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Harsh terrain can increase transport costs and make an overseas expansion unviable.
© iStockphoto/ Adventure_Photo
Imagine that, five years ago, your organization expanded into a new overseas market. It had high hopes of success, but the venture turned out to be a big mistake.
First, transport costs were higher than expected because of difficult road conditions. Then, a flood damaged stock at the warehouse. Finally, customers complained that the marketing campaign was culturally inappropriate.
Your organization had to withdraw from this market. It lost money, and the unsuccessful venture damaged its reputation among potential investors.
The expansion went wrong because leaders in your organization had not seen the "bigger picture" in their planning. They saw a large potential market and high levels of disposable income among customers, and assumed that the expansion would bring in more than enough revenue to cover costs.
However, they overlooked a number of other factors that added cost and risk to the venture. These, ultimately, caused it to fail.
In this article, we'll look at the CAGE Distance Framework, a tool that you can use to think about how market-related factors can affect an expansion into a new region. We'll then explain how to use this framework when you're researching a foreign market.
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Ghamawat, P. (2001) 'Distance Still Matters: The Hard Reality of Global Expansion,' Harvard Business Review, September 2001. (Available here.) [Accessed 2 May 2013.]
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