Cage Distance Framework

1. International Business
Chapter 3
CAGE Distance
Framework

2. CAGE Distance Framework
 CAGE Analysis is an excellent tool for
associations and businesses looking to develop
international strategies.
 CAGE Analysis identifies the middle ground
between the one-size-fits-all and the mass-
customization extremes that typify most global
market strategies and product development
efforts.

3.  Easily assess the potential size, risks, and
barriers to different international
markets.
 Eliminate the guesswork of choosing
which countries to enter in which order.
 Identify current products most easily
transportable at minimum cost.
 Develop new products unique to global
ventures.
How it helps?

4. The Four Dimensions
 C (Cultural Distance)
 A (Administrative Distance)
 G (Geographic Distance)
 E (Economic Distance)

5. Cultural Dimension
 Greater cultural differences– leads to lower
amount of cultural trade.
 Long lasting economic interactions– leads
to weakening effect of cultural differences.
 More malleable over the long run than
differences in language, ethnicity or
religion.

6. Example of CAGE Culture
 Different languages.
 Different ethnicity.
 Different religions.
 Different values, norms and dispositions.

7. Administrative Dimension
Refers to:
 Laws.
 Policies.
 Governmental run institutions.
 International Organizations.
 Treaties the country either support or created.
Factors impacting Foreign Direct Investment:
 Country’s political stability.
 Tariffs.
 Non-tariff barriers.
 Quotas.

8. Geographical Dimension
 Physical distance transportation and
cost increases.
 Size of the country-Geographical size,
remoteness.
 Weak transportation or communication-
failure in delivery timelines.
 Lack of internal navigation  Difficulty
in finding locations.

9. Examples of Geographical Dimension
This mainly affects industries related to:
 Products that are fragile or perishable.
 Products that require communication and
connectivity.
 Products having low value or bulk ratio.
 Local supervision and operational requirements.

10. Economic Dimension
 Economic size.
 Difference in consumer income  rich and poor
differences.
 Differences in cost and quantity of resources-
human, financial, Natural.
 Differences in infrastructure, information or
knowledge.

11. Conclusion
 CAGE framework can be used to compare the
chances of success of different countries in a
given foreign market.
 Companies can use the CAGE framework to
choose where to invest.