strategic role of localization in multi national enterprises

8/2/2019 Strategic Role of Localization in Multi National Enterprises

1/23

The Strategic Role of Localization in Multinational Enterprises

1Bryan Petro, Gary Muddyman, Jared Prichard, Katy Schweigerdt, Nitish Singh

Bryan Petro, Jared Prichard, Katy Schweigerdt(California State University Chico)

(C/O Professor Nitish Singh)

Corresponding Author

Nitish Singh, Ph.DAssociate Professor of Marketing

The Localization ProgramCollege of Business

California State University, ChicoChico, CA 95929-0051-

e-mail: [email protected]

Gary Muddyman, MD and CEOConversis Headquarters

Bignell Park BarnsChesterton, Bicester

OxfordshireOX26 1TD

United Kingdom

Acknowledgement

This research study was conducted by the research team at the Localization Program, CSU Chico-and the research team would like to thank Conversis Global for donating funds that further ourprograms research ability.

1 Names are in alphabetical order


2/23

The Strategic Role of Localization in Multinational Enterprises

2Bryan Petro, Gary Muddyman, Jared Prichard, Katy Schweigerdt, Nitish Singh

Introduction

The localization industry has grown over the past few decades from the mere services of

translation into a multi-billion dollar industry consisting of linguistic and cultural customization of

products, web sites, and information. Many companies have realized a boost in global sales,

achieved a global brand presence, and generated product acceptance as a direct result of their

localization efforts. Table-1 displays information illustrating the trends for world internet usage.

From the year 2000 to the year 2006 the total world internet usage has increased 200%.

Furthermore, most of the world market, in terms of internet usage, has not been tapped. The world

total for percentage of internet population penetration is only 16.7%, leaving immense room for

growth.

Table-1: World Internet Usage

WORLD INTERNET USAGE AND POPULATION STATISTICS

World RegionsPopulation( 2006 Est.)

Population% of World

Internet Usage,Latest Data

% Population( Penetration )

Usage% of World

UsageGrowth

2000-20

Africa 915,210,928 14.1 % 32,765,700 3.6 % 3.0 % 625.

Asia 3,667,774,066 56.4 % 394,872,213 10.8 % 36.4 % 245.

Europe 807,289,020 12.4 % 308,712,903 38.2 % 28.4 % 193.

Middle East 190,084,161 2.9 % 19,028,400 10.0 % 1.8 % 479.

North America 331,473,276 5.1 % 229,138,706 69.1 % 21.1 % 112.

Latin America/Caribbean 553,908,632 8.5 % 83,368,209 15.1 % 7.7 % 361.

Oceania / Australia 33,956,977 0.5 % 18,364,772 54.1 % 1.7 % 141.

WORLD TOTAL 6,499,697,060 100.0 % 1,086,250,903 16.7 % 100.0 % 200.

(Miniwatts Marketing Group, 2006)

2 Names are in alphabetical order
http://www.internetworldstats.com/stats1.htmhttp://www.internetworldstats.com/stats3.htmhttp://www.internetworldstats.com/stats4.htmhttp://www.internetworldstats.com/stats5.htmhttp://www.internetworldstats.com/stats2.htmhttp://www.internetworldstats.com/stats2.htmhttp://www.internetworldstats.com/stats6.htmhttp://www.internetworldstats.com/stats1.htmhttp://www.internetworldstats.com/stats3.htmhttp://www.internetworldstats.com/stats4.htmhttp://www.internetworldstats.com/stats5.htmhttp://www.internetworldstats.com/stats2.htmhttp://www.internetworldstats.com/stats2.htmhttp://www.internetworldstats.com/stats6.htm


3/23

These statistics demonstrate the opportunity businesses have for expansion. Localization services

will become increasingly more important. Multinational Enterprises will need to localize their web

sites, products, and documents; localization will become not only a strategic advantage but a

necessity. The Common Sense Advisory estimates that the current translation and Localization

market size is US$ 8.8 billion and in 2010 will reach a total of US$ 12 billion (Beninatto & De

Palma, 2005). The objective of this study is to understand Multinational Enterprise practices in

terms of their web site, product, and document localization and how these aspects affect the growth

strategies of the enterprise. Specifically, the research seeks to understand the following:

Strategic Importance MNEs place to localization of their online and offline content.

Impact of localization on organizational effectiveness, as measured by revenues, market

growth and customer satisfaction.

Use of localization services by MNEs

Defining Localization

Globalization traditionally referred to the practice of expanding business across borders. Most

companies sold the same product using the same strategies. To successfully implement an e-

business, this traditional view must evolve to include the process of internationalization (I18N) and

localization (L10N). Internationalization involves designing a product or document that can be

easily adapted to local languages and cultures (W3C, 2005). Internationalization is a backend

process that generalizes templates and formats in the product development stage. Proper

implementation of product, document, or web site design internationalization helps simplify the

localization process and helps reduce costs.


4/23

Localization is often mistakenly assumed to be synonymous with translation. Although translation

is an important aspect of localization, it is less complex than the localization process. Localization

involves customizing the language and cultural aspects of a product or web site (LISA, 2006).

Web localization involves ensuring all forms, dates, currencies, colors, logos, symbols, icons,

graphics and more are customized to the targeted local (W3C, 2005). The best practice for

ensuring quality localization is to involve locals in the process of localization. This research is

focused on the localization of web sites and related materials into multiple languages for multiple

cultures. Understanding the practices of generating these materials and how companies use them

to reach international markets is a major goal of this research project.

Importance of Localization

English speaking internet users account for only 29.7% of the total internet user population,

leaving an overwhelming percentage left over that does not speak English. If companies want to

enter the rest of the internet market, they must create web sites in different languages. Pure

translation will not be as effective as localization. The remaining 70.3% of the internet population

will react most to a web site that is customized to their language and culture. As shown in Table-2,

there are a number of languages that are expected to have large increases in internet usage. The

domination of the United States in the online marketplace is eroding due to changing online

demographics, diffusion of internet technology across the globe, and acceptance of internet by

consumers worldwide(Singh & Pereira, 2005).

Table-2: Top Ten Languages Used in the Web


5/23

Top Ten Languages Used in the Web( Number of Internet Users by Language )

TOP TENLANGUAGES

IN THE INTERNET

% of allInternet Users

Internet Usersby Language

InternetPenetration

by Language

InternetGrowth

for Language( 2000 - 2006 )

WorldPopulation

2006 Estimate

for theLanguage

English 29.7 % 322,600,837 28.7 % 135.2 % 1,125,664,397

Chinese 13.3 % 144,301,513 10,8 % 346.7 % 1,340,767,863

Japanese 7.9 % 86,300,000 67.2 % 83.3 % 128,389,000

Spanish 7.5 % 81,729,671 18.7 % 231.1 % 437,502,257

German 5.4 % 58,854,682 61.3 % 113.2 % 95,982,043

French 4.6 % 49,660,498 13.0 % 307.1 % 381,193,149

Portuguese 3.1 % 34,064,760 14.8 % 349.6 % 230,846,275

Korean 3.1 % 32,372,000 45.8 % 78.0 % 73,945,860

Italian 2.7 % 28,870,000 48.8 % 118.7 % 59,115,261Russian 2.2 % 23,700,000 16.5 % 664.5 % 143,682,757

TOP TENLANGUAGES

79.5 % 863,981,961 21.5 % 166.7 % 4,017,088,863

Rest of WorldLanguages

20.5 % 222,268,942 9.0 % 500.0 % 2,482,608,197

WORLD TOTAL 100.0 % 1,086,250,903 16.7 % 200.9 % 6,499,697,060

(Miniwatts Marketing Group, 2006)

In understanding that the majority of the worlds population does not speak English it makes sense

that internet users prefer to read web material that is presented in their native language. Having

web content in a consumers native language puts web consumers at ease and also drops the

demand for customer service when instructions are in that consumers native language. Also, when

marketing to a target audience in another country or in another culture, there is only one way to

ensure the message reaches them, put the marketing message into the consumers native language.

This will ensure that the consumer can actually understand the message that is being delivered.

Some of the benefits a company can enjoy from web site localization are increased revenue, brand

recognition, product acceptance, and international credibility.
http://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/stats10.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/stats.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/stats10.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/reports.htmhttp://www.internetworldstats.com/stats.htm


6/23

37.88%

46.97%

15.15%

localized

some-localization

standardize

Level of Localization on International Web Sites

Even with all of the benefits it is surprising to see large companies that are not implementing

localization into their business strategy. Some changes that need to be made to localize a web site

include:

Rewriting text

Translating text

Modifying graphics

Creating new graphics

Changing colors

Changing layout

Modifying table, forms, data fields, databases


7/23

(Yunker, 2003).

Methodology

To understand the role of localization in multinational companies the study surveyed international

business managers, localization managers, e-business managers, web content managers, IT

managers and marketing managers to get a cross-sectional view from various organizational

departments about each companys localization practices. A list of Fortune 500 companies was

compiled based on the attribute that each company had a presence in different locales. This list was

later enlarged to include Multinational Enterprises found from a wide array of sources.

An online survey was created and distributed to companies that were willing to participate. A team

of researchers contacted multinational companies via e-mail and via phone and prompted them to

take the 5 minute online survey.

Research Questions

Q1: How important are localization services to your company?

Q2: How much importance does the senior management give to localization as a strategic priority?

Q3: How important is localization to achieving each of the following: higher company revenues,

increase revenues from global operations, international customer acquisition, international

customer satisfaction, and international market growth?

Q4: How important are the following attributes your translation vendor offers: price, quality,

service, expertise, and timely delivery?

Q5: How do you rank a translation vendor on the following attributes: size of company, client list,

TM (translation memory), quality orientation, and duration of vendor existence?


8/23

Q6: Using a scale of 1-5, rate the following aspects of the localization process:

translation/terminology/linguistic management, localization engineering/internationalization,

graphic localization, quality assurance and testing, and project management.

Q7: What countries provide the greatest localization challenges for you?

Q8: What percentage of your overall budget is allotted to localization/translation services?

Q9: Which of the following holds primary budgetary responsibility for localization/translation

services: head office, corporate marketing, international marketing, IT, or other?

Q10: Who are the top 3 Localization or Translation vendors with which you are the most familiar?

Results & Analysis

When companies were asked how important localization services were to the company 49.1%

stated that localization was very important to most important service in the company. This is

almost half of the companies that we surveyed and another 39% said that localization services were

somewhat important to the

company as a whole.

When added together that

is 88% of the companies

surveyed that stated

localization is at least a

somewhat important

aspect to the company.

This data proves that localization is an important aspect to a company not only for expanding

globally, but also for new streams of revenue. Companies are realizing that in certain countries

Importance of Localization Services to

Companies

8.50%3.40%

39%

28.80%

20.30%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

1 2 3 4 5

Level of Importance

(1=Least Important 5=Most Important)

PercentageofResponses


9/23

markets are saturated and the best place to expand is in foreign countries. They also realize that

localization plays a large role in the globalization of a company.

Next when asked how much strategic priority does senior management give to localization 42.4%

of companies surveyed said that senior management felt that localization having strategic priority

was very important. With that another 37.3% of companies surveyed said that senior management

thought localization as a strategic priority is somewhat important. These results complement the

results from above not only do these companies find localization to be important but senior level

managers are placing localization at the top of their companies strategic priority list.

Importance Sr. Management gives to Localization

as a Strategic Priority

13.60%

37.30%

6.80%

15.30%

27.10%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1 2 3 4 5

Level of Importance

(1=Least Iportant 5=Most Important)


From the data collected the three most challenging countries to localize are China, Japan, and

India. China was the most challenging country to localize and out of all the countries this was

voted the most challenging with 29.16% of the participants choice. The second most challenging

country to localize was a tie between Japan and India which both had 16.66% coverage in this area.

The third most challenging company to localize was India. Some other countries to name that were


10/23

mentioned a lot as being difficult to localize were Germany, Korea, and Russia. This data is very

helpful for companies when they need to decide what countries to expand into and how much time

and money to allocate to each country. It can be seen that China is the most difficult country to

localize therefore more resources should be allocated to localization for China. Also careful

planning needs to be taken into consideration when entering into any of these countries to be

localized whether it is China, Japan, India, Korea, Russia, or Germany.

MostchallengingCountry

Second most ChallengingCountry

Third most ChallengingCountry

Kazakhstan 4.16% Lithuania 5.55% India 13.33%

Switzerland 4.16% UK 5.55% Germany 6.66%

Puerto Rico 4.16% Russia 5.55% Turkey 6.66%China 29.16% Iraq 5.55% Greece 6.66%

Iran 4.16% Asian Countries 5.55% Vietnam 6.66%

ArabicCountries 8.33% India 16.66% Russia 6.66%

Japan 4.16% Japan 16.66% European Countries 6.66%

AsianCountries 8.33% Malaysia 5.55% Thailand 6.66%

Singapore 4.16% France 5.55% Spain 6.66%

Israel 4.16% Korea 11.11% Saudi Arabia 6.66%

Germany 8.33% Belgium 5.55% China 6.66%

All

countries 4.16% China 11.11% Mexico 6.66%EuropeanCountries 4.16% Japan 6.66%

Russia 4.16% USA 6.66%

India 4.16%


11/23

Most Challenging Country to Localize

4.16%

29.16%

8.33% 8.33% 8.33%4.16%

0.00%

5.00%

10.00%

15.00%20.00%

25.00%

30.00%

35.00%

Kazakhstan

Switzerlan

d

PuertoRicoChina Ira

n

ArabicCountries

Japan

Asian

Countries

SingaporeIsrael

Germany

Allcountries

European

Countries

Russia

India

PercentageofComp

aniesSurveyed

Second Most Challenging Country to Localize

11.11% 11.11%

5.55%5.55%5.55%

16.66%

0.00%2.00%4.00%

6.00%8.00%

10.00%12.00%14.00%16.00%18.00%

Lithuania UK

Russia

Iraq

Asian

Countries Ind

iaJapan

Malay

sia

France

Korea

Belgium

China

PercentageofCompaniesSurveyed


12/23

How Important is Localization to Achieving Higher

Revenues?

8.47% 8.47%

18.64%

35.59%

28.81%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Not

Important

Less Imp Somewhat

Imp

Imp Most Imp

PercentageofResponse

s

Third Most Challenging Country to Localize

13.33%

6.66% 6.66% 6.66%

0.00%

2.00%

4.00%

6.00%8.00%

10.00%

12.00%

14.00%

India

Germany

Turkey

Greece

Vietnam

Russia

European

Countries

ThailandSpain

SaudiArabia

China

Mexico

JapanUS

A

PercentageofComp

aniesSurveyed

Understanding how important localization is to companies in terms of their achievement of various

growth measures was the motivation of the next portion of our research. The perception of an

opportunity to gain higher profits is a driver for companies. The survey results show that 65% of

respondents believe

localization is either

important or very

important for achieving

higher company revenues.

This corresponds to the

results for the importance

of localization in

achieving increased revenues from global operations, in which 74% of respondents believe it is

either important or most important. These results show that localization is important if not

necessary for increasing revenues from global operations and for the entire company.


13/23

How Important is Localization to Acquiring

International Customers?

10.17%

5.08%

15.25%

27.12%

42.37%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Not

Important

Less Imp Somewhat

Imp

Imp Most Imp


How Important is Localization to Achieving Higher

Global Revenues?

6.78% 6.78%

11.86%

37.29% 37.29%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%35.00%

40.00%

Not

Important

Less Imp Somewhat

Imp

Imp Most Imp


Another measure of company success related to localization is customer acquisition. 69% of

respondents state that localization is either important or very important for acquiring international

customers. In a similar line

of questions, participants

were asked how important

localization was for

achieving international

customer satisfaction. 76%

of the respondents believe

that it is either important or very important. Companies are expressing an importance for

localization. They believe that customer acquisition and satisfaction are directly related to the

cultural and linguistic customization efforts from companies.


14/23

How Important is Localization to International

Customer Satisfaction?

6.78%3.39%

13.56%

33.90%

42.37%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%40.00%

45.00%

Not

Important

Less Imp Somewhat

Imp

Imp Most Imp


These results confirm the findings from the last question in this series. The final question about

growth measures asked the importance of localization for achieving international market growth.

The answers corresponded to the previous related questions; 71% of respondents believe

localization is either important or very important for international market growth.

How Important is Localization for International

Market Growth?

6.78%3.39%

16.95%

25.42%

47.46%

0.00%5.00%

10.00%15.00%20.00%

25.00%30.00%35.00%40.00%45.00%50.00%

Not

Important

Less Imp Somewhat

Imp

Imp Most Imp

Percentage

ofResponses


15/23

After determining that localization is a strategic priority, the next step is implementing the

necessary measures to actually localize a companys website. The first step is to either set up a

localization department within the MNE, or else outsource the necessary services that need to be

performed. An essential portion of the localization process is the translation from English into a

foreign language. We sought to determine what attributes MNEs find to be the most important

when choosing a localization vendor. An overwhelming 66% of respondents undoubtedly

expressed that quality is the most important attribute of a localization vendor. Those respondents

who did not view quality as being the most important attribute noted that service, expertise, and

timely delivery instead occupy the topmost important attribute in their minds, respectively

accounting for 49, 47, and 41 percent. Surprisingly, price was viewed as a very important

attribute, though never labeled as being the most important deciding factor. However, on

average, price was the least important attribute, with only 66% of respondents noting it to be very

important or most important. In comparison, a timely delivery occupies 80% of responses for

very important or most important.


16/23

Importance of Translation Vendor Attributes

0

10

20

30

40

5060

70

Price Quality Service Expertise Timely

Delivery

Translator Vendor Attributes

Responses(% 1- Not Important

2- Less Imp

3- Somewhat Imp

4- Imp

5- Most Imp

After choosing a translation vendor and reviewing their overall performance, one must

wonder, how does a MNE rank a translation vendor on their attributes. What is it about that

particular translation vendor that makes them rank higher then the rest in the mind of the

localization decision-makers for the MNEs? Our results reveal that the size of the translation

vendor is the lowest ranking attribute they take into consideration, with 53% deeming it to be the

lowest rank. The client list of the company also proves to not be a primary ranking factor, with

38% of respondents rating it as being the second to last ranking. Ranking for translation memory

(TM) of 3rd and 4th highest rankings, 53% of respondents occupy this position. The two attributes

which ranked the highest out of the five choices were the duration of vendor existence, which

occupied 55% of the 4th and 5th highest ranking. Even so, a translation vendors quality orientation

occupied 74% of the 4th and 5th highest ranking, reaffirming the above conclusions we uncovered;

quality is the most important attribute for MNEs when choosing a translation vendor.


17/23

Importance of Attributes

0

10

20

30

40

50

60

1 2 3 4 5

Ranking 1-5 (5 being highest)

Responses(% Company Size

Client List

TM

Quality Orientation

Duration of Existence

Which aspect of the Localization Process is the easiest to perform, and which aspect is the most

difficult? This was yet another question we sought to have answered by the MNEs. To learn

about the localization process from a textbook is one thing, but to understand which aspects real-

life localization industry professionals find to the most frustrating is useful information to provide

insight into the real picture. Our findings reveal that the project management portion of

localization is the most challenging aspect, with 53% of respondents ranking it as being either

very challenging or the most challenging. Though not being viewed as the most challenging,

quality assurance and testing is ranked by respondents as being 57% of the most challenging and

very challenging, with 34% of these statistics representing the very important range. This

reinforces the idea that one of the most important attributes in a translation vendor is also one of

the most difficult aspects of the localization process for MNEs. Translation terminology/linguistic

management are viewed as being the least challenging aspects, occupying 53% of results at the

lowest two tiers. However, without a doubt, the localization of graphics is viewed as being the

easiest aspect of the process. 49% of respondents note that it is the least important, and 17%

more rank it as to being second to last in importance, totaling 56%.


18/23

The Localization Process: The Difficulty Rating

0

10

20

3040

50

60

TranslationMg

mt.

I18N

Graphic

s

Quality

Assura

nce

ProjectMg

mt.

Aspects of the Process

Responses

(%1- Not Challenging

2- Less Chal3- Somewhat Chal

4- Chal

5- Most Chal

Utilizing funds to create the best results is an important balancing act for every company.

According to the survey results a majority of companies believe localization is an important part of

increasing market share and increasing sales. These results appear to contradict the percentage of

overall budgets allotted to localization and translation services; nearly 53% of respondents allot

between 1 and 5% of their budget. This elicits several questions. First, is localization treated as a

nice idea rather than a viable and competitive strategy? Second, how can companies expect

substantial increases in revenue and market growth if they do not invest a substantial amount as

well? Finally, why is there a difference in the perceived importance and the actual importance

companies are placing on localization and translation services?


19/23

Overall Budget Allotted to Localization and Translation

Services

52.8%

13.9%11.1%

19.4%

2.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1-5 5-10 10-15 15-20 20

strategic role of localization in multi national enterprises

Documents