1) Uppsala Framework
The Uppsala model was contrived to discern how international operations of firms were developed in incremental stages and at the same time demarcating decision-making processes to expand internationally (Johanson and Vahlne, 2006). The Uppsala model is built upon the concept of market knowledge as it encompasses step-to-step learning and knowledge appropriation process in conjunction with foreign market and its operation (Johanson and Vahlne, 2006). Frynas and Mellahi (2015) advocate this view indicating that firm should garner good knowledge accumulation and learning as it offers better comprehension of prospects and risks of continual market involvement. Market commitment is another essential aspect of the model in which company expanding abroad is required to carefully allocate appropriate resources or assets to the foreign market and usually EMNEs are required to have higher commitment (Frynas and Mellahi, 2015). As both market knowledge and commitment are analogous and connected, one decision will become input for subsequent decision (Forsgren, 2002). Thus, the more the firm gather knowledge about the foreign market, the lower the existence of perceived xrisk and there will be high commitment and investment in that market (Forsgren, 2002). As a result, the Uppsala explains how firms internationalize progressively and cautiously as it is built based on incremental decisions.
The model also highlights the significance of psychic distance that is described as factors that prevent or derange firms from learning or understanding the foreign environment (Johanson and Vahlne, 2009). Factors can be differences in business practices, language or culture. It is also assumed that firms should expand into markets that are closer to their home country. Therefore, psychic distance influences firm’s market selection (Johanson and Vahlne, 2009).
Despite the incremental stages and concepts that the model entails, it is still being criticized for being too rigid in light of their approach during internationalization as the model omits low level of investment and less risky approaches such as franchising (Ramamurti, 2012). Furthermore, the model explains the incremental internationalization of firms, which is contrary to the aggressive acceleration expansion method that EMNEs usually undertake (Ramamurti, 2012). However, the Uppsala model is able to highlight risks that EMNEs may face which is imperative to decision-making process (Forsgren, 2002). Frynas and Mellahi (2015) further indicate that despite the model being too generic in nature, it is still able to encapsulate issues related to location or strategic changes, which cover essential contextual aspects of companies expanding internationally.