CAGE Framework (E-Learning Exercise)
CAGE Framework (E-Learning Exercise)
[Date of submission]
CAGE is a framework that explains the volume of trade between the two countries involved based on a few dimensions that are encompassed in the acronym CAGE. This framework is developed by Pankaj Ghemawat who is a renowned global strategist and an economist. According to this framework, the general relations between the counties, specifically trade interactions, are affected by some dimensions in both a positive and a negative way. These dimensions are cultural, administrative/political, geographical and economic, thus the acronym “CAGE” used to describe this framework. The fundamental idea to this is that the relations between the countries including the trade interactions are either encouraged by the similarities in these CAGE factors, or are set back due to the differences in these factors. According to Pankaj, the countries that have similar features such as a common language, same border, are a part of some trade arrangement, share common culture are likely to have trade that is 10-15 times larger than most normal trade interactions between countries that do not have such common features. Now such a framework not only suggests that the results are statistically significant, but we may find that the results are somewhat economically meaningful too. In the video, Mr. Pankaj explains this phenomenon by the example of America’s trade with Canada. Now even though Canada’s economy is just about the 10th largest economy in the world, yet it enjoys the status of being USA’s largest trade partner because of some CAGE commonalities such as being closer to USA than other countries such as Mexico etc.
The CAGE framework has many real world applications that can be applied / observed. Let us take the case of Pak-China trade over the years as our example. Both the countries have common CAGE commonalities as they share a common border and have entered many mutual trade agreements. Due to this, the volume of trade between the two countries has been significantly large. Many events such as status of being the MFN (Most Favored Nation) granted to China by Pakistan in 1963, the signing of a Preferential Trade Agreement (PTA) in 2002, and the Free Trade Agreement (FTA) in 2007 between the two countries has led to major trade and development projects such as the recent Mega plan of the Pak-China Economic Corridor, has ensured that both the countries enjoy great trade and diplomatic relations (Memon, 2015). Now from a more industrial perspective, we may see its application from another angle. Let us suppose we take example of sports channels. Now if Sky Sports UK was to expand its coverage internationally, based on CAGE analysis it is least likely to expand its coverage to Turkey since very few people are able to speak and understand English there, and hence are less likely to subscribe to its broadcast. Similarly the Al-Jazeera channel will not expand its coverage to the USA because vast majority of the population cannot understand or speak Arabic. So a more rational and efficient line of action for Sky Sports UK will be to expand its coverage to the countries where many people are able to understand English, thus are more likely to subscribe to its broadcasts. Similarly, Al Jazeera would like to expand itself to the Arab Countries where Arabic is widely understood thus having a high chance of subscription. Thus we see here how a CAGE characteristic such as a common language may affect the actions of an enterprise (Dunung, 2011). Similar argument and analysis can be made for other CAGE characteristics too.
Dunung, M. C. (2011). International Business: Opportunities and Challenges in a Flattening World. Flat World Knowledge. Retrieved from
Ghemawat, P. (n.d.). CAGE framework to evaluate international trade opportunities. Retrieved from Youtube: https://www.youtube.com/watch?v=7FpUJaG7uMk
Memon, A. Q. (2015, August 24). Pak-China trade: Importance of negotiating the FTA. Retrieved from The Express Tribune: