...org TOOL KIT Companies routinely exaggerate the attractiveness of foreign markets, and that can lead to expensive mistakes. Here’s a more rational approach to evaluating global opportunities. Distance Still Matters The Hard Reality of Global Expansion by Pankaj Ghemawat • Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Distance Still Matters: The Hard Reality of Global Expansion 12 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications Reprint R0108K TOOL KIT Distance Still Matters The Hard Reality of Global Expansion The Idea in Brief Why did U.S. media giant Star TV lose $500 million trying to deliver TV programming to Asia? Like many companies, it was so dazzled by the foreign market’s immensity that it ignored the difficulties of pioneering new territories. For example, it assumed—wrongly—that Asian viewers wanted English-language programming. How to avoid this fate—and select the right targets for your firm’s global expansion? Look beyond a country’s sales potential (as expressed by national wealth or propensity to consume)—and analyze the probable impact of distance. But don’t focus only on distance’s geographical dimension. Consider three other dimensions as well: cultural factors (religion, race, social norms, language); administrative factors (colony-colonizer...
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...Distance Still Matters Notes • By focusing on national GDP, levels of consumer wealth and people’s propensity to consume, CPA (Country Portfolio Analysis) places all the emphasis on potential sales. It ignores the costs and risks of doing business in a new market. o Most of those costs and risks result from barriers created by distance • Distance: Not just geographic separation, but also has cultural, administrative and political and economic dimensions that can make foreign markets considerably more or less attractive. • Example: The amount of trade that takes place between countries 5000 miles apart is only 20% of the amount that would be predicted to take place if the same countries were 1000 miles apart. Cultural and Administrative distance produces even larger effects. A company is likely to trade ten times as much with a country that is a former colony, for instance, than with a country to which it has no such ties o Geographic distance, for instance, affects the costs of transportation and communications, so it is of particular importance to companies that deal with heavy or bulky products, or whose operations require a high degree of coordination among highly dispersed people or activities • Cultural Distance: A country’s cultural attributes determine how people interact with one another and with companies and institutions. Differences in religious beliefs, race, social norms and language are all capable of creating distance between two countries. o Some cultural...
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...Distance Still Matters Country Portfolio Analysis (CPA): * An analytic tool managers use to make judgements on international investments * Widely used technique for deciding where a company should compete * Focuses on national GDP, consumer wealth levels, and tendency to consume * Emphasis on potential sales * Ignores costs and risks of doing business in a new market * Ignores barriers from cultural, administrative, geographic, economic (CAGE) * Known as 4 Dimensions of Distance 4 Dimensions of Distance: * Attributes creating distance for each dimension Cultural | Administrative | Geographic | Economic | - different languages - different ethnicities - different religions - different social norms | - absence of colonial ties - absence of shared monetary or political association - political hostility - government policies - institutional weakness | - physical remoteness - lack of common border - lack of sea/river access - size of country - weak transportation or communication links - differences in climates | - differences in consumer incomes - differences in cost and quality of: *Natural resources *Financial resources *Human resources *Infrastructure *Intermediate inputs *Information/knowledge | * Industries or products affected by distance Cultural | Administrative | Geographic | Economic | - products have high linguistic content (TV) - products affect cultural or national identity of consumers...
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...La distancia aún importa * Las empresas que han fallado en su expansión global porque han sobreestimado el atractivo de los mercados extranjeros. * CPA: análisis de portafolio de un país (CPA), es un método usado para decidir en qué mercado debería competir una empresa; considera el GDP nacional, los niveles de riqueza de los consumidores, la propensión a consumir de ellos y en las ventas potenciales. Ignora los costos y los riesgos de hacer negocios en nuevos mercados. * La mayor parte de los riesgos y costos de hacer negocios en otros mercados son el resultado de barreras creadas por la distancia, no tan sola geográfica, sino que también la distancia cultura, administrativa o política, y las dimensiones económicas que separan a un país de otro. Las cuatro dimensiones de la distancia 1. Distancia Cultural: los atributos culturales crean distancia influenciando decisiones que los consumidores hacen entre sus preferencias por determinadas características. (Ejemplo: color, sabores están vinculados con prejuicios culturales). Algunas veces los productos pueden afectar profundamente generando asociaciones relacionadas con la identidad de los consumidores como miembros de una comunidad en particular; en estos casos la distancia cultural afecta categorías de productos completas. 2. Distancia Administrativa o Política: hay muchas medidas que intentan proteger las industrias domésticas, y por lo general son implementadas en industrias que reúnen uno ó más de...
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...Pankaj Ghemawat’s article, “Distance Still Matters: The Hard Reality of Global Expansion” discusses the reasons and rationale that drive companies to over-estimate profit potential in foreign markets. Ghemawat analyzes the failures of different companies’ (News Corp, Tricon Restaurants, etc..) foreign expansion endeavors to determine what these failures had in common. From his analysis, Ghemawat concludes that these failures share one common attribute: a failure to account for distance. As Ghemawat describes it, companies erroneously utilize an antiquated and incorrect modality when deciding on foreign expansion: the country portfolio analysis (CPA). The CPA focuses on national GDP, levels of consumer wealth, and people’s propensity to consume but ignores “the costs and risks of doing business in the market.” These costs are grouped into a category classified as “distance” which itself is sub-divided into four dimensions: cultural distance, administrative distance, geographic distance, and economic distance [CAGE]. Ghemawat proceeds to list factors that influence distance and industries that are affected by the specific dimension. These results are framed in an artificially created schematic: the CAGE Distance Framework. Important attributes contributing towards cultural distance include different languages, different ethnicities, different religions, and different social norms. Important attributes contributing towards administrative distance include absence of colonial...
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...Distance Still Matters The Hard Reality of Global Expansion Pankaj Ghemawat argues the reasons for driving companies to overvaluation profit potential in foreign markets in the article which is named “Distance Still Matters, The Hard Reality of Global Expansion”. He examines the problems of some companies’ international expansion strives to detect that makes these problems mutual. According to his researches, he decides that these problems and failures have a mutual point as distance. He explains it that companies inadequately take advantage from wrong method when deciding on international expansion as CPA ( country portfolio analysis). The CPA is related with national GDP ( gross domestic product), welthness of the people and tendency of people for consuming. However this tendency pass over “the costs and risks of doing business in the market.” In the article, these costs are grouping as four main title: cultural distance, administrative distance, geographic distance and economic distance. Ghemawat created a schema which is called The CAGE Distance Framework. Cultural distance consists of different languages,race,religions and social norms. Administrative distance comprises of lack of colonial ties, shared monetary or political association, political contrast, government policies and organizational powerlessness. Physical position, absence of common frontier and sea access, greatness of country, weaknesses of communication and transportation networks and different...
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...According to source A, it states that when a farmer is producing food that will not travel a long distance, will have a shorter distance, and will not have a high-yield demand for locally grown products. This indicates that a locavore movement of a variety of products means that there will be multiple products and not just one. This matters because we have options for the products we might want to grow or eat. According to source B, the people who did the 100 mile diet go into detail on how foods are produced within a 10 mile radius. I believe that foods do lose nutrition because when they are harvested they have to be planted by the root which indicates the distance between the fruits and vegetables. This shows foods do lose nutrition because when they are harvested they have to be planted by the roots. This matters because of the distance between the fruits and...
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...Fat, big, large, massive- translates el gord in spanish. This name is given to the largest distant galaxy cluster discovered, also known as ACT-CL J0102-4915. Felipe Menanteau, a Research Scientist at the National Center for Supercomputing Applications, states, "This cluster is the most massive, the hottest, and gives off the most X-rays of any known cluster at this distance or beyond." Menanteau describes the characteristics of this enormous cluster unlike any seen before. El Gordo is located approximately 9.7 billion light years away from Earth and its mass is measured three billion times as much as our sun. A cluster unlike any previously discovered. The photo for April 22, 2014 of “El Gorgo Massive Galaxy Cluster” stuck out from other pictures taken on NASA’s Astronomy Picture of The Day. The appearance of this galaxy was especially fascinating. I was drawn by the image’s bright spots and blue and pink colors. The image is a combination of a visible light image by the Hubble Space Telescope in 2002, an X-ray image from the Chandra Observatory of the hot gas in pink in 2014, and computer generated dark matter in blue through gravitational lens distortions. The bright spots in the image are galaxies within and beyond the cluster. Remains of radiation from the Big Bang along with electrons from hot gas in the galaxy cluster creates the warping seen from earth. Hubble's high resolution shows the distortion in space caused by gravity. This warps the background of galaxies in...
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...longer conduct their business activities just within their own country; they gradually reach the international market. However, in the process of penetrating foreign markets, they often face challenges and barriers that are not easily to overcome, such as language, regulation, currency, polity, or economic size. These barriers significantly impact on the activities of a business in a foreign country. Pankaj Ghemawat categorized all barriers into four distances: cultural, geographic, political, and economic distances, which form CAGE framework. He emphasizes that the types of distances influence different businesses in different ways. For example, culture distance determines consumers’ product preferences while geographic distance influences the costs of transportation. Obviously, the future and the success of internationalization in any company depend heavily on the company’s ability to master and reduce barriers, specifically, the four distances. Any company that underestimates their importance or simply ignores the distances may incur a big loss, yet failure. In the retail industry, the failure of Wal-Mart in South Korea is a typical example. After eight years of disappointing sales in South Korea, in 2005, the America’s largest retailer, Wal-Mart, announced to leave the country. A year later, the company quietly transferred all 16 of its South Korean stores to Shinsegae Group, a domestic retailer, for $882 million and officially withdrew from Kimchi (Olsen, 2006). While...
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...ASTR 100 Chapter ReviewQuestions – Fall 2012 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Section-1 Check the letter that represents the best answer to each of the multiple choice questions. Answer all questions in this section. Each question is worth 1 point. This section is worth 40 points. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 1. In the scientific method, a hypothesis _____. A. is a statement of fact B. makes a prediction that can be tested C. is usually proven to be correct D. can only be tested once E. none of these 2. Which of the following can't be considered an acceptable hypothesis?" A. Dark matter, (invisible matter which still has gravitational attraction), determines the orbits of stars in the the galaxy B. Mass increases with velocity C. Matter came into existence together with time D. The megagalaxies of the universe will become invisible to each other in time. E. all are acceptable hypotheses 3. A theory is an integrated explanation of numerous “proven”_____. A. facts B. laws C. controls D. hypotheses E. guesses 4. What is the correct sequence of steps in the scientific method? I. State a problem II. Analyze and interpret data III. Develop a hypothesis IV. Share the results with other scientists V. Design and perform experiment to test the hypothesis A. I – II - III - IV – V B. III – I - V – II – IV C. V – IV – III – II – I D. I – III – V – II – IV E. V – II – I – III - IV 5. Ptolemy's model sought to explain retrograde motion by...
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...are several studies which touch on one or another aspect of the child's grasp of quantity notions (Apostel, Morf, Mays, and Piaget, 1957; Fischer, 1955; Inhelder, 1936; Piaget, 1960a; Piaget and Szeminska, 1939; Szeminska, 1935). The earlier papers are primarily of historical interest, since their contents have for the most part been incorporated into the systematic book on the subject by Piaget and Inhelder, Le Developpement des quantites chez I'enfant (1941). This book is divided into four sections, each three chapters long. In addition, there is the customary chapter of summary and conclusions at the end of the book. The first section deals with what is probably the best-known segment of the quantity work: the so-called conservation of matter, weight, and volume of an object in the face of changes of shape. The basic technique is a simple one (ibid., p. 7). The experimenter gives the subject a ball of clay and asks him to make another exactly like it—"just as big and just as heavy." After the child has done this, the experimenter retains one of the balls as a standard of comparison and changes the appearance of the other by stretching it into a sausage,...
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...destroyed. Therefore the sum of all the energies in the system is a constant. The Big Bang Theory violates this law by stating that all matter and energy was created in an explosion. From Elementary to College students are taught that laws of physics cannot be violated, but are taught a theory that clearly violates one of them. The Plasma Theory on the other hand does not have a explanation as to how the Universe started leaving room for future discoveries to fill in the blank. The law of conservation of linear momentum states that the total momentum of a closed system of objects is constant. One of the consequences of this is that the center of mass of any system of objects will always continue with the same velocity unless acted on by a force from Cannon 2 outside the system. Galaxies are found at varying distances, moving in different directions at different velocities and almost always in clusters containing millions of Galaxies. This is not possible if everything is expanding from a central point because it would violate the law of conservation of linear momentum. This law can be represented by dropping a pebble in a still pool of water, each ripple would be a true circle and expand outward at an equal rate. No ripple would run into another or suddenly change course. But in the case of Galaxies they are not at equal distances moving...
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...scales are so different from one step to the next that they are incredibly hard to comprehend all at once – no “everyday” experience to refer them to * If the Earth were a basketball how big would the moon be? Tennis ball * How many Earths would fit into the Sun? ~ 1 million * How many Jupiter’s would fit inside the Sun? 900 * How many Moons would fit inside the Earth? 50 * If we say the distance from here to Toronto (71 km) represents the distance between the Earth and the Sun, how far are we from Pluto? From Hamilton to Mexico, or from Hamilton to Calgary * If we say the distance from here to Toronto represents the distance between the Earth and the Sun, how far is the Earth from the Moon? From here to the edge of campus (Sterling and Forsyth) * If we say the distance from here to Toronto represents the distance between the Earth and the Sun, how big is the Earth? 3 meters * If we say the distance from here to Toronto represents the distance between the Earth and the Sun, how far is the Sun from the next nearest Star? 1/10th the distance from the Sun to Earth Lecture 3: The Earth: * Our starting point and only home * Both land and water * The only planet to have liquid water at its surface * Atmosphere: dense at sea level and then thins upwards * Clouds + weather * Temperature range: from -90 degrees to 60 degrees Celsius The Moon: * Earth’s only natural satellite * Rocky, ancient surface (powdery) ...
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...may seem unusual as the USA market of this kind of products is the largest all over the world. Another reason of the success of this firm was the transition of the European market for medical devices. These changes where produced because of the entrance of Tyco Healthcare, a global healthcare products company. This company sought favorable contracts with few distributors. The willingness to take GENICON's products increases and this fact helps the company success. Finally, another reason of success could be the strategy of the company, very focused of carrying out deep studies to choose the right countries. Factors as taxes, tariffs, regulations, exchange rates, etc. were taken into account. 2.Apply Country Portfolio Analysis (see Distance Still Matters) to the markets GENICON is considering entering. You may use the combination of industry statistics and country indicators (such as GDP per capita). Which country makes the most sense from this perspective? In order to study these countries we will focus on the GPD, GPD growth, GPD per capita, population and land. In the picture below we can see that China has the best numbers regarding GDP and its growth. Nevertheless, due to this large population the GDP per capita, data that reflects the wealth of the families, is low. Anyway, as the healthcare system is not paid by the families but the government, there are opportunities in this market and it seems they will continue growing. So from this point of view the country I would choose...
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...Press (2010), communication equipment is becoming indispensable to people. In other words, people rely on it as never before. Is it proof that face-to-face communication is no longer important? Absolutely not! Face-to-face communication lets people directly know the actual personalities of people, and interact with each other without any barriers. Although as advanced technology develops, people have many new ways to keep connect with others, face-to-face communication is still the most important and effective method to communicate with others in education, business, and daily life. Education Online education is a teaching method, which uses a network media to allow students and teachers to carry out teaching and learning activities even thousands of miles away. First of all, it really breaks the constraints of time and space, because students and teachers do not have to go to school buildings. They can learn or teach anytime and anywhere. For example, Open University of Britain offers an online and distance education system called ODE, which has a worldwide reputation for education. This program, which has flexible teaching time, exclusively utilizes the online mode of teaching without any face-to-face sessions. In this way, Open University enrolls new students worldwide, and it gives people who do not have much time opportunities to gain professional knowledge. The students do not have to go to Britain, and they do not have to pay the high living expenses of studying in the...
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