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What is Localization and Why Should You Care?

Localization is essential for selling shipments of export cargo and import cargo in international trade.

What is Localization and Why Should You Care?

A slippery and troublesome word, localization means different things to different people. Inherent in the term, however, is the locale.

As Julie Layden describes it, “Localization is the customization of all components of a product for a particular target market.” According to the Globalization and Localization Association (GALA), a product should seem to each market sector as though it had been designed and created by and within that demographic, “no matter their language, culture, or location.”

In its most widely-understood context, the term denotes a process of cultural or regional adaptation that may encompass: translation; design/user experience considerations; formatting and layout issues; legal issues that may vary by country; adapting symbols, icons, and other extra-linguistic semiotic content; market analysis/segmentation; attention to sub-dialects;

aesthetic considerations; cultural references of the target market; historical references of the target market; insider humor of the target market; and cultural conventions.

Cultural insight can play a sizable role in the success or failure of a localization project. Ben & Jerry’s Black & Tan ice cream sold poorly in Ireland. The reason? Inadequate understanding of the connotation of the term for the company’s Irish audience. In the U.S., and possibly other countries, Black & Tan connotes a popular beer cocktail.

In Ireland, the term is laden with baggage from the country’s turbulent history. The Black and Tans (officially the Royal Irish Constabulary Special Reserve), a pro-British paramilitary force, allegedly committed a number of war crimes against the Irish population during the Irish War of Independence (1919-1921).

Long story short, the term did not help Ben & Jerry’s sell ice cream in Ireland. Though the Ben & Jerry’s lesson is less tragic than Irish history, it demonstrates how historical legacies and cultural nuance can disproportionately impact product reception.

The multifaceted nature of localization means that a company must selectively localize, as implementing every aspect of localization would be prohibitively expensive and difficult. For example, a campaign may not have the bandwidth to address foreign user experience, due to its prioritization of cultural humor as a means of reaching its audience. Or, with regards to market analysis, any market can be segmented with infinite granularity; however, past a certain point, increased segmentation produces diminishing returns and compounding difficulty.

In short, to again quote Julie Layden, “A successful localization project requires a balance of time, cost, and quality.”

Rarely will an organization have the budget and time frame to localize in every aspect, much less to do so with meticulous attention to detail. As a Harvard Business Review article puts it, “Too much localization can…lead to ballooning costs. Too much standardization can bring stagnation, dooming a company to dwindling market share and shrinking profit.” In the localization goldilocks zone, however, an organization will prioritize its localization outcomes and allocate resources accordingly.

Regardless of the resources a multinational devotes to various aspects of localization, an accurate and precise translation is a bare minimum. Without your texts, website, and other materials translated into the language of your target market, there is no localization. For certain types of communication, a good translation alone does the trick. For others, additional layers of localization are needed to fit the message to the culture. Translation almost always comprises the bulk of any localization effort; other considerations, when they come into play, piggyback atop the translation project.

Generally, the more technical the text, the less it warrants localization considerations beyond an accurate, precise translation. One can hardly imagine that some great faux pas would emerge from the translation of a set of operating instructions for a wet centerless grinder. Or, that the same manual would need to be localized for seven Arabic sub-dialects. An advertising campaign, on the other hand, usually relies on innuendo, metaphor, and allusion. Every phrase must be considered carefully with regard to each language, dialect, and other segmentation factors. Localizing a marketing piece for seven sub-dialects of a language would probably be wise. As would avoiding references, however oblique, to historical atrocities in the region (a la Ben & Jerry’s).

With localization departments sprouting up in companies around the world, the concept, if murky, is going mainstream. Now it’s up to each organization to figure out what it means to them.

Jacob Andra is Senior Industry Analyst for US Translation Company, a firm specializing in helping US companies localize their offerings for foreign language markets. This article was adapted from a previous post on the US Translation Company blog.

Companies can be liable for distributor FCPA violations in connection with shipments of export cargo and import cargo in international trade.

Multinationals, Distributors, and the FCPA

When doing business overseas, you’ll want to stay on the right side of the Foreign Corruption Practices Act. Just ask LATAM Airlines. The Chilean company is paying $22 million in fines for allegedly bribing Argentinian officials. While LATAM’s violation appears to be overt, companies can violate the FCPA in subtler ways.

Two US agencies enforce the FCPA: the Department of Justice and the Securities and Exchange Commission. FCPA violations include, but are not limited to, kickbacks, bribes, or any other perks given to foreign government officials for purposes of favorably influencing them on behalf of one’s enterprise.

And if a multinational exporter is relying on a distribution partnership, FCPA compliance can get a whole lot dicier.

Many multinationals assume that their overseas distributors will bear the liability for their own FCPA violations. After all, headquarters has no way of knowing what their foreign partner is up to, do they? Why should they be liable for actions that they have not sanctioned? Unfortunately for the company, FCPA officials probably won’t sympathize with this rationale. With enforcement on the rise, companies must inform themselves about how the FCPA views culpability, Specifically, corporate culpability for violations performed by a third party, the distributor.

FCPA enforcement officers won’t so much ask whether the multinational was party to their distributor’s violation. Rather, they’ll inquire about proactive training and monitoring policies: did the multinational have reasonably sufficient procedures in place to preempt said violation? In short, did the company do everything it possibly could to stay abreast of its distributor’s actions and prevent corruption?

Ultimately, the question comes down to this: what anti-corruption protocols and procedures did the multinational have in place; how were employees, partners, and affiliates trained in those; and what form of policing and oversight did the company have to ensure compliance? In the event of an FCPA investigation, the SEC and DOJ will look closely at the company’s policies and enforcement and measure these against industry standards and expectations. If they find the multinational’s measures to be adequate, they’ll be more likely to absolve it and assume that the company had the misfortune of partnering with an especially wily and corrupt partner. Nobody, after all, can be expected to catch 100 percent of shady dealings 100 percent of the time.

Naturally, every multinational prefers to stay in the clear and never incur an FCPA investigation. The following actions will help them do so.

Develop a comprehensive anti-corruption policy, independent of other company policies. Don’t just bury a paragraph or two about corruption in the main policies and procedures document.

Require every distributor to read and commit, in writing, to that anti-corruption policy. Don’t do business with them if they refuse.

Adapt your screening, monitoring, and enforcement for the country’s corruption ranking. For example, distributors in Denmark—rated the “cleanest” country in the world by Transparency International’s Corruption Perceptions Index—warrant less scrutiny than those in, say, the highly corrupt Myanmar. And don’t worry: scrutinizing your Uzbek partners more closely than those in France does not equate to accusing them of malfeasance. Rather, it’s simple math. A country with a high corruption index will exert a disproportionate pull on your overseas colleagues, multiplying the probability of their human frailty caving to massive corruption incentives. By instituting a rigorous monitoring and enforcement protocol, you’re helping balance the equation by offering a corruption disincentive.

Pay special attention to profit margins and insist on distributor transparency. You’ll have some idea of what should be normal. Shady dealings are difficult to mask—they often signal themselves by profit abnormalities. For example, a distributor may sell to government officials at a greater-than-normal discount, which would reveal itself as a lower profit margin. Kiera S. Gans recommends establishing acceptable discounts upfront. Any departure from these should require review and approval from headquarters.

Audit distributor financials on a regular schedule. If this sounds like a whole lot of work, well, it is. But hey, it’s not as bad as prison. Or millions of dollars in fines. View these precautionary actions like any other duty: part of the cost of doing business.

Jacob Andra is Senior Industry analyst for US Translation Company, a language services firm that helps US multinationals adapt to overseas markets.

Exporters must decide who handles localization of their shipments of export cargo and import cargo in international trade.

The Multinational Branding Tug-of-War

When a US exporter enters a distribution partnership in an overseas market, localization (commonly abbreviated L10N) decisions must be made. Questions of control ensue.

The distributor wants the freedom to localize and sell the product in their own way, given their understanding of their own culture, language, and regional trends. The multinational wants to control the presentation of the company image, to maintain some semblance of brand coherence across markets.

On one extreme, the multinational could grant the distributor total license. The distributor, after all, is embedded in the culture. In many if not most cases, the person or persons comprising the operation are native-born, native speakers, with pre-existing contacts and credibility within their community. They know what appeals to their countrypeople.

On the other extreme, the multinational could issue branding and L10N directives from the top down. This makes a certain amount of sense, given that their centralized marketing division has probably invested extensively into crafting the company image and messaging.

Ideally, the multinational will strike a balance that harnesses the distributor’s local expertise while imposing the right corporate branding and procedural constraints. McDonald’s is typically invoked as a model of such corporate-local branding, with their consistently McDonaldian arches and color scheme combined with regionally-specific cuisine. Companies in industrial and manufacturing sectors, obviously, will have a very different set of localization challenges than does a fast-food chain. Still, all multinationals, regardless of industry, will need to resolve the following.

Translation: Does the central office engage a language services provider (LSP) of its choosing, or does the distributor tap local resources (freelancers or in-country LSPs)?

Branding: The distributor will typically use the corporate logo, possibly a slogan, but beyond that, what should stay internationally consistent and what should be tweaked?

Marketing copy (brochures, advertisements, website, social accounts, etc.): Corporate doesn’t know the culture as well as the distributor. However, if they give the distributor free reign, what is the responsibility of headquarters for unforeseen results of messaging gone wrong?

Technical content: Who make decisions regarding the localization of user manuals, schematics, maintenance instructions, safety warnings and the like? Who ensures the technical accuracy of these, and who bears the liability, potentially significant, of error?

Like it or not, liability usually trickles back to the multinational. For this reason alone, the company should maintain close involvement in the L10N process. Conversely, the distributor offers a wealth of local knowledge that headquarters dismisses at their peril.

Often, the perfect allocation of L10N influence involves a proactive distributor submitting detailed localization proposals to the central office, and a corporate marketing division with a commitment to maximum distributor involvement and influence. Depending on the liability—pharmaceutical manufacturers have far greater exposure than does a sportswear brand—it may be better for a distributor to handle translation in-country with corporate review. Or, it may make more sense for the multinational to use the same translation providers across all their overseas concerns.

In a highly technical industry such as aerospace or biotech, the multinational will almost always want to handle (or at least thoroughly review) localization of technical content. For such texts, cultural nuance plays a smaller role and technical accuracy a larger one. The operating instructions for a centrifuge leave little room for metaphor or nuance. Any competent translator, fluent in the source and target languages and having subject matter expertise, can do the job, even if she has never lived in the distribution country.

On the other hand, local nuance looms larger in sales copy, advertising campaigns, and website content. Slang, cultural mythologies, regional subdialects and insider jokes can be invisible to an outsider, but can quickly derail a message. For such translations, a couple of options present themselves. Firstly, a corporation could handle the translation centrally and then have the in-country team review and give feedback. Secondly, the reverse could occur: the distributor’s localization experts perform the translation, with a subsequent corporate review to ensure consistency with the company’s overall image. In either case, both parties should be heavily involved.

Whatever the industry or the particular localization project, exporter and distributor should have a close working relationship. L10N authority, responsibilities and procedures should be clearly defined. At the same time, flexibility should prevail: each localization situation rarely fits any predefined plan perfectly. If the relationship is one of mutual respect and long-term cooperation, the localization process should be relatively smooth sailing.

Jacob Andra heads industry research and analysis for US Translation Company, a localization firm that specializes in helping US industry reach overseas markets.

Buyback cluses are not necessarily the best way to go in international distrbution agreemnts for shipments of export cargo and import cargo in international trade.

Examining the International Distribution Buyback Clause

Many U.S. exporters, in an effort to keep their options open, include an escape clause in their distribution contract. In essence, the clause gives them the option to dissolve a bad distribution partnership after a specified time. Usually, some form of buyback (either of unsold inventory or of a distributor’s built market equity) is built into the provision, leading to the buyback clause nomenclature. At first blush, the escape option seems like a great idea. More options equal greater leverage, which equals reduced risk for the multinational, right? Not necessarily.

David Arnold argues in the Harvard Business Review that the buyback clause may actually undermine your distribution arrangement. Paradoxically, if he is right, the escape option may cause the very thing it aims to protect you from. Arnold’s rationale? In trying to hedge its bets, the multinational signals to its international distributors that it lacks commitment to long-term, quality relationships. It’s the equivalent to the dating profile that specifies “nothing serious.”

If your overseas partner senses, correctly or not, that you’re using them as a short-term market-entry vehicle, their own selfish interest would dictate that they mine the relationship for as much short-term profit as they can. This rarely benefits you, the exporter. Arnold reports that “the manager of a consumer goods company” had multiple foreign distributors drop their prices to boost short-term revenue. These distributors believed that gross revenue determined the buyback prices, so their goal centered on getting the best buyback deal possible. While this made sense to the distributors, given the expected short-term nature of the relationship, it sabotaged the multinational, which had its “market positioning strategies” completely undermined.

In business, as in diplomatic relations, perception is everything. The First World War was largely precipitated by the perceptions (and misperceptions) of Russia, England, Austria, France, Germany, and various other players about the intentions of the rest. In the same way, the perceptions you have about your distributor’s intentions—long-term or short, benefitting both parties or primarily one at the expense of the other—are everything. And vice versa. Acting on perception of the other’s intentions, you each act accordingly, influencing the course of the relationship from the outset.

Caterpillar does the opposite. It’s how the company avoided losing its global market share to the lower-priced Komatsu. (Full disclosure: Komatsu is a US Translation Company client). In the battle between the two heavy equipment manufacturers, Caterpillar built a superior distribution network, with distributors treated as absolutely vital to Caterpillar’s success, which they were. In turn, distributorships typically remained in the same hands for decades, often being passed down to subsequent generations of the same family.

As though further reason were needed to avoid the buyback clause, such clauses are often worthless, or nearly so. If the distributor refuses to honor the buyback, they can drag the multinational into their local courts for a protracted battle. Not only do you risk spending vast amounts on legal fees, you run the gamble that a foreign court will rule in favor of your distributor.

Don’t take this as legal advice. It’s not. Hopefully, this article gets you thinking about the pros and cons of the escape clause, and how those apply to your particular distribution situation. Some sectors may be more suited to the clause than others. Naturally, any attorney would recoil in horror at the thought of the omission of a buyback clause. And their perspective is not wrong. However, the strictly legal perspective is only one facet of a complex business relationship. Other dynamics demand careful consideration before you decide whether or not to include an escape route in your distribution contract.

Jacob Andra heads research and marketing for US Translation Company, a localization firm that helps US exporters customize their product offerings for foreign markets.