Internationalization Theories: Uppsala Model vs Network Theory

This article discusses the Uppsala Model and Network Theory as internationalization strategies for expanding business activities in foreign markets. It compares and evaluates the two theories, highlighting their benefits and limitations. Real-life examples of companies like Paytm and Reliance are used to illustrate the application of these theories. The article concludes by emphasizing the importance of building networks with customers in the internationalization process.

Global Marketing & Sales
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Individual assessment
Component 2
Introduction
Every business organization wants to expand their operational activities in other countries
with the aim of generating larger profitability level. In this different strategy of global marketing
is also play a crucial role as it provide a wider area and platform to company in developing their
business activities at market place. This will directly contribute in enhancing the overall
performance of company at market place. In context of this, Paytm is a leading online company
that going to expand their business in UK market in order to increasing their market share. For
this company also use various internationalisation theories that help them in developing its
positive brand presence and also make their performance more competitive.
Critical evaluation as well as comparison between two internationalisation theories:
Internationalization is the method of involving businesses or organizations in
international markets. The idea of organization internationalization is growing rapidly in the
modern world, as many organizations of established and emerging or developing countries are
taking advantage of the ability to carry out their business transactions internationally.
Internationalization is the process of making products and services available on the market
outside the country of origin in which they are made or the region in which they originate.
Business goes international in order to compete for resources that are scarce within their country
and to sell their goods with the aid of the global economy (Coudounaris, 2018). The company
that is internationalizing must improve its position in such a way that it can comply with the
rules and regulations that have been laid down by foreign countries, so that they can perform
their business transactions effectively, in addition to demonstrating the ability to deal with
volatility and the exchange rate and the contradictory policies of those countries. In context of
this there some effective model of internationalisation such as Uppsala model and network
marketing model. Both are effective for company in entering into new market at global level.
Both models can be understood by following description:
Uppsala model:
The cycle of internationalization of Uppsala is a blueprint for the company's selection of
the market and the mode of entry as it moves internationally. The theory was first developed by
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Wanger in 2009 while watching Swedish films. In their model, they made an experiment that
companies internationalize by pursuing a sequence of chains of establishments. This idea was
later refined and based on four key aspects that the firm would pursue when going international.
These include, in particular, business experience and engagement, engagement to decision-
making before entering the international market, Establishment of a global sales division and the
company's current operations, which are divided into various stages, and to follow true aspects of
change when internationalizing the product. In context of this, an effective awareness of this
theory's contribution to the market helps the management of an emerging company succeed in
internationalizing its business enterprise. According to this model, there are two forms of
international commitment awareness. As, these are practical objectives and aspect of an
organization that can be moved from one market to another in the course of carrying out an
international business transaction or looking for an international market. The second is the
experimental expertise that one firm can benefit from experience. This theory suggests that an
organization's experience and dedication to a specific market has an impact on its dedication
decision and on the manner in which companies have taken decisions on current
internationalization activities.
Network theory of internationalization:
Network Theory of Internationalization claims that recent new companies or emerging
economies do not follow a step-by-step method of internationalization, internalize their market
transactions and other aspects of firms through the availability of network partners' tools. In this
context, many emerging nation-state firms that are internationalizing are to be surrounded by one
or more networks via ties with their manufacturers, contractors and customers. Mainly, A
business network is defined as a collection of two or more interconnected business relationships
that bind the business organization together by exchanging information, ideas and products
between the participating entity. Networking as a source of business intelligence and expertise
that can be retained as a long-term usage for businesses when there is no longer a partnership
with the host country. This means that networking is a way of doing business transactions and
extending business from home country to host country without the aid of the host country, as the
knowledge was kept before the networking process. Therefore, Network plays a critical role in
the conduct of international business transactions and serves as a bridge for internationalization
between firms. The network theory underscored the potential of the parties involved in the
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internationalization of firms by developing a closer partnership with consumers, suppliers and
distributors, which encourages the internationalization of firms. The partnership that has been
developed allows firms in the process of internationalization to create mutual confidence and
commitment to market awareness.
Use of two real life examples
Paytm, is an Indian multinational e-commerce and finance company that provides online
facilities such as mobile recharge, payments of utility bills, booking movie tickets etc., Paytm
was founded in the year 2010 by Vijay Shekhar Sharma. After a successful run in India, now
company is thinking of establishing its business in United Kingdom.
Reliance is another example as it expanding their business in foreign environment. This is
one of famous multinational conglomerate company that wants to execute their operational
activities in another company with the aim of generating more profits and returns.
Most of the companies wants to expand its business in foreign environments so they
adopt the method of “internationalization”. It is a symbol of success and progress, as now
company can reach out to a large number of customers. In the process of industrialization there
are many complexities thus, different scholars have designed several theories adopting which
company can easily accomplish their task of establishing their business. Two of the theories that
will be discussed in this assignment are Uppsala model and Network Model.
Uppsala Model: this model has a theoretical base of behavioural theory and tends to explain
how gradually company increase its involvement at international level. All this is done with the
help of psychic distance and establishment chain. Generally, it has two patterns first one explains
about how a company can engage its business operations and develops itself in foreign market
through “establishment chain”. Second one is by “physic distance” which means, organisation
tend to enter into the market which they understand and where loss and uncertainty is low i.e.
where company can see large amount of opportunities for having a better business growth.
Therefore, it can be said that for establishing business with this pattern requires a lot of
experience of targeted market. Moreover, Uppsala Model has four core concepts divided into
state aspects: includes market commitment, market knowledge and change aspects: current
activities, commitment decisions. All these are inter-linked with one another and generally
depends upon each other. Therefore, while establishing this business it is important that company
consider all the factors so as to operate its business in an effective manner. For example: Paytm,
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in its initial stage of establishing its market can use “establishment chain” pattern. This will help
them in making connection with different firms, suppliers and other people in United Kingdom.
For instance: to start off, first Paytm can offer option of online bill payments than gradually can
move towards other choices like tickets booking for moves, amusement parts and different
events. Besides this, they can join hands with key partners in United Kingdom such as Banks
with escrow services, hotels, shopping centres etc., moreover, this will help them in having a
proper understanding about the market and people of United Kingdom. Therefore, after gaining
experience company can now finally implement “physic distance”. Thus, all these activities will
help them in running their business in an effective manner.
Another example is Reliance, is a multinational conglomerate company operate its
business in India and also expand at international level for generating larger profitability and
competitive success as well. As it committed to innovation led, exponential growth in the
different areas such as hydrocarbon exploratory and production, petroleum refining, natural
resources, retail and telecommunications. In context to internationalisation process in case
company use network theory they does no responsible for follow traditional ways. As they
responsible for build strong network with people like suppliers and customers as well. For
attaining the same, company using various tools to invite or attract large number of customers
towards its services.
As per above comparison of two different organization and their internationalisation
process network theory is consider as an important method and theory in expanding their
business at global level. The main reason behind this is that it is cost effective and also assist in
inviting more and more people towards its services. On the basis of above implementation it is
stated that internalization procedure in not costly and they scan easily expand their business
activities at global level by building proper network. This will contributes in improving the
possibilities of attainment of competitive advantage from rivals.
Conclusion
From the above-mentioned assessment, it is having been concluded that, expanding
business into another country is not an easy task as it creates various issues in-front of company
but at the same time also provide wider area or opportunities to attain higher success. In this
various internationalization theories such as Uppsala model and Network Model. Both theories
are beneficial in improving the possibilities of attaining success within another country. But on
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the other side, building network with the customers play a crucial in internationalisation process
as it help in inviting more and more customers towards the company products and services. In
context to this there are some drawbacks and limitation with Uppsala model is that it is
deterministic and also interdependencies within the another marketplace. As network theory of
internalization is an effective theory that help in providing various opportunities in-front of
company i.e. Paytm and Reliance for expanding their business activities in market place.
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REFERENCES
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Images about Islamic Banks in Jordan: An Empirical Study. OFFICIAL. 12. p.54.
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reference to trupay. International Journal of Engineering & Technology. 7(2.11). pp.52-
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Vijay, A. and Srivastava, A., 2019. Exploring the Dynamic Linkages between Social Media and
Present Marketing Practices. International Journal on Customer Relations. 7(1). p.26.
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