9 investment. It then makes a subsequent resource commitment, perhaps buying out its local distributor or investing in a local manufacturing plant, which allows it to develop additional market knowledge. Gradually, and through several cycles of investment, the company develops the necessary levels of local capability and market knowledge to become an effective competitor in the foreign country.
Whereas many companies internationalize in the incremental approach depicted by the so called Uppsala model, a great many do not. Some companies invest in or acquire local partners to shortcut the process of building up local market knowledge. For example, Wal-Mart entered the United Kingdom by buying the supermarket chain ASDA rather than developing its own stores.
Others minimize their local presence by subcontracting to local partners. Amazon. com has a business in Canada without a single Canadian employee-it manages its website from the United States, and it fulfills orders through the Canadian postal service. Cases such as these highlight the complexity of the decisions multinational enterprises( MNE) face in entering a foreign market.
One important set of factors is the assimilation of local market knowledge by the subsidiary unit, a suggested by the Uppsala model. Other, equally important factors contribute to their Market Knowledge MNE’ s will include its overall level of commitment to the foreign market in question; they will carefully examine the required level of control of foreign operations, and the timing of its entry.
To help make sense of these different factors, it is useful to think of the different modes of operating overseas in terms of two factors: the level of market commitment made and the level of control needed. Some companies internationalize by gradually moving up the scale, from exporting through joint venturing to direct foreign investment. Others, like Wal-Mart, prefer to move straight to the high-commitmenthigh-control mode of operating, in part because they are entering mature markets in which it would be very difficult to build a business from nothing. Still others choose to adopt a low-commitment-Iow-control mode, such as exporting or subcontracting. For example, Amazon. com is able to make this approach work in Canada because it retains control of its website from the United States and has secured a reliable local partner for order fulfillment.
To be clear, none of these approaches is necessarily right or wrong, but they should be consistent with the overall strategic intentions and motivations of the MNE. It is also important to emphasize that some firms are“ born global,” establishing significant international operations at or near their founding. Whether this is due to their International orientation, or the need to move quickly due to the nature of their product of services such firms do not take such an incremental approach.
Similarly not all MNEs are large firms. By definition, most large MNEs started out small. Yet many small and medium-sized enterprises( SMEs) retain such a size, while still ignoring the benefits of internationalization due to a fear of the risks involved in expanding into global markets. They need professional guidance- like what our firm offers- in the process of internationalization.