Saputo is a Canadian company that sells dairy products and cheese to the domestic and global market. At the moment, Saputo is operating in Canada, the USA, Argentina, Australia, and the UK and sells products to 50 countries (“Over 65 years,” n.d). However, Saputo needs to assess the main markets’ features more precisely and adapt to its expansion. Consequently, this paper will address Saputo’s operations in foreign markets to identify opportunities to expand the company’s global trade.
CAGE analysis is a tool that allows companies to assess the distance between countries, including cultural, administrative, geographical, and economic dimensions. Saputo has its main manufacturing facilities in Canada, the USA, Australia, the UK, and Argentina; hence, these markets will be analyzed (“Over 65 years,” n.d.). One can note that the cultural distance between the Canadian, Australian, US, and UK markets is insignificant. Countries have a similar history as they were all colonies of the British Empire, share the English language, religion, and cultural values. However, Argentina has a greater cultural distance as it has a different language, cultural values, although the country shares beliefs in democratic principles. The administrative distance between states is also insignificant as Canada has trade agreements with other countries or uses their market economy and regulations. However, all markets have different currencies, which makes trading more complicated (Orta, 2019). Nevertheless, since the countries have market economies conducive to international trade and foreign companies’ work on their territory, Saputo has a favorable environment for its operations.
Geographic distance has importance to Saputo as it sells dairy products with a short expiration date. At the same time, Canada is located at a sufficient distance from Australia, the UK, and Argentina. However, Saputo has a production capacity in these markets, which reduces transportation distance. The availability of production facilities also helps supply goods to neighboring countries such as Brazil (“Over 65 years,” n.d.). Therefore, although the geographic distance on global markets is significant, this is not a problem for the company. The economic distance between the markets of Canada, the US, Australia, and the UK is small, since they have almost the same level of GPD per capita, financial and human resources, and status of development. This approach allows the company to offer customers the same product prices without requiring additional employee costs. However, Canada and Argentina’s economic distance, and other Latin American countries, is more significant. On the one hand, this distance helps Saputo to save costs on cheaper labor, but, at the same time, lower prices of the goods.
Therefore, the analysis demonstrates that economic and geographic distance plays a decisive role for Saputo due to the specificity of the products. Milk and dairy products, in general, are a universal good, since most countries’ residents consume them daily. Thus, one of the recommendations for global trade is choosing a market with the greater economic distance that lies between middle and high-income countries to create new production facilities. For example, Eastern European countries can be a suitable option, since low labor costs will save costs, and the proximity of countries with a shorter economic distance will help make a profit by trading. Simultaneously, Saputo should pay attention to the local cultural characteristics in the current markets, especially Argentina and Latin America, to create a quality marketing strategy and attract buyers.
In conclusion, CAGE analysis shows that the most significant issue of Saputo is geographic remoteness, which is a considerable disadvantage for dairy products trading. However, Saputo solves this problem of development by building production facilities in demanded markets. In addition, the company’s similarities with the culture of most countries and developed trade relations contribute to its growth in the global market. Consequently, Saputo’s primary efforts should be to find markets with an average economic distance and wealthier neighbors to open production facilities and make a profit.
References
Orta, A. (2019). Making global MBAs: The culture of business and the business of culture. University of California Press.
Over 65 years of passion. (n.d.). Web.