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CAGE Distance Framework Analysis

The document discusses the "Cage Distance Framework" which analyzes how cultural, administrative, geographic, and economic distances between countries can create opportunities for global arbitrage. It presents a table analyzing how attributes creating each type of distance, such as different languages, lack of infrastructure, and differences in costs and resources, can affect certain industries or products. Industries and products that are more affected by one or more of these distances include those with high linguistic content, those tied to national identity, perishable or fragile goods, and those where factor costs or demand levels vary significantly between countries. Overcoming these distances through strategies like standardization or responsiveness to local conditions can open possibilities for international trade or investment.

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archanasridhara
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314 views1 page

CAGE Distance Framework Analysis

The document discusses the "Cage Distance Framework" which analyzes how cultural, administrative, geographic, and economic distances between countries can create opportunities for global arbitrage. It presents a table analyzing how attributes creating each type of distance, such as different languages, lack of infrastructure, and differences in costs and resources, can affect certain industries or products. Industries and products that are more affected by one or more of these distances include those with high linguistic content, those tied to national identity, perishable or fragile goods, and those where factor costs or demand levels vary significantly between countries. Overcoming these distances through strategies like standardization or responsiveness to local conditions can open possibilities for international trade or investment.

Uploaded by

archanasridhara
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

THE CAGE DISTANCE FRAMEWORK: OPPORTUNITIES FOR GLOBAL ARBITRAGE

CULTURAL DISTANCE ADMINISTRATIVE DISTANCE GEOGRAPHIC DISTANCE ECONOMIC DISTANCE


ATTRIBUTES CREATING DISTANCE
Different languages Absence of colonial ties Physical remoteness Differences in consumer
Different ethnicities; incomes
Absence of shared monetary or Lack of a common border
lack of connective political association Differences in costs
Lack of sea or river access
ethnic or social and quality of:
Political hostility
networks Size of country z Natural resources
Government policies z Financial resources
Different religions Weak transportation or
z Human resources
Institutional weakness communication links
Different social norms z Infrastructure
Differences in climates z Intermediate inputs
z Information or knowledge

INDUSTRIES OR PRODUCTS AFFECTED BY DISTANCE


Products have high Government involvement is Products have a low value- Nature of demand varies
linguistic content (TV) high in industries that are: of-weight or bulk ratio with income level (cars)
(cement)
Products affect Producers of staple goods Economies of
cultural or national (electricity) Products are fragile or standardisation or scale
identity of consumers perishable (glass, fruit) are important (mobile
Producers of other
(foods) phones)
“entitlements” (drugs) Communications and
Product features vary connectivity are important Labour and other factor
Large employers (farming)
in terms of size (cars); (financial services) cost differences are
standards (electrical Large suppliers to government salient (garments)
Local supervision and
appliances) or (mass transportation)
operational requirements Distribution or business
packaging National champions are high (many services) systems are different
Products carry (aerospace) (insurance)
country-specific Vital to national security Companies need to be
quality associations (telecom) responsive and agile
(wines)
Exploiters of natural resources (home appliances)
(oil, mining)
Subject to high sunk costs
(infrastructure)
Source: Harvard Business Review, September 2001

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