Introduction
International organizations (IOs) frequently encounter a large number of social risks, including differences in culture, diverse religions, language barriers, and practical challenges, such as supply chain disruptions, logistics failures, the threats of global pandemics, and the digitalization gap between and within countries. Furthermore, IOs may be oppressed by certain political issues and legitimate regulations, including the influx of refugees, inequality in income, and geopolitical conflicts. The vast amount of challenges pose a severe threat to business functions, relationships with customers, and the overall profitability of organizations. Therefore, it is essential to develop comprehensive business models and leadership frameworks to effectively mitigate the consequences of the threats. The current paper attempts to thoroughly discuss three critical challenges that contemporary organizations encounter and propose appropriate solutions to each of them.
International Management Challenges
As mentioned briefly before, international organizations face a large number of problems on a daily basis in regard to social, political, legal, technological, and social factors. Due to the broad scope of the problem, it is advisable to focus on several challenges and provide a thorough explanation to each of them rather than a brief discussion of all the potential threats. Ultimately, the current paper focuses on national differences, which concern the cultural and social aspects of international management, sustainable development, which involves environmental issues and social equality, and globalization that focuses on technological and cultural obstacles to business. The mentioned three challenges are some of the most prominent risks to international management and are highly significant to every contemporary organization.
National Differences
The first prominent challenge that most international organizations encounter is the difference in culture, customs, religions, politics, and social values of both employees and potential clients. The diversity in these aspects may significantly affect the business strategies and profits of the company. To assess the degree of influence on the business, experts generally utilize the term ‘cross-cultural literacy’, which indicates the extent of cultural differences and their effect on the organization (Hill, 2021). One of the most notable factors indicating cross-cultural literacy is the country that companies operate in. For instance, the highly formal and hierarchical business structure in Japan has deep roots in Japanese culture and even language (Hill, 2021). Another example concerns the extended consequences of the caste system in India that still prevails in some sectors of the business (Hill, 2021). Ultimately, the culture has a profound impact on organizations, and it is essential to take it into account while developing business plans and assessing the economic fertility in the region.
Solutions and Examples
It is vital to note that national differences affect both employees of the company and the target audience. The first topic that the current paper emphasizes is the effect of culture on the employees of organizations. In general, IOs present attractive conditions, such as high salaries and the international setting, which attract a large number of job-seekers (Erciyes, 2019). However, the management teams of organizations are not always knowledgeable concerning the theoretical models and leadership approaches that might significantly enhance the atmosphere within the group and address multiculturalism (Erciyes, 2019). The theories vary vastly; however, some of the models that are frequently used to mitigate the consequences of national differences among the staff members are Human Motivation Theory, Implicit Leadership Theory, and Schein’s Culture and Leadership Theory (Erciyes, 2019). These frameworks primarily address the motivation of employees within international organizations and promote a healthy atmosphere within the team.
However, it is possible to unite the mentioned models to create an innovative approach that utilizes the concepts of motivation and leadership. According to the research, effective leadership and motivating factors transcend the national differences allowing for a smooth business process even in international settings (Erciyes, 2019). Based on the data from international organizations, such as WTO, UNCTAD, ITC, and WHO, Erciyes (2019) has suggested a theoretical framework that explains the relationship between the motivation of the employees and national culture. The result of the findings was the following, ‘the motivation concept is related to individual characteristics rather than nationalities’ (Erciyes, 2019, p. 9). It implies that proper leadership and effective motivational tools transcend the national differences within the team and, therefore, are crucial to organizational development.
The second topic concerns the general challenges that international companies might face in various countries. One specific example concerning national differences in organizations is the business process in Japan. Japan is a country with a highly developed economic system, which attracts a significant number of international organizations (Kodama, Javorcik and Abe, 2018). Nevertheless, the said organizations are met with difficulties concerning cultural specificities, the gender gap in employment, and strict hierarchical structure (Kodama, Javorcik and Abe, 2018). While the foreign affiliates in Japan demonstrate better results concerning the gender gap, the evidence shows that cultural norms do affect the international businesses in Japan (Kodama, Javorcik and Abe, 2018). The mindset of Japanese entrepreneurs also affects the economic conditions of the country. For instance, Japan demonstrates significant levels of power-distance, masculinity at the workspace, and uncertainty avoidance (Khalid, 2018). In general, it implies that international organizations need to carefully choose the locations for business operations and prepare accordingly.
Sustainability
The second prevalent problem for contemporary organizations is sustainable development, which covers the social, environmental, and economic aspects of the companies. At present, sustainability is one of the most discussed topics in the business setting, and the majority of prominent companies and conglomerates choose this trend as the primary course of development. For instance, Unilever has indicated that sustainable development is the major priority of the organization and pays close attention to such factors as gender balance, renewable electricity grids, recycling, the cultural and ethnic background of the employees, and other social and environmental factors (Unilever, 2020). Furthermore, the management of the company has declared that the primary purpose of the organization is ‘to make sustainable living commonplace’ (Unilever, 2020). This example transparently demonstrates the global trend toward sustainable development.
Nevertheless, while sustainability is an excellent objective that provides an extensive number of benefits, it also poses several challenges, particularly for small to medium-sized companies. The experts indicate that small enterprises frequently lack the resources for the implementation of sustainable development and are not aware of contemporary methods and approaches (Prashar, 2019). While the social component of sustainability, such as gender equality at the workspace and the absence of racial and ethical prejudice, is achievable with the correct course of action, the environmental aspect is more complicated to manage. Frequently, some of the core business operations are closely associated with environmental risks, and there are no effective analogs in the industry. For instance, approximately 2 billion people do not have access to appropriate solid waste management (SWM), and a significant number of companies in developing countries cannot resort to sustainable development due to economic reasons (Rodic and Wilson, 2017). Ultimately, sustainability is crucial to the development of organizations, including extensive international conglomerates and local small enterprises, and it is essential to develop innovative methods that allow for social and environmental safety.
Solutions and Examples
As mentioned briefly before, not all companies have a clear understanding of sustainable development and finances to achieve it. Nevertheless, it is vital to overcome the said challenges and propose effective theoretical models and leadership frameworks concerning sustainability. One of the most prominent effective methods is the Responsible Leadership (RL) theory (Muff, Liechti and Dyllick, 2020). While this model has received a certain amount of criticism in regard to its practical significance, RL has demonstrated immense progress in terms of sustainable development. The fundamental principles of the framework are ethics, the interconnectedness of the world (social, environmental, and economic aspects), active engagement, mutual support, and values-based behavior (Muff, Liechti and Dyllick, 2020). Furthermore, since RL is associated with active engagement, it also incorporates the transformational change toward sustainability (Muff, Liechti and Dyllick, 2020). Naturally, RL is not a theoretical model that changes the organizational structure immediately; however, it emphasizes sustainability as an objective that the company should work towards.
A specific example of an effective sustainable approach that closely resembles RL is the direction chosen by Unilever. As mentioned before, Unilever, a large multinational conglomerate, has acknowledged sustainability as its main priority and course of action. At present, the company has already achieved the gender balance at the workspace, the complete renewability of electricity grids, and more than two-thirds of raw materials used in the production meet the requirements of sustainable development (Unilever, 2020). Furthermore, while Unilever is a multinational company with brands all over the world, the organization prepares local leaders to maintain the cultural identity and mitigate the consequences of national differences (Unilever, 2020). The company also has ambitious goals to achieve net-zero emissions by 2039 and change all the materials to reusable and recyclable counterparts (Unilever, 2020). Ultimately, this example transparently demonstrates the importance of sustainable development and how international organizations attempt to achieve it.
Globalization
The third challenge that contemporary organizations face is globalization. Globalization is generally understood as the integration at the individual, organizational, and governmental levels in all spheres due to progress in transportation and telecommunication (Hill, 2021). While it is mostly a beneficial transformation for organizations since it allows for better international interaction and, consequently, more business opportunities, globalization might also have a negative effect. In some sense, the outcomes of globalization are interconnected with the previous two challenges, national differences and sustainable development. Globalization might negate the consequences of national differences, but at the same time, it threatens the cultural diversity of the organization (Bitesize, n.d.). Furthermore, some experts indicate that globalization leads to within-country income inequality and environmental damage, which obstruct sustainable development (Figge, Oebels and Offermans, 2016). Ultimately, it is necessary to find a proper balance between the mentioned factors to maximize the development of the organizations.
Solutions and Examples
As a result of the negative consequences of globalization, some experts have promoted antiglobalization ideas as a solution to the problem. For instance, at the end of the 20th century in America, there has been a number of protests against job losses, environmental damage, and risks to cultural diversity (Hill, 2021). The American citizens blamed the World Trade Organization (WTO) for enabling cross-border trade that has eventually led to the mentioned downfalls (Hill, 2021). Nevertheless, the research demonstrates that the fears concerning globalization are highly exaggerated, and, in general, the benefits outweigh the disadvantages (Hill, 2021). Furthermore, it is possible to mitigate the consequences of globalization by utilizing effective countermeasures. For instance, some experts suggest that flexibility of supply chains, exclusion of foreign products in specific industries, development of domestic manufacturing, creation of trade alliances, and localization of global operations might significantly reduce the risks from globalization (Cuervo-Cazurra, Doz and Gaur, 2020). Overall, globalization is a complex notion that provides both benefits and disadvantages for business organizations; however, it is possible to mitigate the drawbacks by utilizing the mentioned strategies.
Recommendations and Discussion
Having proposed the solution to the three mentioned challenges and discussed the real-life business scenarios, it is essential to recap the information and suggest specific recommendations to contemporary organizations in the international setting. The current paper proposes three distinct guidelines in correlation to the three analyzed challenges. The first recommendation is to account for the motivation of the employees in international organizations since comprehensive leadership models and effective motivational tools neutralize the consequences of national differences. The second guideline concerns sustainable development and the utmost necessity to shift to transformational leadership models that emphasize social and environmental safety. Lastly, it is essential to mitigate the detrimental effects of globalization on companies and their core functions.
Conclusion
The current paper has examined the three highly prevalent challenges that IOs face, including the differences in culture and social values, the issues of sustainability, and obstacles imposed by globalization. The said obstacles might pose a serious threat to all types of contemporary business organizations, including small enterprises and large international conglomerates. Ultimately, leaders and management should transparently identify the goals of organizations and work towards them but keep the challenges posed by national differences, sustainable development, and globalization in mind.
Reference List
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