Market Knowledge and Market Commitment Essay
Market knowledge and Market commitment: (The Uppsala Model). The phenomena of market knowledge and Market commitment is derived from the empirical findings on the development of Swedish firms in international operations which lead to a theoretical model known as the Uppsala internationalisation process model (Johanson and Vahlne, 1977; Sara, 2009). According to Sara (2009:21), This internationalisation process is thus described as “the incremental interplay between the development of market knowledge and the commitment of resources in the foreign markets.
Findings from the psychic distance (a concept in the establishment chain model) has shown that it is vital for firms to have a knowledge of foreign market before entering into it (Sara, 2009). Although, this model also found that firms normal do have small or no knowledge of the international market when opening exporting channels (e. g. subsidiaries ) but they continues in the market as their knowledge of the market increases (Hornell et all, 1973; Sara 2009).
Hence, the term market knowledge in this study is referred to as foreign market knowledge which in conjunction includes “the specific knowledge and more general internationalization knowledge” (Sara 2009). According to Sara (2009: 16), foreign market knowledge is “defined as a firm’s experimental knowledge about
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It is evident that the positive performance of firms in the foreign market will be traced back to their pre-knowledge of the market operations (Yli-Renko et al. , 2002 quoted by Sara 2009). According to the Uppsala model, the experimental knowledge of foreign market operations is considered the highest crucial advantage for SMEs during internationalisation. It is highly crucial because it empowers firms to observe or be directly aware of the opportunities and threats in the foreign market.
Acquiring this knowledge about the foreign market, helps the firm to effectively and efficiently create economic links with the foreign market micro-environmental forces needed for it to successfully begin selling its product or services. Market Commitment: According to the Uppsala internationalisation process Model, pre-market knowledge leads to market commitment while increased market commitment leads to more market knowledge development which creates a guide for new resources commitment.
The two main fundamentals that are believed to form the idea of market commitment are the amount of resources committed and the degree of commitment (Johanson and Vahlne, 1977; Sara, 2009). While the amount of resources commitment is regarded as the size or extent of the exporting firms’ investment in the foreign market, the degree of commitment was expressed as the complication of/in discovering a possible choice between the use of resources and transferring them to it.
This invariably implies that the level of commitment increases as resources become or is identified to be more specific to a given market. Furthermore, the experimental knowledge is acquired from a firms commitment to the market while the objective knowledge is obtained from a standardised systematic approach such as conducting a marketing survey. On the other hand, a firms mere objective knowledge of foreign market is regarded by the Uppsala model as a less or non-helpful tool for firms to increase its commitment and involvement in a foreign market (Sara, 2009).