Discuss the implications of the availability and use of the Internet for the Uppsala model of internationalisation.

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SID: 0012130

European Business Studies (Landshut)

Module Title: International Business Environment

Module Code: CPB1007C

Assignment

  1. Discuss the implications of the availability and use of the Internet for the Uppsala model of internationalisation.

International Business concerns commercial cross border activities.  It is the international movement of goods, capital, services, employees and technology. “Businesses undertake international operations in order to expand their sales, acquire resources from foreign countries or diversify their activities.” (Anderson 1990). In former times there were many obstacles like, foreign languages, laws, customs…and it was much harder to overcome them and do international businesses than today.

 The Uppsala model of internationalisation was established in order to explain the process of internationalisation of firms. It was established in 1977 by Jan Johanson from the Uppsala University in Sweden, after which the model is named and Jan-Eric Vahlne from the Stockholm School of Economics in Sweden.

The Uppsala model has grown out of empirical research based on microeconomic and marketing theory about Swedish firms competing internationally. Research from other countries had the same results like in Sweden and confirmed the Uppsala model. It is one of the most widely spread concepts of the mechanism of internationalisation.  It is based on the behavioural theory of the firm (Cyert and March 1963; Aharoni 1966) and Penrose’s theory from 1959 of the growth of the firm. The Uppsala Model sees the internationalisation as a slow, step-by-step process whereby firms slowly get more and more involved into international businesses. This process is an interplay between the development of knowledge of foreign markets and transactions on the one hand and commitment of more and more resources to foreign sales on the other. According to the Uppsala model a firm can get market knowledge mainly from the experience of operating in the foreign country.

This experience is country specific and cannot be generated to other foreign markets. But once a firm has this specific experience and knowledge it gets further business opportunities, reduces market uncertainty and increases its international operations.

Characteristic for the Uppsala model is that it sees the firms as a system of small parts that are loosely connected and each part has its own interests and ideas.

The Uppsala model says, that there are just three circumstances in which the slow process with its small stages can be accelerated. These three exceptions are:

  1. When the firm has so large resources, that the consequences of failure would have no real effect.
  2. When the firm already has experience from similar markets and can generalize this experience to the specific market.
  3. When the market is stable and the firm can gain the relevant knowledge in other ways than with experience.
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When the Uppsala model was established in 1977 the possibility of getting knowledge without making experience was small. There were many barriers and obstacles on the way to internationalisation like geographic distance, language problems, communication possibilities, customs… but now these barriers can be overcome with the help of the Internet.

The Internet is a connection of many networks to one network. It links individual, companies, governments, universities, and research establishments in the whole world together.  

It was originally established in the early 1970’s for the US Defence Department but only in the early 1990s it was opened up ...

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