INTERNATIONALIZATION - AN INTRODUCTION TO THE TERM

Many people think of the term "internationalization" only in terms of large corporations that operate internationally, high costs and additional work. But what exactly is internationalization? What are the possibilities and motivations for internationalization and what opportunities does it offer?

Internationalization - what is it?

Internationalization is generally understood as a corporate strategy or the development of a company to operate internationally. This means that products or services are no longer only offered on the domestic market, but also in foreign markets or worldwide.

Companies generally have two options here:

1. business: geographical decentralization of company activities in international markets, e.g. by means of a new location

2. information technology: program optimization for easy adaptation to other languages, e.g. through multilingual websites

Program optimization can also take place without geographical decentralization. However, a new location without a corresponding country-specific website is not recommended if you want to operate from the new location.

Internationalization - reasons & possibilities

Reasons

The reasons for a company's internationalization can be as varied as the company itself. For example, an already established business idea may also be promising in other countries or a favorable opportunity for a new location may arise spontaneously. However, one of the main reasons is to open up new markets or increase the international perception of the company.

Both active factors (pull) and passive factors (push) can justify internationalization:

Pull factors: there is market potential and special expertise within the company or a positive attitude towards foreign activities, there is demand for the product or service in the target country or there are cost advantages abroad
Push factors: Domestic demand is falling, competitive pressure is increasing, costs are rising due to wage / production costs, for example, or important customers are located abroad

Possibilities

There are as many ways to implement internationalization as there are reasons:

Export
transit trade
Licensing
franchising
joint venture
Foreign branch
Production plant
Subsidiary
Processing business (special form)
Compensation transactions (special form)
Software development (internationalization)

Internationalization - advantages and disadvantages

The necessity of internationalization often outweighs the advantages. This is because international business is constantly increasing and the Internet has been growing rapidly for years. It is important to keep up in order to remain competitive. But what are the advantages and disadvantages of internationalization?

The type of internationalization chosen must be thoroughly analyzed in advance. Factors such as risk appetite, environmental factors, resources, expertise, know-how and, above all, capital and management performance should be taken into account.

Advantages of internationalization

Through internationalization, companies can set themselves apart from the competition, thereby gaining a strategic competitive advantage - e.g. through the "Made in Germany" seal. New sales markets are opened up, thereby gaining new customers. The aim is to systematically build up and maintain potential for success. This reduces dependence on the domestic market, while at the same time increasing growth opportunities, which leads to profit maximization in the long term.

Furthermore, the horizon is broadened by getting to know new cultures and their people. It is advisable to draw on the knowledge and experience of (international) partners, acquaintances or experts in order to identify cultural differences.

Disadvantages of internationalization

First of all, internationalization means getting out of your own comfort zone, your home country, which is a major challenge for many companies. This in turn is associated with uncertainties, such as increased financing, the effort required to obtain information about the foreign environment and an overall increased entrepreneurial risk. In addition, there may be a lack of human and financial resources.

Cultural differences should not be underestimated either. These can be caused by possible language barriers, different market and competitive conditions or different mentalities and behaviors.

The internationalization of companies can trigger structural change as it is a development that promotes prosperity for all. Comparative advantages in the production of services and products are utilized and processed in other countries. As a result, developing countries can become emerging economies and later industrialized countries.

International websites - a first step, also for small companies

As already mentioned at the beginning, internationalization often involves considerable additional expense. In the case of new locations abroad, this may well be the case. However, there is also a first step towards internationalization that is quicker and easier to implement: an international website.

Some people also think of this as a huge additional expense or that this is a step that only large companies with the appropriate resources should take. However, this is a simple, effective and often very underestimated way to internationalize a company. In addition, technology and knowledge have spread, especially in recent years, so that even smaller companies can implement their own (international) Internet presence easily and inexpensively.

You can find out how the internationalization of websites works, which processes need to be completed and what needs to be taken into account in our other blog articles: