The Uppsala Model: An Evolutionary Approach to Business Internationalization

Summary:

The Uppsala model, initially designed to explain the internationalization process of companies, is a useful framework for SMEs looking to expand internationally. To make it more practical and adapted to contemporary realities, we propose some adjustments, including the integration of outsourcing as an entry strategy, the management of international networks via top-down and bottom-up approaches, and an emphasis on the use of digital technologies. Additionally, the model takes into account the specificities of emerging markets, cultural differences, the speed of internationalization, and sustainability factors. These adjustments allow companies to navigate the internationalization process more effectively while minimizing risks and maximizing opportunities.

The Origin of the Model

The Uppsala model, developed in the 1970s by researchers at Uppsala University in Sweden, notably Jan Johanson and Jan-Erik Vahlne, has become a major theoretical framework in the field of international management. It aims to explain the internationalization process of companies, particularly small and medium-sized enterprises (SMEs).

The Original Model

Fundamental Principles

The original Uppsala model is based on two key concepts:

1. Progressive commitment: Companies internationalize gradually, progressively increasing their commitment to foreign markets.
2. Psychic distance: Companies begin their international expansion towards culturally and geographically close countries before venturing into more distant markets.

The Four Stages of Internationalization

The model proposes a sequence of four stages in the internationalization process:

1. Sporadic exports
2. Exports via independent intermediaries
3. Establishment of a foreign sales subsidiary
4. Establishment of foreign production units

Learning Mechanism

The model emphasizes experiential learning. Companies gradually acquire knowledge about foreign markets, which allows them to reduce uncertainty and increase their commitment.

The Adapted Model

In response to criticisms and the evolution of the global economic context, Johanson and Vahlne revised their model in 2009 to integrate new elements.

Integration of the Network Approach

The adapted model recognizes the importance of business networks in the internationalization process. Relationships and partnerships become key factors for access to foreign markets.

Concept of “Outsidership”

The revised model introduces the notion of “outsidership” (exclusion) from relevant networks as the main obstacle to internationalization, replacing the notion of psychic distance.

Recognition of Opportunity

The identification and exploitation of business opportunities are now considered important drivers of internationalization, beyond simply reducing uncertainty.

Bilateral Process

The adapted model emphasizes that internationalization is a bilateral process, involving not only the internationalizing company but also its foreign partners.

Implications and Limitations

The Uppsala model, both in its original and adapted versions, offers a valuable framework for understanding the internationalization process of companies. It highlights the importance of learning, progressive commitment, and networks in international expansion.

Other Aspects Considered by 6temik to Make the Model Practical

Outsourcing as an Entry Strategy

The model could integrate outsourcing as a preliminary or alternative step in the internationalization process. This approach would allow SMEs to test foreign markets and gain international experience with reduced risk and initial investment. Outsourcing certain functions (such as customer service, production, information technology, or marketing) to foreign partners could serve as a springboard for further internationalization.

Management of Contact Networks with Top-Down and Bottom-Up Approaches:

Integrate a dimension of international business network management, combining:

1. A top-down approach for strategic planning and the overall architecture of the internationalization network
2. A bottom-up approach for implementation and optimization at the local level, allowing for greater flexibility and innovation

Integration of Digital Technologies

Emphasize the use of digital technologies to facilitate internationalization, particularly e-commerce platforms and digital communication tools.

Consideration of Innovation Ecosystems

Highlight the importance of innovation ecosystems and partnerships with incubators or accelerators in the internationalization process.

Adaptation to Emerging Markets

Refine the model to better reflect the specificities of internationalization towards emerging markets, which may present unique challenges and opportunities.

Integration of the Cultural Dimension

Deepen the analysis of the impact of cultural differences on the internationalization process, particularly in the context of outsourcing and international network management.

Consideration of Internationalization Speed

Adapt the model to better explain rapid internationalization processes, integrating the advantages of outsourcing to accelerate this process.

Integration of Sustainability Factors

Consider the growing importance of environmental and social considerations in internationalization strategies, including in the choice of outsourcing partners.

These improvement suggestions would allow updating the Uppsala model to better reflect the contemporary realities of business internationalization. In particular, they offer SMEs flexible, less risky, and more effective ways to engage in international markets. By integrating these improvements, the Uppsala model, which was originally a theoretical framework, transforms into a practical tool allowing companies to define and implement an internationalization strategy more adapted to current challenges.

In doing so, it becomes not only a guide to reduce uncertainty and manage risks related to internationalization but also a lever to fully exploit the opportunities offered by international networks and modern technologies.