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CAGE Distance Framework Overview
40 Questions
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CAGE Distance Framework Overview

Created by
@FunnyFlugelhorn

Questions and Answers

What is the primary goal of CAGE Analysis for businesses?

  • To promote one-size-fits-all approaches in global markets
  • To encourage mass-customization strategies
  • To identify international strategy development opportunities (correct)
  • To eliminate the need for market analysis

    • What does the CAGE framework emphasize for internationalization?

  • Prioritizing countries with the greatest physical distances
  • Entering markets with the least psychic distance first (correct)
  • Choosing countries with the most psychic distance
  • Focusing only on high economic size countries

    • According to the CAGE Distance Framework, how does trade between two countries relate to their economic sizes?

  • It is directly related to their economic sizes (correct)
  • It depends solely on cultural differences
  • It is unrelated to their economic sizes
  • It is indirectly proportional to their economic sizes

    • What aspect does the CAGE framework consider when analyzing international markets?

    <p>The perception of cultural and business differences</p> Signup and view all the answers

    Which of the following statements is NOT true regarding the CAGE Distance Framework?

    <p>It promotes a greater focus on physical distances.</p> Signup and view all the answers

    What role does physical distance play in the CAGE framework concept?

    <p>It is inversely related to trade between countries</p> Signup and view all the answers

    Which component is fundamental to the concept of psychic distance in the CAGE framework?

    <p>Perception of cultural and business differences</p> Signup and view all the answers

    Who is credited with developing the CAGE Distance Framework?

    <p>Dr.Aamir Anees Munshi</p> Signup and view all the answers

    How can colonial ties affect trade between countries?

    <p>They can multiply trade nearly threefold.</p> Signup and view all the answers

    Which of the following is NOT listed as a factor that can increase trade?

    <p>Shared language</p> Signup and view all the answers

    What effect can bad relationships between nations have on trade?

    <p>They can increase administrative distance.</p> Signup and view all the answers

    Which of the following barriers is posed by government policies?

    <p>Tariffs</p> Signup and view all the answers

    What can substantially increase trade among member nations?

    <p>Membership in the same regional trading bloc</p> Signup and view all the answers

    What is a possible consequence of having lapsed colonial ties between countries?

    <p>Cultural familiarity can still enhance trade.</p> Signup and view all the answers

    Which type of trade barrier is characterized by restrictions other than tariffs?

    <p>Non-tariff barriers</p> Signup and view all the answers

    What type of relationship can impede administrative processes in international trade?

    <p>Bad relationships between nations</p> Signup and view all the answers

    What factors influence economic distance on the supply side?

    <p>Labor-intensity and cost of capital</p> Signup and view all the answers

    What primarily drives companies to look beyond national borders for demand?

    <p>Large differences in willingness to pay</p> Signup and view all the answers

    Which of the following is NOT a benefit of the CAGE framework for international business strategists?

    <p>Identifies key environmental factors for local production</p> Signup and view all the answers

    How does the CAGE framework assist in understanding the liability of foreignness?

    <p>By highlighting differences in national regulations</p> Signup and view all the answers

    Which aspect is likely to experience low levels of cross-border international exchange?

    <p>Industries requiring high levels of customization</p> Signup and view all the answers

    What is one of the primary functions of the CAGE framework in comparing markets?

    <p>To discount market opportunities by distance</p> Signup and view all the answers

    Which of the following does the CAGE framework help strategists identify regarding products?

    <p>Products most easily transportable at minimum cost</p> Signup and view all the answers

    What key insight does the CAGE framework provide about foreign competitors?

    <p>It compares them against local market owners</p> Signup and view all the answers

    What term describes differences affecting cross-border economic activity distinct from cultural, administrative, or geographic differences?

    <p>Economic distance</p> Signup and view all the answers

    Which factor is NOT included in the definition of economic distance?

    <p>Differences in population demographics</p> Signup and view all the answers

    What correlation is observed regarding rich countries in terms of cross-border economic activity?

    <p>They engage in more cross-border economic activity relative to their economic size.</p> Signup and view all the answers

    How does high per capita income generally affect labor costs?

    <p>It results in higher labor costs.</p> Signup and view all the answers

    Which of the following statements accurately describes the relationship between economic size and cross-border activities?

    <p>Rich countries engage in more cross-border activities relative to their economic size.</p> Signup and view all the answers

    What is one of the economic factors that influence economic distance?

    <p>Differences in human resources availability</p> Signup and view all the answers

    What aspect of infrastructure is crucial when considering economic distance?

    <p>Access to high-speed internet</p> Signup and view all the answers

    Which of the following is least likely to significantly affect economic distance?

    <p>Cultural traditions</p> Signup and view all the answers

    What factor potentially affected the popularity of Starbucks in Australia?

    <p>Australia's geographical size and dispersed population</p> Signup and view all the answers

    What was a reason for the U.S. financing of Starbucks in Australia?

    <p>Inaccessible credit in Australia</p> Signup and view all the answers

    How did the pricing of Starbucks coffee compare to local cafes in Australia?

    <p>It was more expensive than local cafes</p> Signup and view all the answers

    What characteristic of the Australian administrative dimension impacted Starbucks?

    <p>Habit of refraining from operating at a loss</p> Signup and view all the answers

    Which demographic trend in Australia may have hindered Starbucks' growth?

    <p>Scattered population across several large cities</p> Signup and view all the answers

    What was the primary cause of Tim Hortons' struggles in the United States?

    <p>Competition from established coffee chains</p> Signup and view all the answers

    What change in coffee culture was introduced to Australians in the 1990s?

    <p>Influence of Greek and Italian coffee culture</p> Signup and view all the answers

    What aspect of the economic dimension affected Starbucks' price strategy in Australia?

    <p>High local coffee prices during economic growth</p> Signup and view all the answers

    Study Notes

    CAGE Distance Framework Overview

    • CAGE Analysis aids businesses in developing international strategies by balancing global market approaches.
    • Focuses on the concept of "psychic distance," which reflects the perceived cultural and business differences between home and foreign markets.

    Key Points on Trade and Distance

    • Trade relations between countries hinge on their economic sizes and are inversely affected by physical distance.
    • Factors influencing trade include:
      • Tariffs and non-tariff barriers.
      • International organizations and quotas.
      • Colonial ties and regional trading bloc memberships.
      • Shared currency and treaties.

    Administrative Correlations

    • Historical colonizer-colony relationships can increase trade significantly, even after a long period.
    • Preferential trading arrangements and common currencies, like those seen in the European Union, also promote trade.
    • Poor diplomatic relations can enhance administrative distance, increasing trade barriers.

    Economic Distance Insights

    • Economic distance impacts cross-border activity through distinctions in economic size, consumer income, and resource costs/types.
    • Wealthier nations tend to engage more in international trade relative to their economic size, while high per-capita income correlates with elevated labor costs.

    Industry-Level CAGE Framework Insights

    • Economic distance on the supply end is influenced by labor intensity and capital costs.
    • Large discrepancies in consumer willingness to pay can drive international market exploration.
    • Industries requiring significant variety and responsiveness face higher complexity and lower cross-border exchanges.

    Strategic Applications of CAGE Framework

    • Assists international business strategists in analyzing market size, risks, and barriers.
    • Helps in determining the sequence for entering international markets and identifying transportable products.
    • Supports product development specific to global needs and clarifies key market differences.
    • Enhances understanding of foreignness liability and comparisons among competing markets.

    Case Study: Starbucks in Australia

    • Starbucks struggled in Australia due to differences in administrative practices regarding business financing.
    • Geographic factors, such as Australia's sparse population and size, may have limited the chain’s growth.
    • Economic reasons included higher coffee prices compared to local cafes, which deterred Australian consumers.

    Case Study: Tim Hortons in the United States

    • Contextual analysis of Tim Hortons' struggles in the U.S. market, with specifics to be explored through dedicated resources.

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    Description

    This quiz explores the CAGE Distance Framework, an essential tool for businesses developing international strategies. It emphasizes the concept of 'psychic distance' and how various factors, including historical ties and tariffs, influence trade relations between countries. Test your understanding of trade and distance dynamics!

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