FTM 482: Exam #2 questions with
verified solutions
What is the Internationalization Process Model? (Also called Uppsala Model/ U Model/ Stage Model) -
correct answer ✔✔- Developed by scholars at University of Uppsala in Sweden in 1970s
- A sequential pattern of entry into successive foreign markets
Basic assumptions of U Model (Two major obstacles to international operations) - correct answer ✔✔1.
The lack of knowledge about foreign markets (so assumes that experiential learning through the ongoing
activities can overcome this)
2. Market uncertainty (so incremental decisions in terms of entry market and entry mode are necessary)
Psychic distance definition and examples - correct answer ✔✔The sum of factors (e.g., language, culture,
education, industrial development, political systems) increase cultural and geographic gaps between the
firm and a new foreign market
Strength vs. Weakness of the model - correct answer ✔✔Strengths:
- Simple
- Useful to explain the early internationalization of small & medium sized organizations in volatile
markets
Weaknesses
- Did not explain co-operative mode of entry
-Too deterministic and sequential (can't explain born global, service firms)
-Irreversible
-Ignores larger internationalization steps by firms with large resources
-Ignores firms with considerable experience from markets with similar conditions
-Ignores the fact that psychic distance decreases as the world becomes more homogeneous
Fast fashion retailers' internationalization - correct answer ✔✔- Fashion retailers experience a period
where rapid expansion exists
, - During initial internationalization, geographically & economically close markets were chosen (this
mirrors U model)
- After moving to culturally close countries, firms move to countries w close cultural proximity rather
than close to home market
- Internationalization doesn't follow the linear pattern that U model argues
Born global definition - correct answer ✔✔Companies that internationalize rapidly and simultaneously,
at or near their establishment, into the world's leading markets (e.g., the United States, Europe, and
Japan) regardless of psychic distance
ex) Gymshark
U model vs. Born global's expansion pattern - correct answer ✔✔In contrast w U Model:
-Initially mainly focused on small technology-intensive firms. Later expanded to consumer good sectors.
-The definition of BGs is rather vague: "Internationalization within three years of firm inception (time)
and a foreign sales ratio exceeding 25% (scale)"
-Today many new and small firms are born global in the way that they are 'start-ups' on the Internet, and
they sell to a global audience via a centralized e-commerce website
Waterfall vs. sprinkler strategy - correct answer ✔✔Waterfall strategy= U Model, requires a relatively
low investment because the new product is introduced in only a subset of countries.
Sprinkler strategy= Born Global, can fully exploit economies of scale and experience in R&D and
manufacturing by exposing the new product to a maximum number of markets as rapidly as possible. It
is a much faster way to market penetration across the globe, it generates first-mover advantages, and it
preempts competitive countermoves by sheer speed.
- Basically, the tradeoff between a waterfall and sprinkler strategy reduces to a tradeoff between sales
maximization (sprinkler) and risk minimization (waterfall)
Definition of Dunning's Theory of the Eclectic Firm (= OLI Model) - correct answer ✔✔A theory that
attempts to explain why companies would consider expanding into a foreign country.
- The more of below advantages (OLI) a company has, the more likely it is that the company will
internationalize
Three advantages (O, L, I) & meanings - correct answer ✔✔- Ownership
verified solutions
What is the Internationalization Process Model? (Also called Uppsala Model/ U Model/ Stage Model) -
correct answer ✔✔- Developed by scholars at University of Uppsala in Sweden in 1970s
- A sequential pattern of entry into successive foreign markets
Basic assumptions of U Model (Two major obstacles to international operations) - correct answer ✔✔1.
The lack of knowledge about foreign markets (so assumes that experiential learning through the ongoing
activities can overcome this)
2. Market uncertainty (so incremental decisions in terms of entry market and entry mode are necessary)
Psychic distance definition and examples - correct answer ✔✔The sum of factors (e.g., language, culture,
education, industrial development, political systems) increase cultural and geographic gaps between the
firm and a new foreign market
Strength vs. Weakness of the model - correct answer ✔✔Strengths:
- Simple
- Useful to explain the early internationalization of small & medium sized organizations in volatile
markets
Weaknesses
- Did not explain co-operative mode of entry
-Too deterministic and sequential (can't explain born global, service firms)
-Irreversible
-Ignores larger internationalization steps by firms with large resources
-Ignores firms with considerable experience from markets with similar conditions
-Ignores the fact that psychic distance decreases as the world becomes more homogeneous
Fast fashion retailers' internationalization - correct answer ✔✔- Fashion retailers experience a period
where rapid expansion exists
, - During initial internationalization, geographically & economically close markets were chosen (this
mirrors U model)
- After moving to culturally close countries, firms move to countries w close cultural proximity rather
than close to home market
- Internationalization doesn't follow the linear pattern that U model argues
Born global definition - correct answer ✔✔Companies that internationalize rapidly and simultaneously,
at or near their establishment, into the world's leading markets (e.g., the United States, Europe, and
Japan) regardless of psychic distance
ex) Gymshark
U model vs. Born global's expansion pattern - correct answer ✔✔In contrast w U Model:
-Initially mainly focused on small technology-intensive firms. Later expanded to consumer good sectors.
-The definition of BGs is rather vague: "Internationalization within three years of firm inception (time)
and a foreign sales ratio exceeding 25% (scale)"
-Today many new and small firms are born global in the way that they are 'start-ups' on the Internet, and
they sell to a global audience via a centralized e-commerce website
Waterfall vs. sprinkler strategy - correct answer ✔✔Waterfall strategy= U Model, requires a relatively
low investment because the new product is introduced in only a subset of countries.
Sprinkler strategy= Born Global, can fully exploit economies of scale and experience in R&D and
manufacturing by exposing the new product to a maximum number of markets as rapidly as possible. It
is a much faster way to market penetration across the globe, it generates first-mover advantages, and it
preempts competitive countermoves by sheer speed.
- Basically, the tradeoff between a waterfall and sprinkler strategy reduces to a tradeoff between sales
maximization (sprinkler) and risk minimization (waterfall)
Definition of Dunning's Theory of the Eclectic Firm (= OLI Model) - correct answer ✔✔A theory that
attempts to explain why companies would consider expanding into a foreign country.
- The more of below advantages (OLI) a company has, the more likely it is that the company will
internationalize
Three advantages (O, L, I) & meanings - correct answer ✔✔- Ownership
