Distance Still
CS
Article Presentation Series
Matters
P R E S E N T E D BY:
Ali Abdullah Khan-16747
FR
A short case
Template Editing Instruction
s and Feedback
• Launched in 1991, to deliver television programming to media starved Asian audience
• Targeted the top 5% SEC, the newly rich elite whose second language was English
• Planned on televising readily available fairly cheap English programming rather than
spending on production
2
FR
Why it happened?
• Start lost $141 million pretax and $500 million between 1996-1999
Template Editing Instruction
• The reason was the analytical tools they used which underestimated the costs of doing business
s and Feedback
internationally
• Star used Country Profile Matrix which decided where it should compete based on GDP, levels of
consumer wealth, consumption propensity and potential sales while ignoring costs and risks which
result from barriers created by distance
3
Why Distance Matters?
Add a footer 4
Why Distance Matters?
Dimensions of Distance
Dimensions of
Distance
Cultural Administrative Geographic Economic
Add a footer 5
FR
Cultural Distance
Determines how people interact with each
other and with companies
• Differences in religious beliefs, race, social norms
and language are capable of creating cultural
distance
• Certain communities have their own associations
and products can touch a deeper nerve which
influence their purchasing patterns as well
Add a footer 6
FR
Administrative Distance
a . k . a P o l i ti c a l D i s t a n c e
• Historical and political associations shared by countries affect trade
between them. e.g. colony-colonizer links, political unions
• Deliberate barriers for foreign competition to protect domestic
industries if the following criteria are met:
• It is a large employer
• It is seen as a national champion
• It is vital to national security
• It produces staples
• It produces an entitlement good or service
• It exploits natural resources
• Involves high sunk cost commitments
Add a footer 7
FR
Geographic Distance
• The farther you are from a country, the harder it
will be to conduct business in that country.
• Physical size of the country, average within
country distances to borders, access to waterways
and the ocean, transportation and communication
infrastructures matter as much as physical
distance.
Add a footer 8
FR
Economic Distance
• Wealth or income of consumers is the most important economic
attribute that creates distance between countries.
• Rich countries engage in relatively more cross border economic activity
relative to their economic size than poor ones
• Poor countries also trade more with rich countries than with poor ones
• There exists a positive correlation between per capita GDP and trade
flows
• Companies relying on economies of scale, experience and
standardization should focus more on countries with similar economic
profiles since replicating business models in poor countries is difficult
Add a footer 9
FR
Various Distance on
Investments
• Various distances affect
different industries in
different ways
• Some industries may be
more sensitive to physical
distance while others may
be more sensitive towards
cultural distance
Add a footer 10
CAGE Distance Framework
FR
Country Portfolio Analysis (CPA)
The Flawed Approach
• Actual and potential markets of a company
are plotted with a measure of per capita
income on one axis and some measure of
product performance (often penetration
rates) on the other
• Location of the market on the grid reflects
the attractiveness of the market in terms of
individual consumer wealth and propensity
to consume
• Size of the bubble represents total size of the
market in terms of GDP and provides an
estimate of how large the relative revenue
opportunities are
12
FR
Country Portfolio Analysis (CPA)
T h e s t a r k d i ff e r e n c e w h e n a d j u s t e d f o r d i s t a n c e
13
CS
Article Presentation Series
Thank You.
Angelica Astrom
208 555 0164
Questions?
[email protected]
www.fabrikamresidences.com
