easy for them to buy (e.g., via the Internet). What is more, in the Internet economy, as the saying goes, “you snooze, you lose.” Enterprises that are slow to market with new products, or that fail to reinvent existing ones, may well find their place at the table already taken. Global exposure means global competition, while speed of innovation leads to speed of imitation. As a result, competitors can research and often copy new features or products within days.

Going Global— Some Basic Facts

• Global trade accounts for 20% of global output and is set to expand by 7–8% this year. Global trade figures in 1997 were up by a factor of 14 on 1950 levels.
• Nearly 50% of revenue from US companies marketing goods globally is generated by international sales. 12 million US jobs are the direct result of exports, and 90% of exporters are small enterprises.
• A sizeable majority of all Web documents are in English (62%–87%, depending on the survey). However, only one in four of the world’s population speaks English to some level of competence.
• The number of Internet users is forecast to rise to approx. 1 billion by 2005. Of these, 300 million are likely to be in China alone. In addition, the number of online users in Europe is forecast to exceed those in the United States in 2003.
• E-commerce will potentially be generating global sales in excess of US$3 trillion by 2003.

Sources: British Council, Forrester Research/VistaTec, IDC, Inktomi, Softbank Corporation, US Department of Commerce, World Trade Organization.

Guidelines for Going Global

In other words, while the Internet and the Web provide global reach, this is not enough on its own to ensure success. Going global in today’s economy thus means rethinking—and reengineering—almost every aspect of your business. Only careful preparation for and implementation of the globalization process will create, rather than destroy, value. To this extent, speed must be balanced against planning, and blind activity avoided. Companies must think as far as they can into the future, plan well, and then implement rapidly.

Among the key issues that companies need to address when starting out are:

• The need to develop and implement a global vision, strategy and (e-)business processes. Selling to the world—especially via the Internet—means selling to a new, complex market. Relying on past business plans and assumptions simply will not work. Enterprises must therefore develop new goals and strategies, and ensure that these are implemented. For example, they need to establish an appropriate local presence (e.g., subsidiaries, affiliates, partners, distributors or shipping agents). As the list suggests, this will vary not only with the maturity and potential size of the target market, but also with the product or service and the degree to which effective support can be provided online.
• The need to establish and maintain global branding and release policies. Companies must strike a careful balance (which may well differ between individual markets and over time) between global consistency and local responsiveness. For example, local and global pricing models must be harmonized, since today’s global customers are adept at exploiting international price differences. The introduction of the euro as a single currency for many countries in Europe will further accelerate price comparisons. In addition, customers generally stop buying local versions of an existing product when a new release of the original is announced. With today’s rapidly shrinking product lifecycles, sales in the weeks following a new release may well account for up to 10% of total revenues, making such behavior painful. Rapid or even simultaneous shipment (“simship”) of new releases to key local markets is therefore critical.
• The need to design products and services for global distribution. Rapid rollouts require upstream planning. Although the Web may be flattening geographical barriers, other market requirements have not been homogenized. Differences in working practices, legislation, culture and languages—in some cases even in human anatomy—need to be taken into account. This is best achieved by designing products to enable subsequent modification, since failure to do so results in downstream reengineering, and therefore spiraling costs. Indeed, such retrofitting may well make international product rollouts uneconomic. In contrast, products that have been “globalized” in this way can be adapted to different markets with a minimum of effort.
• The need to provide localized products and services. Where products and services are to be sold in other markets, they must be “localized”, i.e., adapted to meet specific local needs. First and foremost, this means making them available in the local language(s), since English on its own is simply not enough. Even though it is now the international language of business, science and technology, currently only one in four of the world’s population speaks English to some level of competence. In addition, customer orientation and user friendliness, national or regional legislation, and tender specifications may well dictate local language provision. However, this is generally not enough by itself: instead, localization needs to go beyond language questions to address issues of content and “look and feel”, with the ultimate aim of releasing a product that looks like it has been developed in country.
• The need to globalize back-office functions. Globalization does not stop at the company’s front door or Web site. Rather, back office workflows must be reorganized to cope with global sourcing, distribution and support. For example, reporting and accounting structures, legal and payroll functions and employee relations must all be looked at in a global context. Support for foreign language e-mails and telephone inquiries, foreign address formats and multicurrency payment facilities should not be forgotten, either. Last but not least, e-commerce/e-business and Web solutions must be integrated with existing (“legacy”) applications and databases and tailored for international audiences.

The Role of the Localization Industry

It is impossible for companies to design and implement such complex and fundamental changes without calling on expert advice. In practice, enterprises going global will need to seek the help of a number of specialist professional services providers such as lawyers, accountants and e-commerce specialists. Above all, however, they will need the services of the localization industry—the dynamic young sector devoted to product globalization and localization. Localization service providers offer not only operational support for globalizing and localizing products and services, but also consulting, strategic advice and training. Many of the best-of-breed companies are organized in LISA, the Localisation Industry Standards Association. And while almost everyone today is trying to jump on the globalization and localization bandwagons, LISA’s service providers have a proven track record of making it happen. Equally, client enterprises going global can benefit from the experience of the major enterprises in LISA who have gone before them. LISA acts as a forum for exchanging ideas and establishing and disseminating standards and best practices throughout the world, as well as promoting the industry to potential clients and other stakeholders.

The Localization Industry Primer is available in printed form from LISA Administration. Prices start at $40 for a single copy; discounts for multiple copies, LISA members and academic institutions are available. To order, please download the order form available on the LISA Web site: http://www.usa-lisa.org/globalseminar/orderfor.pdf.

Deborah Fry
Co-Director
Fry & Bonthrone Partnerschaft
In der Witz 29
D-55252 Mainz-Kastel
Germany
Tel: +49-6134-2046-0
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