CAGE distance analysis for Local Product (Case study : Polygon and Garudafood)

“locally rooted, globally accepted”

By Annisa G. Wachman

The Covid 19 pandemic was a devastating blow to the entire world including Indonesia, many
companies from various sectors experienced a decline in revenue even bankruptcy. However,
this is not the case with the two Indonesia multinational companies ; Polygon (bicycle) and
Garudafood. These two domestic companies were able to prove their existence, not only
through domestic sales, but also international sales.

The success of the two companies in expanding, cannot be separated from the success of the
marketing team in analyzing the needs of the destination country market, in this essay will be
discussed through the CAGE Distance Framework approach how to compare the gap between
the local product country and the expansion destination country (case study: Polygon and
Garudafood) to successfully penetrate international sales.

Through the CAGE Distance Framework analysis, it can be seen what approaches are used by
these companies in marketing their products internationally.

The CAGE Distance Framework is an analysis used to identify cultural, administrative,

geographical, and economic differences or similarities that should be considered in developing
a strategy to expand a product to a destination country. CAGE stands for Cultural,
Administrative, Geographic and Economic.

1. Cultural Distance

Culture contains cultural norms, values and social beliefs, otherwise known as unwritten rules
that shape the behavior of both individuals and organizations, knowing the culture in a place
can help marketers/producers predict the acceptance of a product, in line with what Setiadi
(2003) stated that cultural factors have an influence as a need to determine what behavior is
widely and deeply acceptable to consumer behavior in purchasing.

Polygon

Polygon Bikes have been designing, building and engineering for over 25 years world class
bicycles in partnership with engineers, industrial designers, creative thinkers and professional
riders based in North America, Europe, and Asia. Polygon are one of the few global bike brands
that own manufacturing facilities allowing them to control all aspects of the manufacturing
process from the craftsmanship of hand welding our frames right through to our industry-
leading assembly and painting facilities.

Quoted from Polygon's marketing director when interviewed by SWA magazine. Recently,
Polygon has exported to more than 60 countries with the largest export destination are Europe
(80%).

Polygon has been consistent since its inception, producing bicycles for export. Polygon realizes
that the countries with the highest cycling habits are European countries, One of Polygon's
biggest export destinations is Germany, based on the European Cyclist Federation report,
Germany is the most comfortable country for cyclists.

Garudafood

Established in 1990, Garudafood has been pioneered since 1979 by the founder of the company
through PT Tudung Putra Jaya (TPJ), a company in Pati, Central Java, which markets peanut
products which later became known as Garuda Peanut. Until now, Garudafood has marketed
various types of food and soft drinks with various brands. Garudafood has exported its products
to more than 20 countries with the focus on ASEAN countries, China and India.

Garudafood through Gery Gone Mad products, built a factory in India by joint venture with
local company Polyflex, Gery gone mad sells snack products similar to Gery that produced in
Indonesia, except that there are several variants that are not found in Indonesia, as quoted from
"The Story of Desi Cuisine" the staple food of Indian people is rice, atta (whole wheat flour)
and various types of nuts. Two Indian Gery products feature cashew and almond flavors, so in
addition to flavors such as chocolate, cheese and strawberry that are already universally known,
Indian Gery also adopts local food habits to meet the tastes of the market there.

2. Administrative

The differences in history and politics among countries. From lack of shared currency to
political hostilities including legal system and government corruption (Richard, 2004)

Polygon

Polygon has consistently focused on the export market since its inception, and to meet the
requirements of Japan and Europe, Polygon has been equipped with JIS and EU standards,
which are the world's bicycle manufacturing standards. Polygon does not always sell its
products under its own brand, but through OEM (Original Equipment Manufacture) products,
Polygon supplies several leading bicycle brands from various countries such as Scott,
Kuwahara, Mustang, Avanti, Kona, Saracen and Marine.

Garudafood

Garudafood has exported its products to more than 20 countries, Garudafood even does not
only rely on exports, but they have implemented a direct investment system or Foreign Direct
Investment (FDI) by building its own factories in India and China.

In India, Garudafood named their products "Gery gone mad" by Joint venture with local
company polyflex to compete in the snack market in India, by Joint venture with local
companies, Garudafood gets better trust from the public and the government in marketing
products. Quoted from bestmediainfo, Garudafood polyflex entrusts its product marketing
affairs to Carat. Carat won the account in a multi-agency pitch. DDB Mudra is the incumbent
agency. The agency will handle the account from its Bangalore office.

In 2008 as the investment of Indonesian Pt Garudafood Putra Putri Jaya Company, Fuhua
Company became Sino-foreign joint ventures in China, nowadays it has owned several tens of
production lines and over one thousand employees in their factory.

3. Geographic distance

Geographic. The geographic gap is not only the physical distance between the producing
country and the destination country, but also the physical size, whether it is directly adjacent
or not, and the access/trade route whether by sea or other accessible routes.

Interesting fact argued by Stober (2014) The rough assumption that halving distance doubles
exports intensity implies that for a distance of one-fourth eventhough there are other variables
that need to be considered in as much as physical distance is not the only geographic factor that
is often incorporated as an explanatory variable in gravity models.

Garudafood

Garudafood chose China and India as the destination countries for expansion. These two
countries are ranked 1 and 2 as the most populous countries in the world, quoted from the
official census site of the Chinese government. while India, recorded in 2023 the population in
India ranks second in the world with an estimated population of 1,422,280,000 people, while
in China, in 2023 the recorded population of 1,409,880,000 people,
Reporting from the official website of Garudapolyflex India, the biggest consumers of Gery
Gone Mad are children and teenagers. Based on data from the Organization for Economic
Cooperation and Development in 2021, the number of productive population in India reached
900 million, this is a good potential for the snack food sector, in line with what Rahardja and
Manurung (2008) stated that the more the population of a country, the more the level of
consumption.

4. Economics

Economics. One of the biggest determinants of the economic gap between producing countries
and export destination countries is the cost of labor and the level of consumer wealth. The
availability of natural resources, human resources, to infrastructure and advances in
information and technology.

Garudafood

Stober (2014) in the journal CAGE Analysis of China's Trade Globalization stated trade that
developed economies tend to trade with other developed ones as emerging or developing
economies will trade with each other respectively, since buyers are more likely to afford similar
products and share the same taste with similar prices due to their per capita income similarities.
In 2020, India's GDP per capita was 1,931 USD, one rank above Indonesia among the G20
countries with a GDP per capita value of 3,894 USD (BPS, 2020). The World Bank (World
Bank) makes four groups of countries adjusted for per capita income. First, countries with a
per capita income of US$975 per year are included as low-income countries, countries that
have a per capita income between US$976 per year and US$3,855 per year are included as
lower middle income countries. Third, countries that are included as upper middle income
countries have a per capita income of US$3,856 per year and US$11,905 per year Indonesia is
on the threshold between upper middle income countries and lower middle income countries,
while India is categorized as a lower middle income country. China is still categorized as an
upper-middle income country, similar to Indonesia, although China per capita income has
reached US$10,229.

Polygon

Polygon consistently markets its products abroad, especially to European countries. Indonesia
and Europe have a big gap in terms of GDP per capita and science and technology. According
to Ceicdata, the average GDP per capita of European countries is 34,402,565 USD, far above
Indonesia's GDP of 3,856 USD. This means that the purchasing power and standards of
European society are much higher than Indonesia. However, this did not stop Polygon from
marketing its products. Through in-depth research and innovation, Polygon has managed to
penetrate the European market and become a supplier to the world's leading bicycle brands.
One of Polygon's innovations that even received appreciation from the German media "World
of MTB" is the Floating Suspension System, a technology that can provide comfort for riders
spending long hours on the bike.

In addition to product innovation, Polygon is consistently present in the world's largest

international bicycle exhibitions, such as Eurobike Show in Germany, China Cycle Show,
Taipei International Cycle Show and Sea Otter in the USA. Polygon is the first and only
Indonesian bicycle brand to participate in international bicycle exhibitions.

5. Conclusion

The success of local Indonesian products cannot be separated from the company's persistence
in conducting destination market analysis. In this CAGE distance approach, both products are
able to deliver the needs of their market share in the destination country of expansion by
looking at the similarities and differences in cultural, administrative, geographic and economic
distance. The weakness of this analysis is that it compares the country of origin with the
destination country of expansion, so the focus on the product still requires other types of
analysis or approaches.