Doing Global Business and Foreign Direct
Description: Doing Global Business and Foreign Direct Investment 2025 University of Lima Ricardo Tirado Week 4 The CAGE (Distance) Framework Redefining Global Strategy. Crossing Borders in a World Where Differences Still Matter Pankaj Ghemawat. Harvard
Related Topics
Download Presentation
"Doing Global Business and Foreign Direct" is the property of its rightful owner. Permission is granted to download and print the materials on this website for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Presentation Transcript
slide1. Doing Global Business and Foreign Direct Investment 2025 University of Lima Ricardo Tirado<br>
slide2. Week 4 The CAGE (Distance) Framework<br>
slide3. Redefining Global Strategy. Crossing Borders in a World Where Differences Still Matter
Pankaj Ghemawat. Harvard Business School Publishing 2018.
Pages:
24-35 and 50-52. Chapter 1. Semiglobalization and Strategy
53-91 Chapter 2. Differences Across Countries The CAGE Distance Framework Week 4 Mandatory Readings<br>
slide4. Introduction to CAGE Developed by Pankaj Ghemawat
Framework to assess distance between countries
Focuses on 4 dimensions:
CULTURAL
ADMINISTRATIVE
GEOGRAPHIC
ECONOMIC
Helps companies evaluate global expansion and FDI decisions https://www.youtube.com/watch?v=7FpUJaG7uMk<br>
slide5. Why CAGE matters Not all international markets are equally distant
It’s a metric that helps firms reduce risk and adapt strategies
Supports mode-of-entry decisions (exporting, joint venture, FDI)<br>
slide6. CAGE Impacts communication, taste, consumer behavior. Gift giving in Japan vs. USA https://www.youtube.com/watch?v=_FGUkxn5kZQ https://www.youtube.com/watch?v=PxtXI0K4YJs 2:40<br>
slide7. CAGE Impacts market entry, intellectual property protection, trade barriers.<br>
slide8. CAGE Impacts supply chain, efficiency and distribution logistics. Take a minute:
Find 2 examples of Geographic Distance in International Business<br>
slide9. CAGE Impacts pricing, market potential, investment attractiveness. Take a minute:
Find 2 examples of Economic Distance in International Business<br>
slide10. How businesses use CAGE Market selection: Choose markets with lower distance or high potential despite distance.
Entry mode decisions: CAGE helps choose between exporting, licensing, joint ventures, or direct investment.
Risk assessment and mitigation: Identify potential challenges in communication, regulation, logistics, and adaptation.
Tailoring products and marketing strategies: Customize offerings based on cultural or economic differences.
Cluster-based expansion: Companies often expand first into culturally or geographically similar markets.<br>
slide11. How businesses use CAGE International expansion:
09/2010 – CANADA
09/01/2012 – Entered European markets
2011 – Entered Latam and the Caribbean
03/2015 – Entered Oceania markets
01/2016 – Entered Russia, Turkey, India and South Korea and Nigeria
Unavailable: China, North Korea
* 2022 - In response to the 2022 invasion of Ukraine, Netflix suspended its services in Russia. https://www.youtube.com/watch?v=IrggjKLqKw0 IKEA first expresses interest in entering India in 1990s.
First IKEA store in India opened in 2018.
Single-brand retailers are not allowed 100% ownership of the company. IKEA avoids joint ventures or partnering with local companies.
30% of their products must be sourced from local vendors.
Land acquisition for stores was slow and complicated.
Permissions from government departments took years.
Delays in approval for in-store restaurants (part of IKEA’s model) due to food regulations.
Frequent policy changes.
Lack of transparency.
Different interpretation of rules by central and state governments.<br>
slide12. How businesses use CAGE Started in Spain
1988: First international market – Portugal
1990: France
C: Similar fashion taste
A: Shared EU regulations
G: Proximity to Spain
E: Comparable levels of income
1992: First Latin American market – Mexico
C: Shared language and lifestyle
A: Strong historical and political ties
G: Accessible through maritime routes
E: Growing middle class and urbanization
1998: Expansion to UK, Argentina
1999: Expansion to Germany, Netherlands, Brazil, Chile and Uruguay
2001: Expansion to Italy
C: Low cultural distance
A: Bureaucratic challenges in retail
G: Very close to Spain
E: Highly competitive fashion market with legacy brands
2007: Colombia
2012: Peru Zara's decision demonstrates that Cultural and Administrative closeness can outweigh Geographic proximity.<br>
slide13. Hagamos una encuesta: Group size: 3-5 students per group
Pick fictional company from anywhere in the world and 2 countries it could expand to:
Peruvian fashion brand – expand to Germany or Mexico
Create a quick CAGE analysis between the country of origin and the other 2 countries.
Your recommendation: Which country to expand to and why?
Include 1 potential risk and 1 adaptation strategy Group activity: CAGE Challenge Example:
“We recommend expanding to Mexico instead of Germany. Although both are attractive markets, Mexico has lower cultural and administrative distance due to shared language and trade agreements. The economic gap is manageable with price adjustments. A key risk is supply chain delays — we’d adapt by sourcing regionally.”<br>
slide2. Week 4 The CAGE (Distance) Framework<br>
slide3. Redefining Global Strategy. Crossing Borders in a World Where Differences Still Matter
Pankaj Ghemawat. Harvard Business School Publishing 2018.
Pages:
24-35 and 50-52. Chapter 1. Semiglobalization and Strategy
53-91 Chapter 2. Differences Across Countries The CAGE Distance Framework Week 4 Mandatory Readings<br>
slide4. Introduction to CAGE Developed by Pankaj Ghemawat
Framework to assess distance between countries
Focuses on 4 dimensions:
CULTURAL
ADMINISTRATIVE
GEOGRAPHIC
ECONOMIC
Helps companies evaluate global expansion and FDI decisions https://www.youtube.com/watch?v=7FpUJaG7uMk<br>
slide5. Why CAGE matters Not all international markets are equally distant
It’s a metric that helps firms reduce risk and adapt strategies
Supports mode-of-entry decisions (exporting, joint venture, FDI)<br>
slide6. CAGE Impacts communication, taste, consumer behavior. Gift giving in Japan vs. USA https://www.youtube.com/watch?v=_FGUkxn5kZQ https://www.youtube.com/watch?v=PxtXI0K4YJs 2:40<br>
slide7. CAGE Impacts market entry, intellectual property protection, trade barriers.<br>
slide8. CAGE Impacts supply chain, efficiency and distribution logistics. Take a minute:
Find 2 examples of Geographic Distance in International Business<br>
slide9. CAGE Impacts pricing, market potential, investment attractiveness. Take a minute:
Find 2 examples of Economic Distance in International Business<br>
slide10. How businesses use CAGE Market selection: Choose markets with lower distance or high potential despite distance.
Entry mode decisions: CAGE helps choose between exporting, licensing, joint ventures, or direct investment.
Risk assessment and mitigation: Identify potential challenges in communication, regulation, logistics, and adaptation.
Tailoring products and marketing strategies: Customize offerings based on cultural or economic differences.
Cluster-based expansion: Companies often expand first into culturally or geographically similar markets.<br>
slide11. How businesses use CAGE International expansion:
09/2010 – CANADA
09/01/2012 – Entered European markets
2011 – Entered Latam and the Caribbean
03/2015 – Entered Oceania markets
01/2016 – Entered Russia, Turkey, India and South Korea and Nigeria
Unavailable: China, North Korea
* 2022 - In response to the 2022 invasion of Ukraine, Netflix suspended its services in Russia. https://www.youtube.com/watch?v=IrggjKLqKw0 IKEA first expresses interest in entering India in 1990s.
First IKEA store in India opened in 2018.
Single-brand retailers are not allowed 100% ownership of the company. IKEA avoids joint ventures or partnering with local companies.
30% of their products must be sourced from local vendors.
Land acquisition for stores was slow and complicated.
Permissions from government departments took years.
Delays in approval for in-store restaurants (part of IKEA’s model) due to food regulations.
Frequent policy changes.
Lack of transparency.
Different interpretation of rules by central and state governments.<br>
slide12. How businesses use CAGE Started in Spain
1988: First international market – Portugal
1990: France
C: Similar fashion taste
A: Shared EU regulations
G: Proximity to Spain
E: Comparable levels of income
1992: First Latin American market – Mexico
C: Shared language and lifestyle
A: Strong historical and political ties
G: Accessible through maritime routes
E: Growing middle class and urbanization
1998: Expansion to UK, Argentina
1999: Expansion to Germany, Netherlands, Brazil, Chile and Uruguay
2001: Expansion to Italy
C: Low cultural distance
A: Bureaucratic challenges in retail
G: Very close to Spain
E: Highly competitive fashion market with legacy brands
2007: Colombia
2012: Peru Zara's decision demonstrates that Cultural and Administrative closeness can outweigh Geographic proximity.<br>
slide13. Hagamos una encuesta: Group size: 3-5 students per group
Pick fictional company from anywhere in the world and 2 countries it could expand to:
Peruvian fashion brand – expand to Germany or Mexico
Create a quick CAGE analysis between the country of origin and the other 2 countries.
Your recommendation: Which country to expand to and why?
Include 1 potential risk and 1 adaptation strategy Group activity: CAGE Challenge Example:
“We recommend expanding to Mexico instead of Germany. Although both are attractive markets, Mexico has lower cultural and administrative distance due to shared language and trade agreements. The economic gap is manageable with price adjustments. A key risk is supply chain delays — we’d adapt by sourcing regionally.”<br>