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1502074027 Hw 2 Essay

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Introduction
As the advancement in telecommunication, transportation and production, internationalization is an inevitable trend of corporate operation. Although there is no universal definition of “Internationalization”, it is always understood as the tendency of enterprise to operate across boundary lines. It is obvious that the internationalization improve the efficiency of labor and resource allocation. Many famous theories have been published to explain international activities and these theories have been evolving over time. Founded by Swedish researchers, Johanson and Vahlne, Uppsala Model has been one of the most discussed dynamic theories in Nordic and world. It explains the steps of firms intensifying their activities in the foreign markets. This essay will firstly discuss the initial Uppsala Model presented in 1997. Following this, it will describe the revisited model in 2005 and identify the differences. Finally, it will look at the key factors influencing the internationalization speed according to the revisited model.

Initial Uppsala model
Through the empirical observation and research of data of a great deal of Swedish subsidiaries and international companies, Johanson and Vahlne from Uppsala University concluded the patterns of internationalization process. The assumption of the model is that before the internationalization strategy, firms are well established and gain experience in their domestic market.

One is the development stage. The foreign operation is carried out in incremental and small steps. It unfolds through 4 successive stages, namely ad hoc export, export via agent, sales subsidiaries and production. Ad hoc exporting marks the start of the internationalization in the most cases (Carlson, 1975; Forsgren & Kinch, 1970). At this stage, there is no regular export activities. This would then be followed by companies formalizing their export through contracting with intermediaries. These intermediaries are usually agents representing the company in foreign countries. As the business expands and sales volume increases, companies will send their own sales subsidiaries abroad to take the place of the agents. When the sales continue to grow, companies would choose to build manufacture plant in foreign countries to overcome transporting expense and trade barriers.

Another feature of the pattern is that companies usually start their internationalization strategy by stepping into countries with close psychic distance. Psychic distance is the perceived differences between the domestic and foreign country regardless of the time and space factors that differs across cultures. Factors including cultural factors, linguistic differences, economic situation and political system can all affect psychic distance between two countries. Then, they would gradually enter countries with longer psychic distance. The model describes the international operation as the process of company’s experiential learning and incremental commitment. Eventually, this advances the...

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