Who invented the CAGE Distance
framework?
The CAGE Distance framework was created
by Pankaj Ghemawat, global Professor of
Management and Strategy and Director of
the Center for the Globalization of Education
and Management at the Stern School of
Business at New York University, and the
Anselmo Rubiralta Professor of Global
Strategy at IESE Business School – he knows
his stuff!
What is the CAGE Distance framework?
The CAGE Distance framework is a
framework to capture essential information
you need to consider when entering a new
market and highlight how big a difference
there is between what you currently do and
what you will need to do. Commonly it’s a
geographic market, but it can also apply to
entering a different industry.
The CAGE Distance framework is based
around 4 pillars:
● Cultural difference
● Administrative difference
● Geographic difference
● Economic difference
There are many examples of companies
going into different markets and failing (see
Nokia’s approach to the US in the 2000s) so
the CAGE Distance framework can be a
really effective way to ensure markets are
analysed correctly. The more thought that’s
put into the differences, the more
companies can tailor, tweak and optimise
their products and services for the greatest
success.
Ultimately, it’s a framework to help
international growth happen quicker!
What are some example cultural differences
in a CAGE Distance framework?
Cultural differences can be really impactful
and they are present across all countries –
even ones that seem very similar, ones that
speak the same language, or share the
same history, can all have a multitude of
different cultural attributes you should
consider.
The cultural differences found in a CAGE
Distance framework include:
● Different languages and dialects
● Different ethnicities and networks
● Different belief systems and religions
● Different online behaviour such as social
networks or search engines
● Different values and social norms
● Different attitudes on issues
It’s important to consider how your own
country is viewed within the market too, and
what impact that will have on your market
entry. Don’t ignore culture!
What are some example administrative
differences in a CAGE Distance framework?
While often considered, the true impact of
administrative details is not always realised
when a business enters a new market. There
is a lot to consider and early sight of these
issues will save a lot of time (and margin!).
The administrative differences found in a
CAGE Distance framework include:
● Colonial ties
● Trade agreements & policies
● Currency differences
● Political situation
What are example geographic differences in
a CAGE Distance framework?
The geographic differences are often the
easiest to identify. It’s the first aspect
management teams consider and includes
the tangible, physical differences between
the two countries. The geographic
differences found in a CAGE Distance
framework include:
● Physical distance between home country
and new market country
● Border structure (land or sea)
● Timezone differences
● Climate
● Disease differences
● Physical size of country and location of
major cities
● Transport and communication ease
What are example economic differences in a
CAGE Distance framework?
Clearly the economic differences will impact
your success, and can have wide ranging
consequences on your pricing, uptake and
margins. Countries differ so dramatically in
economic differences so it’s vital to
consider. The economic differences in a
CAGE Distance framework include:
● Country resources
● Rich and poor social divides
● Infrastructure
● Average income levels and country
wealth
What are the advantages of the CAGE
Distance framework?
CAGE Distance is a great framework to help
plan entry to a market because:
● It forces consideration on a wide range
of issues that can impact you
● It enables discussion to take advantage
of the differences
● It’s comprehensive in the categories
● It works for all countries / markets
● It provides a clear look at practicalities of
entering a geographic market
What are some of the limitations of
CAGE Distance framework?
The main limitations are:
● It focuses on your entry and isn’t useful
to deciding market size
● It requires a lot of research on the
market so is not a quick framework to
use
● Ideally you’d have a country expert in
your session
● It’s focused on the country and not the
industry or market
What tools work well with the CAGE
Distance framework?
The CAGE framework works well
with Porter’s Five Forces as a method for
complete evaluation of a geographic
marketplace and PESTLE.
