Case Study: The Uppsala Model Of Internationalization

In this essay, we will examine the internationalisation process of IKEA, Swedish Company founded in 1943 and the world's lieder in supplying home furnishing at low price with imaginative styles and application facility. In addition, we will describe from the different frameworks that have sought explain the Internationalisation process, the factors that have taken this company to perform its international expansion. From to be a simple local shop in a small town in Sweden 60 year ago, to be an actual powerful multinational with more than 76.000 employees and shops in more than 43 countries.

In addition, the internationalisation is the strategy to occupy the foreign market step by step. Also, the porter’s competitive advantages theory is to analysis the strategies of global business. They could divide to three strategies: over cost leading, diversity, and market focus strategy (Passemard& Calantone, 2000). The cost leading strategy focus on establish efficient scale production facility and minimize the research and advertising cost. The diversity strategy focus on introduce some unique product in whole industry. But, this strategy will with a high cost price. The focus strategy is attack of a particular customer group or specialist regional market, its purpose to design the service for a particular target. Consequently, the companies need to consider the internal and external factor condition, such as: factor condition, demand condition, related and supporting industries condition, and firm strategy and rivalry. They are called diamond system. This dynamic system gives the company a standard to measure theirs advantage and disadvantage before they enter foreign market. Moreover, the specific advantage in Internationalisation of Production is give companies a new choose for exhausted market (Strange,S. 1992). In an international environment, the companies will face more uncertain and unequal condition than home market, therefore the companies need keep the attention of more factors:

The company’s products are not selling in the market even after making several changes and reforms in the operation process i.e. experiencing difficulty in gaining traction in the market.

In a time of global commerce, new business ventures can take on many forms. What used to be local or even national companies have become world-wide. International growth of a business can be extremely beneficial but is not without its challenges. Different countries have different peoples and different cultures - different ways of doing business altogether. If a venture is to be successful, these differences must be well understood.

International business meshes across multiple domains most notably market entry strategies and sociocultural variances. Factoring in those two critical aspects and giving them the right amount of attention is the separating line between success and failure. Terralumen, Blue Ridge, and Delta are all successful companies; However, by not observing the basic requirements of

In recent years, many researchers have tried to determine factors that affect the internationalization process and the success of internationalization. One of the factors that they have determined is psychic distance. Psychic distance is still an obscure concept to some, though. This literature review aims at describing exactly what psychic distance is and how it affects internationalization.

The company depicts no stress in acquiring raw materials as well as problem with marketing plans since; the raw material is

Internationalisation advantages purely relates to the fact that should it be advantageous to internationalise once all things are considered, it should be done. Thus, Sternquist’s (1997) adaptation of Dunning’s (1981) elective paradigm theory only captures the motives behind internationalisation and whether it is the right idea to expand globally; it does not focus on the strategy firms undertake to enter foreign markets and how they behave once there.

However, “The Uppsala Internationalisation Model” (Johanson & Vahlne, 1977, 1990), argues that organisations grow through incremental or gradual process by gradually increasing their internationalisation activities as they gain more experience and learning. Organisation they believe commit more resources as they gain more knowledge a certain market by first investing in close psychic distant market, (Banalieva & Santoro, 2009; B Elango, 1998; Balasubramanian Elango & Sethi, 2007; Johanson & Vahlne, 1977, 1990; Johanson et al., 2009). Johanson et al, (2009), though has revisited the Uppsala Model and propose a network theory concept approach to internationalisation,(Johanson & Mattsson, 1988),. Acknowledging that business environment is viewed as a web of relationship or network, where

The biggest factor to making multinational business successful and possible is the globalization between the countries in the world. Breaking the invisible barriers such as trade tariffs, transportation, has helped the business world smooth into international/multinational corporations. Through technology, communication, transportation, and foreign permissions, an American manager can hold a meeting online with an Indonesian manager in seconds. When barriers are hurdled other can be encountered. For example, if a business has the ideal product for a country/market, but doesn’t keep in consideration the tasks and information that needs to be known from this region, the success of the product can be jeopardized. This is where the Hofstede’s theory comes to play and elaborates in great detail the differences between two cultures.

The traditional internationalization models regard that firms’ capabilities (internal factors) lead firms to make internationalizing activities. On the contrary, OC paradigm refers to internationalization as a process that internal and external factors interact so that firms obtain a competitive advantage in the global level. According to this innovative model, firms achieve superior performance by adapting and integrating in view of a varying environment. Considering that BGs try to survive, operating under uncertain conditions that change all the time, OC constitutes the most suitable way for studying them.

The most challenging decision that a company may face in internationalization is the degree of standardization or adaptation in its operations. The question of standardization or adaptation affects all avenues of a business’ operations, such as R&D, finance, production, organizational structure, procurement, and the marketing mix. Whether a company chooses to standardize or adapt its operations depends on its attitudes toward different cultures. These attitudes are defined by three orientations toward foreign culture: ethnocentric, polycentric, and geocentric.

Subject : Appraisal of a MNE's recent market entry (2007-2010) ( 1. Firm Motivations for internationalization 2. Entry Strategy 3. Corporate Strategy)

In 1977 Swedish researchers at Uppsala University came up with a model/theory how businesses should grow their activities in foreign market, this model explains that companies should select an entry mode by taking into consideration their own resources and exploring costs, and risks based on market nature. (Johanson and Vahnle, 2009) Researchers at Uppsala University in their empirical study found that Swedish firms mostly started their process of internationalization by exporting, initially companies had agents that represented them in foreign market, but these firms exported in countries that had little differentiation in culture, language and political systems from their home country, this was labeled in their model as physically close countries. Uppsala Model considers two types of knowledge objective and experience based knowledge, the model describes that after first entrance in foreign market businesses understands how to work in external country, and later they step by step increase level of internationalization to physically distant countries. (Johanson and Vahnle, 2009) But, can Uppsala model be applied to services? This model was mainly reliable for manufacturing industries; a paper with contrary arguments was published in 2008, providing two variables; environment-related and service specific, to question whether Uppsala model can be used for service

In the beginning we want to going for huge sales for this we have to increase our distributor’s number in whole country. We have to identify the main distributors in the remote area of Bangladesh. We have to evaluate their capacity and then try to convince to sell our product in their distribution network more frequently. We have a plan an action program just for our distributor’s sales persons. It will be discuss in detail later in the action programs.