THE CAGE PROJECT
BACKGROUND
In a highly popular 2005 book, Thomas Friedman declared that the “world is flat.” What he meant was that because of communication technology (i.e., the Internet), increased travel, labor migration (going to a different country to work), etc. the people of the world were converging on common tastes, preferences, etc. By “flat,” Friedman argued that differences among people and markets no longer mattered and that competitively the world became a level playing field. This meant that a company in China could compete in the U.S. on an equal footing with an U.S. company because customer tastes and expectations were the same in both markets (“What works in Shanghai, China works in Savannah, Georgia”). For example, Friedman would argue that Lenovo (the Chinese company that bought IBM’s PC business) can compete successfully in the U.S. market with Hewlett-Packard and Dell as would Dell in China because of similar market characteristics. In short, Friedman’s idea supports globalization.
Pankaj Ghemawat, a Harvard professor, opposes Friedman’s idea – in fact, he derisively calls it “globaloney” (even professors, like NBA hoopsters, do trash talking!). His point is that there are significant differences in Cultural, Administrative (i.e., management styles), Geographic, and Economic (CAGE) areas that companies should pay attention to. He calls these differences “distance,” such as cultural distance, administrative difference, etc. In other words, he would argue that Dell could face (and in fact, Dell did and continues to face) considerable problems succeeding in China because of vast CAGE differences.What works for Dell in the U.S. would not necessarily work for them in China. Ghemawat suggests looking at the attractiveness of foreign markets from a CAGE perspective – the more CAGE difference between (say) the U.S. and a particular country, the less attractive is that market because of the difficulty of doing business profitably in that…