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Any time a company decides to trade internationally, they are taking a risk

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Any time a company decides to trade internationally, they are taking a risk. Target's attempted entry into the Canadian market is a prime example. A company must examine the risks and evaluate the opportunity for success before taking the plunge. A common approach is to analyze the cultural, political, and economic risks that can influence the outcome. Another tool that is often used is the CAGE framework.

 

The CAGE framework examines the difference between the home and foreign target countries on four key dimensions. The bigger the difference, the greater the risk of failure.

 

The four CAGE dimensions are:

• Cultural Distance
• Administrative Distance
• Geographic Distance
• Economic Distance

Let us suppose that Tesla is interested in expanding its business into Europe or South America and has done some preliminary assessment that suggests that the best choice of location would be Germany or Chile. using the CAGE framework to help decide, which location do you think would be the better choice? This should include an introduction, analysis of each of the CAGE dimensions, CAGE matrix of results, Summary, and Recommendations.