Chapter 3 Cage Distance Framework by Islam El-Shafie

Cage Distance Framework

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.