Culturally Complexities in Foreign Market - StarTV Case Study The four case studies presented relate to the questions on the next slide regarding Professor Pankaj Ghemawat's Harvard Business Review (2001) article on "Distance Still Matters."

1. Distance Still Matters:
Pankaj Ghemawat
The hard reality of global expansion.
Companies often overestimate the attractiveness
of foreign market, and the extent of globalisation
has been vastly exaggerated. Do you agree?
Topic: Theoretical perspective
Tajudeen Ogunsola
Case study – Star TV Private Limited
MOMN009H7: International Business Strategy (MSc. Module)
Case study

2. Agenda
Pankaj Ghemawat
Professor of Global Strategy, Harvard Business Review Journal Article Titled ‘Distance Still Matters’ (2001 )
2 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
1. Companies often overestimate the attractiveness of foreign market, and
the extent of globalisation has been vastly exaggerated. Do you agree?
2. Benefiting from high distance market ?
3. The Idea in practice: The CAGE Distance Framework
4. Adaptation of the CAGE Distance Framework
5. Do you agree?
6. The idea in Brief: lesson learned from market entry on Ghemawat argument
and framework.
7. Case study: Star TV Private Limited
8. Conclusion

3. Companies often overestimate the attractiveness of
foreign market, and the extent of globalisation has been
vastly exaggerated. Do you agree?
Case study: China Market Entry
4 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

4. Overestimate the attractiveness of foreign market, and the extent of
globalisation has been vastly exaggerated. Do you agree?
1
MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
01 Globalisation is a Process
Globalisation is not exaggerated but consider the
number of trade agreements between nations.
e.g., BRICS, MINT, NAFTA, or ASIAN TIGER
economies.
02 Untapped Markets
Due to the sheer size of an untapped market,
companies tend to lose sight of the difficulties of
new territories rather than benefit from
international expansion.
03 Four Dimensions of Distance
Companies can take into account the four dimensions
of distance in order to dramatically change the
company's assessment of the relative attractiveness
of foreign markets
Economic
Growing middle-
class
Total
addressable
market
GDP Trends
Economic Operations
Geographicdistances
are shortening
through Technology
& Coat
Economic
More countries
are meeting
the minimal
level of critical
mass to attract
global
attention (i.e.
Walmart,
Starbucks,
Dominos Pizza)
America and
Cuba’s conflict
Sephora entry
into Japan
Ikea fight
Russian
corruption
Target’s exit
from Canada
Political/Administrative
Geographic
Geographic distances
are shortening
through Technology
& Coat
– National Pride
Airlines, Commodity
(Oranges, Coffee)
– National Security
(Telco's)
– National Defence
(Software, Arms)
Governments will protect these
industries and restrict trade,
especially for “distant” sellers
No
Globalisation
has not
been
Exaggerated.
MINT
Economies
ASIAN TIGER
E c o n o m y
5

5. Source: Dawar and Frost, “Competing with Giants: Survival Strategies for Local Companies in Emerging Markets”., 1999
Spain/
Latin America
USA/ Britain
Anglophone Africa
Americas &
the Caribbean/
Parts of Asia &
"Down Under
France/Canada &
French francophone
African
countries Cultural/
Different
Social norms
Colonial examples
account for 900%
increase
Cultural differences
6 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
Benefiting from high distance markets?
Industry and product offered by distance
1
05 Market Alignment
Adapt assets to industry characteristics for better
market opportunities.1
06 Defend Market
Defend the company's new market by analysing and
evaluating home advantage to explore new growth
markets.12
07 Extend Market Advantage
Extending the company's local advantages abroad
through Ghemawat's administrative / political
distance to create or enter a new markets.13
08 Grow Profits to Build Brand Equity
Contenders at global level can increase a company's
profit and build brand equity..11
Travel to and within
Technological distance
(modern/ traditional )
Trade costs (Shipping
costs) Time zones
Perhaps the best
known/understood
Logistical limitations
Political/Administrative
Geographic
Cultural differences

6. The Idea in practice: The CAGE Distance Framework
Source: Pankaj Ghemawat , “Distance still matters: The hard reality of global expansion” Harvard Business Review, 2001
7 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

7. Adaptation of the CAGE Distance Framework
Spain/
Latin America
USA/ Britain
Anglophone Africa
Americas &
the Caribbean/
Parts of Asia &
"Down Under
France/Canada &
French francophone
African
countries Cultural/
Different
Social norms
Economic
Growing middle-
class
Total
addressable
market
GDP Trends
Economic Operations
Colonial examples
account for 900%
increase
8
Monitoring and analysis to make better market entry decisions: such as "invest" or "divest."
FIRST IN-BETWEEN SECOND
IMPACT OF DISTANCE
America and Cuba’s conflict
Sephora entry into Japan
Ikea fight Russian corruption
Target’s exit from Canada
Geographic
Travel to and within
Technological distance
(modern/ traditional )
Trade costs (Shipping costs)
Time zones
Perhaps the best
known/understood
Logistical limitations
Geographic distances
are shortening
through Technology
& Coat
Geographic
Cultural differences
More countries are meeting the
minimal level of critical mass to
attract global attention (i.e. Walmart,
Starbucks, Dominos Pizza)
Industry and product offered by distance Attributes creating distance
Adapted by author based on the CAGE Distance Framework developed by Pankaj Ghemawat Source: P. Ghemawat, 2001
Siemen Nigeria issue
Starbucks Polish
disaster
MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
– National Pride
Airlines, Commodity
(Oranges, Coffee)
– National Security
(Telco's)
– National Defence
(Software, Arms)
Governments will protect these
industries and restrict trade,
especially for “distant” sellers
Political / Administrative

8. No globalisation has not been exaggerated.
NEW OPPORTUNITY
DISTANCE
GDP increases by 1% percent
and .7% to .8% in trade.18
‘Trade between two
countries which are
separated by 5000 miles is
just 20% compared to
countries 1000 miles apart.’13
‘Common currency
increases trade by
340% and/or
common
membership in
regional trading
increases trade by
330%.’12
GDP New markets
Currency/
memberships
9 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
Do you agree?
The number of trade
deals is an example
of this (think NAFTA,
Trading Blocs like the
EU etc.)
DECIDE OR CONQUER
Per Zaheer – ‘globalization
will eventually bring the idea
of cultural differences down
as the world will become
flatter’.1

9. .
How could STAR TV have
avoided this fate?
 Ghemawat; Look beyond a
country's sales potential (as
expressed in national wealth or
the tendency to consume) and
analyse the likely effects of
distance.
 Companies should not only focus
on the geographical dimension of
distance.
 Businesses need to consider three
other dimensions
 1. Cultural (religion, race, social
norms, language)
 2. Administrative (colony-
colonizer links, currencies, trading
arrangements)
 3. Economic (income,
distribution-channel quality).
Achievement
• Dazzled by the immensity
of a foreign market.
• Ignored the difficulties
pioneering a new field.
• "Assumed" Asian viewers
wanted English-language
programming.
• Product offerings did not
align with market needs.
Countries
differ in
market
dimensions.
Lesson learnt
10 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
The idea in Brief: lesson learned from market entry on Ghemawat argument and framework.
Why did Star TV lose $500M?
Strategies refer to; Ghoshal (1987),
Levitt (1983), Levitt, Montegomery and
Porter (1991), Agnihotri and Santhanam
(2003), Ohmae, K. (1994)

10. Case study: Star TV Private Limited
Star TV Television – China Market Entry
Companies that are considering alternative options like the CAGE
Distance Framework to discover market opportunities and / or
consumer spending power.
Result
Est. First air date 26 August 1991
Founder: Keith Rupert Murdoch
Owner: China Media Capital (CMC
Brand: Star TV (21st Century Fox)
Origin: Australian/British/American
Market objective: China market entry
Niche: "Nouveau riche" – (newly rich elite) who could not only afford the
services but who also represented an attractive advertising market.
Cable television network, Subsidiary of (CMC)
Goal: Deliver TV programming across the Asian markets.
Product: Twentieth Century Fox English based TV/movie content
Market position: For information-hungry residents to bypass state-controlled
television channels
Market penetration: the top 5% of Asia's social-economic pyramid
Headquarters: 13/F One Harbourfront 18 Tak Fung Street
Chief Executive Office: Richard Li
Revenue: valued at $11.2 billion (2015 Morgan Stanley )
Number of locations: Star India, Star Greater China & Fox International India
Parent organization: The Walt Disney Company India
Subsidiaries: Not listed
Lesson Learned – Choose new markets wisely
Challenge: The attractiveness of the foreign market has been
overestimated. Culturally, a key part of the Four Dimensions of Distance was
ignored or dismissed. The economic distance - the income of consumers was
exaggerated for the purpose of globalisation.
Lost revenue: In 1996-1999, it lost $500 million, then $141 million in 1999,
with revenues of $111 million. By 2002, there were positive operating
profits and Star TV continues to grow.
The CAGE Distance Framework
Theoretical perspective: It focused on the geographical dimension of
distance and did not account for three other factors: cultural (religion, race,
social norms, language); administrative (colony-colonization links,
currencies, trading arrangements); and economic factors (income,
distribution, channel quality).
Conclusion: Chinese consumers are indigenous people with limited foreign
language skills. Star TV's ignorance of administrative and political
sensitivity led to programmes that served no purpose. Star TV has not
aligned its audience with the preferred "local content." Ghemawat's
"distance still matters" shows catastrophic consequences if companies do
not go beyond "flawed," adjusted, and CPA analyses to determine the
attractiveness of foreign markets.
11 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

11. Conclusion: Star TV Private Limited
12 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
Analyse the effects of distance to improve the chances of
investing in profitable foreign markets "1. Both case studies
(Target Corporation & Star TV) show similarities that the types
of distance (USA or China) affect industries differently or
culturally.
Consider
alternatives to
overcome
challenges
Star TV, China, has taught us that high-distance markets have
value and profitability opportunities, and high-distance markets
are not an avoidance market.
Limit risk
& cost as soon
as possible.

12. References
[1]P. Ghemawat, "The Cross-Border Integration of Markets and International Business",
SSRN Electronic Journal, 2001.
[2]O. Shenkar, "Beyond cultural distance: Switching to a friction lens in the study of
cultural differences", Journal of International Business Studies, vol. 43, no. 1, pp. 12-17,
2012.
[3]"Business Opportunities and Risks: Plan Before You Expand Overseas", National Center
for the Middle Market, 2018. [Online]. Available:
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[4]M. Alexander, "When you shouldn't go global (companies' ill-fated globalization
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[5]J. Dunning, "Location and the multinational enterprise: A neglected factor?", Journal of
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[6]S. Zaheer, M. Schomaker and L. Nachum, "Distance without direction: Restoring
credibility to a much-loved construct", Journal of International Business Studies, vol. 43, no.
1, pp. 18-27, 2012.
[7]B. O'Brien, "4 lessons learned from famous market entry failures - Trade Ready", Trade
Ready, 2018. [Online]. Available: http://www.tradeready.ca/2015/trade-takeaways/4-
lessons-learned-famous-market-entry-failures/. [Accessed: 16- Jan- 2018].
[8]"Forbes Welcome", Forbes.com, 2018. [Online]. Available:
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can-be-managed/#7c0c3a543acb. [Accessed: 18- Jan- 2018].
[9]D. Chatterjee, "Morgan Stanley values STAR TV at $11.2 billion", Business-standard.com,
2018. [Online]. Available: http://www.business-standard.com/article/companies/morgan-
stanley-values-star-tv-at-11-2-billion-115082900813_1.html. [Accessed: 18- Jan- 2018].
[10]T. Friedman, "It's a Flat World, After All", Nytimes.com, 2018. [Online]. Available:
http://www.nytimes.com/2005/04/03/magazine/its-a-flat-world-after-all.html. [Accessed:
18- Jan- 2018].
[11]P. Ghemawat, "Distance still matters. The hard reality of global expansion.", Harvard
Business Review, no. 0, 2001.
[12]P. Ghemawat, "The world is still round - like a soccer ball: redefining global strategy",
Strategic Direction, vol. 24, no. 3, pp. 3-5, 2008.
[13]R. Thakur, "Redefining Global Strategy: Crossing Borders in a World Where Differences
Still Matter Pankaj Ghemawat", Paradigm, vol. 12, no. 1, pp. 106-108, 2008.
[14]J. Frankel and A. Rose, "An Estimate of the Effect of Common Currencies on Trade and
Income", SSRN Electronic Journal, 2001.
[15]P. Ghemawat, "Competition and Business Strategy in Historical Perspective", Business
History Review, vol. 76, no. 01, pp. 37-74, 2002.
13
[30] House R.J. et al. (eds.), Culture, Leadership, and Organizations: The GLOBE Study of 62
Societies. Thousand Oaks, CA: Sage, 2004.
[16]O. Shenkar, "Cultural distance revisited: Towards a more rigorous conceptualization
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43, no. 1, pp. 1-11, 2012.
[17]D. Dow and A. Karunaratna, "Developing a multidimensional instrument to
measure psychic distance stimuli", Journal of International Business Studies, vol. 37, no.
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[18]G. Hofstede and G. Fink, "Culture: organisations, personalities and nations. Gerhard
Fink interviews Geert Hofstede", European J. of International Management, vol. 1, no. 12,
p. 14, 2007.
[19]S. Sakarya, M. Eckman and K. Hyllegard, "Market selection for international
expansion", International Marketing Review, vol. 24, no. 2, pp. 208-238, 2007.
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Emerging Market Companies", SSRN Electronic Journal, 1998.
[21]M. Hitt, M. Dacin, E. Levitas, J. Arregle and A. Borza, "PARTNER SELECTION IN
EMERGING AND DEVELOPED MARKET CONTEXTS: RESOURCE-BASED AND
ORGANIZATIONAL LEARNING PERSPECTIVES.", Academy of Management Journal, vol.
43, no. 3, pp. 449-467, 2000.
Reference for Figure/tables
[22]Lorraine Eden, , Stewart R Miller, (2004), DISTANCE MATTERS: LIABILITY OF FOREIGNNESS, INSTITUTIONAL DISTANCE
AND OWNERSHIP STRATEGY, in Michael A. Hitt, Joseph L.C. Cheng (ed.) "Theories of the Multinational Enterprise: Diversity,
Complexity and Relevance" (Advances in International Management, Volume 16) Emerald Group Publishing Limited, pp.187
– 221
[23] House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (2004). Culture, Leadership, and Organizations: The
GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage Publications.
[24] Sema Sakarya, Molly Eckman, Karen H. Hyllegard, (2007) "Market selection for international expansion: Assessing
opportunities in emerging markets", International Marketing Review, Vol. 24 Issue: 2, pp.208-238,
https://doi.org/10.1108/02651330710741820
[25]Porter, M.E. 1985. Competitive advantage: creating and sustaining superior performance: with a new introduction. New
York: The Free Press
[26] Porter, M.E. 1980. Competitive strategy: techniques for analyzing industries and competitors: with a new introduction.
New York: The Free Press
[27] Chuck Leddy, 2013, Business Opportunities And Risks: Plan Before You Expand Overseas Source: (National Center for
the Middle Maket, 2018)
[28] Dawar, N., Frost, T., ‘Competing with Giants: Survival Strategies for Local Companies in Emerging Markets’
MARCH–APRIL 1999 ISSUE
[29] Brent Adamson, Matthew Dixon and Nicholas Toman (2013)Dismantling the Sales Machine
FROM THE NOVEMBER 2013 ISSUE HTTPS://HBR.ORG/2013/11/DISMANTLING-THE-SALES-
MACHINE
MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

13. Case study – Pankaj Ghemawat article on Distance Still Matters: The hard reality of global expansion.
MOMN009H7: International Business Strategy
Thank you!
Q&A
Tajudeen
Ogunsola