The Cagr Framework
April 23, 2013
INTERNATIONAL MARKETING
About the chapter “The CAGE Distance Framework” by Pankaj Ghemawat
The CAGE Distance Framework The semi globalized state of the real world, in which borders continue to matter; the large differences arise at borders. The differences are in terms of the distances between countries along a variety of Cultural, Administrative / political, Geographic and Economic (CAGE) dimensions. As a result, the CAGE framework not only helps identify the key differences in particular settings; it also shows the insights into differences in differences by providing a basis for distinguishing countries that are relatively close, along the key dimensions, from those that are relatively far. The example of Google's difficulties in Russia and China, touches on all the components of the CAGE distance framework: • Cultural distance: Google's biggest problem in Russia seems to have been associated with a relatively difficult language. • Administrative distance: Google's difficulties in dealing with Chinese censorship reflect the difference between Chinese administrative and policy frameworks and those in its home country, the United States. • Geographic distance: Although Google's products can be digitized, it had trouble adapting to Russia from afar and has had to set up offices there. • Economic distance: The underdevelopment of payment infrastructure in Russia has been another handicap for Google relative to local rivals. A company that has been successful but has run into a great deal of trouble with distance is Wal-Mart, the world's largest enterprise in terms of sales. Wal-Mart failed to account for distance, several years ago, CEO Lee Scott was asked about Wal-Mart's international prospects. His response: "People said we would struggle when we left Arkansas and got to places like Alabama. We even hired a person to work on the cultural differences. Our business model has performed well at home, despite the skeptics, so it should also perform
INTERNATIONAL MARKETING
About the chapter “The CAGE Distance Framework” by Pankaj Ghemawat
The CAGE Distance Framework The semi globalized state of the real world, in which borders continue to matter; the large differences arise at borders. The differences are in terms of the distances between countries along a variety of Cultural, Administrative / political, Geographic and Economic (CAGE) dimensions. As a result, the CAGE framework not only helps identify the key differences in particular settings; it also shows the insights into differences in differences by providing a basis for distinguishing countries that are relatively close, along the key dimensions, from those that are relatively far. The example of Google's difficulties in Russia and China, touches on all the components of the CAGE distance framework: • Cultural distance: Google's biggest problem in Russia seems to have been associated with a relatively difficult language. • Administrative distance: Google's difficulties in dealing with Chinese censorship reflect the difference between Chinese administrative and policy frameworks and those in its home country, the United States. • Geographic distance: Although Google's products can be digitized, it had trouble adapting to Russia from afar and has had to set up offices there. • Economic distance: The underdevelopment of payment infrastructure in Russia has been another handicap for Google relative to local rivals. A company that has been successful but has run into a great deal of trouble with distance is Wal-Mart, the world's largest enterprise in terms of sales. Wal-Mart failed to account for distance, several years ago, CEO Lee Scott was asked about Wal-Mart's international prospects. His response: "People said we would struggle when we left Arkansas and got to places like Alabama. We even hired a person to work on the cultural differences. Our business model has performed well at home, despite the skeptics, so it should also perform