ABSTRACT
This chapter summarizes the concept of comparative advantage-a driver behind globalization-and describes the CAGE framework for decision making, sourcing, and marketing in other countries. This framework calls for assessing distance between trading partners along four dimensions: cultural, administrative, geographic, and economic. Comparative advantage makes globalization inevitable for retailers and manufacturers in retail supply chains. Portugal had an absolute advantage in both products in Ricardo's day. Despite this absolute advantage, the theory of comparative advantage calls for Portugal to specialize in wine while purchasing its wool from England. This is because dedicating itself to wine produces more overall value than diverting a portion of its winemaking capacity to wool production. The chapter explains comparative advantage theory and method for assessing where to go, or where not to, if alternatives for doing business in new countries exist. The method recognizes that physical distance and local income may not be sufficient to understand risks in extending a supply chain to a new region.
