Bundoora Campus

ECO3BWE
Business in the World Economy

Class 3:
Getting to Know your Firm: Export
Readiness

INNOVATIVE | RESPONSIBLE | ENGAGED

Outline
latrobe.edu.au/business

Internationalisation Theories: an Overview of Three Selected Models

– Uppsala Model
– Network Model
– Born Global
Export Readiness
– Four constructs of the pre-internationalisation phase
– The Internationalisation Readiness Indicator (IRI)
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Internationalisation Theories
Uppsala Model
This model focuses on a gradual internationalisation process
that can be separated into two different dimensions:

1. The establishment chain (market commitment)

2. The psychic (and geographic) distance
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Internationalisation Theories
Uppsala Model
1. The establishment chain

Stage 1
No regular export activities
(ad hoc operations)

Stage 2
Export via intermediaries
As experiential knowledge
(usually independent agents)
increases so does the level of
commitment
Stage 3
Establishment of an overseas
sales subsidiary

Stage 4
Some cases progress to
overseas production
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Internationalisation Theories
Uppsala Model
2. The psychic (also geographic) dimension
– Psychic distance refers to the market, institutional and cultural differences
between two countries.
– Psychic distance is usually (although not always) positively correlated with
geographical distance.
– This is why this dimension of the gradual process of internationalisation in the
Uppsala model is described as a geographical expansion of the business.
 latrobe.edu.au/business

Internationalisation Theories
Uppsala Model
This model is based on a gradual learning process that flows from “State
Aspects” to “Change Aspects”. Once changes are introduced, state
aspects in which the firm operates are modified, which allows a new
learning stage in preparation for the next change.

• Response to
• Objective knowledge problems or
• Experiential knowledge opportunities

• Amount of resources • Source of experience

• How rigid or specific • Market vs firm
they are experience

Source: Johanson and Vahlne (1977). https://link-springer-com.ez.library.latrobe.edu.au/content/pdf/10.1057/palgrave.jibs.8490676.pdf

 latrobe.edu.au/business

Internationalisation Theories
Network Model
– This model indicates that a firm may internationalise its
business by establishing or taking advantage of a network of
firms and connections.
– Note that the network model implies that the firm does not
necessary follow an approach of a sequence of stages to
internationalise.
– Networks could be financial, personal, technical, supply
chain, etc.
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Internationalisation Theories

Network Model
1. The firm internationalises through a
network in another country.
2. The firm integrates an international
network.
3. The firm internationalises through a
network that is established at
home.

Extracted from Ratajczak-Mrozek M., (2012). The development of business networks in the company
internationalisation process, Chapter: The network model of internationalisation, Publisher: Poznań
University of Economics Press, Editors: K. Fonfara, pp.30-36.
 latrobe.edu.au/business

Internationalisation Theories
Born Global
– These are firms that experience globalisation from birth or
very early after being created.
– They do not follow a strategy of consolidating in one market
to then internationalise their business.
– They see the world as one market.

Example: “NOJA Power is an Australian owned company that manufacturers a

range of pole mounted automatic circuit reclosers. Since inception NOJA Power
has targeted its products for export and is a company that was born global.”
Extracted from:
https://www.nojapower.com.au/press/2006/global-bank-support-global-business.html
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Export Readiness
Before venturing into an internationalisation process the firm
needs to evaluate its readiness to export.
– Note that for the purposes of this subject we focus on an internationalisation
process that involves only exporting.
– In connection to this, we will think of an internationalization process that follows
Uppsala, similarly to Tan et al. (2010) Measuring export readiness using a
multiple-item index. EIBA Conference, 9-11 December, 2010, Porto, Portugal.

– The pre-internationalisation phase, in which the firm evaluates its

readiness to export, could then be thought as the stage before making
the commitment decision to export in the Uppsala Model.
 latrobe.edu.au/business

Export Readiness
Four constructs of the pre-internationalisation phase

1. Exposure to Stimuli
2. Attitudinal/Psychological Commitment
3. Lateral Rigidity
4. Firm Resources
 latrobe.edu.au/business

Export Readiness
Four constructs of the pre-internationalisation phase
1. Exposure to Stimuli

– There are internal and external stimuli

Internal stimuli originate within the firm and relate to a firm’s history, its products,
management, etc.
Examples: product or technology uniqueness or excess production capacity.

External stimuli originate outside the firm and could be from the domestic or
international environments.
Examples: unsolicited orders from foreign customers, encouragement from
domestic or foreign partners or increased domestic competition that calls for
internationalisation.
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Export Readiness
Four constructs of the pre-internationalisation phase
2. Attitudinal/Psychological Commitment

– This construct refers to how stimuli is perceived by the decision makers of the firm.
This factor relates to behavior of individuals and not the organisation as a whole.

• Is the stimuli received with a positive attitude?

• Do the stimuli trigger psychological commitment? Note that this commitment

is not in the form of resources allocated to an internationalisation project, but
in the form of positive behavior towards exploring the possibility of
internationalisation.
Examples: preliminary information search on potential international
markets, holding staff meetings for discussions regarding the possibility of
internationalisation and consulting with experts.
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Export Readiness
Four constructs of the pre-internationalisation phase
3. Lateral Rigidity

– This construct refers to the perception by policy makers of barriers in the

implementation of an internationalisation project.
– Lateral rigidity could be interpreted as resistance to change, risk aversion and lack
of flexibility to adapt the organisational strategy to changes in conditions.
 latrobe.edu.au/business

Export Readiness
Four constructs of the pre-internationalisation phase
4. Firms Resources

– This construct refers to the decision-maker’s perception of the availability of tangible

and intangible resources, which are necessary in the internationalisation process.
Examples:
a. Financial or human-related attributes
b. Product attributes
c. Technological attributes
d. Investment in research and development
e. Distribution channels and control systems
f. Management attributes such as skills and knowledge
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Internationalisation Readiness Indicator (IRI)

1.EXPORTING
Are you currently exporting your product/service?
2.SELLING
Is your product or service selling in the Australian market?
3.PRODUCTION CAPACITY
Does your business have spare production capacity or available staff to supply export orders for your product or service?

4.DEFINED SELLING PROPOSITION

You have a clearly defined selling proposition for your product and service and can state why overseas customers should buy from you compared with your
competitors?

5.RESOURCING MODIFICATIONS
Do you have resources and funds available to make modifications to your product or service to suit overseas customers, cultures and local standards?
6.MARKET RESOURCES
Do you have the financial resources to support ongoing marketing of your product or service overseas e.g. overseas travel, promotions, samples?
7.MANAGEMENT
Is the management of your company committed to devote staff, time and resources to sustained export business?

8.MARKET RESEARCH
Has the company undertaken initial research into overseas markets such as whether you require licenses, or what regulations or labelling requirements may
be?
9.PROMOTIONAL MATERIAL
Do you have promotional materials suitable for overseas customers such as website and brochures?
10.PRICING
Have you determined at what price you will make your product or service available for overseas customers? e.g. for products this means at least FOB
pricing
11.PAYMENT MECHANISMS
Do you have an understanding of payment mechanisms for international transactions (e.g. Letter of Credit) and managing foreign currency transactions?

12.DELIVERY
If you received an export order tomorrow, are you confident your company could process and deliver the order on time?