CAGE Distance Framework
The CAGE framework, also known as CAGE Distance Framework, is a strategic tool that most international businesses use to discover essential variances between various nations that they should focus on when coming up with their strategies in reducing distance across global markets. CAGE is an acronym standing for Cultural, Administrative, Geographical, and Economic differences, assists businesses by analyzing various countries and determining the distance gap between them (Herrera, 2017). The Nordic Industrial Park (NIP) has been of great help in reducing the international distance for international businesses, as in the case of China. In relation to the CAGE framework, NIP in China provides a wide range of essential services to its global markets in setting up businesses.
First, they provide administrative services such as the registration of companies and drafting of legal business contracts in China. Both Europe and China have different regulatory and political guidelines affecting international markets. In China, stringent political and legal policies have been established to conduct the operations of business administration. Due to the unfamiliarity of these administrative policies, new businesses that may want to start their companies in China may face awkward moments and may end up losing focus (MccDonald, 2019). At the same time, the country has embedded various friendly administrative relational policies that may favor the operation of new foreign businesses. Different legislation and guidelines in countries may have severe effects on trading practices between them. NIP is intensively informed on these different administrative measures in China. Therefore they will help the new foreign organizations to gauge if those differences may be of help or hindrance to their business expansion strategy.
NIP also provides geographical space for business offices and light-industrial amenities. Geographical differences entail the physical feature of the locational distance between the different countries. In our case, China and Europe are at a separate geographic location in the globe with differences in their transport facilities, climate, size, infrastructure, among other aspects. Due to these international differences, through technology, NIP bridges the countries in various ways. In physical differences, they provide transport facilities either by air, road, or sea to the designated businesses in the foreign country hence reducing the physical distance between them (Grechkina et al., 2017). They also help in automating and rescheduling of time due to the variance in the geographic time zone between the countries. In the means of communication, NIP assists the business startups in developing viable and stable communication systems for efficiency during their regular business operations.
Finally, Nordic Industrial Park (NIP) offers economical services such as financial reporting, accounting, and other financial services involved in the business. Every country has differences in their economic features such as wealth distribution, income levels, gross domestic products, and purchasing power. Differences in the economic aspects of a country like China can be a great hindrance to foreign startup companies but also can offer vast financial opportunities for them. Operating a company in a foreign country will need a sound understanding of its fiscal position, economic trends, and requirements. Additionally, differences in natural resources, knowledge and information access, costs, human resources, and financial quality may affect businesses. NIP offers the relevant competent expertise to the startup businesses that will help them navigate well through the country’s prevailing economic conditions.
Various advantages are associated with companies located in an industrial park as depicted in the above case study but also come possible disadvantages that affect the operations of the startups. First, companies face little or no control over their business operations due to complete dominance by the industrial park owner. Most industrial park owners provide everything for the incoming startup companies, such as administrative, cultural, economic, and geographical services, for the efficient operation of their business activities in the foreign nation (Gillis, 2019). The majority of the expertise and competencies are met by the industrial park owners, which in case of any misalignment to the laid guidelines by the company, may lead to possible retaliation of services by the industrial parks. As a result, this will adversely affect the productivity and growth of the located companies.
The occupational health and safety rules of the employees are compromised. Since industrial parks are associated with substantial industrial activities such as manufacturing and processing, there are possibilities of unhealthy emissions such as poisonous gases and irking noise. Employees working in such areas are likely to be affected during their duty performances hence adversely affect their productivity (Aynalem, 2019). Additionally, due to the large number of people staying under a confiscated area, the safety of the employees’ tools and properties are at stake. It later on, alarms the need for advanced security systems to guarantee the company of their employees’ security. Poor sanitation among people in the industrial parks is alarming, such that this can affect the comfortability and healthy working environment for the employees. There is a need for the industrial parks to advance and promote a sustainable working environment that caters to the safety and occupational health of the employees hence enhancing high employee productivity.
Finally, companies indulged in industrial parks face diminishing productivity scale and industrial indiscipline. Labor productivity capacity in the industrial parks tends to be lower than in other low-cost industrial terminuses (Aynalem,2019). Due to the confinement set-up of the companies, there is minimum exposure to the rest of other companies bringing no or little competition. As a result, this leads to a lack of growth, specialization, and advancement in their activities. Also, due to the cultural differences among the employees being the locals and managers being foreigners, it may cause forms of misunderstandings in the companies. As a result, the company employees will not operate at their full capacity hence low productivity and sustainability of the companies.
References
Dong, L., Li, X., McDonald, F., & Xie, J. (2019). Distance and the completion of Chinese cross-border mergers and acquisitions. Baltic Journal of Management.
Liu, Z., Adams, M., Cote, R. P., Geng, Y., & Li, Y. (2018). Comparative study on the pathways of industrial parks towards sustainable development between China and Canada. Resources, conservation, and recycling, 128, 417-425.
Kuznetsova, S. N., Romanovskaya, E. V., Potashnik, Y. S., Grechkina, N. E., & Garin, A. P. (2017). Factors determining whether industrial parks are successful or not. In Managing Service, Education, and Knowledge Management in the Knowledge Economic Era (pp. 53-57). CRC Press.
Gillis, W. R. (2019). Rural Disadvantages. The Future Of Rural America: Anticipating Policies For Constructive Change.
Jing, R. (2017). Study on the Location and Mode of Energy and Heavy Chemical Industrial Area. Chemical Engineering Transactions, 62, 553-558.
Aynalem, Y. (2019). Opportunities and Challenges of Industrial Park Development in Ethiopia: Lessons from Bole Lemi and Hawassa Industrial Parks (Doctoral dissertation, Addis Ababa University).
Herrera, M. E. F. (2017). Contrasting the strategic role of firms in the economic development of Ecuador with that of South Korea using the Ghemawat CAGE distance framework.
Dong, L., Li, X., McDonald, F., & Xie, J. (2019). Distance and the completion of Chinese cross-border mergers and acquisitions. Baltic Journal of Management.