This term paper deals with the Uppsala model of internationalization and the question whether it is still working today or if modern companies have more possibilities to enter new markets in foreign countries in a different way.
The model was developed almost forty years ago and the framework and conditions of internationalization and technological progress have changed a lot. In economics, internationalization is the process of increasing involvement of enterprises in international markets, although there is no agreed definition of internationalization. There are several internationalization theories which try to explain why there are international activities.
This paper will stick to the classic school theory, the Uppsala model or international stage model in comparison to modern ways of internationalization by the example of ‛Born Globals’. The Uppsala model provides a universal explanation of how internationalization works in the form of sequential stages during its early development. ‛Born Globals’ are young companies that start to globalize very fast from the beginning without any preceding long term period of internationalization. They do not follow the stages in the suggested order, they rather leap-frog some of the steps given by the model.
The aim is to show that the business world has changed and the model is not contemporary anymore. This paper will start with the backround of the Uppsala model, its structure. A description of the establishment chain and the psychic chain will follow. After that the internationalization model will be illustrated which will lead to the critical view of the Uppsala model. Chapter three describes the modern way of internationalization using the example of ‛Born Globals’. The last chapter of this term paper is the conclusion.
Table of Contents
- Introduction
- The Uppsala internationalization model
- Background of the Uppsala model
- The establishment chain - international penetration
- The psychic chain - international expansion
- The internationalization model
- Critical view
- Born Globals
- Conclusion
Objectives and Key Themes
This paper examines the Uppsala model of internationalization, assessing its continued relevance in light of modern business practices. It compares the model's sequential approach to international market entry with the rapid globalization strategies employed by "Born Global" firms. The goal is to demonstrate how the business landscape has evolved and whether the Uppsala model remains a contemporary framework for understanding internationalization.
- The Uppsala model's framework and its stages of internationalization.
- The concept of "psychic distance" and its influence on market entry decisions.
- A critical analysis of the Uppsala model's limitations and applicability in the modern business environment.
- The characteristics and strategies of "Born Global" firms.
- A comparison between the Uppsala model and the "Born Global" approach to internationalization.
Chapter Summaries
Introduction: This introductory chapter sets the stage for the paper by introducing the Uppsala model of internationalization and its core premise. The author establishes the central question of whether this nearly forty-year-old model still accurately reflects contemporary approaches to international market entry. The chapter introduces the concept of "Born Globals" as a contrasting approach to internationalization, highlighting the rapid expansion of young firms without a lengthy preceding period of gradual market entry. The chapter outlines the paper's structure, previewing the subsequent exploration of the Uppsala model's components and a comparative analysis with the "Born Global" phenomenon.
The Uppsala internationalization model: This chapter delves into the details of the Uppsala model, beginning with its historical context and the motivations behind its creation by Swedish researchers in the 1970s. It highlights the model's response to existing theories, emphasizing the often-overlooked significance of cultural differences and the internal capabilities required for successful international operations. The chapter then elaborates on the two key components: the establishment chain, outlining the sequential steps of market entry, and the psychic distance chain, which underscores the role of knowledge and understanding of foreign markets in decision-making. The chapter lays the groundwork for a later critical evaluation of the model's limitations.
Keywords
Uppsala model, internationalization, Born Globals, market entry, psychic distance, international expansion, incremental decisions, globalization, cultural differences, international business strategy.
Frequently Asked Questions: A Comprehensive Language Preview
What is the main topic of this document?
This document provides a comprehensive preview of a paper examining the Uppsala model of internationalization and its continued relevance in the context of modern business practices, particularly in comparison with the rapid globalization strategies of "Born Global" firms.
What are the key themes explored in this paper?
The key themes include the Uppsala model's framework and stages of internationalization; the concept of "psychic distance" and its impact on market entry decisions; a critical analysis of the Uppsala model's limitations; the characteristics and strategies of "Born Global" firms; and a comparison between the Uppsala model and the "Born Global" approach to internationalization.
What is the Uppsala model of internationalization?
The Uppsala model is a framework explaining how firms internationalize gradually, starting with markets perceived as less distant (culturally and geographically) and progressively expanding to more distant markets as they gain experience and knowledge.
What is the role of "psychic distance" in the Uppsala model?
Psychic distance refers to the perceived differences between a firm's home country and a foreign market. The Uppsala model suggests that firms tend to enter markets with lower psychic distance first, minimizing uncertainty and risk.
What are "Born Global" firms?
"Born Global" firms are companies that rapidly internationalize from their inception, often targeting multiple global markets simultaneously, contrasting with the gradual approach of the Uppsala model.
How does the paper compare the Uppsala model and the "Born Global" approach?
The paper compares the sequential, incremental approach of the Uppsala model with the rapid, global expansion strategy of "Born Global" firms, analyzing their respective strengths and weaknesses in the current business environment.
What are the chapter summaries included in the preview?
The preview includes summaries of the introduction chapter (setting the stage and introducing the key concepts), and the chapter on the Uppsala internationalization model (detailing its components, establishment chain, psychic distance chain, and historical context).
What are the objectives of this paper?
The paper aims to assess the continued relevance of the Uppsala model in light of modern business practices and compare its incremental approach to the strategies employed by "Born Global" firms. The overall goal is to understand how the business landscape has evolved and whether the Uppsala model remains a useful framework for understanding internationalization.
What are the keywords associated with this paper?
The keywords include Uppsala model, internationalization, Born Globals, market entry, psychic distance, international expansion, incremental decisions, globalization, cultural differences, and international business strategy.
What is the structure of the paper?
The paper's structure includes an introduction, a detailed explanation of the Uppsala model, a discussion of Born Global firms, and a concluding chapter that likely synthesizes the findings of the comparison between these two models.
- Quote paper
- Claus Hombrecher (Author), 2014, The Uppsala model of internationalization. A critical review, Munich, GRIN Verlag, https://www.grin.com/document/458052
