Reference no: EM13330466

In a highly popular 2005 book, Thomas Friedman declared that the "world is flat." What he meant was that because of communication technology (i.e., the Internet), increased travel, labor migration (going to a different country to work), etc. the people of the world were converging on common tastes, preferences, etc. By "flat," Friedman argued that differences among people and markets no longer mattered and that competitively the world became a level playing field. This meant that a company in China could compete in the U.S. on an equal footing with an U.S. company because customer tastes and expectations were the same in both markets ("What works in Shanghai, China works in Savannah, Georgia"). For example, Friedman would argue that Lenovo (the Chinese company that bought IBM's PC business) can compete successfully in the U.S. market with Hewlett-Packard and Dell as would Dell in China because of similar market characteristics. In short, Friedman's idea supports globalization.

Pankaj Ghemawat, a Harvard professor, opposes Friedman's idea - in fact, he derisively calls it "globaloney" (even professors, like NBA hoopsters, do trash talking!). His point is that there are significant differences in Cultural, Administrative (i.e., legal and regulatory, and management styles), Geographic, and Economic (CAGE) factors that companies should pay attention to. He calls these differences "distance," such as cultural distance, administrative difference, etc. In other words, he would argue that Google could face (and in fact, Google did and continues to face) considerable problems entering China because of vast CAGE differences. What works for Google in the U.S. would not necessarily work for them in China. Ghemawat suggests looking at the attractiveness of foreign markets from a CAGE perspective - the more CAGE difference between (say) the U.S. and a particular country, the less attractive is that market because of the difficulty of doing business profitably in that market. While a market may be big in size (for example, India's 1.1 billion population or China's 1.3 billion), it doesn't mean it will be attractive to a U.S. company because of significant CAGEdifferences. You have to understand, though, that CAGE differences can be specific to a particular product - for example, the CAGE difference between the U.S. and the U.K. may be small when it comes to cell phones but big when it comes to (say) over-the-counter pharmaceuticals.

YOUR TASK

You have been hired by a US based company that has, until now, competed only in the U.S. market. Due to increased competition in the U.S. market, they now desire to go overseas. But they don't know which country (ies) to go first, which next, etc. This is where you come in. Your task is to do research on the selected countries (for the product assigned by the company ) and you are required to prepare a report examining the CAGE differences between the U.S. and 2 other countries and make recommendations about those 2 markets for your client.

1. Your CAP should have population on X axis and per capita income or any other factor that you think more appropriate for your producton Y axis (e.g. drinking age is important for estimating wine consumption; per capita income is important for cars, etc) and the third dimension will be the bubble graph shown as estimated sales (in your case, number of cars or in dollar amount of sales) and not demographics and or incomeshould indicate the size of the bubble.

2. Then you prepare for CAGE; You need to determine at least 4 to 5 variables in each of those four CAGE factors that you think influence sales. You can use a scale ranging from 1 to 5; indicating that a lower number (e.g #1) has a very low impact and #5 has a very high impact; if any of the variable is likely to have a negative impact, you can assign (-) minus sign.

3. Then you arrive at the total for each CAGE factor and multiply each of those numbers by the weight that you assigned for each CAGE factor.; you may be better off assigning decimal weight .40 for 40, .20 for 20, etc as a fraction of 1 instead of assigning weights using percentages of 100, shown in the illustration below.

4. After computing the weighted averages of each, add all the four averages and divide them by number four ((CAGE factors)

Now you have a weighted index for CAGE. Use this number to multiply the sales potential that you had in CAP graph. Now the CAGE adjusted graph might look different.