Introduction
Internationalization is the process of involving an organization or entities in the international market. The perception of internationalization of company is evolving rapidly in the modern world as many companies in developed and developing countries adopting opportunities to conduct international business. Besides, the internationalization of organization and business from a historical perspective begins with the human skills of conducting business at sea or at the border. There are many things a company needs to know when going international for a successful business transaction. Additionally, developing countries need to follow the most important issues for the organization to conduct business transactions and consider the political condition of the country including the availability of labor as the role of government in a foreign country (Autio, 2017). This study will examine the models of internationalization in developing markets.
Discussion
Critical evaluation as well as a comparison between two internationalization theories
The Uppsala Model (U- model)
The Uppsala globalization process is the model that helps the Company in selecting market as well as mode of entry when entering the international market. Moreover, the theory was first developed by Wenger in 2009 while observing Swedish organizations. In this model, he conducted a series of tests on a number of internationalization companies. This theory is then polished and focuses on four key points that an organization needs to follow when going international. Along with that, these include mostly the market knowledge and commitment, commitment to decision making when entering the overseas markets, as well as the establishment of foreign sales subsidiary. Besides, the present activities of companies separated into various phases and to accept several aspects of change when organization decides to expand its activities across the world. The knowledge of the market commitment from this theory assists the management of a developing organization to succeed in its business enterprise to become globalize. According to this model, there are two types of knowledge that must be practiced internationally. It is the objective knowledge of the company that can transfer from one market to another during the process of global market research or global business transaction. In addition, the second is a test of knowledge that the organization can acquire through experience. This theory leads to the conclusion that organizational knowledge and commitment to a specific market influence the way companies make decisions and the decisions they make about internationalization (Forsgren, 2016).
The commitment to make decisions when entering a foreign market which is actually an asset commitment about a foreign market has an impact on companies related to the foreign market. One more review of this model tells us about the step-by-step steps progress of the organization towards internationalization. It means that companies start its international transactions within markets that are less psychic distant. Also, psychic distance refers to a number of specific factors, including differences in language, culture, political system, and more. Additionally, this theory indicates that organizations that don’t have any business transaction or exporting link with other overseas markets. It can start transferring product to the market through the suppliers or they can enter the market by joint venture or other approach for globalizations of their organizations.
Although Uppsala model has contributed significantly to extensive understanding the process of internationalization of firms, the model itself has taken some basic international steps to define the “Total Internationalization Process” because it intended be its original unit of analysis even before we determine the change within business environment in the previous 20 years as well as it affects the development of theory. For example, the model doesn’t presents more consideration to management incentive as well as its impact on decision making or when they introduces some steps to enter the market, and ignores some other types of market entities that are problematic to impose on the model scale, like franchising considering comparatively a smaller amount of risky market entry as well as have the opportunities to develop huge market control and coverage, or licenses that require a low level of investment and deliver adequate control over market or strategic alliance and some other market activities (Santangelo and Meyer, 2017).
Born global
The perception of born global model varies from the traditional Uppsala model. Besides, the born global organization adopts a global perspective and initiates international expansion at the beginning of a business or soon. The born global firms have a tendency to jumping into the globalization stages and are considered as departing from the traditional expectations using the benefits of internationalized marketplace. Therefore, the process of internationalization of these organizations (born global) is difficult to describe through traditional theories. Improved globalization has improved the condition of born global organizations and made it easier to apply the strategies of born global. However, although the perception of born global organization looks different from the Uppsala model. Born global may be a slow process of internationalization, while it will progress rapidly (Knight and Liesch, 2016).
The born global companies have many goals of rapid internationalization. There are a number of reasons why Born Global expansion is facilitated. One of the important reasons is the growing role of niche markets and the growing demand for customized or specialized products. Moreover, shorter product life cycle is one of the aspects causing Born global organizations for adopting the global perspective regardless of its size and age. These aspects supported SMEs in considering exporting its products and achieving internationalize in its initial stage. Additionally, other significant aspects triggering the launch of Born Global include significant advances in manufacturing, communications, and transportation, the importance of global networks and alliances, and the broad capacity of individuals, with those of the entrepreneur/ founder who begins internationalizing organizations (Tarek et al. 2019).
The Born Global is evolving in huge numbers worldwide and perhaps reflecting an evolving paradigm, including the potential to become one of the major species in the international business environment. As an understandable, this born-global phenomenon is exciting because it arises from an international exchange system where there can be active participants in international business regardless of tangible resources, age, and experience, can be a dynamic participant in international business. While large global organizations and the negative aspects of internationalization are often present in reports on global branches published in the popular media, the growing role of globalization spreads more optimistic possibilities. In relative terms, born global can be seen as an international business system where more diverse organizations can succeed internationally. The purpose of future research is to gain a sense of internationalization, which reflects an endless trend (Martin et al. 2017).
Comparison between above two models
One of the most important aspects of the Uppsala model is the amount of experimental acquaintance in the hands of entrepreneurs. Acquiring experimental knowledge is more difficult than anyone can create long-term objective knowledge in the regional market. If one has experience from the beginning, it is easy to predict the business opportunities that will be existing in the foreign market. However, the Uppsala model fails to determine the particular environment and features of the market industry of a particular country. These include economic scale, government regulations, and intensity of research and development. On the other hand, the main factors influencing the globalization strategy of Born global organizations have been identified as networks, investors and demand in specific markets. Besides, close partnerships have also influenced market choices, expansion speeds and entry modes. The Born global organization is a rich organization that exists in a variety of environments. Organizations need to be organic according to the different environments and growth aspirations of the organization (Vahlne and Johanson, 2017).
Use of two real-life examples
Zara use the expansion strategies of Born Global in fast-paced global fashion based on the theory of internationalization. To understand the role of fashion in dynamic internationalization, the internationalization strategy of Zara includes aspects related to resource-based theory, psychic distance, and knowledge sharing are covered. Zara implements high-risk and high-reward model of globalization to keep its innovative product and retail position in an authentic manner. The born global expansion strategies of Zara produced psychic distance paradox that is initially very effective in foreign markets. This is recommended that the fashion retailer, like Zara can achieve success on top of the “dynamic strategic planning process” that could expand into the international market.
In other words, Coca-Cola had several processes for internationalization. One of the strategies is to form of franchises in varied countries in the world. Besides, Coca-Cola adopts the Uppsala internationalization model and chooses franchising options that have been very successful. Moreover, Coca-Cola has made some integrations and acquisitions in the process of internationalization. Coca-Cola has a franchise in almost every country and this franchise helps company to distribute their products. Additionally, the Uppsala model is very effective in understanding the process of internationalization. In this model, the company invests in foreign markets. The business may form partnerships with other firm established in separate nations. The two firms then sell their products together. For example, if Coca-Cola company acquires or merges with another organization in various nation, Coca-Cola sold its products in the organization’s stores (Knight and Liesch, 2016).
Conclusion
The Upsala model is one of the most well-known models of how organizations conduct their internationalization processes. It shows a successive way and it means that the organization incrementally internationalize its activities. The model assumes that there is a deficiency of knowledge for overseas markets that undermines internationalization, so it shows that companies need to establish themselves in the local market, then enhance its resources and commitment in the target market in stage, continuing to the next phase once adequate knowledge and understanding of the situation of the overseas market have been achieved. The model proposes a uniform step-by-step process for the globalization of companies aimed at replicating each corporate country that tends to enter new markets at psychic distances. The model is an adequate direction to internationalization because it encourages additional learning that minimizes uncertainty related to foreign markets. However, it may be criticized for failing to consider some of the information obtained so that it can be transferred.
References
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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.
Santangelo, G.D. and Meyer, K.E., 2017. Internationalization as an evolutionary process. Journal of International Business Studies, 48(9), pp.1114-1130.
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.
