The number of companies operating internationally is increasing, with many UK businesses setting their sights on global trade despite an uncertain economic outlook. Airwallex – a financial technology platform that supports businesses with their expansion efforts – reports that 70% of UK small-medium enterprises (SMEs) plan to scale internationally in 2023.

Globalisation has given rise to international trade and global business partnerships, connecting companies and consumers across geographical, political, social, economic and cultural boundaries. Those operating in our global marketplace – with its vast web of multinational stakeholders, including employees, supply chain contacts and policymakers, customers, business partners and investors – must understand that society and culture has an impact on every aspect of overseas business.

How does social structure affect business?

How organisations construct, coordinate and engage with their workforces, business activities and wider marketplaces is closely linked to social structure. The impacts can be far-reaching, from how they interact with their environments to the values that drive and shape their work.

The social structures and contexts businesses operate within can have significant impact – whether positive, negative or neutral – on a host of aspects.

• Cohesion – how do businesses maintain identity and structure while balancing internal and external pressures?
• Adaptation – how do businesses innovate and integrate in response to changing environments?
• Hierarchy and power relations – how do businesses handle questions of autonomy, power management, resource allocation, negotiation and organisational models?
• Conflict – how do businesses seek to address organisational blockages, poor productivity, insecurity, high stress levels, labour disputes or absenteeism?

Decision-making across each of these axes has subsequent impacts on any number of factors, such as social and identity links between employers and employees, communication and communication tools, and the flow of information.

Business leaders and managers must examine and reflect on these – and other – critical issues. Awareness of social structures and how they relate to organisational management is one aspect, but any awareness should be followed up by considered, responsible solutions, where required.

And that’s before the global business dimension is added to the mix.

Why do social factors and structures matter in international business?

The individual social structures and contexts of different demographics, communities, countries and nations all feed into the complex, interconnected space of global business and operations. They play a key role in shaping both macro and micro business practices: how the organisation is managed, what goods and services are produced, how they will be sold, what managerial and operational practices are established and, ultimately, how successful an international venture will be.

Businesses with international and multinational interdependencies must consider the predominant attitudes, values and beliefs of the countries in which they operate if they are to succeed in their business goals and avoid issues and tensions.

Sociocultural factors to be mindful of include:

• culture
• language
• religion
• education level
• customer preferences
• societal attitudes

Sociocultural differences and values impact every aspect of business practice. How do employees like to be managed? Is entrepreneurship encouraged? Are business ethics and social responsibility prioritised? What competencies are valued and rewarded? How is organisational social change received?

If they are to remove barriers to success, operational ease, as well as workplace cohesion and profit, leaders must remain cognisant of these factors. Balancing different social structures and values will support organisations to:

• create stability, order and a framework in which all stakeholders can interact, cooperate and co-exist
• understand the complex relationships between different social cultures and structures and their roles
• predict the behaviours and responses of others
• share information and resources for collective benefit
• provide laws, regulations and social norms which support desired behaviours and attitudes
• establish a sense of identity, belonging, unity and purpose.

This last point is particularly important, as Mark Granovetter – an American sociologist and professor, dubbed the ‘father of social network analysis’ – demonstrates in his Strength of Weak Ties theory. The theory posits that ‘weak ties’, such as those that exist between acquaintances (‘strong ties’, alternatively, are those between close friends) can help to form a bridge between clusters of people – such as disparate groups in the workplace. Novel information, therefore, can then be shared across these clusters, resulting in greater widespread awareness and inclusivity than would occur via people with strong ties.

How can cultural differences be managed by international businesses?

Stereotypes, misunderstanding and ignorance related to different cultures and traditions can lead to disruption, offence, and the inability of some teams to work effectively or handle cross-cultural business dealings.

Effective management of cultural differences is not only the remit of human resource management: it extends to every corner of an organisation and must be embedded in everyday business practice.

Managing cultural differences includes embracing diversity and accommodating differences, promoting open communication, discussing and modelling shared company culture and behavioural norms, rallying teams around shared visions and common causes, and providing training, awareness and leadership of cultural diversity.

What are the current and emerging social issues for international businesses in 2023?

For many business leaders, an unstable social, economic, political and environment backdrop will present as many threats as it does opportunities – and, in turn, may impact existing social structures and frameworks.

Global business insights and thought leadership experts INSEAD Knowledge outline some of the events, contexts and trends for businesses to remain aware of:

• climate change
• income and wealth inequality
• social instability
• inflation and recession risks
• geopolitical crises

Adapt to international contexts, challenges and opportunities with ease

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Modern, turbulent business environments demand business leaders to develop approaches that can respond to change, adversity and unpredictability. Leaders who fail in this endeavour are likely to find their businesses outcompeted, outmanoeuvred, and obsolete.

Top management executives are cognisant of this and are keen to design and develop methods of avoiding this fate. Dynamic capabilities – an organisation’s ability to adapt to the environment in which it finds itself – together with strategic, plan-focused leadership may hold the answer.

What is strategic management?

Successful leaders ensure that company resources are used in the best possible ways to achieve both short-term and long-term business objectives. Strategic management is a universal business strategy which drives the organisation toward these objectives.

Strategic management is the highly organised, continuous process of planning, monitoring, and adapting progress towards a company’s objectives and ambitions. It enables businesses of all types and sizes to evaluate their overall progress and performance and make adjustments to their operations and activities to better align themselves with their goal-orientated roadmaps.

Responsive, continuous strategic management allows businesses to remain resilient in ever-evolving environments and situations. Changes in both internal and external business environments – from staffing issues, to new industry regulations, to shifting customer demands – can happen at any time. A business which can alter its course of action by flexibly leveraging resources, assets and other core competencies in response to change and adversity is well-placed to remain on track and enjoy superior performance, while simultaneously managing its transaction costs.

There are a number of other key benefits to strategic management and strategic decision-making:

• Stakeholders are aligned with business objectives, facilitating operations and establishing a shared, cohesive corporate culture
• Businesses are more likely to achieve their desired ambitions, goals, and key performance indicators (KPIs)
• Performance can be measured, monitored, and managed in line with planned targets
• Systems, processes, and business units and activities are better aligned with the wider vision
• Cost savings are made due to better allocation of resources and return on investment (ROI)
• Businesses are able to develop in a structured manner and grow in resilience, sustainability, and flexibility
• Key activities and projects such as the launch of new products or services can be prioritised according to the overarching plan.

A direct result of these strategic planning benefits is an increase in competitive advantages. 

What are the main strategic management theories?

There are various schools of thought in the field of strategic management:

• Profit‐maximising and competition‐based theory – the main business objective is to maximise long-term profit and develop a sustainable competitive advantage over other businesses. This industrial-organisation (I/O) perspective deems external market positioning as the most important factor incompetitiveness.
• Resource‐based theory – a company’s competitive advantage is found in its internal firm resources, competencies, and capabilities rather than its positioning in the external environment.
• Survival‐based theory – the concept that an organisation must continuously adapt to its competitive environment if it is to survive.
• Human resource-based theory – the notion that human factors of an organisation are the most critical elements in the strategic process.
• Agency theory – the importance of the underlying relationships between company owners and company managers, in this context referred to as shareholders and agents.
• Contingency theory – businesses should design an appropriate management strategy for the situations and conditions they encounter.here is no isolated, best approach to organisational management.

Gary Hamel and C. K. Pralahad’s strategic intent theory is based on the concept that ‘Western companies focus on trimming ambitions to match resources.’This strategy only searches for advantages that can be sustained. In contrast, Japanese corporations ‘leverage resources by accelerating the pace of organisational learning,’ a methodology that enables them to conceptualise and achieve bigger goals. Motivating workforces with  global vision reinforced by strong leadership may prove a more useful strategy that doesn’t set its own limitations and constraints.

The key tenets of strategic intent are:

•   capturing the essence of winning
•   stability over time
•   setting targets that inspire personal effort and commitment.

Ultimately, the competitive strategy and theory chosen by any leadership team will differ based on its assessment of what the business requires to reach its goals. Whatever the chosen approach, most businesses will do well to factor in Michael Porter’s three strategies to maximise competitive advantage: cost leadership, differentiation, and market segmentation. Additionally, Porter highlights the importance of evaluating the substitutes of any organisation’s products or services.

What is the strategic management process?

Strategy formulation should underpin and inform an organisation’s business model. It generally includes four key steps which apply to both new businesses and established organisations:analysis, formation, execution, and evaluation and control.

1. Analysis. First, identify and clarify business intentions in line with the organisational mission statement. Use a SWOT analysis to investigate the correlation between the intentions and current performance, gather data and information from stakeholders, and conduct risk management evaluations. This information, together with a clear idea of company objectives, will inform the strategic approach.
2. Formation. Design a SMART (specific, measurable, achievable, realistic, and time-bound) action plan based on achieving the objectives to serve as a framework for activities, resource allocation, contingencies, and other considerations.
3. Execution. Once all stakeholders are up-to-date with the plan and resources are where they need to be, the plan can get underway. For example, business processes in need of restructuring are reorganised in line with the plan and ready to go.
4. Evaluation and control. Assess progress so far, benchmarking any progress made against the original objectives and goals. Depending on the outcome, corrective action and alternative plans may be required.  

Remember: each action should be purposeful and intended to bring business activities  into alignment with overarching strategic objectives. In-depth research and articles detailing the process – as well as wider expertise in the field of management strategy – can be found in the Strategic Management Journal, the Journal of Management, and other leading international journals.

The balanced scorecard

Robert S. Kaplan and David P. Norton’s balanced scorecard (BSC) provides a quick, detailed insight into overall company performance, enabling leaders to gain an objective view of the firm.

Examining performance through the scorecard’s four key measures – financial analysis, customer analysis, internal analysis, and learning and growth perspectives – offers holistic feedback that allows business owners to make strategic changes in a timely manner. Additionally, it exposes key areas that require urgent intervention and informs how action plans may be revisited and redeveloped in light of organisational performance and health.

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It’s no exaggeration that the Covid-19 pandemic transformed the business world. With millions of workers furloughed and redundancies rife, companies – both big and small – faced extraordinary challenges.

For those who remained in business, mass adaptations had to be made – from remote working to social distancing. Fostering a collaborative, communicative and sensitive company culture became essential.

In our post-pandemic reality, corporate responsibility continues to be tested. Our societal lens has shifted, with staff welfare a centre point of discussion, labour demand being questioned and misconduct reports on the rise. The very nature of the coronavirus has forced companies to consider wider health and safety implications, while other businesses have had to adapt, modify and change to meet ever-evolving consumer needs too.

Meanwhile, wider societal fears are on the increase. Amongst other telling statistics, the 2022 Edelman Trust Barometer reports a 6% global increase in public fear of experiencing prejudice or racism, a 3% increase in concern over climate change, and a notable anxiety regarding job security. And, with government distrust at a disarming high point, in the wake of the pandemic, the public have turned to NGOs and businesses to solve these escalating ethical concerns.

This is nothing new. In the 1960s, rising consumer-awareness and discourse on increased corporate responsibility underpinned the decade – and markedly, the concept of business ethics was first conceived. In times of global crisis, it’s been proven that they matter more than ever.

What are business ethics?

Business ethics refer to an essential system of policies and practices that uphold a corporation’s legal and moral responsibilities. At their core, they determine what is ‘right and wrong’ for a company and its employees and inform a wider code of conduct.

These ethical standards are reflective of various contributing factors to a safe and functioning workforce. Many are embedded in law, others are influenced by social and ethical dilemmas, while additional business practices may be adopted as part of a more ‘individualised’ company culture.

While organisations vary in nature, business ethics should typically address the following principles:

Personal responsibility
Workers strive to be reliable employees and complete the duties assigned to them to their best ability.

Corporate responsibility
Businesses uphold contractual and legal obligations to employees, stakeholders and clients – such as determining safe working conditions, meeting minimum wage requirements and upholding manufacturing standards.

Loyalty and respect
Addresses the ways in which a company, their stakeholders, employees and clients should interact with integrity to maintain positive business relations. 

Trust
Businesses should cultivate trust, with employees trusting that terms of their employment will be kept, while clients can trust the business with their money and confidential information, for example.

Fairness
A company commits to holding all employees to the same standard, regardless of rank, and employs an equal treatment of customers.  

Community and environmental responsibility
Businesses will consider their impact on wider society and adhere to environmental regulations.

Examples of ethical standards in action

General expressions of ethical behaviour within the workplace include maintaining data protection, prioritising workplace diversity, putting customer needs first, and operating fairly and transparently as a business. Other ethical practices are more sector-specific, such as food and cosmetic producers adhering to lawful product labelling; and, financiers protecting against bribery and insider trading.

Alternatively, cultivating a hostile workplace, ignoring conflicts of interest, favouritism or discrimination of employees and misusing company time would be examples of unethical behaviours.

Business ethics: the bigger picture

Business ethics also bleed into a wider framework of corporate social responsibility, which refers to the way in which a company works to achieve or support larger societal goals. Not governed by law, corporate social responsibility is largely a self-regulated practice, where a business independently and voluntarily decides how it can contribute positive action of a philanthropic, activist or charitable nature.

This could include a commitment to the reduction of a company’s carbon footprint, improving their labour policies, making charitable donations, strengthening diversity, equality and inclusion, and making socially conscious investments.

Some key real-world examples include Coca Cola’s commitment to sustainability and Ford Motor Company’s investment in electric vehicles. Starbucks, meanwhile, in a move to tackle racial and social equity, aims to represent black, indigenous, and people of colour (BIPOC) at 30% in corporate roles and 40% in retail and manufacturing by 2025. 

Why are business ethics important?

Business ethics are important for a number of reasons. They ensure that a company operates lawfully, safeguarding both employees and the general public. They keep trade honest and fair, uphold manufacturing standards, and prevent false or bogus product claims. Plus, a strong ethical corporate culture fosters, amongst other things, improved performance and prevents employee burnout.

It works both ways, too. Any successful relationship is built on trust, and adhering to an evolved code of ethics can really benefit a business in terms of brand awareness and customer loyalty.

As Edelman states in its 2022 report: “Lasting trust is the strongest insurance against competitive disruption, the antidote to consumer indifference, and the best path to continued growth. Without trust, credibility is lost and reputation can be threatened.”

With regard to social responsibility, a values statement that addresses, challenges and attempts to solve both social and environmental issues paves the way to a business having real-world impact. With both millennials and Gen Z taking an amplified interest in brand activism and positive action, socially conscious companies are more likely to capitalise on reach, engagement and public investment.

Do business ethics make economic sense?

As we’ve seen, ethical decision-making breeds trust – and, in business, trust is currency. 

A company that upholds ethical standards that reflect real-world concerns and plays to a rising consumer consciousness is more likely to attract monetary investment, loyal staff (reducing recruitment costs) and consistent clientele. A good reputation is valuable and ultimately results in stronger financial health, from share price to increased sales.

Getting caught for unethical behaviours, on the other hand, could cost a company custom and fines, lead to less competitive hires and drive down its share price. For example, when Reuters reported a Johnson & Johnson company cover-up involving asbestos-contaminated talcum powder, the accusation triggered a 10% drop in the company’s stock price. 

Ultimately, leveraging business ethics wisely can result in increased brand equity overall.

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How can a business maximise its growth and development? What can be done to increase competitive advantage? Are businesses making the best possible use of all their assets?

In an increasingly crowded global economy, all businesses must work hard to remain relevant, competitive and profitable. Innovation is key to maximising business growth and, for many businesses, they already possess the means to achieve it. Alongside this, developing customer-focused, personalised experiences – and adding value through the customer journey – is key. An organisation’s intellectual capital has the potential to achieve both aims, and add significant economic benefit – but what is it, and how is it best utilised?

What is intellectual capital?

Intellectual capital (IC) refers to the value of an organisation’s collective knowledge and resources that can provide it with some form of economic benefit. It encompasses employee knowledge, skill sets and professional training, as well as information and data.

In this way, IC identifies intangible assets, separating them into distinct, meaningful categories. Although not accounted for on a balance sheet, these non-monetary assets remain central to decision making and can have a profound impact on a company’s bottom line. More than ever, IC is recognised as one of most critical strategic assets for businesses.

Broadly speaking, there are three main categories:

• Human capital: the ‘engine’ and ‘brain’ of a company is its workforce. Human capital is an umbrella term, referring to the skills, expertise, education and knowledge of an organisation’s staff – including how effectively such resources are used by those in management and leadership positions. A pool of talented employees, with a wealth of both professional and personal skills, adds significant value to a workplace. Companies who prioritise investing in the training, development and wellbeing of their teams are actively investing in their human capital. It can bring a host of benefits, including increased productivity and profitability.
• Relational capital: this category refers to any useful relationships an organisation maintains – for example, with suppliers, customers, business partners and other stakeholders – as well as brand, reputation and trademarks. Customer capital is adjacent to this, and refers to current and future revenues from customer relationships.
• Structural capital: structural capital relates to system functionality. It encompasses the processes, organisation and operations by which human and relational capital are supported. This may include intellectual property and innovation capital, data and databases, culture, hierarchy, non-physical infrastructure and more.

Each area offers the means for value creation – which is integral to increasing competitiveness. As such, business leaders should prioritise intellectual capital, and its role within operational strategy, in both short-term and long-term planning.

How is intellectual capital measured?

As stated, while IC is counted among a company’s assets, it is not included in its balance sheet. While there are various ways to measure intellectual capital, there isn’t one widely agreed, consistent method for doing so. Together, these aspects mean that quantifying it can be challenging.

Three main methods are generally used to measure IC:

• The balanced scorecard method examines four key areas of a business to identify whether they are ‘balanced’. They are:
  1. customer perspective – how customers view the business; 
  2. internal perspective – how a company perceives its own strengths; 
  3. innovation and learning perspective – examining growth, development and shortfalls;
  4. financial perspective – whether shareholder commitments are being met. 

A visual tool which communicates organisational structure and strategic metrics, the scorecard provides a detailed overview without overwhelming leaders with information.

• The Skandia Navigator method uses a series of markers to develop a well-rounded overview of organisational performance. It focuses on five key areas: 
  1. financial focus – referring to overall financial health; 
  2. customer focus – including aspects such as returning customers and satisfaction scores; 
  3. process focus – how efficient and fit-for-purpose businesses processes are; 
  4. renewal and development focus – which looks at long-term business strategy and sustainability;
  5. human focus – sitting at the centre of the others, human focus encompasses employee wellbeing, experience, expertise and skills.
• Market value-to-book value ratio is calculated by comparing a company’s book value with its market value, and aims to identify both undervalued and overvalued assets. A ratio above one indicates that there may be undervalued assets which are not being utilised; a ratio below one indicates there may be overvalued assets which action could be taken to strengthen.

How can a business increase its intellectual capital?

Intellectual capital acts as a value-driver in our twenty-first-century economy. As such, it’s no surprise that many businesses are pivoting to focus on human, relational and structural assets over others. Given both its relative importance and the returns an organisation can expect, finding ways to increase IC could be key to achieving key business goals.

For Forbes, efforts to increase IC mean adopting either a solution-focused or perspective-focused approach. The first refers to the methods by which specific results can be achieved – the what, when, why and where. The second refers to how IC can utilise industry and marketplace trends, forecasts and insights to seize opportunities. Whichever approach a business opts for, there are a number of ways in which to boost intellectual capital efforts. These include:

• Improving employee satisfaction to increase retention rates
• Recruiting individuals with specific knowledge, competencies and skill sets that are currently lacking among the existing workforce
• Auditing and enhancing systems and processes
• Gathering research and data to inform decision making
• Investing in training and development opportunities for employees
• Improving employer branding to both attract and retain the best talent
• Creating new products, services and initiatives through innovation

Influential contributors and further reading

Early and current proponents and authors of intellectual capital thinking include:

• Patrick H Sullivan who wrote ‘A Brief History of the Intellectual Capital Movement’. He presented a concise overview of the beginnings of the discipline in which he traced it back to three origins. These were: Hiroyuki Hami, who studied invisible assets pertaining to Japanese operational management; the work of various economists (Penrose, Rumelt, Wernerfelt et al) which was included in Dr David J. Teece’s 1986 article relating to technical commercialisation; and Karl Erik-Sveiby, who focused on human capital in terms of employee competences and knowledge base. His model of intellectual capital, published in 1997, was a seminal contribution in the field.
• Dr David J Teece published ‘Managing Intellectual Capital’ in 2002, and further publications by him are available on Google Scholar.
• Leif Edvinsson’s 2002 book, ‘Corporate Longitude’, concerned itself with the measurement, valuation and economic impact of the knowledge economy.
• Thomas A Stewart, a pioneer in the field, authored ‘The New Wealth of Organizations’ in 1997. He delved into areas such as unlocking potential hidden assets, spotting and mentoring talented employees, and investigating methods to identify and retain customer and brand loyalty.

The field of intellectual capital continues to expand and evolve globally. Many well-known international figures such as Johan Roos and Nick Bontis continue to explore both its ramifications and applications.

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Franchises are a good option for people who want to be their own boss and run their own business, but are lacking the knowledge or resources to launch a new product or service on their own. Franchising is also a fairly financially-safe way of being your own boss, as there is a much higher rate of survival than in new businesses and startups.

At its core, a franchise is a partnership between an individual (the franchisee) and an existing organisation (the franchisor).

There are three types of franchise systems:

• Product: This is when a franchisor gives a franchisee permission to sell a product using their logo, trademark, and brand name.
• Manufacturing: This is when a franchisor partners with a franchisee to manufacture and sell their products using their logo, trademark, and brand name.
• Business: This is when a franchisor licences their brand to a franchisee and provides regulations around how the business operates and is managed.

How franchises work

A franchisor grants a franchisee the right to market and/or trade their products and services. When a franchisee purchases a franchise, there is an initial fee to the corporation they’re going into partnership with, and they will usually also pay regular royalties to cover the cost of initial and/or ongoing training, business support and marketing. 

By paying for the organisation to manage these areas of the business, the franchisee can concentrate on the day-to-day running of their business. They also avoid the cost of organising these services in-house.

The franchisee agreement is a contract which governs the partnership between franchisee and franchisor. Within this, the partnership is tied in for a set period of time – generally between five and twenty years. Once the period of time is up, the contract tends to be renewable.

The history of franchises

The franchising model was created in the 1800s, by Isaac Singer – inventor of the widely-used Singer sewing machine. After the US Civil War in the 1860s, he was mass-producing his famous machines, but needed a system in place that would enable repairs and maintenance to cover the whole country. Initially, local merchants across the US were sold licences that permitted them to service the machines. This then grew to enable the merchants to sell the machines, too. The contract used was the earliest form of franchise agreement.

During the Second World War, companies like Coca-Cola and Pepsi looked to expand quickly and began franchising. As the 1950s and 1960s saw growth in population, economic output and social change, franchising grew in popularity in the UK, especially amongst food retailers such as the fast-food chains Wimpy, McDonald’s and KFC, and ice cream brands Lyons Maid and Mr Softee.

Today, franchising is a function of many established brands across multiple sectors, with franchise opportunities in food, pet grooming, homecare agencies, beauty salons, recruitment companies and many more.

How popular are franchises?

The British Franchise Association’s 2018 bfa NatWest Franchise Survey found that the franchise industry is growing more than ever before. At the time of survey, there were 48,600 franchise units in the UK, and 935 business format franchise systems – around double of what existed twenty years prior.

It’s been widely reported that Millennials are turning to self-employment at a faster rate than any previous generations, and so it is no surprise the results of the franchise survey show this as an attractive option to this group. 18% of franchisees were found to be under the age of 30 – a significant rise in recent years. 

With 4 in 10 franchise systems operational from a home office, following the work from home orders issued throughout the recent Covid-19 pandemic, is it possible that this way of working could continue to thrive?

Are franchises a good investment?

The cost of owning a franchise can vary wildly, with the initial fee ranging from £1,000 to £500,000. On top of this, you also need to have budgeted for start-up costs, working capital, monthly rent, salaries, inventory, software and utilities.

The franchise industry contributes £17.2 billion per annum to UK GDP, and employs 710,000 people. The 2018 bfa NatWest Franchise Survey also found that franchises are a largely successful business model, with 93% of franchisees claiming profit. 60% have an annual turnover of more than £250,000.

To ensure franchise business success, a franchisee must first do their due diligence by making sure there is room for expansion in the territory they’ll be working in, understanding how much training and ongoing support will be offered, researching the success of other franchisees, and budgeting and planning for fee payments. With this knowledge, a successful business plan can be written, and a successful future awaits them.

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With us you’ll develop an understanding of business strategy, operations management, finance, leading and managing people, marketing and sales. As you study part-time, you can continue to earn while you learn, applying the knowledge you gain to your existing role. You’ll connect with a global network of peers as you study alongside professionals from all over the world.