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The Strategic Role of Localization in Multinational Enterprises

Bryan 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.D Associate Professor of Marketing The Localization Program College of Business California State University, Chico Chico, CA 95929-0051e-mail: Gary Muddyman, MD and CEO Conversis Headquarters Bignell Park Barns Chesterton, Bicester Oxfordshire OX26 1TD United Kingdom Acknowledgement

This research study was conducted by the research team at the Localization Program, CSU Chicoand the research team would like to thank Conversis Global for donating funds that further our programs research ability.

Names are in alphabetical order

The Strategic Role of Localization in Multinational Enterprises


Bryan 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 Regions Africa Asia Europe Middle East North America Latin America/Caribbean Oceania / Australia WORLD TOTAL Population ( 2006 Est.) 915,210,928 3,667,774,066 807,289,020 190,084,161 331,473,276 553,908,632 33,956,977 6,499,697,060 Population % of World 14.1 % 56.4 % 12.4 % 2.9 % 5.1 % 8.5 % 0.5 % 100.0 % Internet Usage, % Population Usage Latest Data ( Penetration ) % of World 32,765,700 394,872,213 308,712,903 19,028,400 229,138,706 83,368,209 18,364,772 1,086,250,903 3.6 % 10.8 % 38.2 % 10.0 % 69.1 % 15.1 % 54.1 % 16.7 % 3.0 % 36.4 % 28.4 % 1.8 % 21.1 % 7.7 % 1.7 % 100.0 % Usage Growth 2000-2006 625.8 % 245.5 % 193.7 % 479.3 % 112.0 % 361.4 % 141.0 % 200.9 %

(Miniwatts Marketing Group, 2006)

Names are in alphabetical order

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 ebusiness, 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.

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

Top Ten Languages Used in the Web

( Number of Internet Users by Language )
TOP TEN LANGUAGES IN THE INTERNET English Chinese Japanese Spanish German French Portuguese Korean Italian Russian TOP TEN LANGUAGES Rest of World Languages WORLD TOTAL % of all Internet Users 29.7 % 13.3 % 7.9 % 7.5 % 5.4 % 4.6 % 3.1 % 3.1 % 2.7 % 2.2 % 79.5 % 20.5 % 100.0 % Internet Users by Language 322,600,837 144,301,513 86,300,000 81,729,671 58,854,682 49,660,498 34,064,760 32,372,000 28,870,000 23,700,000 863,981,961 222,268,942 1,086,250,903 Internet Penetration by Language 28.7 % 10,8 % 67.2 % 18.7 % 61.3 % 13.0 % 14.8 % 45.8 % 48.8 % 16.5 % 21.5 % 9.0 % 16.7 % World Internet Population Growth 2006 Estimate for Language for the ( 2000 - 2006 ) Language 135.2 % 1,125,664,397 346.7 % 1,340,767,863 83.3 % 231.1 % 113.2 % 307.1 % 349.6 % 78.0 % 118.7 % 664.5 % 128,389,000 437,502,257 95,982,043 381,193,149 230,846,275 73,945,860 59,115,261 143,682,757

166.7 % 4,017,088,863 500.0 % 2,482,608,197 200.9 % 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.

Level of Localization on International Web Sites

standardize some-localization localized




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

(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?

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.
Percentage of Responses

Importance of Localization Services to Companies

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 3 Level of Importance
(1=Least Im portant 5=Most Im portant)

When added together that is 88% of the companies surveyed that stated localization is at least a somewhat important aspect to the company.

39% 28.80% 20.30% 8.50% 3.40% 4 5

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

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
Percentage of Responses 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 37.30% 27.10%

13.60% 6.80%


3 Level of Importance

(1=Least Iportant 5=Most Im portant)

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

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.
Most challenging Country Kazakhstan Switzerland Puerto Rico China Iran Arabic Countries Japan Asian Countries Singapore Israel Germany All countries European Countries Russia India Second most Challenging Country Lithuania UK Russia Iraq Asian Countries India Japan Malaysia France Korea Belgium China Third most Challenging Country India Germany Turkey Greece Vietnam Russia European Countries Thailand Spain Saudi Arabia China Mexico Japan USA

4.16% 4.16% 4.16% 29.16% 4.16% 8.33% 4.16% 8.33% 4.16% 4.16% 8.33% 4.16% 4.16% 4.16% 4.16%

5.55% 5.55% 5.55% 5.55% 5.55% 16.66% 16.66% 5.55% 5.55% 11.11% 5.55% 11.11%

13.33% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66% 6.66%

Percentage of Companies Surveyed

Percentage of Companies Surveyed 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%

Li th ua ni a

As ia n

UK Ru ss ia



8.33% 8.33%

Most Challenging Country to Localize


Second Most Challenging Country to Localize

5.55% 11.11% 5.55%

8.33% 4.16%

Ira ou q nt rie s In di a Ja pa M n al ay sia Fr an ce Ko re Be a lg iu m Ch in a

Ka za Sw khs itz t an Pu erl er a nd to R ic o C hi Ar na ab ic Ira Co un n t ri As es ia n Jap Co a u n Si nt ri n g es ap or e Is G rae er Eu l ro All ma pe co ny a n un C tri e ou s nt ri R es us sia In di a


Percentage of Companies Surveyed

Third Most Challenging Country to Localize

14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 13.33%




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
Percentage of Responses

important or very important for achieving higher company revenues. This corresponds to the results for the importance of localization in

In d er ia m an Tu y rk G ey re e Vi ce Eu et na ro pe m a n Ru ss C ou ia nt Th rie s ai la n Sa S d pa ud i A in ra bi C a hi n M a ex ic o Ja pa n U SA G

How Important is Localization to Achieving Higher Revenues?

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 35.59% 28.81% 18.64% 8.47% 8.47%

Not Important

Less Imp

Somewhat Imp


Most Imp

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.

How Important is Localization to Achieving Higher Global Revenues?

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Percentage of Responses 37.29% 37.29%

11.86% 6.78% 6.78%

Not Important

Less Imp

Somewhat 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
45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Percentage of Responses

How Important is Localization to Acquiring International Customers?


27.12% 15.25% 10.17% 5.08%

Not Important

Less Imp

Somewhat Imp


Most Imp

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.

How Important is Localization to International Customer Satisfaction?

45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Percentage of Responses 42.37% 33.90%

13.56% 6.78% 3.39% Less Imp Somewhat Imp Imp Most Imp

Not Important

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?

50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Percentage of Responses 47.46%

25.42% 16.95% 6.78% 3.39% Less Imp Somewhat Imp Imp Most Imp

Not Important

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.

Importance of Translation Vendor Attributes

70 60 50 40 30 20 10 0 Price Quality Service Expertise Timely Delivery

Responses (%)

1- Not Important 2- Less Imp 3- Somewhat Imp 4- Imp 5- Most Imp

Translator Vendor Attributes

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.

Importance of Attributes
60 50 Responses (%) 40 30 20 10 0 1 2 3 4 5 Ranking 1-5 (5 being highest) 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 reallife 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%.

The Localization Process: The Difficulty Rating

60 50 40 30 20 10 0
I1 8N s As su ra nc Pr e oj ec tM gm t. t. G ra ph ic M gm

Responses (%)

1- Not Challenging 2- Less Chal 3- Somewhat Chal 4- Chal 5- Most Chal

Tr an sla t io n

Aspects of the Process

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?

Q ua l


Overall Budget Allotted to Localization and Translation Services

60.0% 52.8% 50.0% Percentage of Responses 40.0% 30.0% 20.0% 10.0% 2.8% 0.0% 1-5 5-10 10-15 15-20 20< Percentage of Overall Budget 19.4% 13.9% 11.1%

According to earlier results, localization and translation services are important to very important in 49.1% of companies. Also, 42.4% of companies surveyed state that senior management believes that localization is an important strategic priority for their company. These answers demonstrate that companies do not believe localization is just a nice idea, rather, they believe localization is a competitive strategy worth pursuing.

Realistically, companies should not expect substantial gains without the equivalent investment. This presents a challenge for localization managers. Some companies want to see results before investing more in a new strategy, but it may take more investment to see a real result. Although a majority of the companies surveyed spent 1 to 5% of their overall budget on localization and translation services, the next largest group spent 15-20%. This group consisted of nearly 20% of respondents. This group appears to have their budget aligned with their levels of importance.

The final question dealt with the perceptions and reality of the importance placed on localization. The difference in perceived and reality is evident in the responses to its importance and the amount of budget allotted to localization. This difference could be a result of who holds the primary budgetary responsibility for the localization and translation services.

According to the survey, 40.6% of companies primary budgetary responsibility for localization and translation services comes from the head office. The percentage of budget allotted to localization could be lower because of a miscommunication or misunderstanding of the budgetary requirements of a successful localization
Percentage of Responses 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 12.5% 28.1% 25.0%

Primary Budgetary Responsibility for Localization and Translation Services


strategy. There are some companies that do not view localization as an important factor for growth, but those that do view localization as a strategic tool should


0.0% Head office Corporate marketing International marketing IT Other (please specify)

Primary Holder of Budgetary Responsibility

invest in their conviction. Without the proper investment, management can not demand substantial results from the localization department.

Part of our research was to determine the trends in localization. We tried to determine the largest players for Localization and Translation vendors. Our original question tried to determine the top

three vendors in order of recognition. The results were inconclusive. When we combined all of the responses into a single frequency chart, we noticed LionBridge,, SDL, and Adapt were the most frequently mentioned vendors at 24, 11, 8, and 5% respectively. This only equates to 49% of the total responses. These results lead to the conclusion that other than a few companies, the rest of the industry is spread between various companies. This is characteristic of an industry with low barriers to entry. When companies can enter a market and make a profit without barriers to entry, then many companies will begin operations. LionBridge appears to have a first mover advantage, but according to this study they are only ranked in the top 3 companies by 24% of our respondents.

Conclusion/Managerial Implications Our research has revealed insight into the following areas of localization, complete with our hypotheses regarding the deciding factors for MNEs when making decisions regarding localization methods. Important attributes when selecting a translation vendor o Our findings reveal that the most important attribute for MNEs in their selection of a translation vendor is quality. Therefore, out of price, quality, timely delivery, expertise, and service, quality was deemed to be the most important attribute, and price the least important, with the remaining attributes falling in the middle. Challenges MNEs face in the localization process o When companies start to make their web site global there a few countries that pose a problem when localizing. Special consideration needs to be taken into account when localizing for China, Japan, and India. Another groundbreaking discovery is

that Germany is a country that exhibits challenges for companies when localizing but in theory German web sites are supposed to be a bit easier than other locales. o The localization process also poses problems within the company in terms of implementing the necessary procedures to localize the website. The most challenging aspect, according to our results, was the project management aspect. The resources allocated to the localization department of MNEs o Currently there is a gap in the perceived and actual importance placed on localization. Senior management view localization as important, but the resources allotted are not relatively proportional to the strategic importance placed on localization. Strategic advantage localization provides MNEs o Localization provides companies with a competitive advantage. It leads to increased customer acquisition and satisfaction due to the fact that consumers prefer to browse and purchase products and services on websites that are in their native language. In conclusion, our findings reveal that though localization is considered to be vital by managers, budgets for localization are under funded. Our answers demonstrate that companies do not believe localization is just a nice idea, rather, they believe localization is a competitive strategy worth pursuing. From a realistic standpoint, companies cannot expect substantial gains without the equivalent investment. Some companies want to see results before investing more in a new strategy, but it may take more investment to see a real result.

Works Cited Beninatto, R., & DePalma, D. (2005). Common Sense Advisory announces size of worldwide translation and localization market and ranking of top 20 language services companies. WikiNews, July 16, 2005, Retrieved November 13, 2006, from nslation_and_localization_market_and_ranking_of_top_20_language_services_companies. Kwintessential. (2006). Language and Culture Specialist. Retrieved November 30, 2006, from Benefits of Web Localization Web site: Miniwatts Marketing Group. (2006). Internet World Stats. Retrieved November 13, 2006, from INTERNET USAGE STATISTICS - The Big Picture Web site: Miniwatts Marketing Group. (2006, Sep 20). Internet World Users by Language. Retrieved November 30, 2006, from Internet World Stats Web site: Singh, N. & Pereira, A. (2005). The Culturally Customized Website. Burlington: Elsevier. W3C. (2005). FAQ: Localization vs. Internationalization. Retrieved November 30, 2006, from World Wide Web site: Yunker, J. (2003). Beyond Boarders: Web Globalization Strategies. United States of America: New Riders Publishing.