MRKT 4504 Week 2 CAGE Country Screening Example

Two Composite Markets Measured by Distance: A CAGE Country Screening for a Barbecue Sauce Exporter, Tying Each Cultural, Administrative, Geographic and Economic Gap to a Cost the Firm Would Bear

Student Name

Walden University

MRKT 4504: Global Marketing

Instructor Name

Month Day, Year

Two Composite Markets Measured by Distance: A CAGE Country Screening for a Barbecue Sauce Exporter, Tying Each Cultural, Administrative, Geographic and Economic Gap to a Cost the Firm Would Bear

The Candidates

Ember County Smokehouse is choosing its first planned export market. Two candidates are compared here. Both are composites assembled from features of several Southeast Asian markets, labeled Market A and Market B so that no figure is attributed to a real country. Market A is a high-income city market with a large expatriate population, modern supermarket chains and a strong habit of imported packaged foods. Market B is a larger middle-income market with a fast-growing modern grocery sector in its two biggest cities but most food still sold through traditional markets and small grocers. The screening uses the CAGE framework of Ghemawat (2001), which measures the distance between countries along cultural, administrative, geographic and economic lines and argues that distance in each raises the cost of doing business abroad.

Comparison

Table 1

CAGE Distances for the Two Candidate Markets

Composite markets. Figures are illustrative and drawn from the case, not from any single country.

Reading the Distances

Market A is closer on three of the four distances. Culturally, its shoppers already know American barbecue flavors through restaurant chains, and English labels are acceptable alongside a short local-language sticker. Administratively, the composite case gives it a trade agreement with the United States, near-zero duty and a two-month registration. Economically, its households spend more on food and pay a premium for imported sauces.

Market B is larger and growing faster, and over ten years it may well be the more valuable market. But every distance adds cost now. A 15 percent duty raises the landed price before any margin is added. A six-month registration delays revenue for half a year. Full relabeling in the local language and the work of teaching shoppers to use a smoky barbecue sauce in an unfamiliar way add costs before the first sale. Ghemawat (2001) argued that firms often overestimate the attraction of large markets because they focus on size and underweight distance; Market B is a textbook example of that trap for a small exporter.

The Choice

Market A advances. It is smaller, but its distances are shorter on every dimension except market size, and it offers the importer who already placed an order. Johanson and Vahlne (2009) argue that firms learn about foreign markets through experience and relationships, and that early commitments should be small enough to learn from. Entering Market A first gives Ember County a place to learn about exporting with lower costs and risks.

What This Choice Gives Up

Choosing Market A means accepting a smaller market and a customer base that leans toward expatriates and higher-income shoppers. Its growth is limited. Market B is not rejected; it is deferred. The screening also shows where Market A's advantage is weakest: its expatriate shoppers are a narrow base, and growth will depend on reaching local households who do not yet use barbecue sauce at all. The cultural analysis that follows takes up that question directly. If Ember County succeeds in Market A and builds experience with registration, labeling and distributors, it can return to Market B in three to five years with that knowledge. Cateora et al. (2020) note that a firm's first export market often serves as a training ground for later ones; the screening treats Market A that way.

Limits

Because both markets are composites, the figures illustrate the reasoning rather than describe real conditions. A real screening would draw on each country's published trade data, tariff schedules and food registration rules, and the research memo later in the course discusses which sources would supply them.

References

Cateora, P. R., Money, R. B., Gilly, M. C., & Graham, J. L. (2020). International marketing (18th ed.). McGraw-Hill Education.

Ghemawat, P. (2001). Distance still matters: The hard reality of global expansion. Harvard Business Review, 79(8), 137-147.

Johanson, J., & Vahlne, J.-E. (2009). The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411-1431. https://doi.org/10.1057/jibs.2009.24