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    The Uppsala Model proposes that firms gradually increase their international involvement in foreign markets starting with no regular export activities and progressing through exporting via independent representatives, sales subsidiaries, and eventually production/manufacturing. The model suggests that firms enter new foreign markets that are psychically close and gradually move to more distant markets as their knowledge and experience increases. It outlines a learning cycle where market knowledge leads to commitment decisions and current activities that further increase knowledge.

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    The Uppsala Model proposes that firms gradually increase their international involvement in foreign markets starting with no regular export activities and progressing through exporting via independent representatives, sales subsidiaries, and eventually production/manufacturing. The model suggests that firms enter new foreign markets that are psychically close and gradually move to more distant markets as their knowledge and experience increases. It outlines a learning cycle where market knowledge leads to commitment decisions and current activities that further increase knowledge.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    21 views14 pages

    Upsula Model1

    Uploaded by

    chhavib
    The Uppsala Model proposes that firms gradually increase their international involvement in foreign markets starting with no regular export activities and progressing through exporting via independent representatives, sales subsidiaries, and eventually production/manufacturing. The model suggests that firms enter new foreign markets that are psychically close and gradually move to more distant markets as their knowledge and experience increases. It outlines a learning cycle where market knowledge leads to commitment decisions and current activities that further increase knowledge.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 14

    Uppsala

    Model

    Uppsala
    Uppsala Model
    Model

    Group 16
    Chhavi Bhandari
    Divya Gupta
    Freejo Jose
    Pragjyoti Samal
    Rajat Chandra
    Shubham Agarwal
    Agenda

    • Context
    • Psychic Distance
    • Variables Governing International Business
    • Learning Cycle
    • Establishment Chain” of Market
    Commitment
    • Case: Johnson Electric
    • Internet Up against Uppsala Model
    • Merits of the Uppsala Model
    • Deficiencies of the Uppsala Model
    • Merits
    • Deficiencies
    Context

    Rank   Country   Companies  


    1  United States 140
    2  Japan 68
    3  France 40
    4  Germany 39
    5  China 37
    6  United Kingdom 26
    7  Switzerland 15
    8  Canada 14
    8  South Korea 14
    10  Netherlands 12
    10  Spain 12
    Psychic Distance Uppsala
    Model

    “Psychic Distance” – Measure of barriers to market knowledge.


    It is defined in terms of factors like:
    lang cult poli educati
    legal onal
    uage ure tical systems
    Companies begin their operations in fairly nearby markets and
    gradually penetrate to far-flung markets
    Variables Governing International Business Uppsala
    Model

    Level of market
    Level of knowledge to
    commitment in steer the
    a particular host direction of the
    country geographic
    expansion

    Firm’s Own Commitment


    decisions: Market
    Operations:
    uncertainty and
    Experiential
    perceived risks
    knowledge is and
    crucial. opportunities.
    Learning Cycle Uppsala
    Model

    Commitment
    Market knowledge Decision

    Current
    Market Commitment
    Activities
    “Establishment Chain” of Market Commitment Uppsala
    Model

    Irregular export
    activities

    Export via
    independent sales
    representative
    Uppsala
    Model

    Production /
    Manufacturing
    Market Commitment

    Sales subsidiary

    Export via
    Independent
    Representatives

    No Regular Export
    Activities

    Market Knowledge
    1979 – China’s
    modernization
    Late 70s –
    programme –
    Became a
    moved to low
    Mid 70s – supplier to West
    cost
    Started German auto
    manufacturing
    producing mfgs
    in Chine
    1972 – motors for
    Diversificatio business
    n with machines
    motors for
    1949 –
    Founded by
    household
    Wang Seng appliances
    Liang in Hong
    Kong to mfg.
    micro motors
    for toys
    Internet Up against Uppsala Model Uppsala
    Model
    Pros of Uppsala Model Uppsala
    Model

    ●
    Export oriented firms
    Influenti ●
    Useful for companies and
    al Theory government bodies.

    Firms are often relatively small and


    ●

    Sequenti do not belong to a multinational


    company with access to sufficient
    al Stages resources.
    Pros of Uppsala Model Uppsala
    Model
    Cons of Uppsala Model Uppsala
    Model
    Deterministic ●
    ● Internationalisation process once started, cannot be
    stopped.
    Establishment Chain
    Gradual nature of ●
    ● Firms may ‘leap frog’ ahead
    internationalisation ●
    ● Firms may be ‘Born-Global’
    Contested.
    ●
    ● Paths may be industry dependent

    ●
    ● Assumed to be exports
    Starting Point ●
    ● Internationalisation also includes importing, licensing, and foreign
    direct investment.

    Manufacturing ●
    ● Services sector neglected
    ●
    Focus on individual firms excluding the effects of networks
    based
    ●

    No predictions ●
    ● Technology, firm size, strategic considerations, economies
    of scale etc excluded.
    Possible
    When Firms Do not need to Follow Uppsala Model Uppsala
    Model

    Firms with access to a Once a firm has gaine


    Relevant market
    large pool of resources experience from a
    knowledge can be
    are less susceptible to market with similar
    acquired in ways other
    the consequences of conditions, it may be
    than through direct
    (bad) commitments and possible to generalise
    experience when market
    able to step up their this experience and
    conditions are stable and
    internationalisation apply it to the new
    homogeneous
    effort at a faster rate target market.

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