The Uppsala Internationalization Model
Internationalization refers to the process of organizations gradually expanding beyond borders, intensifying their foreign involvement. Over the past decades the number of multinational enterprises has grown significantly, more firms are partaking in international business operation. This is reflected the increasing amount of academic research into the internationalization of firms (Johanson & Vahlne, 1990). One important step of research into the internationalization process was the development of the Uppsala Internationalization Model by Johanson and Wiedersheim-Paul (1975). The model distinguishes between four stages of foreign involvement, namely: 1) No activities abroad 2) Exporting 3) Sales subsidiaries abroad 4) Overseas production/manufacturing. …show more content…
Expanding business activities across borders offers companies access to new markets and new customers. Often, firms’ home market does not offer sufficient opportunities, as it may be too small or too saturated, therefore companies may be attracted by the foreign market’s size or significant growth potential. (Hansson & Hedin, 2007). Furthermore, by being present in various countries, companies are not dependent solely on their domestic market, as they are able to compensate for potential critical situations or temporary losses within their home country by moderating the risk through diversification (Rodriguez, Barcos & Álvarez, …show more content…
Cavusgil et al, (2014) identified four main areas, where internationalising companies may face challenges. Firstly, cross-cultural risk is perpetuated by the differing societal norms of the transacting parties, which can affect decision making, negotiation processes or even ethical standards (Cavusgil et al, 2014). According to Hofstede culture is “the collective programming of the mind which distinguishes the members of one human group from another“(1984, p. 21). The distinct social systems have led to differences in fundamental levels across nations, including among others their education systems, family relationships, political background, religion or societal values. To mitigate the cross-cultural risk that can aggravate planning, cooperation and communication, companies have to dedicate time and resources to effectively study the culture of target markets, in order to effectively manage the new-found diversity of the firm (Ruigrok & Wagner,
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