Introduction
The globalization process makes golden opportunities for achieving a fast growth in cross-border movement of technology, products and services and capital. Besides, companies try to expand their operations in the global markets. Based on the model, market experience plays an important role in gradually entering new zones. Besides, the model is very effective for a few organizations through the process of internationalization. However, it often focusses on defining the procedure of internationalization of multinational corporations and are therefore apt to explain the internationalization conduct of resource-constrained firms is often asked. This model is interpreted internationally as a gradual process based on learning where companies grow and continuously increase their international commitment in successive and incremental step although the change between separate steps is driven by the knowledge acquired in the previous steps (Vahlne and Johanson, 2017).
Therefore, this study is pointed to examine some characteristics of the traditional internationalization model, namely the Uppsala model and the Born Global, whose applicability for certain situations of firms, which are often discussed in the international business literature.
Discussion
Critical evaluation as well as a comparison between two internationalization theories
Born Globals
The “born global” organization is outlined as business entities that from beginning pursues to gain competitive benefit from the sale of outputs and the use of resources in several nations. Therefore, the perspective on this phenomenon of internationalization differs from the above theory, although the company then chose a consistent and uninterrupted approach to expand their business activities into new markets or countries whereby domestic success is taken into consideration as antecedent to global expansion, the “born global” definition suggests that stated expansion can never happen concurrently to the local stage of the organization’s development quickly.
A review of existing literature on the phenomenon of born global was conducted by Tarek et al. (2019) and demonstrated the use of various theoretical approaches, and explain the born global phenomenon, across studies highlighting the significance of foundational resources (especially knowledge) in the organization. Indeed, a model that focuses on the importance of networking, or with evolution that some organizations find it easier to use resources and create new knowledge than others, thus accomplishing better performance.
However, the author further notes that there are some gaps in the born global approach, as well as the backgrounds of the born global phenomenon relating to managerial performance and behavior and specifically related to the outcome of born global strategies (contrasted with purely economic) performance. Moreover, this critique is verified by Martin et al. (2017), who reveals towards the motivation of internationalization management and cognitive skills as a key determinant of internationalization processes and decisions. Regarding the performance of congenital global companies, Knight and Liesch (2016) argue that the view of exporting companies has different goals, not only financially, but also strategically (i.e. creating strategically important markets, or simply certifying known products outside of the present market). Therefore, the born global approach must address this gap to be a broader framework that can define the internationalization phenomenon.
The Uppsala Model
The internationalization model has been developed according to experiential observations from the Swedish manufacturers and explains how the international activities of companies are growing progressively and gradually. First, this model stated that firms start global activities in the neighboring market. As of this viewpoint, physical and psychic distance is a major aspect among the host and the home nation in the procedure. Besides, psychological distance is referred to as an element that hinders the flow of information to separate language, the culture of learning.
In other words, the Uppsala model has theoretical foundation in the behavioral theory of the organization. It is also inclined by Penrose’s theory of the development of the company. Behavioral theory defines the globalization of an organization as a process where the organizations progressively rises their international engagement, that is stated in the Uppsala model by psychic distance as well as the formation chain. Also, the process grows in an interplay among growing knowledge relating to overseas market and operation as well as growing commitment of resources to those marketplaces. The key issue of the model is how companies know and its learning influence the consequence of investment actions. One more important factor of the Uppsala model is the best model, it reflects the globalization of the organization as a procedure. Additionally, Uppsala model is able to outline two forms in the globalization processes of company. The initial commitment pattern to involve in activities in a specific overseas market grows consistent with the establishment chain that is an order of segments that are created in minor incremental points with prolonged commitment as well as the higher grade of assurance for all innovative step. Moreover, the second form is clarified by the fact that firms incline to enter new market with successively greater psychic distance and geographical distance in several cases (Coviello et al. 2017).
The structure of the model differs in terms of variables relating to country and change aspects of internationalization. Characteristics of the country mentions to how many resources dedicated to the overseas market and what organizations know about the global operation and market. Change aspects consists of two elements, such as the execution of business operation and commitment decision.
In other words, the model is depending on four main perceptions, including current actions, market knowledge, market commitment, and commitment decision. Based on the Uppsala model, lack of knowledge creates a noteworthy barrier to the global expansion of companies and leads to uncertainty about overseas markets. This is noteworthy that they divided into two categories, such as market-specific knowledge and general knowledge. In this way, general knowledge is acquired using book and other sources as well as associated with general characteristics of the customers and market and interactions with other companies. Further, it can also be moved from one market to another. Then again, detailed knowledge is learned only through market experience and activities. However, it is difficult to implement this knowledge within other nations. This acquaintance is directly relating to market commitment. Also, the perception of market commitment has two extents, including the number of committed resources that have now invested within the marketplace and the level of commitment that makes it difficult to find substitute use for the resources and shifting them to it (Forsgren, 2016).
In conclusion, various kinds of theory related to internationalization address varied aspects of the decision of internationalization in companies and all have its qualifications. In this manner, the Uppsala model is more focused on the knowledge and experience acquired from these factors as an influential key element in the decision to expand business activities to the foreign market. In contrast, the born globals approach proceeds from the stage-based, sequential, and gradual approach for addressing the synchronized or fastest expansion for a particular organization, and gradually moving away from the outlook, but the decision to consider different ways to interact with different actors and environments when trying to enter internationalized organizations.
Use of two real-life examples
McDonald’s is a great example of effective expansion and internationalization around the world. Besides, the company is now present in almost every country and provides its dishes in more than 36,000 stores worldwide. The internationalization process of McDonald’s began in 1967 with the closure of the market. Subsequently, there was a gradual movement in other countries, in line with the Uppsala model of the sequential expansion. Besides, other organizations must follow or copy good practice that lead to the success with several factors, such as introducing franchising model of expansion, and merging outlets and marketing campaigns (Oliveira et al. 2018).
Amazon.com started the business in 1995. The organization’s key goal is to use the Internet to sell products that educate, encourage, and inform. This organization is considered as a Born Global organization. Customers who use Amazon.com find this interactive website as they can buy the product of their choice. In particular, customers can access the site to find specific product by choosing titles, browse, write and read comments, subscribing to individual services on credit cards to purchase, and checking the status of orders. Besides that, maximum orders are usually shipped directly from warehouse of the company between 24 to 72 hours.
Conclusion
The purpose of this paper is to examine some of the traditional internationalization phase model, including Uppsala model and Born Global model. These models are discussed in the literature on international business of multinational organizations. While the benefits of the Uppsala model are its simplicity as well as the ability to describe the internationalization of a sufficient number of organizations, not at all various studies have shown that in some organizations these assumptions are incorrect, or even correct after some corrections. The authors also put some basic assumption to compose and generalize the Uppsala model. First, organizations strive for maximum long-term profit. Second, organizations attempt to retain risk-taking at the low extent. Finally, the attempts to achieve the first two expectations are prepared at each level of organizations. Also, state of globalization affects supposed risks and chances that influence current actions and commitment decisions.
The original research found that the Uppsala model doesn’t reflect the internationalization of small companies from each country appropriately. Some of these assumptions are valid in the process of internationalization. In addition, the differences between the selected countries indicate that it is more appropriate to adapt the model to the specific business situation of each country without creating a generally applicable internationalization model. It supports the decision to ask about the general application of Uppsala model and argues that new globalization theories need to be developed to adapt to current business conditions.
References
Coviello, N., Kano, L. and Liesch, P.W., 2017. Adapting the Uppsala model to a modern world: Macro-context and microfoundations. Journal of International Business Studies, 48(9), pp.1151-1164.
Forsgren, M., 2016. A note on the revisited Uppsala internationalization process model–the implications of business networks and entrepreneurship. Journal of International Business Studies, 47(9), pp.1135-1144.
Knight, G.A. and Liesch, P.W., 2016. Internationalization: From incremental to born global. Journal of World Business, 51(1), pp.93-102.
Martin, S.L., Javalgi, R.G. and Cavusgil, E., 2017. Marketing capabilities, positional advantage, and performance of born global firms: Contingent effect of ambidextrous innovation. International business review, 26(3), pp.527-543.
Oliveira, R.H., Figueira, A.R. and Pinhanez, M., 2018. Uppsala model: A contingent theory to explain the rise of EMNEs. Internext: Revista Electrônica de Negócios Internacionais da ESPM, 13(2).
Tarek, B.H., Zouhayer, M. and Adel, G., 2019. Entrepreneurial competitive intelligence between Uppsala model and born global theories in the case of North African SMEs. Journal of the Knowledge Economy, 10(2), pp.734-755.
Vahlne, J.E. and Johanson, J., 2017. From internationalization to evolution: The Uppsala model at 40 years. Journal of International Business Studies, 48(9), pp.1087-1102.
