Friday, July 26, 2019
The CAGE and AAA Models as the Drivers of Globalization Essay - 3
The CAGE and AAA Models as the Drivers of Globalization - Essay Example This research will begin with the statement that globalization, in the business sector, is widening. More and more companies, in the recent days, have either gone global or are contemplating on doing so. The reason as to why a company needs to globalize its dealings are still unclear to most, but they believe that more the company spreads its branches internationally the better. Globalisation comes with its challenges though. Being an international business entails a myriad of issues. It is in this connection that various frameworks and models have been formulated to give insight on what is required successfully to establish an international business. Nokia, BOEING, Renault, FedEx, Virgin Group and Vodafone are perfect examples of successful international companies. Nokia, for instance, is a handset manufacturing company, whose products are sold in over 150 countries. The company earns an estimated annual income of 38 billion sterling pounds. In India, Nokia is the largest multinatio nal company, yet the company is located in Finland. Nokia employed a cost leadership technique in India, to look for various ways of cutting cost and making their products readily available. These involved setting up manufacturing stations for handsets, creating financial options for mobile phones and together with network providers to reduce airtime cost. Nokia also created the distribution network that attracted over 25000 dealers, this was three times the size of Samsung and six times the six that of Sony Ericsson. Moreover, Nokia considered working with distributors of fast moving consumer goods and consumer durables. This enabled their products to be readily available to consumers on the market, thus explaining their dominance in India. Nokia operates in the telephone and communications industry. Globalisation has a played a notable role in this type of industry. Companies are monopolizing their dealing, and this has substantially led to globalization. Large telecommunication c ompanies have taken over this industry and hence denying the smaller companies a chance to develop. The local companies are faced with stiff competition from these multinationals making them pull out of business. According to the CAGE and AAA frameworks, this kills local entrepreneurial spirits and increases dependence on the advanced nations. However, globalization has led to improved services in the telecommunication sector. Large organizations have sufficient capital, hence, investing in expensive networks that are of highly rated. The networks provide faster transfer of quality sound and videos, which are convenient for subscribers. The success of any multinational company depends on the strategies they decide to adopt. A proper framework gives the business guidelines, which could enable it to attain multinationalism. Some of the most popular frameworks include the CAGE distance framework, AAA model, Adding Value and Drivers of Globalization. CAGE distance framework considers th e cultural, administrative, geographical, as well as economic differences, and factors when selecting the countries a company should address when crafting international strategies. This framework was formulated by Pankaj Ghemawat, a business professor, in Spain, at the IESE Business School. The framework links interactions between countries to their national incomes divided by some composite measure of distance. Cultural distance, in this case, refers to the difference in languages, ethnicities, religion, values, norms, and dispositions of a particular nation. Companies should use the CAGE distance framework as it includes both bilateral and unilateral factors. It is also more practical than other frameworks due to some of its aspects.