As a business professional for more than 25 years, I recommend considering different types of business networks before taking your business into global markets. International business networks enable transactions between multinational companies that would otherwise be limited by market exchange costs.
Function
Business networks connect people who conduct transactions. For example, the telephone has been used for decades to exchange information. More recently, mobile devices and smartphones, linked together by cellular networks or the Internet, enable flexible approaches to both business transactions and instructional programs. Content distribution networks allow businesses to gather digital text, images and multimedia from multiple sources and publish it together for marketing campaigns and online learning. International social network technology enables companies to build personal relationships with customers and offer customized offers, service and advice. Social networks also facilitate mentoring, coaching and professional development.
Conventional Economic Theory
If you assume that individuals are selfish, you may conclude that companies are as well. Without restraints, selfish interests can motivate individuals to cheat one another. Business partners may not pay each other even though this damages their relationship. They implement contracts which are costly to manage and enforce. Without adequate legal sanctions, however, trust evaporates. This theory suggests that formal, rigid structures are required for international business networks to function adequately.
Internationally Dispersed Family Network
Families contain a natural hierarchical structure to regulate informal business relationships. Immediate family members form a fairly rigid hierarchy, but the extended family operate more loosely. These networks rely on trust. Once a legal structure exists to formalize these relationships, formal international business relationships can be created. Economic, technical and political turmoil may disrupt trust and impede business transactions. This theory suggests that relying on a family network, based on trust, can expedite processing and improve productivity and profitability in international companies.
Non-Family Networks In International Business
Ethnic and regional ties can also cause people to form a network to conduct business. Shared affiliations to institutions such as churches and clubs may unite companies. Strong social connections make conducting business easier and more productive. In the past, networks built on trust that allowed forms of international economic coordination that might be used today as well since they can be less costly to administer than market-based transactions. Managerial hierarchies add layers of complexity. This theory suggests that self-contained structures of multinational corporation are required to coordinate international economic activity during periods of turbulence and uncertainty. While managerial hierarchies may make sense short-term, more flexible inter-firm networks may provide a better long-term solution that allows for more expansive growth and innovation.
