The and usually EMNEs are required to have higher

 

The Uppsala model was contrived to discern how
international operations of firms were developed in incremental stages and at
the same time demarcating decision-making processes to expand internationally (Johanson and Vahlne, 2006). The Uppsala
model is built upon the concept of market knowledge as it encompasses
step-to-step learning and knowledge appropriation process in conjunction with foreign
market and its operation (Johanson and Vahlne, 2006). Frynas and
Mellahi (2015) advocate this view indicating that firm should garner good
knowledge accumulation and learning as it offers better comprehension of
prospects and risks of continual market involvement. Market commitment is
another essential aspect of the model in which company expanding abroad is
required to carefully allocate appropriate resources or assets to the foreign
market and usually EMNEs are required to have higher commitment (Frynas and Mellahi, 2015). As both
market knowledge and commitment are relatively comparable and connected, one
decision will become input for subsequent decision (Forsgren,
2002).

Thus, the more the firm gather knowledge about the foreign market, the lower
the existence of perceived risk and there will be high commitment and
investment in that market (Forsgren, 2002). As a result,
the Uppsala explains how firms internationalize progressively and cautiously as
it is built based on incremental decisions.

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The model also highlights the significance of
psychic distance that is described as factors that prevent or derange firms from
learning or understanding the foreign environment (Johanson and Vahlne, 2009). Factors can
be differences in business practices, language or culture. It is also assumed
that firms should expand into markets that are closer to their home country. Therefore,
psychic distance influences firm’s market selection (Johanson and Vahlne, 2009).

 

Despite the gradual stages and concepts that the
model entails, it is still being criticized for being too rigid in light of
their approach during internationalization as the model omits low level of
investment and less risky approaches such as franchising (Ramamurti, 2012). Furthermore, the model explains
the incremental internationalization of firms, which is contrary to the
aggressive acceleration expansion method that EMNEs usually undertake (Ramamurti, 2012). However, the
Uppsala model is able to highlight risks that EMNEs may face which is imperative
to decision-making process (Forsgren, 2002). Frynas and
Mellahi (2015) further indicate that despite the model being too generic in
nature, it is still able to encapsulate issues related to location or strategic
changes, which cover essential contextual aspects of companies expanding
internationally.

 

 

 

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