Porters Diamond and Uppsala Models to Improve the Sustainability and Demand of an Organization - Essay Example

Uppsala model Table of Contents Discussion 3 What is internationalisation? 3 Ways to enter new markets? 3 Why consider the need for international? 4 Concept and stages of Uppsala model 5 Analysis 9 Comparison of Uppsala model with recent theories of internationalisation 9 Conclusion 13 References’ 14 15 Introduction In this age of competitiveness, sustainability and competitive advantage might be attained only if the organization may operate effectively in both domestic and international markets. This is because; it might help the organization to enhance the demand of its products that may increase its profitability and total revenue. Along with this, expansion into new foreign markets might also prove effective for the organizations such as SME’s or MNC’s to enhance its range of customers thereby amplifying its reliability and portfolio in the market as compared to many other rival contenders. Furthermore, penetrations into international or foreign markets also help to intensify the demand and brand image of the organization in the market. As a result, such type of penetration helps to improve the total sales and position thereby amplifying its reputation in the market among other contenders. Due to these reasons, maximum extent of the organizations desire to expand its operations into foreign markets. Discussion What is internationalisation? Internationalisation is recognised as a procedure to identify and penetrate the most feasible foreign market so as to enhance its operations. By doing so, the organization might increase its market share and brand value that may improve its inner strengths and opportunities as compared to many other rival contenders. Ways to enter new markets? An organization may enter an international market in order to enhance its operations and customer base by many ways as mentioned in the below figure: An organization may enter a foreign market just by exporting its product lines so as to increase its level of awareness and credibility (Mathews, 2002, pp. 467-488). Apart from this, an organization might establish a joint venture with another domestic firm of that country so as to increase its total sale and net income. With the help of licensing also, an organization might enter the new foreign market and increase its revenues and profitability. Other than this, the organization may introduce its franchises and enhance its portfolio and position in the foreign market to a considerable extent. Hence, an organization may enter the foreign market with the help of the above mentioned ways. (Source: smartbiz.nu, 2013) Why consider the need for international? In this age, maximum extent of the organizations desire to develop their entities outside the state border. The prime reason behind this desire is to exploit the opportunities in both domestic and international border. However, in order to expand the operation of an organization in overseas markets, it’s extremely essential to analyse the market scenario and competitors activities. Only then, it may enhance its productivity and profitability in those unknown markets as compared to many other contenders. Thus, the process that well-explains and evaluates the need for a domestic organization to expand internationally is depicted by Uppsala model. Concept and stages of Uppsala model Uppsala model is recognised as a theory that describes the ways by which a firm might expand its operations towards a foreign or international market as presented in the below picture. It is done, in order to enhance the reputation and well-being of the organization in both domestic as well as foreign market so as to amplify its demand and equity. Moreover, the model of Uppsala is recognised as a set of assumptions that an entrepreneur might consider, prior penetrating a new market like, customer buying power, competitors, net income of the customers, language, politics, bargaining power of the customers and suppliers and many others, before entering the new market. However, in order to gain the information regarding these assumptions, personal knowledge or experience is extremely essential. Only then, the upcoming challenges and barriers of businesses might get reduced thereby amplifying the total revenue and loyalty in the market among others (Luo & Tung, 2007, pp. 481-498). Furthermore, by evaluating the market scenario with the help of Uppsala model, the risks or threats of the organization might get lowered that may improve the sustainability and reliability of the organization. Besides this, evaluation through Uppsala model also helps to analyse the entry strategies that may prove extremely effective for the organization as compared to others. By doing so, the organization desiring to penetrate a new market might very easily establish its foreign operations and sales. So that the organization might exploit the opportunities of the foreign market and improve its dominance and consistency. Thus, due to these above mentioned reasons, the model of Uppsala is extremely preferred by the managers of the organizations desiring to penetrate in new markets. (Source: smartbiz.nu, 2013) The Uppsala model comprises of four distinctive stage or concepts, which is extremely essential for an organization at the time of internationalisation. These concepts are stated below: Market Knowledge: It is considered as the first stage of Uppsala model. This is one of the most essential stages as it helps an entrepreneur to attain all sorts of knowledge related to that market. By doing so, the entrepreneur or the organizational management might become successful in knowing the competitive rivalry of the contenders, bargaining power of the buyers, bargaining power of the sellers, threat of new entrants and threat of substitute products. Apart from this, with the help of market knowledge, the management of the organization might become successful to evaluate the political, economic and social scenario, the environmental policies and strategies utilised by the existing competitors as well as the craze for advanced technologies. So that, the organization might become entirely prepared with all sorts of requirements that may improve its position and competitiveness in the foreign market as compared to others. Market Commitment: this is also another important stage of Uppsala model that is totally linked with the first step, Market Knowledge. If the organization management or entrepreneur includes all sorts of knowledge about a specific market, then he or she might become highly interested or committed towards it. As a result, it might prove effective for the organization to enhance its operations and functions thereby amplifying its net profit margin and net income. Moreover, after knowing all the pitfalls of the market and the competitors, the organization might implement its policies and strategies in an effective way. So that, it may offer effective results for the organization in long run as compared to others. Commitment decisions: if the strategies and policies of the competitors operating in foreign market are known effectively, then the decisions taken to enhance the devotion or dedication of the organization might get enhanced. As a result, the organization might become successful in developing varied types of inventive products and services for the customers that may easily satisfy their changing needs and demands. By which, the demand and profitability of the organization might get enhanced that may improve its sustainability as well. Apart from this, the rate of reliability and consistency of the customers might also get enhanced that may increase the total sale and productivity of the organization in long run. Other than this, if the range of customer bases might get enhanced then the position and loyalty of the organization might also get improved. Due to which, the level of supremacy of the organization might get increased that may reduce the business challenges or upcoming risks of the market (Kotler, 1998, pp. 567-578). Besides, popularity and dominance might also help an organization to cope up with the new entrants in an effective way thereby retaining its position (Kotler & Keller, 2012, pp. 435-454). Thus, it might be clearly stated that commitment decisions helps an organization to improve its competitive advantage and reputation in the market among other contenders. Current activities- if an organization becomes extremely committed over the activities of the market, then it might easily cope up with any sort of turbulent scenario (Li, 2007, pp. 296-318). For example: entrance of a new player. Entrance of a new player in the market may not hinder the operations of the organization, only if the organization holds a strong or dominant position. Then, the organization might retain its portfolio and profitability in the market in the similar way thereby amplifying its total sale and productivity as well. Moreover, if the organization holds a reputed image, then rate of switchover costs of the customers may not decline (Kazmi, 2007, pp.768-778). Therefore, the organization might easily retain its current position in the market in spite of numerous rival players. For example: After the time of entering the market of United Kingdom, Sony Corporation offered high concentration over market research activities. This is done in order to know the market scenario as well as the competitor’s strategies of the market of United Kingdom, prior devising its own strategies. So that, after entering the market, the organization may enhance its business operations and total sale as compared to others. Along with this, Sony Corporation also desired to increase its range of customers and brand image in the market of UK so as to improve its portfolio and position in the entire globe (Keegan, 2002, pp.367-378). Thus, it might be stated that, if the organization is well-versed with the actions of the competitors or suppliers of the market, then it may easily handle any sort of activities or actions in an effective way. Thus, it might be depicted from the above mentioned information that prior knowledge and experience acts as the best weapon to analyse or evaluate any sort of situation or market scenario. Analysis Comparison of Uppsala model with recent theories of internationalisation Uppsala model is described as a catalyst that may be used to know any foreign market, more vividly and effectively, prior entering it. This is done, in order to increase its range of customers and to offset seasonal disturbances in the market. Along with this, with the help of Uppsala model, an organization may reduce the risks and threats arising due to competitors actions (Hill, 2010, pp. 645-656). SO that it may increase its productivity and demand in the market that may improve its competitive position and sustainability. Such type of activities might also prove effective for the organization to enhance its market share and net income as compared to other rival players. On the other hand, Porter’s Diamond model is another effective model that may be used for the organizations trying to expand into new markets (Grant, 2005, pp. 534-545). It is a sort of economic model that is used to analyse the resources or aspects present within a country that may enhance the competitive advantage of an organization. However, competitive advantage of an organization might also be attained due to the high-end performance of any other organization. This means, it is a cluster of activities directly interrelated with one –another so as to improve the prosperity and popularity of the organization with in a region or nation. However, the entire progress of the organization is dependent over its six interrelated steps such as factor conditions, demand conditions, related and supporting industries, firm strategy, structure and rivalry, government and chance. Factor conditions or specific resources like human resources, knowledge, capital resources are all essential for an organization to improve its competitive advantage in the market (ESOMAR. 2008, pp. 456-467). However, it might prove effective for the organization only if the organizational attains a wide knowledge about the conditions of the market. Only then, the organization may make use of all the available resources of the market in ban effective way that may increase the demand of its products and services. Apart from this, demand conditions of the organization might be enhanced in the market only if, new products are invented. However, in order to invent new product lines, an organization need to offer high concentration or commitment over the demand and requirement of the customers of the market. Only then, the organizational management might become able to analyse the changing demands of the customers and may act accordingly (Drummond & Ensor, 2006, pp. 434-444). Moreover, if the organization maintains a good relationship with the related and supporting industries, only then it may make use their resources in an effective way. However, in order to do so, it’s extremely essential to know the current activities of the competitors. Only then, it might act as per their actions and maintain a good relationship with them. Furthermore, firm strategy, structure and rivalry might get reduced only if the organization offers high concentration over the activities of the market. By doing so, the organization might operate effectively in the new market, thereby amplifying its position and reliability within the minds of the customers and shareholders as well. As a result, the organization might enhance its popularity and profit margin to a significant extent both in domestic as well as in foreign market (Bradley, 2007, pp. 323-334). Government policies might not hinder the operations of the organization only if the committed decisions are taken by the organization. Then, it might easily analyse the activities of the government and may act as per their actions. So that, implementation of new policies may prove effective for the organization in long run just as other rival players. Other than this, chances that are beyond the limit of the organization might also be tackled in an effective way only if the activities of the market are known, previously. Only then, the organization might enhance its activities and performances in the market thereby reducing its negative impacts. Therefore, it might be clearly revealed that from the above mentioned information, that an organization entering a new foreign market might improve its performance and image among other rival players, only if it is well-versed with the conditions and activities of the competitors (Beall, 2010, pp. 123-134). By doing so, the organization may develop the product lines as per the requirements of the customers so as to retain its portfolio and competitive advantage (Porter, 2008, pp. 234-244). As a result, the net income and total sale of the organization might get enhanced that may improve its reputation and prosperity in the market. Hence, it might be stated that both the models are extremely essential for an organization desiring to penetrate any new market. (Source: Smartbiz.nu, 2013) Conclusion Conclusively, it might be stated that in order to improve the sustainability and demand of an organization in order domestic and international markets, it’s extremely essential to know both the models, named Porter’ Diamond Model and Uppsala model. This is because; with the help of both the models, an organization might analyse the conditions and scenario of the market in an effective way. Along with this, the organization might also analyse the strategies and policies implemented by the competitors of that market so that, it might develop its strategies accordingly. Only then, the strategies might help the organization to improve its customer base and profitability thereby amplifying its demand and competitive advantage. Moreover, implementation of these strategies might also help the organization to enhance its reliability and loyalty that may prove effective in amplification of its brand value and market share. Furthermore, implementation of the ideas of both the models, an organization entering in a new market might reduce its challenges and risks thereby amplifying the opportunities and strengths so that, the organization might improve its reputation and equity as compared to other rival players. However, in order to maintain a strong image in an international market, it’s also extremely essential to maintain a good relationship with its rival players. Only then, the organization entering the new market might become aware about the changing policies and strategies of the government and preferences of the customers. By knowing this information, an organization might develop its product lines in order to remain competitive in the market among others. References’ Beall, A, E. 2010. Strategic Market Research: A Guide to Conducting Research to solve problems. Boston: Harvard Business School Press. Bradley, N. 2007. Marketing Research: Tools & Techniques. New York: McGraw-Hill. Drummond, G. & Ensor, J. 2006. Introduction to Marketing Concepts. New York: Cengage Learning. ESOMAR. 2008. Market Research Handbook. London: Sage. Guillén, M. F. & García-Canal, E. 2012. Execution as Strategy. Harvard Business Review Vol. 90(10). Grant, R, M. 2005. Contemporary Strategy Analysis. London: Sage. Hill, C. 2010. International Business Mc Graw Hill 8th International Edition. New York: McGraw-Hill. Keegan, 2002. Global Marketing Management. London: Pearson Education. Kazmi, S, H, H. 2007. Marketing Management. Germany: Springer. Kotler, P. & Keller, K. 2012. Marketing management. Harlow, NJ: Pearson Education. Kotler, P. 1998. Marketing Management. Harlow, NJ: Pearson Education Luo, Y. & Tung, R. L. 2007. "International expansion of emerging market enterprises: A springboard perspective." Journal of International Business Studies 38(4): 481-498. Li, P. P. 2007. "Toward an integrated theory of multinational evolution: The evidence of Chinese multinational enterprises as latecomers." Journal of International Management Vol.13(3), pp. 296-318. Mathews, J. A. 2002. Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies. Asia Pacific Journal of Management. 19 (4), 467-488 Porter, M, E. 2008. Competitive Strategy: Techniques for Analyzing Industries and Competitors. London: Simon and Schuster. Smartbiz.nu. 2013. The International Process. [Online] Available at: http://smartbiz.nu/pages.asp?PageID=560&Base=1&MenuID=690 [Accessed on 15th March, 2014]. Read More