Part 1. Respond to the following in a minimum of 175 words:
Discuss the CAGE Distance Framework that firms should consider when choosing which foreign markets to enter. What conditions help managers determine which type of distance is most likely to affect the success of an international expansion? Provide an example.
Part 2. Reply to the following classmate in a minimum of 100 words:
“There are always risks and barriers to consider when choosing a market to enter especially in a foreign country. Cultural distance, administrative distance, geographic distance, and economic analysis should always be analyzed when trying to establish company brand/products in new markets as this will help determine if products will be sold successfully or not. Framework patterns such as flow of people, trade, capital, etc. should be analyzed in order to develop strategic plans that will help in building a successful international expansion. For example knowing cultural differences can help choose the product that will best fit the customer needs and preferences. Geographical difference can affect cost of equipment/products transportation depending on type and size of machinery needed due to climatic conditions, technological advancement usage, and much other factors that come into play.
Managers determine how much it will cost to expand the business to new foreign areas therefor I think they take a further looking into the economic analysis of the foreign country. Determining costs of everything plays a huge factor due to the high risks being taken. If profit margins are going to be low or revenue will be impacting the business other alternatives will be considered to were business can start introducing products without losing profit.” – Moises S.
Part 3. Respond to the following classmate in a minimum of 100 words:
“Deciding on a globalization strategy is an important decision for any business. As we’ve seen with past business failures such as Avon launching in Japan or the launch of Yugo in the United States, proper research must be completed. According to Rothaermel (2019), CAGE is an acronym that describes what kind of distance a company must analyze before launching a global expansion initiative (p. 354). You must understand your business enough to know the impacts you could encounter in areas of culture, administrative, geographical, and economic.
Cultural distance appears to me to hold the largest of impacts to a business. Cultural distance refers to topics like religion, norms, language, and trust. I often tell the story of trying to get a circuit installed with a telecom company in Qatar. This was a new partnership in the middle east with this telecom company. What normally should have been a single phone call or email, took multiple attempts over a 3 week time period to resolve. We didn’t understand the time change. They were closed when we were open for business. We also hit 2 major company holidays when they were closed. There was also a culture distance with their ability to talk to a woman on the phone to conduct business. This was against their cultural norms and not permitted. Had we explored some of these cultural distances between our two companies, we could have planned better for this new global partnership.” – Yvonne P.
Rothaermel, F. T. (2019). Strategic management: Concepts (4th ed.). McGraw-Hill.