What are some of the Key Factors in International Expansion?
International expansion is important for firms. According to Zahra, Ireland, and Hitt (2000), new ventures are moving sooner into international markets earlier in the life cycle than normal (p. 925). As mentioned by Carpenter and Sanders (2008), international expansion can be a risky option regardless of how much revenue it can produce/retain (p.206). However, Zahra et al. (2000) state expansions enable new ventures to reach growth and positive returns by exploiting unique resources and capabilities (p.925). As described by Zahra et al. (2000), international expansion can endorse organizational and technological learning that would facilitate the development of skills and ability that help the firm accomplish a competitive advantage (p. 925). Carpenter and Sanders (2008) also described the four key factors in international expansion as “economies of scale and scope, location, multipoint competition and learning” (p.207). It is essential that firms understand the key factors in regards to international expansion what the pros and cons are and what to expect.
How does the CAGE Distance Framework assist in identifying attractive locations?
CAGE is defined by Carpenter and Sanders (2008) as a “tool that considers the dimension of culture, administration, geography, and economics to assess the distance created by global expansion” (p.210). As described by Ghemawat (2001) CAGE distance framework’s most overlooked dimensions are cultural and administrative distance (p. 3). Even by just reading the definition of CAGE, it is self-explanatory that the four main areas of concern when deciding on an attractive location are as mentioned by Carpenter and Sanders (2008). Carpenter and Sanders (2008) also discussed that the application of CAGE framework and how it requires that managers identify the appealing locations based on the framework, cost, access to markets, access to consumers, and other important decisions (p.211). Within each of the CAGE acronyms, there are bilateral measures and unilateral measures that Ghemawat, Reiche, and Rosenberg (2011) described.
Dr. Ghemawat Ted Talk
The video hosted by Ghemawat (2012) was interestingly describing and supporting a few interesting viewpoints about the “world.” I had previously heard that the world is not flat and have also read about some famous individuals that have mentioned the world is flat. Ghemawat (2012) described the interesting percentage of phone call surveys that are actually completed. The percentages described by Ghemawat (2012) were interesting as he shared the how minor the percentages are compared to the world. It was without a surprise that the GDP for exported goods percentage was much higher than any of the other surveyed elements. Even though the percentage was only twenty percent, it makes such a difference to many different parts of the world (Ghamawat, 2012). Interestingly, the guesses the general population took while trying to guess the percentage for each of the brackets, was significantly different than the actual percentages analyzed (Ghamawat, 2012). Lastly, the most exciting part of the talk was when Ghamawat (2012) described globaloney and how it works.
Carpenter, M. A., & Sanders, W. M. (2008). Strategic management: A dynamic perspective—Integrated StratSim simulation experience. Upper Saddle River, NJ: Pearson Prentice Hall.
Ghemawat, P. (2001). Distance still matters. Harvard business review, 79(8), 137-147.
Ghemawat. P., Reiche. S., & Rosenberg. M., (2011). The globalization of business enterprise. Harvard Business Review. Retrieved from http://www.hbs.edu/rethinking-the-mba/docs/iese-gl…
Ghemawat, P. (2012). Actually, the world isn’t flat [Video]. Retrieved from https://www.ted.com/talks/pankaj_ghemawat_actually…
Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management Journal, 43(5), 925-950.