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CAGE Distance Framework

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Ghemawat emphasizes that different types of distance matter to different extents depending on the industry. Because geographic distance, for instance, affects the costs of transportation, it is of particular importance to companies dealing in heavy or bulky products. Cultural distance, on the other
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The table shown below provides more detail on each of the CAGE categories, and how they can manifest themselves depending on whether one is comparing a pair of countries or looking at one in isolation. One of the distinctions between the CAGE Framework and other country analysis frameworks is its
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identifies Cultural, Administrative, Geographic and Economic differences or distances between countries that companies should address when crafting international strategies. It may also be used to understand patterns of trade, capital, information, and people flows. The framework was developed by
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To facilitate quantitative analysis based on the CAGE framework, Prof. Ghemawat has developed an online tool called the CAGE Comparator. The CAGE Comparator covers 163 home countries and 65 industries, and allows users to customize the impacts of 16 types of CAGE distance.
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It can be used to compare markets from the perspective of a particular company. One method to conduct quantitative analysis of this type is to discount (specifically, divide) raw measures of market size or potential with measures of distance, broadly
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It can shed light on the relative position of multinationals from different countries. For example, it can help explain the strength of Spanish firms in many industries across Latin America.
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hand, affects consumers’ product preferences. It should be a crucial consideration for a consumer goods or media company, but it is much less important for a cement or steel business.
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in linking interactions between countries to the product of their sizes (usually their gross domestic products) divided by some composite measure of distance."
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Other differences in cost or quality of natural resources, financial resources, human resources, infrastructure, information or knowledge
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It helps to pinpoint the differences across countries that might handicap multinational companies relative to local competitors.
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The impacts of CAGE distances and differences have been demonstrated quantitatively via gravity models. Such models "resemble
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Ghemawat offers some advice on how the CAGE Framework can help managers considering international strategies:
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Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter
356: 346:, Pankaj Ghemawat and Jordan Siegel, Harvard Business Review Press, 2011, Chapter 1 280:, Pankaj Ghemawat and Jordan Siegel, Harvard Business Review Press, 2011, Chapter 2 240:
Professor Ghemawat recommends using the CAGE framework together with the
334:, Pankaj Ghemawat, Harvard Business Review, 79, no.8, 2001, p137-147 89:
Different ethnicities; lack of connective ethnic or social networks
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Distance still matters. The hard reality of global expansion.
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Nonmarket/closed economy (home bias vs. foreign bias)
293:World 3.0: Global Prosperity and How to Achieve it 167:Lack of membership in international organizations 130:Differences in climates / disease environments 8: 315: 313: 189:Weak transportation or communication links 98:Different values, norms, and dispositions 59: 288: 286: 273: 271: 269: 267: 265: 263: 261: 257: 218:It makes distance visible for managers. 344:Cases about Redefining Global Strategy 278:Cases about Redefining Global Strategy 148:Countries (Unilateral / Multilateral) 7: 108:Lack of shared regional trading bloc 304:Pankaj Ghemawat official website: 14: 1: 180:Lack of internal navigability 170:Weak institutions, corruption 38:Newton's law of gravitation 379: 127:Differences in time zones 80:Country Pairs (Bilateral) 306:http://www.ghemawat.com/ 68:Administrative Distance 111:Lack of common currency 18:CAGE Distance Framework 363:International business 242:ADDING Value Scorecard 199:Low per capita income 186:Geographic remoteness 137:Rich/poor differences 105:Lack of colonial ties 33:in Barcelona, Spain. 27:University of Navarra 25:, a professor at the 71:Geographic Distance 31:IESE Business School 124:Lack of land border 114:Political hostility 92:Different religions 86:Different languages 74:Economic Distance 65:Cultural Distance 55:unilateral factors 205: 204: 121:Physical distance 370: 347: 341: 335: 329: 323: 317: 308: 302: 296: 290: 281: 275: 60: 378: 377: 373: 372: 371: 369: 368: 367: 353: 352: 351: 350: 342: 338: 330: 326: 318: 311: 303: 299: 291: 284: 276: 259: 254: 212: 183:Geographic size 46: 23:Pankaj Ghemawat 12: 11: 5: 376: 374: 366: 365: 355: 354: 349: 348: 336: 324: 309: 297: 282: 256: 255: 253: 250: 246:AAA Strategies 230: 229: 225: 222: 219: 211: 208: 203: 202: 201: 200: 197: 192: 191: 190: 187: 184: 181: 178: 177:Landlockedness 173: 172: 171: 168: 165: 160: 159: 158: 157:Traditionalism 155: 150: 144: 143: 142: 141: 138: 133: 132: 131: 128: 125: 122: 117: 116: 115: 112: 109: 106: 101: 100: 99: 96: 93: 90: 87: 82: 76: 75: 72: 69: 66: 63: 45: 42: 13: 10: 9: 6: 4: 3: 2: 375: 364: 361: 360: 358: 345: 340: 337: 333: 328: 325: 321: 316: 314: 310: 307: 301: 298: 294: 289: 287: 283: 279: 274: 272: 270: 268: 266: 264: 262: 258: 251: 249: 247: 243: 238: 234: 226: 223: 220: 217: 216: 215: 210:Practical Use 209: 207: 198: 196:Economic size 195: 194: 193: 188: 185: 182: 179: 176: 175: 174: 169: 166: 163: 162: 161: 156: 153: 152: 151: 149: 146: 145: 139: 136: 135: 134: 129: 126: 123: 120: 119: 118: 113: 110: 107: 104: 103: 102: 97: 95:Lack of trust 94: 91: 88: 85: 84: 83: 81: 78: 77: 73: 70: 67: 64: 62: 61: 58: 56: 52: 49:inclusion of 43: 41: 39: 34: 32: 28: 24: 19: 343: 339: 331: 327: 319: 300: 292: 277: 245: 241: 239: 235: 231: 213: 206: 147: 79: 54: 50: 47: 35: 17: 15: 53:as well as 252:References 154:Insularity 44:Components 51:bilateral 357:Category 244:and the 228:defined. 16:The 359:: 312:^ 285:^ 260:^ 248:. 57:. 29:-

Index

Pankaj Ghemawat
University of Navarra
IESE Business School
Newton's law of gravitation









http://www.ghemawat.com/


Category
International business

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