Internationalization and globalization are both concepts that involve activities that businesses engage in when they expand internationally. People might consider them as the same but they have distinct meaning and usage and understanding them is essential for people in charge of running the company and spreading their brand identity globally ensuring that it resonates with multiple cultures and satisfies their specific needs. Internationalization refers to the process in which firms seek to expand beyond international borders and strategize to develop products to fulfill the needs of the international market. The term internationalization falls under the head of globalization. Globalization is a broader term that refers to all the activities a company engages in that result in different countries, their economies, people and cultures coming closer together. This global interactivity has had a catalyzing effect on the world economy which has increased the world’s GDP to a total of $75 trillion in the year of 2016 which was only $50 trillion in the year of 2000.
Definitions and meanings
For a business, globalization is the process by which a firm interacts with its market and partners around the globe. From a broader perspective, it is the process which facilitates the flow and interchange of goods, money, services, trade, skill and technology across different countries. This results in different countries, their governments, distinctive cultures and economies coming closer together. It expands and strengthens the economic system in terms of free market, free competition and free trade on a global level. It is a sort of global inter-connectivity that has changed the world economy into a more open and autonomous system.
For example, companies producing consumer electronics first outsource raw material from India, assemble products in China and finally sell in America. Similarly, ecommerce platforms like eBay, Amazon, Etsy and Walmart enable buyers to make purchases from across the globe. Other examples of globalization include cloud computing and international air travel.
In current times, globalization has flourished due to the positive impact of factors like availability of transportation facilities, ease of communication, availability of low cost labor and free trade opportunities etc. Globalization has revolutionized the world economic system which is beneficial for both corporations and consumers. Many multinational companies have born and opened branches in multiple countries. It has resulted in increased global trade and higher dependence on the world markets.
Internationalization is a corporate strategy through which firms develop products and customize them to meet the needs of the foreign market. It falls under the head of globalization. The process begins when the firm seeks to expand its presence beyond the local boundaries by opening franchises, branches, outlets and offices in multiple countries.
Internationalization also includes all trading activities like export, import, foreign direct investment, investment in a new trade, relocation, international transmission of know-how etc. While trying to expand internationally, the corporations face a set of new challenges such as imposition of compliance with laws and regulations, liability to pay import/export taxes, catering to culture-specific needs, social concerns, adhering to price, time and quality restrictions.
Companies going for internationalization have to focus on making their product flexible and as adaptable as possible. For example, Netflix operates in more than 190 different countries while catering to the specific needs of each country by having subtitles and dubbings in different languages. Another example is the world renowned shoe brand Nike whose swoosh logo resonates with various cultures and languages. As part of its expansion strategy, Nike has partnered with famous sportsmen in numerous countries and utilizes endorsements to support its brand.
Difference between globalization and internationalization
The five main points of difference between globalization and internationalization are listed below:
Globalization refers to free trade between countries, their interdependence upon one another bringing them closer together. Internationalization on the other hand refers to the process of customizing products to meet the standards of the foreign market and selling them internationally.
2. Main purpose of the process
The main purpose of internationalization is expansion of the business and brand. Whereas globalization focuses upon free exchange of merchandise, skill, investment and technology across international borders.
Internationalization mainly involves the firm and its trade activities. Globalization is a broader term and involves the world economy and the relevant country’s GDP.
4. Is depended upon
Internationalization depends upon various factors like local traditions, cultural customs, social interactions and personal preferences etc. On the other hand, globalization depends upon infrastructure, logistics, international laws, foreign policies and telecommunications etc.
5. Main effects
Internationalization increases the presence of the enterprise, spreads its brand message and also stimulates the world economy towards globalization. Globalization results in free trade, removal of trade barriers, increased social interactions, positivity between countries, international migration and emergence of the world as an autonomous system.
Globalization vs internationalization – tabular comparison
A tabular comparison of globalization and internationalization is outlined below:
|Free trade and interdependence of countries on one another.||Adapting and customizing merchandize to meet foreign market’s standards to expand internationally.|
|Interchange and free flow of merchandise, skill and, money globally.||Expand the brand internationally and generate profit.|
|The firm and its trade activities.||Involves the world’s economy and the country’s economy.|
|Traditions, cultural customs, social interactions and personal preferences etc.||Logistics, telecommunications, infrastructure, international laws and foreign policies, availability of low-cost labor etc.|
|Increases the brand’s presence and initializes globalization.||Emergence of world as an autonomous system, removal of trade and social barriers and facilitation of free trade between countries.|
Conclusion- globalization vs internationalization
Globalization and internationalization are both recognizable terms and it is important to differentiate between them in order to effectively strategize on how to expand your company. Globalization is termed as the interconnectedness of world cultures and economies in a broader sense. It further influences not only the local culture and economy but the global environment, political systems and the world economy as a whole etc.
Internationalization which comes under the domain of globalization helps firms expand their reach geographically, and hence, affecting and initializing the process of globalization.