FOCUS on e-commerce and globalization

Globalization refers to the move towards international trading in a single global market­place and also to blurring of social and cultural differences between countries. Some perceive it as ‘Westernization’ or even ‘Americanization’. We saw in Chapter 1 that for both SMEs such as North West Supplies and larger organizations such as easyJet and Cisco, elec­tronic communications gives the opportunity for increasing the reach of the company to achieve sales around the world.

Quelch and Klein (1996) point out some of the obvious consequences for organizations that wish to compete in the global marketplace; they say a company must have:

• a 24-hour order taking and customer service response capability;
• regulatory and customs-handling experience to ship internationally;
• in-depth understanding of foreign marketing environments to assess the advantages of its own products and services.

Language and cultural understanding may also present a problem and a smaller or medium­sized company is unlikely to possess the resources to develop a multi-language version of its site or employ staff with sufficient language skills. Similarly, Quelch and Klein (1996) note that the growth of the use of the Internet for business will accelerate the trend of English becoming the lingua franca of commerce. Tailoring e-commerce services for individual Localization  countries or regions is referred to as localization. A web site may need to support customers

• different product needs;
• language differences;
• cultural differences.

The importance of localization is highlighted by a report by Common Sense Advisory (2002). According to them, for many US Fortune 500 firms, non-US revenue – or what they refer to as ‘xenorevenue’ – accounts for 20 to more than 50 per cent of their global income. A similar situation is likely to exist for non-US multinational organizations.

Don Da Palma, the author of the report, adds:

This fact alone makes it easy to see the value in catering to buyers in global markets with localized products and services in their language. Still, localization expenditures are minuscule – 2.5% and lower of non-US revenue – compared to the benefits of gaining market share and customer loyalty.

It may be necessary to vary:

• The language that content is provided in.
• Tone and style of copy.
• Site design – certain colours or images may be unsuitable or less effective in some countries.
• Range of product offerings.
• Product pricing.
• Promotional offers used to encourage acquisition of customer e-mail address (see Chapter 9). This may be affected by local data protection, taxation and trading laws.
• Local contact points.

Localization will address all these issues. It may be that products will be similar in different countries and localization will simply involve providing a local-language version of a web site. However, in order to be effective, this often needs more than translation, since different pro­motion concepts may be needed for different countries. An example of a business-to-consumer site with extensive localization is Durex (www.durex.com) and a business-to-business site is 3M (www.3m.com). Durex localizes content for many countries since language and the way in which sexual issues can be discussed will vary greatly between different countries. 3M, however, only localizes content in local language for some countries such as France, Germany and Spain. Consider large multinational companies such as 3M, Ford and GlaxoSmithKline for which localization is a significant strategic issue for e-commerce. The decision on the level of localiza­tion will need to be taken on a regional or country basis to prioritize different countries according to the size of the market and the importance of having localization. Since the cost of localization is high it may only generate a return on investment for the largest markets.

Singh and Pereira (2005) provide an evaluation framework for the level of localization:

• Standardized web sites (not localized). A single site serves all customer segments (domestic and international).
• Semi-localized web sites. A single site serves all customers; however, there will be contact information about foreign subsidiaries available for international customers. Many sites fall into this category.
• Localized web sites. Country-specific web sites with language translation for international customers, wherever relevant. 3M (3m.com) has adapted the web sites for many countries to local language versions. It initially focused on the major web sites.
• Highly-localized web sites. Country-specific web sites with language translation; they also include other localization efforts in terms of time, date, postcode, currency formats, etc. Dell (deN.com) provides highly localized web sites.
• Culturally customized web sites. Web sites reflecting complete ‘immersion’ in the culture of target customer segments; as such, targeting a particular country may mean providing multiple web sites for that country depending on the dominant cultures present. Durex (durex.com) is a good example of a culturally customized web site.

Deciding on the degree of localization is a difficult challenge for managers since while it has been established that local preferences are significant, it is often difficult to balance localiza­tion costs against the likely increase or conversion rate through localization. In a survey published in Multilingual (2008), the importance of localization was seen as important with 88% of managers at multi-national companies stating that localization is a key issue, with 76% of them saying that it is important specifically for international customer satisfaction. Yet, over half of these respondents also admitted that they allocate only between 1% and 5% of their overall budget for localization.

An indication of the importance of localization in different cultures has been completed by Nitish et al. (2006) for the German, Indian and Chinese cultures, assessing localized web sites in terms not only of content, but cultural values such as collectivism, individual­ism, uncertainty avoidance and masculinity. The survey suggests that without cultural adaptation, confidence or flow falls, so resulting in lower purchase intent.

A further aspect of localization to be considered is search engine optimization (SEO, see Chapter 9) since sites which have local language versions will be listed more prominently within the search engine results pages for local versions of the search engines. Many special­ist companies have been created to help manage these content localization issues for companies, for example agency Web Certain maintains a forum advising on localization (www.multilingual-seo.com).

One example of the effect of localization on conversion rates is provided by MySpace CEO Mike Katz who stated in NMA (2008) that: ‘All the 27 sites are localised, we don’t believe that one size fits all’, says Katz. ‘We know that from the first day we localise in any language, we triple our sign-ups on original users.’ In 2008, 45 million of the 130 million MySpace users were outside the US; new sites were planned for Russia, India, Poland and Korea, each requiring a local version of the MySpace model.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).