Distance Still Matterthe Hard Reality of Global Expansion
Case Study Summary
Distance Still Matters: The Hard Reality of Global Expansion
CAGE Distance Framework
Distance Still Matters analyses several factors that impact both success and failure in global expansion strategies. The challenges discussed are dimensions of distance. The four dimensions of distance discussed are cultural, administrative, geographic and economic.
Cultural distance is essentially the differences in communication, interaction, religion, race and social norms.
Administrative or Political distance refers to the absence of colonial ties, shared political association and institutional weaknesses. Examples of political barriers are tariffs, trade quotas and restrictions on foreign investment. Political associations between countries, typically that exist in a colony/colonizer relationship facilitates international trade due to similarities in administrative dynamics.
Geographic distance is created due to remoteness or the lack of access due to transportation, communication limitations or differences in size and climate.
Economic distance is created by a discrepancy in resources such as financial, intellectual, human and natural.
Star TV
Star TV’s attempt to expand into the global media television market was given as an example of a failed initiative due to the lack of focus on dimensions of distance between foreign markets. Star TV was founded in 1991 with a mission to deliver television programming to Asian audiences. Their motivation was that they perceived the Asian audience as being starved for diverse media choices. Star projected that English language programming would transition into the Asian culture, especially with the socio-economic elite (top 5%). The strategy to gain a competitive advantage over broadcaster was to use satellite technology to transmit programming.
Star’s expansion attempt failed, recording losses of $141 million in 1999 and $500 million between 1996 and 1999. Without extensive Asian market research this
Distance Still Matters: The Hard Reality of Global Expansion
CAGE Distance Framework
Distance Still Matters analyses several factors that impact both success and failure in global expansion strategies. The challenges discussed are dimensions of distance. The four dimensions of distance discussed are cultural, administrative, geographic and economic.
Cultural distance is essentially the differences in communication, interaction, religion, race and social norms.
Administrative or Political distance refers to the absence of colonial ties, shared political association and institutional weaknesses. Examples of political barriers are tariffs, trade quotas and restrictions on foreign investment. Political associations between countries, typically that exist in a colony/colonizer relationship facilitates international trade due to similarities in administrative dynamics.
Geographic distance is created due to remoteness or the lack of access due to transportation, communication limitations or differences in size and climate.
Economic distance is created by a discrepancy in resources such as financial, intellectual, human and natural.
Star TV
Star TV’s attempt to expand into the global media television market was given as an example of a failed initiative due to the lack of focus on dimensions of distance between foreign markets. Star TV was founded in 1991 with a mission to deliver television programming to Asian audiences. Their motivation was that they perceived the Asian audience as being starved for diverse media choices. Star projected that English language programming would transition into the Asian culture, especially with the socio-economic elite (top 5%). The strategy to gain a competitive advantage over broadcaster was to use satellite technology to transmit programming.
Star’s expansion attempt failed, recording losses of $141 million in 1999 and $500 million between 1996 and 1999. Without extensive Asian market research this
References: Beamish W. Paul and Bartlett Christopher, Transnational Management: Text, Cases, and Readings in Cross-Border Mangement, pg. 95-105