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The CAGE Distance Framework identifies Cultural, Administrative, Geographic and Economic (CAGE) differences or distances between countries that companies should address when crafting international strategies. It was developed by Pankaj Ghemawat, an international strategy expert, to offer businesses a way to evaluate countries in terms of the “distances” between them.
Description of CAGE Distance Framework
The CAGE Distance Framework divides the differences between how countries do business into four categories which help to simplify the analysis. They are Cultural, Administrative, Geographic and Economic and provides a broader view of “distance” among countries than just the obvious one. Each is described in detail below:
Cultural distance: This refers to the cultural norms, values and social beliefs, also known as the unwritten rules, that shape the behavior of individuals and organizations. Various societies also differ in their attitudes toward globalization and market power that have important consequences in terms of both formalized trade regulations and general attitudes toward how businesses are run.
Administrative distance: This refers to differences in history and politics among countries, especially those which do not share colonial ties. Also, a lack of shared currency, political hostilities, and government corruption contribute to Administrative distance.
Geographic distance: Geographic distance refers not only to the physical distance between two countries, but also a country’s physical size, whether it shares borders with hostile or non-hostile neighbors, and access to trade routes such as the ocean and other topographical features. Any of these attributes can cause Geographic distance and make doing business a challenge.
Economic distance: Two of the biggest determinants of economic distance are the Cost of Labor and level of Consumer wealth between countries. It is more difficult for a company from a wealthy country to enter a poorer country and be successful there, but not impossible.
Using the CAGE Analysis is helpful in order to create insights into the key differences between a company’s home market and the international market it intends to target. It is also helpful because it allows companies to assess the desirability of that market in an organized manner.
Praxie's Online CAGE Distance Framework Tools & Templates
The new online CAGE Distance Framework template from Praxie is an important resource for strategy teams looking to conduct international business and that need to maintain situational awareness around how different companies in other markets may engage with their customers and their competition. When a strategy team is looking to develop a deeper level of understanding around a particular market and lacks existing insight within the team, they can use the CAGE Distance Framework to determine the “distance” between companies across two or more markets.
This tool helps identify distances between culture, administration style, geography, and economic conditions. After pulling this information together into the tool through desk research and interviews, it becomes much more straightforward to develop concepts and ideas which resonate across cultures. Get started with our CAGE Distance Framework.
How to use it:
- Enter what you know about the two countries you want to compare to identify how much “distance” exists between them.
- Identify implications for your strategy, project, or other related activities.
- Create an action plan focused on creating and implementing your CAGE Distance Framework.
Unlike most traditional strategy techniques, Praxie’s online CAGE Distance Framework tools allow any team or organization to instantly begin working with our web templates and input forms. Our digital platform goes far beyond other software tools by including progress dashboards, data integration from existing documents or other SaaS software, elegant intuitive designs, and full access on any desktop or mobile device.