Cage Framework

Parth Parkhani
40XXX
Operations
The Presentation is my own work & the data collected has been referenced. I have not sought help from any other external entity.
CAGE DISTANCE
FRAMEWORK
• Developed by Mr. Pankaj Ghemawat, a professor at the University of Navarra.
• The framework identifies & prioritize Cultural, Administrative, Geographic & Economic differences/distances
between countries that companies should address while crafting international strategies.
• It is used to understand patterns of trade, capital, information, & people flows.

Cultural Distance Administrative Distance

Cultural distance encompasses differences in religious Political associations between countries,

belief, race, language, ethnicity, preferences, social
norms & values. Societies even differ in social attitude
towards market & globalization that play a decisive
role for any business to flourish in a distant land, both
formally via regulations & informally. To establish a
“Connect” with new audience the cultural difference
needs to subdued.
colonial links, free-trade agreements, status quo
of relationship have a great impact on the
economic exchanges between the company.
Weak policies, institutions, adverse regulations
& levels of corruptions are bottlenecks when
expanding to a new territory.
CAGE DISTANCE
FRAMEWORK (CONTINUED)
Geographic Distance
Apart from the actual ground distance between two
countries, country’s physical size, within-country
distance to borders, time zones, topography, ocean
accessibility must be considered while carving out
international strategy
Economic Distance
Economic Distance are determined in terms of per-
capita of the country, consumer wealth, income, cost
of labour, cost of raw material, infrastructure cost,
availability or dearth of resources and other inputs that
are complementing organizational capabilities.
INDUSTRIES/PRODUCTS
AFFECTED BY THESE DIMENSIONS

• Products having high linguistic • Nature of demand varies with

content income
• Product affected by national • Labor cost factors are salient
Identity • Limits Economy of scale benefits
• Products features Variations
• Product carrying country
C E • Distribution systems are different

specific quality associations

•
•
Producer of staple goods
Large employers A G • Low value-to-weight ratio
• Fragile or perishable products
• Large supplier to government • Local supervision and operations
• Vital to National security are high
• Subject to high sunk cost
• Exploiters of national
resources
GOOGLE IN RUSSIA
CASE STUDY
Google entered Russian Market in 2001
In 2013, Market share of Google in Russia was 26.9% compares to Yandex’s market share of 61.7%

WHAT WENT WRONG FOR GOOGLE ?

• Algorithm used by Yandex is better at understanding Russian than Google’s Algorithm. In addition, it’s better
at understanding CrazyFont, which is writing Russian words using Latin script rather than Cyrillic.

C • Yandex’s a matter of national pride for Russians

• In Yandex, all queries are divided into geo-dependent and geo-independent searches. For geo-dependent
searches, only websites from a particular region are shown, which means that people from different cities will
see completely different search results.

A •

•
Russian government had always distrusted Google and seen it as a tool of the US government to spy on
Russia & its citizens.
No Active support from the Government for a US based Search Engine.

G • It was only after 2006 that google set up office in Russia at St. Petersburg.

• Yandex allowed local merchants to deposit payments for advertising in banks whereas Google made
E payment available only through online payments. As Russians did not trust online payment services, they
preferred advertising via Yandex
KEY TAKEAWAYS
•CAGE analysis compares a possible target market to a company’s home market on the dimensions of
culture, administration, geography, and economy.
•It yields insights in the key differences between home and target markets and allows companies to
assess the desirability of that market.
•CAGE analysis can help to identify institutional voids, which might otherwise nullifies internationalization
efforts. Institutional differences are important to the extent that the absence of specialized intermediaries
can raise transaction costs just as their presence can reduce them.

REFERENCES
1. Ghemawat, P. (2018). Pankaj Ghemawat: Differences and the CAGE Distance Framework. Retrieved from
https://www.ghemawat.com/globe-course/readings/195/Differences+and+the+CAGE+Distance+Framework
2. K. (n.d.). The CAGE Framework – Distance Matters in Globalization!!! Retrieved from
http://enrichwise.com/2011/12/10/the-cage-framework-distance-matters-in-globalization
3. CAGE Analysis. (2018). Retrieved from https://saylordotorg.github.io/text_international-business/s12-04-cage-
analysis.html
THANK YOU!