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The Stage Model
The Swedish researchers interpreted the pattern in the internationalisation process they had observed in the Swedish companies. The first thing they noticed was that the companies had begun to operate abroad in a nearby market and then slowly penetrated markets far away. Another conclusion was that it appeared as the Swedish companies chose to enter new markets through export, instead of using sales organisation or manufacturing subsidiaries of their own. After several years of exports the company could establish wholly owned or majority-owned operations. The process is interplay between the development of knowledge about foreign market and operations on one hand and an increasing commitment of resources to foreign markets on the other.
The geographical dimension in this figure shows that companies enter new markets with successively greater psychic distance. Psychic distance can be defined by factors such as differences in language, culture and political systems, which disturb the flow of information between the companies and the market. Companies start internationalisation by going to these markets they can most easily understand, where they will see opportunities, and where the perceived market uncertainty is low .
The internationalisation process model can explain two patterns in the internationalisation of the company. The first pattern is that the company's engagement in the specific country market develops according to an establishment chain, e.g. at the start no regular export activities are performed in the market, then export takes place via independent representatives in the market, later through a sales subsidiary and eventually manufacturing may follow. This stage indicates an increasing commitment of resources to the market.
The second stage is when the company has an information channel to the market and receives superficial information about the market conditions. These activities will lead to more differentiated and wide market experience. According to the second pattern the companies enter new markets with successively greater psychic distance. Psychic distance can as earlier mentioned be defined by factors such as differences in language, culture, political systems, which disturb the flow of information between the firm and the market.