Target Audience: 

Dr Cate Isla, CIO, Deepika Chopra

Date: 29/4/22

Word count: 428

Topic: System to evaluate potential international expansion countries

Background: Dr Cate is considering how Deepika Chopra may analyse potential countries of interest to expand into.
This paper provides guidance and framework to how the business may approach their consideration for potential
new markets.

Analysis: To evaluate potential markets Dr Cate may consider the CAGE distance framework (Ghemawat, 2001). It
includes cultural, administrative, geographic, and economic distances. Cultural distance includes characteristics that
will determine distance such as language, ethnicity, religion, and social norms. Administrative distance includes
colonial ties, shared monetary and political association, political hostility, government policies and institutional
weakness. This distance is limited for China within Africa as there is a positive political relationship (Wang et al.,
2020). Geographical distance includes physical distance, common borders, river or sea access, transportation access,
climate, and size of country. Devinci expanded to the U.S largely due to a shared boarder (Plourde & Aspirot, 2019).
Economic distance includes consumer income and cost and quality of resources. Distances are prioritised to ensure
the best option is selected. Priority can be determined by administrative distance having the greatest impact on
businesses due to colonial ties increasing business by 900% (Ghemawat, 2001). Values, ethics, and motivations
(Bartlett & Beamish, 2018). For Devinci, market seeking behaviour was a motivation due to the large populations of
western counties in their expansion path. Therefore, prioritised characteristics were colonial ties to increase likely
hood of business and level of hostility as no benefit is gained if customers will not buy from the business (Plourde &
Aspirot, 2019. However, countries may not have all necessary characteristics, and there may be Institutional voids.
Institutional voids are often filled by partnerships in the new market, and systems are created to exploit opportunity.
Shortlisted countries can be evaluated by prioritised distance, motivations, sector, and values. Including impact of
institutional voids if the business is willing to fill them.

Ethical cautions: Dr Cate must consider the level of corporate social responsibility and ethical conduct within
potential markets. If Deepika enters a market without knowing the social responsibilities or ethics and if
expectations are lower, Deepika may be manipulated by local firms resulting in negative impacts on marginalised
locals within the new market (Ghoul, Guedhami, & Kim, 2017)

Recommendation: Dr Cate may evaluate the businesses motivations to determine if any particular distance will have
a greater impact, to then be prioritised during selection of countries of interest. As well as consideration of
institutional voids and if they are too challenging to fill.

References:

Bartlett, C. A., & Beamish, P. W. (2018). Expanding abroad: Motivation, means, and mentalities. Transnational
management: Text and cases in cross-boarder management (8th ed.) (pp. 11-29). Cambridge University Press.
Ghemawat, P. (2001). Distance still matters: The hard reality of global expansion. Harvard Business Review, 79(8),
137-147.
Ghoul, S. E., Guedhami, O., & Kim, Y. (2017). Country-level institutions, firm value, and the role of corporate social
responsibility initiatives. Journal of International Business Studies, 48(3), 360-385.
https://doi.org/10.1057/jibs.2016.4
Plourde, Y., & Aspirot, Y-R. (2019). Cycles Devinci: Develop an Asia-Pacific internationalization strategy? International
Journal of Case Studies in Management, 17(3), 1-16. https://www.hec.ca/en/case_centre/ijcsm/index.html
Wang, D., Cui, L., Vu, T., & Feng, T. (2021). Political capital and MNE responses to institutional voids: the case of
Chinese state-owned enterprises in Africa. Organisation Studies. https://doi.org/10.117/0170840620954011