The platform business model has a significant force in terms of internationalization due to such significant competitive advantages compared to other models like digital technologies and network effects. First of all, such firms are unique in the way that they are part of the business that connects the right buyers with the right sellers, and vice versa. The role of platforms as a kind of intermediary allows its users to reduce transaction costs and search costs. When considering the internationalization of platform companies, it should be borne in mind that they, first, differ from traditional (linear) firms. Second, they demonstrate a number of specific features that affect the internationalization process. These are the reason for unsuccessful attempts to explain ways and patterns of PC internationalization using existing theories of international business. The report starts with a brief description and background information about the case study. Then, the analysis of the case was done, followed by recommendations. Finally, the implication and limitations of the study are mentioned, along with concluding statements.
The Uppsala model deals with the process by which a firm gains knowledge about the markets and how that knowledge influences the firm’s subsequent investment. Since the lack of knowledge about foreign markets is a major obstacle to internationalization, it can be overcome by studying the conditions of foreign markets. Investment decisions and investments themselves are made gradually as the degree of uncertainty decreases. The more information a firm receives about a foreign market, the less risk it is exposed to and, therefore, the more actual investment will be made in that market. In the case of Hailo, the company did not invest enough time and effort into the knowledge about the foreign market. The company should have done a proper analysis of the U.S. market before entering. The company’s main losses were due to a lack of proper evaluation of competitors’ financial status and economic strength. As the Uppsala model suggests, market knowledge directly influences commitment decisions, which defines the number of resources committed to the foreign market. If Hailo conducted a proper financial analysis of the U.S. market, they would have properly estimated their ability to compete with already established local companies. Similarly, high-quality financial analysis of the Asian market would have changed the decision of Halio to enter the market. If these two major failed moves could be avoided, the company would not face huge financial losses, and they could concentrate their efforts on other potentially successful markets.
As a recommendation for the current case, the CAGE model is proposed for the successful internationalization of the company. CAGE analysis is a strategic analysis tool that allows you to study the strategic distance or proximity between countries based on such groups of factors as cultural proximity, administrative and legal characteristics, geographic distance, and level of economic development (Shaheer & Li, 2020). This model allows the management of the company to study the strategic remoteness or proximity of the country, which is selected as an object of research in relation to potential trading partner countries. The CAGE model is based on the assumption that the level of trade between two countries is a function of their size and the distance between them. While distance immediately suggests geographic distance in miles or kilometers, research shows that there are other types of distance between countries, usually falling into one of four categories – cultural, administrative, geographic, and economical. To carry out the CAGE analysis, the CAGE Comparator service is recommended to be used, which allows you to identify the factors that determine the distance between economies and apply them to analyze market opportunities. First, foreign culture plays an important role in identifying the local population’s attitude towards taxi cabs and taxi services. It would give valuable insights into the development of a market entry plan. Also, the business culture of the U.S. can be better evaluated in order to predict the moves of competing companies. The CAGE Comparator services would allow Hailo to obtain enough economic data regarding the market, which would reveal the risks and opportunities of the market.
Implications and Limitations
The implication of the study is that the company should have done more actions, including investments, in order to gain more knowledge about the new market. According to the Uppsala model, the company should have carefully thought about the investments, slowly gaining knowledge about the market, and reducing the uncertainty factors. Along with careful investment strategy comes the limitation of the Uppsala model, which is the long time required for step by step elimination of uncertainties. At the same time, the limitations of the CAGE model are the outcome of the model is based on the entries. Hence, it is unable to identify the market size. Similar to Uppsala, it required a long time of dedication, which makes the process not fast. Also, the model is more focused on a country itself rather than on its market or industry. The main limitation of the study is that the proposed models are case-specific and cannot be implemented or advised for use in other business cases.
The case study covers the internationalization of the Halio platform developed by British taxi drivers. The company started successfully expanding in an international arena but was forced to leave North America and Asia due to intense competition from rival companies. In the end, the company was absorbed by a bigger player in the global market. The analysis using the Uppsala model indicates that the investment decisions of the company should have been carefully made. Also, the CAGE model is recommended for the successful internationalization of the company within the case.
Shaheer, N.A. and Li, S., 2020. ‘The CAGE around cyberspace? How digital innovations internationalize in a virtual world.’ Journal of Business Venturing, 35(1), p.105892.