No One Wears Shoes Here

Last Sunday was Father's Day here in the United States and I spent the day catching up on my reading while the children played around me. Among a series of interesting articles and OpEds in BusinessWeek, Fortune, the New York Times, and other publications, I found an interesting column by Rana Foroohar in the Curious Capitalist section of Time Magazine called "Why the World Isn't Getting Smaller."

The spirit of the article is that globalization is not such a big thing as some of us want it to be, and — using Thomas Friedman's image — that the world is not that flat.

Rana points to some facts:

• More than half of global trade, investment and migration still takes place within regions — much of it between neighboring countries.
• Some 80% of global stock-market investment, for example, is in companies that are headquartered in the investor's home country.
• Exports represent about 25% of the global economy.
• Less than 20% of Internet traffic crosses national borders.
• Only 2% of students attend a university outside their home country.

The author also discusses the fact that one of the effects of globalization is actually more demand for localized products as emerging markets now have money and confidence to call their own shots and demand for customized products and solutions.

My father was the son of a shoemaker from Italy and grew up in a small town in Brazil and he used to tell a joke that came to my mind as read this column. It's the story of two shoe salesmen who were sent to Africa to see if there was a market for their product. The first salesman reported back, “This is a terrible business opportunity, no one wears shoes here.” The second salesman reported back, “This is a fantastic business opportunity, no one wears shoes here.”

Whether the world is getting smaller or not doesn't really matter. The reality is that as countries become wealthier, populations start to demand products to meet their needs, and they want these products in their own language. So for the language services industry, I would say that the world is a fantastic business opportunity, no one speaks all languages here!

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Almost 50% of Sales of S&P Companies Come from Outside the U.S.

For many years, I have tried to find a way to extract information about international sales from the financial reports of public companies in the United States, what Common Sense Advisory calls xenorevenue. In addition to my personal research, I have talked to data service companies to find a way to automatically extract this information from their databases, to no avail.

Today, the Investing Insights blog in Bloomberg BusinessWeek, shares my frustration by stating that "While globalization is apparent in almost all company reports, exact sales and export levels are difficult to obtain. Many companies tend to categorize sales by regions or markets, while others segregate government sales. Additionally, intra-company sales, and hence profits, are sometimes structured to take advantage of trade, tax and regulatory polices. The resulting reported data available for shareholders is therefore significantly less than the desired level for analysis."

However, their analyst was able to look at data from half of the S&P 500 companies, which gives us a good indication of the level of international activity of large American corporations and helps us build a business case for translation expenditures.

While Howard Silverblatt, the author of the posting, focuses on comparing international sales with previous years (they have declined!), I was more interested at the actual volumes of international sales, which are higher than I would have guessed. According to the report, of the reporting 250 companies, 46.6% of all sales were produced and sold outside of the United States, compared to 47.9% in 2008, 45.8% in 2007, and 43.6% in 2006.

But what is no surprise to Localization veterans, is that Information Technology continued to be the dominating sector with over 56% of its declared sales being foreign in nature. The IT sector represents 20.4% of all U.S. foreign sales.

The full report with more detailed data, including some geographic breakdown, is available in PDF format here.

I will analyze this data more thoroughly and write a follow-up post.