The CAGE framework analyzes four dimensions - cultural, administrative, geographic, and economic distance - to help businesses develop international strategies. It identifies a middle ground between one-size-fits-all and highly customized global strategies. Using CAGE, businesses can assess market potential and risks in different countries, eliminate guesswork in market entry order, and identify products suitable for international markets. The cultural dimension examines differences in language, ethnicity, and values. The administrative dimension refers to laws, policies, and trade agreements. The geographic dimension impacts transportation costs and product delivery. The economic dimension considers differences in market size, resources, and infrastructure.

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.