A market entry framework that compares countries across cultural, administrative, geographic, and economic distance to predict expansion friction.
Why This Matters
Imagine you want to play a game with a friend.
If you live close, speak the same language, and share similar habits, the game feels easy and fun. You understand each other without much effort.
But if you live far apart, speak different languages, and come from very different cultures, even a simple game becomes hard to coordinate.
Countries work the same way.
Many companies assume international expansion is only about market size or growth potential. Then friction appears. Products struggle to land. Partnerships slow down. Costs rise. What looked like a good opportunity turns complex very fast.
The real challenge is distance. Not only physical distance, but cultural, administrative, geographic, and economic distance. The CAGE Model helps leaders see these gaps early, before strategy turns into costly trial and error.
What is the CAGE Model About
The CAGE Model is a framework for analyzing why some countries trade more easily with each other, and why others face friction. It was introduced by Pankaj Ghemawat in Harvard Business Review.
Instead of treating global markets as flat, the model measures distance across four dimensions:
- Cultural
- Administrative
- Geographic
- Economic
Together, they explain how similar or different two countries really are from a business perspective.
Core Concept of the CAGE Model
The CAGE Model helps firms evaluate international markets by examining four types of distance.
Cultural Distance
Cultural distance looks at how similar people are across markets and how easily meaning, trust, and value transfer from one context to another.
It includes:
- Language and communication style
- Religion and belief systems
- Traditions and daily habits
- Values and social norms
- Social structure and authority models
When cultural distance is low, products are easier to explain, marketing feels natural, and trust forms faster. When cultural distance is high, companies must invest more in education, branding, and localization to avoid misunderstanding or rejection.
Two countries may be geographically close but culturally far apart if their values and consumption habits differ sharply. In those cases, assumptions built in the home market often fail.
