DEPARTMENT OF INFORMATION SYSYTEMS

KARUBA YAPHET A M234113

STRATEGIC MANAGEMENT ASSIGNMENT 2 MIS 513

QN: ILLUSTRATE HOW YOU MAY EMPLOY THE CAGE
FRAMEWORK TO ASSESS THE SUITABILITY OF A FOREIGN
MARKET.
The CAGE framework (also referred to as the CAGE distance framework) was developed by
Pankaj Ghemawart to capture essential information you need to consider when entering a new
market and highlight how big a difference there is between what you currently do and what you
will need to do. The CAGE framework is a tool that considers four dimensions to assess the
distance created by global expansion and these include culture, administration, geography, and
economics (Carpenter and Sanders, 2014).

1. Cultural Distance

The products or services a business offers and how they are used in other cultures might be
affected by differences in culture. How the inhabitants of the new market will use and
comprehend the company's offer is an illustration of cultural difference in the CAGE framework.
For instance, whereas Fanta soft drinks are peach-flavored in Botswana, the same product has
been adapted to be more flowery to appeal to the tastes and cultural differences of the Japanese
market. Every foreign market will favor certain foods, goods, and brands. And based on these
cultural variations, the CAGE framework indicates what changes need to be made in order to
offer a profitable good or service.

Cultural distance has to do with the possible differences existing in relation to the way
individuals from different countries observe certain values and behaviors for example, colors
have specific implications in China, and these are culturally significant whereas in United States,
they carry less significance hence, launching a US product in China without knowledge of this
difference in social standards might risk the success of the product.

Language differences as well as history between nations can also be included amongst attributes
that creates distance in terms of cultural distance for example looking at Zimbabwe and Zambia,
one would first think that the two countries have a much larger cultural distance but due to the
fact that most business is performed in English in both countries and both were British colonies,
there is less cultural differences between them.

2. Administrative Distance

The legitimate and political frameworks of the home and target nations decide the managerial
distance between the two. In nations where the political frameworks are unique, for instance, a
majority rule government versus socialism, there is a more prominent distance and more
vulnerability. Various regulations between nations can make consistence and carrying on with
work more troublesome. For instance, in certain nations, regulations overseeing contract
consistence are not upheld. In certain countries on the off chance that a purchaser neglects to
make installment for buys, the dealer can sue, however it might require a long time under the
watchful eye of a court trying and hearing the case. Additionally, work regulations can be very
unique among countries. In the Dominican Republic, for example, organizations are expected to
pay workers a thirteenth month of pay toward the year's end, as a little something extra. Then
again, a few countries safeguard the social liberties of individuals who fall inside safeguarded
classes in the US (e.g., age, race, sex, class, orientation, sexual direction, and so forth), however
different countries may not. This brings up especially interesting issues for firms who should
submit to US regulations, but seeking to expand abroad,

3. Geographical Distance
One important factor in this dimension is the actual physical distance between the home nation
and the target country. Geographical distances involves assessing how far apart are trading
partners in physical terms, the size of the country, differences in climates, and nature of
transportation and information networks(Carpenter and Sanders, 2014)? Traveling there or
shipping goods there takes longer and costs more money as a result of how further away the
nations are. However, mileage is not the only consideration. Another is the simplicity of
international communication. This is nearly nonexistent in most nations thanks to improvements
in telephone and internet communications. However, communication can be difficult
especially when in different time zones since the working hours might be different like in United
Kingdom and Zimbabwe.

4. Economic Distance
Economic distance captures fundamental differences relating to income, the distribution of
wealth, and the relative purchasing power of segments of a geographic market (Mariados, 2017).
The greater the differences in the two economies, the more difficult it is to be successful.
Factors such as production, packaging and logistics are key considerations for economic CAGE
analysis. Once the key strategy team has evaluated the cultural, administrative and geographical
differences, they have to determine whether the new market will be economically viable. At
times, this is the factor that does not allow companies to break through a new market due to an
exorbitant increase in costs.
Often, most organizations have the best chance of success when they expand into markets
that have a similar economic profile. A simple example would be a U.S.-based company
expanding into Canada. Canada has many unique attributes, but it's a closer economic
match to the United States than a country such as India or Zimbabwe.
REFERENCES
Carpenter, M & Sanders G 2014, Strategic Management Concepts and Cases, 2 nd edn,
Pearson, London

Pankaj Ghemawat, “The Forgotten Strategy,” Harvard Business Review 81, no. 11
(September 2003).
Kentow, W. (2019). 'Distance Still Matters: The Hard Reality of Global
Expansion,' Harvard Business Review, September 2001.
Available https://hbr.org/2001/09/distance-still-matters-the-hard-reality-of-global-
expansion. [Accessed August 26, 2023.]
Mariadoss, B. J. (2017). Global Market Opportnity Assessment – Cage
Analysis. Core principles of international marketing [Pressbooks edition]. CC BY NC
SA 3.0. Washington State University. https://opentext.wsu.edu/mktg360/chapter/6-3-
selecting-target-markets-and-target-market-strategies. [Accessed August 26, 2023]