Business internationalization is the process by which the company creates the necessary conditions to go for the international market. Companies tend, increasingly, to offshoring and to direct their strategy abroad.
Internationalization is, for example, the main outlet for the growth of SMEs that currently produce 33% of their business volume in other countries.
In relation to internationalization processes, Juan José Renau Piqueras raises three questions that any company should do:
- How internationalization is carried out
- Where are some of the activities of the value chain developed?
- Why the company wants to internationalize?
In addition Renau Piqueras analyzes in his article (The why, how and where of the internationalization of a company), three currents
- The Uppsala model
- The eclectic paradigm.
III. Porter’s paradigm
Firstly, we will analyze the Uppsala model which focuses more on explaining how and where of the internationalization but not why.
How internationalization is carried out?
According to this Swedish model, internationalization is based on four stages:
- Sporadic export
- Export through agents
- Sales through commercial subsidiaries
- Production and marketing subsidiaries
The elements that determine the type of export to be used are proactive and reactive.
The proactive factors are based on the excess of installed capacity or the existence of some competition that differentiates those exports.
In the opposite, the reactive factors are based on external circumstances.
Where internationalization takes place?
Knowing which countries companies will address in their internationalization processes is largely determined by psychic distance. According to Renau Piqueras, psychic distance is understood as the “set of factors that hinder the flow of information between markets and the company, factors including language, culture, managerial practices, level of education, prolific system, etc”.
According to this concept, companies begin to export to those countries where psychic distance is lower and later, after learning, companies are exporting to countries with increasing psychic distances.
The model uppsala on internationalization is a good tool to understand the processes, especially of SMEs, but it is not enough to understand why these actions exit the market.
In Comerciando Global we group companies and professionals to support different activities and areas of consulting in the field of internationalization and public affairs, which require a strategic and innovative vision to achieve growth or bigger efficiency in cost savings.
If you want more information about the design and implementation of internationalization strategies, please contact us.
Juan José Renau Piqueras was a professor of business economics and dean of the faculty of economic and business sciences of the University of Valencia.