Going Global: Where and How?
8 important questions on Going Global: Where and How?
What is the Cage distance Framework?
-Pankaj Ghemawat
What are the 4 Dimensions of the Cage Distance Framework?
o Administrative and political Distance
o Geographic Distance
o Economic Distance
CAGE: Cultural Distance
! Greater cultural distance increases liability of foreignness !
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CAGE: Administrative and political Distance
- Shared monetary/political associations
- Political Hostilities
- Weak/strong legal and financial institutions
CAGE: Geographic Distance
Determined by:
- Country's infrastructure (road, power, telecommunication networks,...)
Relevant when trading products with low value-to-weight ratios.
(ex. steel, cement, fragile and perishable products such as glass, meat, fruits)The costs to cross-border trade rise with geographic distance.
CAGE: Economic Distance
- Wealth
- Per capita income of consumers
Wealthy countries-- engage in more cross-border trade
Rich countries trade with other rich countries
Poor countries trade more with rich countries
How do MNEs Enter Foreign markets
What are Greenfield Operations?
(Preferred by MNEs)
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