Global Business Environment: Factors, Challenges, and Influences on Organizational Functions

This report analyses the key factors that drive global commerce and trade, the complexity of strategic challenges faced by organisations in a global environment, and the influences of globalisation on organisational governance, leadership, structure, culture, and functions. It also evaluates the influences of ethical and sustainable globalisation on organisational functions, different ways of effective decision making in a global context, and various routes to internationalisation. The report is based on the case study of SASOL Ltd. and uses McKinsey's 7s and Hofstede's culture model to evaluate the influences of globalisation on organisational functions.

Global Business
Enterprise

Table of Content.
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
P1 Analyse key factors of cost, market, environment and competition that drive global
commerce and trade.....................................................................................................................1
P2 Explain the complexity of strategic challenges faced by organisations when operating in a
global environment supported by specific examples...................................................................3
P3 Evaluate the influences of globalisation on organisational governance and leadership,
structure, culture and functions....................................................................................................4
P4 Evaluate the influences of ethical and sustainable globalisation on organisational functions.
......................................................................................................................................................6
P5 Evaluate the different ways decision making can work effectively in a global context.........7
P6 Determine and articulate the various routes to internationalisation an organisation may
adopt, including key barriers........................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

1

SPEAKER NOTES:-
The organisation was formed in South Africa in 1950 and has a global network dealings across
31 countries including America, Europe, Middle East etc. This report will be a brief
discussion that will be made on key factors that drives a firm towards globalisation,
challenges faced by companies while their operations in globalisation and influence of
globalization on an organisation's governance, leadership, structure, culture and functions.
Furthermore in this report, impact of ethical and sustainable globalisation will be discussed
on organisational functions along with different ways of effective decision making in global
context and various ways to enter into globalisation with their barriers.
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SPEAKER NOTES:-
Cost:- Due to vast demographic conditions, cost may drive a firm towards globalisation as due to
availability of various resources and raw materials in different nations (Ding, Lu and Zheng,
2019). This can be a reason for an expanding firm as in order to reduce the cost of
production so that ultimate prices can be reduced, they may enter into global market where
availability of resources is cheaper. In reference with SASOL Ltd., this factor will help them
in attaining their inputs in cheaper prices so that competitive advantage can be acquired.
Market:- As this dynamic world is changing rapidly with the increasing competition and
entrance of new firms into the market, the respective or national market of the firm is being
narrowed down (Kolodko, 2018). In order to keep their growth rate constant, it is important
for the firm to enter in global market. But in order to ensure profitability, it is important for
them to keenly observe the market in which they are entering so as to ensure better results.
In reference with SASOL Ltd., the firm needs to assess the new market in order to analyse
their possibility of survival in respective market.
Environment:- For better results in respect of the expansion of the company, it is important for
them to thoroughly observe and analyse the market conditions of the new region or market
so that their culture, climatic conditions can be analysed in order to get bets effective results
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in the industry. In context to SASOL Ltd., the firm needs to observe the new market in
which they are expanding so that effective results and better profitability can be ensured.
Competition:- During a firm's expansion in new market of a new nation, the firm needs to
observe the existing competitive firms in respective market and analyse their market share in
that market so as to determine the level of threat they face to their firm so that any dangers
can be determined and risks can be evaluated. In reference with SASOL Ltd., the firm needs
to prioritise this factor in order to analyse the danger and threat their existing competitors in
new market of a new nation can be determined so that calculated risk can be taken.
SPEAKER NOTES:-
Political:- These are the factors that affects a business's presence politically such as change in
government, trading policies, taxation policies etc. Herein SASOL Ltd., the firm needs to
overlook these factors frequently so that better effective results can be obtained. They need
to analyse factors like leadership of the nation, trade policies in market, taxation policies etc.
so that better profitability and smooth functioning can be ensured.
Economical:- These are the factors like, interest rates employment rates inflation, foreign
exchange rates that affects a firm's operations (Madsen and Grønseth, 2022). In reference
with SASOL Ltd., the firm needs to analyse these factors in the new market so as to
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determine the best cost so that lowest price possible can be offered in order to gain
competitive advantage in new market.
Social:- Social or socio;logical factors consists of the factors such as market trends,
demographic conditions, consumer beliefs, etc. that may affect a firms profitability. In
context to SASOL Ltd., the firm needs to set up a proper management in their organisation
that will help them in analysing these factors so that better sustainability of organisation can
be obtained.
Technical:- These are the factors that affects the presence and operations of an organisation
technologically. These factors includes various aspects such as technical infrastructure,
cyber security, automation system etc. In reference with SASOL Ltd., the firm needs to
analyse the availability of better or substitute technology in new market where expansion is
being made so that better profitability and operations can be obtained.
Legal:- These are the legal aspects of external environment of an industry which includes
corporate taxation policies, industry regulation laws, consumer and employment protection
laws. Herein SASOL Ltd., they need to frequently overlook on various factors such as
industry regulation laws and consumer protection laws in order to ensure smooth
functioning of the organisation.
Environmental:- Environmental factors are the factors like climatic conditions, availability
of natural resources, availability of raw material etc. that affects a business's presence. In
reference with SASOL Ltd., the firm needs to analyse this factor of PESTLE analysis in
order to ensure smooth organisational operations and better return on investments.
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SPEAKER NOTES:-
Language Barriers:- In order to expand globally, language barrier is a major hindrance for any
company as different organisations speak different variety of languages and in order to
succeed in long run they need to overcome this barrier so that better effective results can be
obtained. In reference with SASOL Ltd., the firm already exists in international market and
in order to enter into a whole new market, it is important for the managers to know the
language of the country or hire a personnel specialising in respective language so as to ease
up the operations.
Different Culture:- It plays an important role if an organisation is thinking of to expand in a
whole new nation. A nation consists of different sets of culture that is followed by the
people residing there which a firm needs to observe and adopt the same in their working so
as to ensure better and sustainable business operations. In context to SASOL Ltd., if they
want to operate appropriately in long run in a whole new market, they need to assess the
culture of new market so as to keep earning profits in short run as well as long run.
Foreign Exchange:- Foreign exchange is a major hindrance that a firm needs to overcome in
order to set up a new branch or expand their chain in international market. The exchange
rate of a currency is not always same and keeps on fluctuating so in order to avoid
miscellaneous losses a firm needs to overlook the currency rates and fluctuation rates. In
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reference with SASOL Ltd., the firm needs to set the prices of the products so that any
unforeseen fluctuations in currency can be tackled effectively.
Management of team:- While entering into global market, it is important for the firm to
coordinate between different departments across different nations properly. National borders
between nations makes it difficult for the firm to manage efficiently but to ensure
profitability management plays an important role. In reference with SASOL Ltd., the firm
has effectively managed their different branches across the globe and earned impressive
amount of profits through their operations.
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P3 Evaluate the influences of globalisation on organisational governance and leadership,
structure, culture and functions.
The increase in globalisation proves to have a positive impact on functioning of an
organisation as it opens a wide range of opportunities to the firm that they can avail in order to
maximise their profitability and grow with a better speed. They can enter into different markets
of various nations to avail greater profits. On the other hand, globalisation has its negative effects
too such as it enhances more threat of competitors to the firm as other existing firms dealing in
the same industry can enter into their domestic market seeking for their profitability.
McKinsey's 7s:-
McKinsey's 7s is a strategic framework module used by managers of different companies
to analyse their organisations well being and its profitability in near future (Buye, 2021). In
reference with SASOL Ltd., this framework is as:-
1. System:- System is the term in this matrix that is referred to processes or procedures that
a firm uses in their operations to ensure better and smooth functioning of operations. In
reference with SASOL Ltd., the firm needs to keenly observe their system and regarding
management of risk and the relationship between customer and management in order to
make sure stability and growth in international market.
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2. Style:- This factor includes the leadership style or culture that a firm has adopted in their
functioning in so that smoothness in organisational operations can be ensured. In context
to SASOL Ltd., they have chosen an effective organisational style but, they need to
observe it thoroughly and wisely to seek for more options that may lead to increased
workflow efficiency in the organisation.
3. Structures:- Structure of an organisation consists of the organisational structure in an
enterprise in which flow of information and communication in an organisation takes
place. Herein SASOL Ltd., the firm the firm has adopted the best organisational structure
according to their operations so that better flow of command can be assured.
4. Strategy:- Strategy complies of the strategies and techniques that the firm follows in
their organisational operations and in sales that enhances profitability of the firm and also
helps them in gaining competitive advantage in industry. In reference SASOL Ltd., the
firm needs to improve their strategies so that cost can be reduced without affecting the
value in their products so as to gain competitive advantage in global market.
5. Skills:- Skills in McKinsey's 7s model consists of professional abilities and knowledge of
their human resources that leads them to gain competitive advantage in market. In context
to SASOL Ltd., the firm has a skilled human resources that they had build up in the
organisation by various training and development sessions organised in the enterprise.
6. Shared values:- Shared values are the values, ethics and beliefs in the organisation that
they has adopted in their operations in order to ensure effective results from their
employees. Herein SASOL Ltd., the organisation has set up an effective work
environment and has build up an efficient mission and employees belief so that they can
give best results through their operations.
7. Staff:- Staff is the management and recruitments of the human resources inside an
organisation so that best results can be obtained through various operations. In reference
with SASOL Ltd., the firm has an appropriate recruitment and selection process which a
personnel has to go through so that the firm can hire effective and best employees.
Hofstede's Culture Model:
Hofstede's culture model is a framework module used by managers of different
companies in order to evaluate the different culture of different regions or nations so that better
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effective ways of operating a business in respective region can be determined (Salvarli and
Kayiskan, 2018). In context to SASOL Ltd., respective culture model is as follows:-
 Power Distance Index:- This is the index in which determines the rate of inequality in an
economy is indulged. Herein SASOL Ltd., the firm is a South Africa based organisation
where low power index is followed that ensures equality in the nation as well as
organisation.
 Collectivism vs Individualism:- This factor states the individual vs group nature of their
target customers. It states their perspective regarding their individual support vs
community support as a whole. In reference with SASOL Ltd., South African culture
follows individual culture as their people cares more about them and their family than the
community or the society.
 Uncertainty Avoidance Index:- It states the nature of the people and the extent up to
which they can avoid the unclear or uneasy situations or decisions. In context to SASOL
Ltd., the culture of the firm follow high tolerance of ideas and decisions that includes
high risks and are willing to mould their ethics for it.
 Feminity vs Masculinity:- It is the dimension the culture related to female vs male
recruitment of staff in their organisation. In reference with SASOL Ltd., the firm
approaches masculinity belief so that highly competitive and powerful workforce can be
hired.
 Short Term vs Long Term Orientation:- This state complies of the decision making or
employees recruitment in their organisation and their time period for which they had been
taken or hired in the firm. In context to SASOL Ltd., the firm follows short term decision
making in the firm so that rapid changes in the environment can be tackled effectively.
P4 Evaluate the influences of ethical and sustainable globalisation on organisational
functions.
Globalization is a term concerned with the trading of goods and services in international
market by expanding their business in different nations. In order to expand and function in global
market effectively and efficiently so that better profitability can be enhanced, an organisation
should ensure decision making and operations in an ethical and sustainable manner. Herein
SASOL Ltd., the influence of globalization on organisational functions are:-
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 Ethical Globalisation:- Ethical globalisation is the term that explains the ethical or moral
code of conduct of an organisation in which an organisation operates. It states the
comparative mindsets o their employees in the international market so that profits can be
earned in and more employee satisfaction can be ensured (Minkov and Kaasa, 2020) . It
is very important for the firms to build up an ethical and effective mindset in the minds
of their workforce so that they can work effectively and efficiently towards
organisational goal achievement. In reference with SASOL Ltd., the firm implies
policies and vision mission statements along with a better working environment that
defines the enterprise's effective ethical environment that will help them push towards
globalisation with a better pace.
 Sustainable Globalisation:- Sustainability is the term concerned with the maintenance of
certain standards and ability on a convinced rate or level so that better results can be
obtained. It is important for the firms to ensure sustainability while entering into global
market as this will help the firm in boosting up their sales due to their maintain standards
of products and services. In reference with SASOL Ltd., the firm focusses on different
approaches to ensure production methods that are environment friendly so that
sustainability can be assured.
P5 Evaluate the different ways decision making can work effectively in a global context.
Decision making can be defined as the process of identifying what is best fro the firm and
planning an effective step to step module that can be followed by the organisation in order to
achieve success in short term as well as long term growth. It simply can be termed as the taking
initiative in the organisation about a specific problem that needs to be solved or a particular
opportunity that can be availed so that better smooth functioning as well as return on investments
can be obtained (Kullberg and Braekkan, 2018). Decision Making plays a vital role in
organisational operations as it helps them to determine the priorities of the firm and helps them
work towards it so that initiatives can be taken for the sake of a company. The more efficiency in
decision making ensures better results in the organisation as it leads them towards better
profitability and smoother organisational operations. There are two types of decision making that
are:-
 Proactive:- Proactive decision making is the type of decision making in which managers
takes decisions in the organisation on a regular basis. These decisions are generally taken
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to tackle short term problems and to avail short term opportunities (Siebert and Kunz,
2020). It is a continuos process in which decisions are taken by managers or professionals
of a firm on a frequent basis so that betterment in short term can be enhanced. In
reference with SASOL Ltd., the firm has acquired this decision-making in their
functioning in order to take decisions that fulfils short terms needs.
 Reactive:- It is a type of decision making in which initiatives in an organisation are taken
after a happening of an event that has influenced the firms operations or profitability. In
order to avoid further damages or to avail further opportunities from that event. These
decisions are generally taken for long terms as these are taken to overcome challenges
that has been faced by the organisation. In context to SASOL Ltd., the firm has adopted
this type of decision making in their operations so that long term barriers and
complexities can be overcame by the organisations and opportunities can be availed in
long term.
P6 Determine and articulate the various routes to internationalisation an organisation may
adopt, including key barriers.
There are various ways in which a firm can enter into global market in order to offer their
goods and services into international market. Some of these ways are:-
1. Franchising:- It is a way of entering into global market in which the firm gives
allowance to other individuals or firm the right to use a firms name and produce as well
as sell their products in their market (Назаров, 2020). It helps the original brand holder in
saving the expenses of actual establishment and also provides gives them commission on
sales or a agreed proportion of profits that has been earned. In reference with SASOL
Ltd., the firm usually prohibits this method for globalisation due to fear of loss of
goodwill and market share.
2. Exporting:- It is the form of globalisation in which the firm establishes a their branch in
overseas nation and exports their goods and services through this branch in various
regions of the nation.
3. Joint Venture:- Joint venture is a form in which a firm collaborates with another firm in
the market that already exists in that market (Orgonáš, 2020). This method allows the
firms to enjoy the existing goodwill of the firm with which they are collaborating and
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also enhances the use of their assets which saves them the cost of setting up respective
asset.
Recommendation:-
There are a lot ways in which SASOL Ltd., can enter into international market. These
methods will help them inn various ways through which profitability can be enhanced. They can
adopt franchising method to ensure fixed income on the use of their brand name as it will allow
them to charge fixed commission on sales and even a part of profit earned by franchising firm.
Barriers to a firm while entering into global market.
Documentation:- A major barrier in the way to globalisation is the documentation
required in it. Various nations puts different restrictions and has different trade regulation laws
which a firm needs to tackle so as to set up an enterprise across different nations.
Local Competition:- One of the most common barrier in while entering into
globalisation in local competition that they need to face. The market in which they are entering
already has firms that deals in substitute products and have their share in market. It can prove
hard for a firm in tackling those competitors in order to achieve higher success.
CONCLUSION
From the above report, this can be concluded that globalisation plays an important role in
an organisation and for an economy as a whole as it opens various and wide ranges of
opportunities for the firm. It ensures better profitability of for the firm while on the other hand, a
nations national economy and quality of living can be enhanced. This report was a detailed
discussion that was made on globalization as well as various factors affecting it such as market,
cost, competition and environment with PESTLE analysis determining various external factors.
Along with this, various barriers, influence of it on an organisation's governance, leadership,
structure, functions and culture were discussed with appropriate models. Furthermore, influence
of ethical and sustainable globalization on organisation's functions, different ways of decision
making and various routes to internationalisation were also discussed.
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