The uppsala model a poor guide

The uppsala puzzle a poor use upThe Uppsala model is one of the best known models of how firms set active the internationalisticisation subprogram. It presents a sequential approach, meaning that the firm internationalises incrementally. The model assumes that there is a lack of familiarity of the foreign market which is detrimental to internationalisation, therefore it suggests that a firm should firstly establish itself in its domestic market, then increase its commitment and resources in the target bucolic in stages, processioning to the next stage erstwhile sufficient understanding and knowledge of the foreign market conditions render been attainted. The four stages identified by this model are referred to as the establishment chain. Step 1 is when the firm has no regular export activity amount 2 is when the firm begins to export to the target country through agents or independent representatives step 3 involves the establishment of sales subsidiaries and finally the 4th step is starting to produce and or manufacture in the target country.This framework as well as relies heavily on the concept of psychic outmatch, defined as the factors preventing or disturbing the flows of information amidst firms and markets. (Tayeb, M. International business P141) This suggests that firms are more likely to pass water international relations with countries which appear to assimilate the most similarities to them. These factors could include language, culture, semipolitical systems, educational systems and industrial development. Psychic distance is often linked with geographical distance, just this is not always the case. One example of this is the relationships between United Kingdom with countries like New Zealand and Australia the countries have a relatively small psychic distance as they speak the same language, have similar cultures and also similar political and educational structures, and yet are geographically far apart.So how reusable is thi s model, the authors themselves do not state that it can be used in all circumstances.One of the first criticisms of the Uppsala model is that it can be connected to twain the firm and the market. The study carried out by Johanson, J and Wiedersheim-Paul in 1975 highlighted the internationalisation process of the four firms involved, however the model itself tends to the internationalisation of a firm in a specific market. expandThe model suggests an identical step-by-step process for the internationalisation of the firm, which is intended to be repeated for each country that the firm tries to slip in into. (Firms tend to enter new markets with successively greater psychic distance) However this view does not suggest a degree of difficulty from step to step, nor from country to country. Furthermore It assumes that the quantity and type of knowledge required is identical in each market, when in fact some knowledge will be moveable and apply to more than one market. On the other ha nd some markets will be vastly different. The model is a fairly good guide to internationalisation as it encourages incremental learning which reduces some of the uncertainties linked with foreign markets. However it could be criticised because it fails to take in to consideration that some of the information obtained is transferable.The Uppsala model also fails to consider the specific market environment and industry characteristics in the target country. This includes economies of scale, research and development intensity and also government regulations. expand internationalisation can start at any stage skips stages, an example? Of an FDI W/out export etc. Mixed empirical support, especially stages e.g. evidence of leapfrogging, quickeningSMEs for example often begin the internationalisation process when they relatively small and gradually increase their international presence. The majority of SMEs have a lack of international knowledge, as they are traditionally domestic busin esses resulting in limited international experience. Therefore the decision to launch themselves internationally is more risky than that of larger firms, this is also due to the required investment needed to internationalise, inadequate management and lack of brand recognition. For these firms it seems that the Uppsala model allows them to gain this essential experience in stages, increasing their knowledge of the international markets and allowing them to analyse the opportunities and problems which exist. By allowing the firm to familiarise itself with the market, with relatively low risk exports the Uppsala model removes or reduces most of the disadvantages that SMEs face when trying to internationalise, however it does not deal with the potential lack of finance facing many of these firms. The firm may also encounter problems with instability of exchange rates, local laws and regulations or political shocks however this is not exclusive to SMEs. This suggests that the model is q uite an efficient guide for SMEs however with a lack of capital the SME may find it difficult to progress to the 3rd of 4th stages unless the exports have generated them sufficient profits.Edwards and Buckley (1988) found that most Australian firms who had invested in British factories or facilities had not passed through an export phase. The Uppsala model highlights internationalisation as a slow and steady process of learning through experience, but thanks to the advances in technology, education and travel many new businesses have vast amounts on international knowledge, thanks to relations with MNCS. This highlights that companies with experience, or entrepreneurial firms would find the Uppsala model a poor guide to internationalisation, as they already have sufficient knowledge and resources to skip stages and invest in a foreign country. The Uppsala model does not consider the use of strategic alliances or joint ventures as pathways to internationalisation. Joint ventures allo w firms to share each others skills and knowledge of each others markets, thus reducing the risks. One example of this is NUMMI (New United Motor Manufacturing Inc), this is the joint venture between General Motors and Toyota. Toyota would benefit from access to the US market, and General Motors would benefit from Toyotas technological knowledge and its renowned management structures. (Czinkota, M, Global Business P414)The rise of born international firmsMaybe some positives?Conc. How good/poor is it as a guide. Why? Refer to argumentsInternationalisation is the process of increasing involvement in international operations (Welch and Luostarinen). Welch, D.J./Luostarinen, R., Internationalization Evolution of a Concept, Journal of General Management, 14(2), 1988, pp. 36-64Clegg J, Internationalisation strategies P193-196 (1997) Macmillan PressTayeb, M. International business (2000) P141, Prentice HallJohanson, J and J-E Vahlne, (1977) The internationalisation process of the firm P2 3-32Johanson, J and Wiedersheim-Paul (1975) The internationalisation of the firm P305 322Czinkota, M, Ronkainen, I, Moffett, M and Moynihan, E (2001) Global Business P414, Harcourt College Publishers