Uppsala model

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The Uppsala model[1] is a theory that explains how firms gradually intensify their activities in foreign markets. It is similar to the POM model.[2] The key features of both models are the following: firms first gain experience from the domestic market before they move to foreign markets; firms start their foreign operations from culturally and/or geographically close countries and move gradually to culturally and geographically more distant countries; firms start their foreign operations by using traditional exports and gradually move to using more intensive and demanding operation modes (sales subsidiaries etc.) both at the company and target country level.[3]

The Uppsala model also proposes that foreign sales begin with occasional export orders that are followed by regular exports; and the POM model states that the first sales object is physical product – services, knowledge, and systems are possibly, but not necessarily later added to the sales objective.[3] Additionally, the POM model assumes that the first expansion in the sales object/product, operation and market strategy concerns expansion to new foreign markets.[3] Finally, the firm will not commit higher levels of resources to the market until it has acquired increasing levels of experiential knowledge and therefore the internationalization evolves stepwise at a relatively slow pace because of local market regulations and/or organisational learning.[4] Uppsala model specifies that level of commitment may also decrease or cease if performance and prospect are not sufficiently met.

Note: commitment is defined in terms of the product of the size of the investment times its degree of inflexibility. While a large investment in saleable equipment does not necessarily indicate a strong commitment, unwavering dedication to meeting the needs of customers does.

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References[edit]

  1. ^ Elgar, Edward (2003). Learning in the Internationalisation Process of Firms. Johanson & Wiedersheim-Paul (1975), Johanson & Vahlne (1977). p. 261. ISBN 1-84064-662-4. Retrieved 2009-03-21. 
  2. ^ Elgar, Edward (2003). Learning in the Internationalisation Process of Firms. Luostarinen (1979). p. 261. ISBN 1-84064-662-4. Retrieved 2009-03-21. 
  3. ^ a b c Elgar, Edward (2003). Learning in the Internationalisation Process of Firms. p. 261. ISBN 1-84064-662-4. Retrieved 2009-03-21. 
  4. ^ Elgar, Edward (2003). Learning in the Internationalisation Process of Firms. Nordström & Vahlne (1992). p. 261. ISBN 1-84064-662-4. Retrieved 2009-03-21.