In the text Redefining Global Strategy, Pankaj Ghemawat discusses a method of identifying the
various differences that can exist between two countries, and that must be addressed when
considering cross-border operations.
This method is called the CAGE Framework. CAGE is an
acronym used to describe the cultural, administrative, geographic, and economic distances that
can exist between multiple countries.
While methods of measuring physical and psychic
distance have been already been incorporated over the last three decades, "... the CAGE
framework takes a much broader view of distance, and has a much more solid empirical base."
(Ghemawat, 41) By exploring these four dimensions, a company can better plan their strategy
when considering international expansion.
A study and comparison of the cultural distance between two countries may reveal barriers that
had not yet been considered.
As stated by Ghemawat, "Cultural differences between countries
generally tend to reduce economic interactions between them."
Cultural constituents such
as language, ethnicity, religion, willingness to trust, and social and family norms/values all must
be considered when measuring the cultural distance between two borders.
Nations that share
similar qualities and opinions concerning the above constituents tend to be more likely to
institute cross border operations successfully.
The more contact established between these
countries, the more mutual familiarity and rapport exists between them, increasing the likelihood
of successful economic activity.
Nations with different, or even conflicting, viewpoints (and
little to no contact) are less likely to establish these relationships.
They set the new standard for acceptable working conditions and demand change where they see
necessary. If they are larger corporations, they are more willing to "throw their weight around" to
use their influence for the greater good.