Understanding the Internationalisation Process of Organisations

How do organisations internationalise?
1. Johanson and Vahlne Uppsala Model- The process model of internationalisation (1977)
This model was based on empirical evidence from studying Swedish firms. The major assumption of the Uppsala model is that firms develop their international operations by taking incremental steps based on knowledge about foreign markets and this knowledge determines their commitments to foreign markets (Johanson andVahlne, 1977). Of importance in the model is the distinction between objective and experiential knowledge.
Objective knowledge is generalised and relates to concerns such as market methods and statistical tools while experiential knowledge is more indigenous to the foreign country and is about culture and

Market knowledge

2. Commitment decisions
3. Market commitment
4. Current activities
2. Evaluating the limitations of the Uppsala model in the modern era
1. The reactive nature of businesses
In a tumultuous business environment, being proactive is the norm for any business to outrival rather than being reactive and uncertainty reducing as conjectured by the Uppsala model. Finding opportunities are not always a result of deliberate search and knowledge acquired (Holm et al, 2009). Opportunity seeking can arise out of many other reasons such as:
• Serendipity (Denrell, Fang and Winter, 2003)
• Luck (Barney, 1986)
• Unpredictable causes such as accidents (Hayek, 1980)

2. Homogenous markets
With globalisation, the world has become more homogenous and this has led to a decrease in psychic distance, which has been defined as Johanson and Vahlne as the sum of factors preventing the flow of information from and to the market such as culture and differences in language.

3. The internationalisation of units of

The network model of internationalization (Johanson and Mattson, 1988)
Identifying the roles and strengths of the actors within a foreign network provides the firm with an understanding of possible constraints and opportunities (Johanson and Vahlne, 1992).
In contrast to the Uppsala model, the network model assumes that experiental knowledge can be gathered through by gaining access to other firms without necessarily going through the same experiences (Eriksson et al, 1998). Thus, the modus operandi has changed from gradual expansion to one in “leaps”.
The model is considered to be closely echoing business reality. For instance, it shows the importance of maintaining long term relationships with customers, suppliers and other actors (Hadley and Wilson, 2003). It also explains behaviours that fall outside the traditional models, such as a late starter choosing to enter into the most distant markets (Axelsson and Agndal, 2000). This is contradictory to the belief of the Uppsala model in which firms choose to expand with the closest markets first.
The position of the firm in the network is the most important driver for internationalisation and is based on two elements: degree of internationalisation of the firm and degree of internationalisation of the market. Based on this, a typology of 4 market positions are