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Luostarinen’s model

Uppsala model

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International
networks models

Born global models

Concept

Luostarinen made a more in-depth study than
the Uppsala school model, based on a questionnaire
with 1006 companies’ respondents which developed by HSE, Finland and
surrounded areas. This model stated that internationalization is a gradual
and orderly process of geographical expansion from nearby business distance
markets to more distance ones. Luostarinen’s model is about increasing
commitment with the foreign operations in transforming the companies’ inputs
from raw materials and designs into outputs of products, operations and
markets…

Swedish
researchers from the Uppsala University (Johanson and Wiedersheim-Paul, 1975;
Johanson and Vahlne, 1977) developed their own model to explain the
sequential steps in the increased
internationalization direction. The theory dignifies the
internationalization strategy in the form of gradual acquisition and the use
of knowledge about overseas markets and operations in order to intensify the
level of commitment to those international destinations and indicate the
current business activities based on the gained experiences. The Uppasala
school model is quite similar to the Luostarinen’s
model but different in the methodological choice, the level of commitment may
also decrease or discontinue if the performance and scenario are not met and Uppsala model indicates that
foreign sales begin with occasional export orders that are followed by
regular exports.

The
network approach has been developed by Jonhanson and Mattson (1988) where
internationalization is seen as a process of continuously established, developed, maintained and dissolved
rapports in order to achieve the firm’s objectives. This model requires
firms to leverage their skills and resources of other organizations as well
as their activities of going global would be influenced by larger partners in
the network. This model is different from
the rest because this model is based on relationships.

A
true born-global organization is a new venture that target on becoming
international from day one without preceding long term from domestic markets
to international ones. This model is
very distinctive from other models due to the fact that other models are
pattern-oriented and this model is customers-oriented. Also this model is different from other models
because these models take sequential steps from domestic markets or regional
markets to international markets when born global firms from inception seek
for performance in multiple countries.

Content

Luostarinen’s
strategy described the internationalization process with POM: 
·        
P stands for The Product
·        
O stands for the Operation Mode
·        
M stands for the Market
This
could be breakdown into four stages:
·        
Starting: pertinent
·        
Development: Product introduction to a foreign market
with an operation strategy
·        
Growth: Penetrating into more distance market and using
more complex operation mode
·        
Mature: Foreign operations acquired in distance
business markets

The
model is concluded based on a case
study about four manufacturers and their internationalization approach of
emerging into psychic nearby market first to enhance knowledge and still have
control on resources and later on gradually expand to more distance markets
when they become more experienced and acquired more resources. There are four
main steps in the Uppsala model:
·        
Step 1: No regular export (Sporadic export)
·        
Step 2: Independent representatives (Export modes)
·        
Step 3: Foreign direct subsidiary
·        
Step 4: Foreign production and sales subsidiary

This
model is the best of modern business models that concentrated on higher
levels of technology, knowledge-based with service intensive and international
marketing in the case of born global companies. Firms are set in a network
where their internationalization process is highly effected by it. The
network of the company is based on a lot of things including: actors,
resources, activities; economical, social, technical dimensions;
collaboration, credibility, dependence, benefits, conflicts; strong and weak
bonds and the company’s play in the relation with others.
There
are only three stages in the network approach:
·        
Stage 1: Initial stage: 0-1 year
·        
Stage 2: Active involvement: 1-3 years
·        
Stage 3: Committed involvement across numerous market

Characteristics
of a born global enterprise:
·        
High activity in international markets from or near the
founding
·        
Limited financial and tangible resources
·        
Apply to most industries
·        
Managers have strong global provisions and managements
·        
Emphasis on product quality and different strategy
·        
Leverage ICT
·        
Uses of external facilitators for foreign markets
distributions
 

Context

Finland
is also a small and open country. In Finland back then 1970s, the market was
very small so the production in different fields were also very small in term
of units. Finnish companies at different stages were using different methods
of doing business internationally, mainly export operations. This was totally
different with big countries like the US. Finland is “pushed” into the
international process. Luostarinen’s study based on a questionnaire
respondence of almost every Finnish exporter that accounted for 92% of the
total export to come up with a developed model. 

Swedish
researchers from Uppsala university had critical thoughts with the existed
theories, they believed that most of the internationalization theories at
that period somehow deducted the importance of cultural differences and paid
very little attention to the required internal foundations for the
internalization activities of the company. Therefore, they based on a case
study of four companies and came up with their own theory as an independent
one to explain the increased internationalization involvement.

The
world has rapid increase in international trade therefore it has becoming
more and more globalized. The traditional markets is replaced by the network.
More and more SMEs are moving toward internationalization. Studies stated
that the internationalization of these firms are impacted by the network of
multiple relationships.

Even
though new ventures existed for centuries, the born global was born to focus
on MNEs. Research about entrepreneurship related to policies on SMEs
importing, entrepreneurs and their activities in different countries,
exporters and non-exporters.

As a business
consultant, how could they be useful for different types of companies? Please
give examples of different business situations in which they would be
helpful.

Marimekko:
·        
Product strategy:
–         
Physical product
–         
Services
·        
Operation strategy:
–         
Export
–         
Sub-contracting
–         
Licensing
–         
Management contracts and manufacturing
·        
Market strategy:
–         
Nordic
–         
Europe
–         
Asia and USA

In
1928, the Volvo Group first produced passenger cars in Sweden then moving
into trucks manufacturing 2 years later. Volvo has grown through acquisition
and organically, now they have nine business areas across the globe from
Europe, Asia, North America, South America and others, etc. Volvo Truck has
grown by the acquisitions of Renault Trucks and Mack Trucks subsidiary in
2001. These activities strengthened its production in the US. Its acquisition
of Nissan Diesel in 2007 also strengthened its global production,
distribution, management with the capacity of covering every regional markets
in the world.
 

Almost
every company in China uses the network approach. In order to success in both
doing domestic business and international business in this country, the
relationships between firms play a very important role. “Guanxi” in Chinese,
which translates as “connections” in English is the Chinese character which
describes as the network of connections between individuals or companies.

Skype
– a software that offering people all over the world the ability of free
texting, calling through video or audio, was established since 2003. 7 years
later, Skype had 660 million users worldwide.

 

 

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