Distance still matters, and companies must explicitly and thoroughly account for it when they make decisions about global expansion. This perspective, says ghemawat, blinds firms to a contrasting strategy. In this article one can appreciate the discussion more rational approach to evaluating global opportunities. Gemawat gemawat that different types of distance matter to varying degrees. Distance, however, does not refer only to geography. The individual sessions in this module work through the cultural, administrative, geographic and economic components of the cage framework, in that order. Cultural distance, on the other hand, affects consumers product preferences. Begin by considering the example summarized in exhibit 21, which plots walmarta s operating margin by country in 2004 against the distance between each countrya s capital and walmarta s headquarters.
These costs are grouped into a category classified as distance which itself is subdivided into four dimensions. Tool kit companies routinely exaggerate the attractiveness of foreign markets, and. Pankaj megawatt ghemawat is an international strategy guru who developed the cage framework to offer businesses a way to evaluate countries in terms of the distance between them. Thus, cultural distance matters more in the beer industry than in the cement industry, where geographic distance is the category that stands out. In this work, ghemawat proposes the cage distance framework that. Because geographic distance, for instance, affects the costs of transportation, it is of particular importance to companies dealing in heavy or bulky products. Traditional country portfolio analysis needs to be tempered by a cleareyed evaluation of the many dimensions of distance and their probable impact on opportunities in foreign markets. By pankaj ghemawat distance still matters presented by kedar gokhale pgdm exec kj somaiya1 2. Recall though, that any international expansion strategy still needs to be supported by the specific resources and capabilities possessed by the firm, regardless of the picture presented by the cage analysis. This chapter is excerpted from pankaj ghemawat, world 3.
May 24, 2018 but then along came the internet in the 1980s, and suddenly distance related business costs collapsed for transactions, communications, transportation, and search. Overall following the cage model of distance ghemawat. They loose sight of the difficulties of pioneering new, often very different territories. Crossing borders in a world where differences still matter.
The hard reality of global expansion discusses the reasons and rationale that drive companies to overestimate profit potential in foreign markets. Professor pankaj ghemawat, director of the center for the globalization of education and management at the stern school of business, discusses the cage frame. In this work, ghemawat proposes the cage distance framework that allows firms. The article gives a more rational approach to evaluating global opportunities. Dec 10, culture happens to be the first facet of cage, in terms of the acronym, but it also cage framework, mba discussions, pankaj ghemawat. Distance stiii matters the hard reality of global expansion by pankaj ghemawat w hen it was launched in 1 9 9 1, star tv. The globalization of business nterprise globe pankaj ghemawat. It is based on systematic data, from for example the gravity model, which has indicated that distance matters concerning international trade2. Know the reasons why cage analysis emphasizes distance. Distance still matters, and companies must explicitly and thoroughly account for it when. Ghemawat 2001 clearly displayed for the research in the introduction.
As summarized in table the cage framework, the cage cultural. Traditional country portfolio analysis needs to be tempered by a cleareyed evaluation of the many dimensions of distance and their probable impact on opportunities in. Summary pankaj ghemawat s article, distance still matters. Ghemawat emphasizes that different types of distance matter to different extents depending. An analysis of pankaj ghemawats distance still matters. This note introduces the cage distance framework, which is used to identify and prioritize the differences between countries that companies must address when developing crossborder strategies. My analysis of spanish regions merchandise trade with other oecd countries over 19952005 found a home bias multiple ranging from ff. Find, read and cite all the research you need on researchgate. Distance stiii matters the hard reality of global expansion by pankaj ghemawat w hen it was launched in 1991, star tv looked like a surefire winner. Nov 27, 2012 distance still matters, and companies must explicitly and thoroughly account for it when they make decisions about global expansion. Jan 16, 2020 ghemawat 2001 easily attracted readers by naming this article distance still matters. If borders still matter so much between neighbors, they cast an even bigger shadow on trade between countries farther away from each other. Distance still matters the hard reality of global expansion.
Star tv the situation1991 star tv aims to enter asia and target market is top 5% star tv could use cheap english programming 2 nd languageminimize geographical distance by distributing through satellites news corporation bought out. Tool kit companies routinely exaggerate the attractiveness of foreign markets, and that can lead to expensive mistakes. Companies routinely overestimate the attractiveness of foreign markets. Recreated from pankaj ghemawat, distance still in value, harvard.
Pankaj ghemawat is global professor of management and strategy at the nyu stern school of business. Jun 17, 2017 by pankaj ghemawat distance still matters presented by kedar gokhale pgdm exec kj somaiya1 2. Ghemawat emphasizes that different types of distance matter to different extents depending on the industry. Pdf distance stiii matters the hard reality of global. The previous chapter ghemawat, llano and requena highlighted the importance of. Distance stiii matters the hard reality of global expansion. The hard reality of global expansion 12 further reading a list of related materials, with. By analyzing the possible impact of distancein all its dimensionsyou. Distance still matters in business, despite the internet.
Distance at the industry and company levels chapter 6 the. By dividing differences into these four dimensions. Reconceptualizing international strategy and organization pankaj. A summary of harvards professor pankaj ghemawats influential article. Ghemawat analyzes the failures of different companies news corp, tricon restaurants, etc. Whats the topic companies routinely exaggerate the attractiveness of foreign markets and that can lead to expensive mistakes. Reprinted with permission from distance still matters. Star tv the situation 1991 star tv aims to enter asia and target market is top 5% star tv could use cheap english programming 2ndlanguage minimize geographical distance by distributing through satellites news. In this case, distance is defined broadly to include not only the physical geographic distance between countries but also the cultural, administrative currencies. The web was the death of distance, a concept popularized in 1997 by frances cairncrosss book of the same title. Distance still matters 3 ghemawat p distance still. In this work, ghemawat proposes the cage distance framework that allows firms to consider four dimensions of international distance cultural, administrative, geographic, and economic when planning global expansion.
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