CAGE ANALYSIS

Using the CAGE Analysis is helpful in order to create insights into the key differences
between a company’s home market and the international market it intends to target. It is also
helpful because it allows companies to assess the desirability of that market in an organized
manner.

Harvard Business Review: Distance still matters

Description of CAGE Distance Framework

Cultural distance: This refers to the cultural norms, values and social beliefs, also known as the
unwritten rules, that shape the behavior of individuals and organizations. Various societies also differ
in their attitudes toward globalization and market power that have important consequences in terms of
both formalized trade regulations and general attitudes toward how businesses are run.

Administrative distance: This refers to differences in history and politics among countries, especially
those which do not share colonial ties. Also, a lack of shared currency, political hostilities, and
government corruption contribute to Administrative distance.

Geographic distance: Geographic distance refers not only to the physical distance between two
countries, but also a country’s physical size, whether it shares borders with hostile or non-hostile
neighbors, and access to trade routes such as the ocean and other topographical features. Any of these
attributes can cause Geographic distance and make doing business a challenge.

Economic distance: Two of the biggest determinants of economic distance are the Cost of Labor and
level of Consumer wealth between countries. It is more difficult for a company from a wealthy
country to enter a poorer country and be successful there, but not impossible.