organization and team structure symbolized with cubes

How does social structure affect international business?

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

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