the cage distance framework identifies cultural, administrative, geographic and economic (cage) differences or distances between countries that companies should address when crafting international strategies. 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. 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. economic distance: two of the biggest determinants of economic distance are the cost of labor and level of consumer wealth between countries.
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. 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. 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. praxie’s best practices online software tools, templates, and business process apps get teams instantly focused and collaborating faster.
it can seem scary, difficult and full of challenges, and while that may be true, it can also be highly successful, enjoyable and be a key part of your growth. weâre going to assume youâve completed your external analysis, meaning youâre aware of the current environment you operate in and have potentially selected a new market to enter. 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. there are many examples of companies going into different markets and failing (see nokiaâs approach to the us in the 2000s) so the cage distance framework can be a really effective way to ensure markets are analysed correctly. itâs important to consider how your own country is viewed within the market too, and what impact that will have on your market entry.
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 geographic differences found in a cage distance framework include: clearly the economic differences will impact your success, and can have wide ranging consequences on your pricing, uptake and margins. the economic differences in a cage distance framework include: the cage framework works well with porterâs five forces as a method for complete evaluation of a geographic marketplace and pestle. practical ways to ensure your leadership team are firmly on the same page and fully aligned around your strategic plan, to drive execution and ensure results ð¯ââï¸
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