Globalization and global markets are dominating in the today’s business arena. Companies are more often than not required to internationalize and operate in global markets instead of just competing within national borders. Due to the high level of globalization, psychic distance between nations and countries is argued to have decreased significantly. However, underlying national and business culture differences still very much exist and companies must be aware of and take the differences into account in their international operations. For decades cross-cultural science has been guided by Hofstede’s cultural dimensions model and it is widely used to research and describe national cultures and differences between different cultures. Psychic distance concept is one of the most applied constructs of multinational enterprises’ internationalization and it has deservedly attracted a lot of attention within the literature and research of international business. Psychic distance is recurrently utilized when presenting and evaluating differences between a company’s home and foreign market. The general underlying notion of psychic distance is that companies operating in psychically close countries will succeed in their international operations. However, there is an increasing amount of research and literature providing contradictory evidence, referred to as psychic distance paradox. According to the concept of psychic distance paradox, perceived similarities within countries may result in cultural overconfidence and inadequate preparation prior entering psychically close markets resulting in poor organizational performance. The aim of the dissertation is to contribute in the research of the psychic distance concept regarding the existence of the psychic distance paradox and how it appears in the international business. The main focus is on management’s perceptions of psychic distance and how they affect a company’s organizational performance in psychically close foreign market. From the research conducted it can be concluded that the management’s perceptions of psychic distance can essentially affect the company’s organizational performance in a foreign market. In case the management’s perceptions of psychic distance are not in accordance with reality and the differences are overlooked, the company can face difficulties and poor organizational performance even in a psychically close market. The findings of the research provide additional proof to the existence of the psychic distance paradox concept.

Internationalization is important for small- and medium-sized enterprises (SMEs) since it is a way to survive and to grow. Emerging markets have enormous latent possibilities for SMEs but behind the possibilities there are potential risks linked to political and institutional factors, uncertain economic and market conditions, and unknown business environments. National culture is one of the factors that create distance between home and host countries. In this paper, the author intends to examine the importance of cultural distance in the internationalization process and the relationship between the international experiences and cultural distance. The author focuses on the internationalization process of Swedish SMEs in Russia. Since culture is a complex phenomenon, the author scrutinizes the nature of cultural distance by employing a qualitative method by in-depth interviewing of managers from two Swedish SMEs. The theoretical framework is important for the analysis and consists of the Uppsala internationalization model and Hofstede’s cultural dimensions. Through the analysis of empirical data and previous research, the author finds that there are significant cultural differences between Russia and Sweden but the role of cultural distance in the internationalization process of the Swedish firms in Russia should not be exaggerated. The author’s conclusions are that cultural distance as a part of psychic distance has influence on the choice of entry mode though its impact is implicit and comes along with other factors. Another finding is that the international experiences of the firms have a great influence on the internationalization process - in the way that cultural distance becomes less important.

<p>Hur går ett företag tillväga när de tar sig ut på den internationella spelplanen. Vilka problem</p><p>blir de tvungna att hantera. I studien som följer har danska livsmedelskedjan Netto studerats,</p><p>deras inträde på den svenska marknaden, det sätt de har gått tillväga på .</p><p>Syftet med uppsatsen är således att studera hur Netto har gått tillväga vid inträdet på den</p><p>svenska livsmedelsvaruhusmarknaden och hur de kulturella skillnaderna mellan hemlandet</p><p>och värdlandet har påverkat detta.</p><p>Upplägget för studien har varit att genom en kvalitativ metod studera såväl primära som</p><p>sekundära källor utifrån aktuell teoribildning, genom att bland annat haft kontakt med en</p><p>förhandlingschef på Netto Marknad Sverige. Men också sätt till sekundära källor för att få en</p><p>uppfattning i vilket sammanhang Netto verkar.</p><p>Studiens visar på att Netto tagit sig in på den svenska marknaden på ett sätt som i många</p><p>fall går rakt emot den rådande teoribildningen inom området. Genom att ingå i ett joint</p><p>venture med ICA har Danska Netto gått in på den svenska marknaden som om det rörde sig</p><p>om en mycket okänd och avlägsen marknad. En viktig orsak till detta beteende är den hårda</p><p>bransch-situation som råden på den svenska livsmedelsmarknaden, med starka aktörer som</p><p>ICA och COOP, samt vår bristande tradition av lågprisaktörer.</p><p>Slutsatsen av denna studie är att det är branschen och inte landet, som avgör hur företaget</p><p>kommer att gå tillväga vid inträdet.</p>

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Hur går ett företag tillväga när de tar sig ut på den internationella spelplanen. Vilka problem blir de tvungna att hantera. I studien som följer har danska livsmedelskedjan Netto studerats, deras inträde på den svenska marknaden, det sätt de har gått tillväga på . Syftet med uppsatsen är således att studera hur Netto har gått tillväga vid inträdet på den svenska livsmedelsvaruhusmarknaden och hur de kulturella skillnaderna mellan hemlandet och värdlandet har påverkat detta. Upplägget för studien har varit att genom en kvalitativ metod studera såväl primära som sekundära källor utifrån aktuell teoribildning, genom att bland annat haft kontakt med en förhandlingschef på Netto Marknad Sverige. Men också sätt till sekundära källor för att få en uppfattning i vilket sammanhang Netto verkar. Studiens visar på att Netto tagit sig in på den svenska marknaden på ett sätt som i många fall går rakt emot den rådande teoribildningen inom området. Genom att ingå i ett joint venture med ICA har Danska Netto gått in på den svenska marknaden som om det rörde sig om en mycket okänd och avlägsen marknad. En viktig orsak till detta beteende är den hårda bransch-situation som råden på den svenska livsmedelsmarknaden, med starka aktörer som ICA och COOP, samt vår bristande tradition av lågprisaktörer. Slutsatsen av denna studie är att det är branschen och inte landet, som avgör hur företaget kommer att gå tillväga vid inträdet.

This study aims to test the Uppsala Internationalisation model and one of its crucial elements, the concept of psychic distance. The evidence is drawn from a Chilean multinational Business to Business manufacturing company, AJ Ing which has gone international since 1997, 14 years after its inception. The Uppsala model and the concept of psychic distance are discussed and explored as well as other relevant literature. This is followed by a computation of psychic distance between Chile and some of the countries AJ Ing is established in, as well as Kenya where it seeks to establish itself soon. Interviews were then conducted with the Assistant Director of Operations at the company in order to give insight into the company's internationalisation process. The results show that the Uppsala model was followed to some extent. The internationalisation was done in incremental steps and after gaining knowledge and experience, but the notion of psychic distance played a minor direct role in the process.

The purpose of this thesis is to study how two small and medium sized Swedish apparel firms internationalize their business activities.The international business activities are more frequent now than ever because cross border trade barriers are much less today. The companies internationalize their business operations for several reasons. High saturation in the local market, cheap supply line, hunting for resources and potential opportunities in the international market are the driving factors for internationalization. The small and medium sized enterprises (SMEs) have no exception from such motives. Generally (SMEs) have fewer resources than big multinationals therefore internationalization is more difficult and challenging for (SMEs). The existing internationalization theories highlight several ways for internationalization. The internationalization process model depicts that companies extend their business activities from less to far psychic distance countries and gradually increase their commitment in the international market based on experiential knowledge i.e. knowledge learned by doing. The revised model argued that companies involve in internationalization by utilizing domestic or international network. The psychic distance concept argued that companies face two types psychic distance i.e. inter – country and inter – firm psychic distance. We developed our interaction process model for internationalization. According to the interaction process model when firms start interaction within network these have higher psychic distance level and lower trust and commitment because firms initially interact occasionally. With the passage of time as the interaction of firms within network gains some pace the psychic distance level started to reduce and trust and commitment builds upward. Finally a stag arrives when psychic distance level reached at least stage and inversely trust and commitment at higher level and this result into international opportunity. Thus firms by hunting international opportunity gets involve in internationalization. Inversely, international opportunity can also be developed at initial or middle stage and interaction process start at later stages. But in such situation psychic distance level is comparatively high and trust and commitment will be low because there is no or lesser interaction among firms. The internationalization in such a way will be more risky.

Executive Summary Swedish companies have a relatively small domestic market that quickly becomes saturated. For those companies who are dependent on increased sales in order to survive or have the ambition to grow internationalization is the one option. Traditionally companies have ex- panded internationally by first exporting to countries with a short geographical as well as cultural distance. With increased experience the companies have entered markets farther and farther away, culturally as well as geographically. Eventually it might be possible to for example start production abroad. With today’s increasingly internationally competitive market it becomes more frequent that companies establish business in foreign countries at a more rapid pace. The choice was to study PMC Cylinders, a Swedish medium sized company that has been operating internationally for approximately thirty years. This company ́s internationaliza- tion processes have been analyzed in order to understand factors that might bridge these distances to other countries. These distances can be bridged by for instance existing customers, consultants, sister com- panies with complementary resources or employees with host country origin. Further the way of establishing foreign operations can contribute. With shorter distance there is no big issue. For example Norway was perceived almost like selling in Sweden. When the per- ceived distance is medium, here Germany serves as an example, it becomes more compli- cated. Existing British customer relationships made it possible to enter the German market. It was not enough to use an agent which was the case at an earlier failed attempt. Relation- ships with different actors and ways of entering foreign markets become even more impor- tant when this distance is long. Here China can serve as an example; the country is far away geographically as well as culturally. Together with a customer production was established in the Chinese market. This was also seen as an opportunity by a sister company to follow one of their customers. Thus the efforts of the companies were combined. PMC Cylinders also used employees with technical, cultural and language knowledge to bridge the distance. Thus there were a number of factors making the establishment in China possible. By the study of PMC Cylinders internationalization processes certain patterns were found. The outcome of these patterns is a structured model with a number of steps. This model implies that with increased geographical and or cultural distance the importance of connec- tions and ways of entering the market grows. The model is a decision tree which can be seen as an internationalization tool for PMC Cylinders.

Digitalisation is one of the greatest transformations in modern times and has impacted organisations, industry structures and the society as a whole. It provides new opportunities for fashion firms to interact with different stakeholders and has altered the way firms operate in foreign markets. Based on in-depth interviews with managers of Swedish high-end fashion firms, the aim of the study was to explore what impact digitalisation has on managers’ perceived psychic distance in their international operations. In particular, how managers use digital technologies to obtain and interpret information about supply and demand conditions in foreign markets was examined. The empirical findings indicate that digital technologies are essential for firms today, as they have increased information availability, enhanced information usage and improved interactive communication. This, in turn, leads to a reduction of managers’ perceived psychic distance.