GLOBAL BUSINESS ENVIRONMENT.

GLOBAL BUSINESS
ENVIRONMENT

Table of Contents

INTRODUCTION
Globalisation can be defined by the interaction of people, companies and government
with the outside world. Globalisation includes transfer of products, employees and technologies
to the various nations. It involves cross-border movement of goods, services and capital. The
organisation chosen for this file is Sasol Limited which is a chemical company and its
headquarter established in Sandton, South Africa and the number of plants is built by a German
chemist and engineers which provided fuel to the military which was required to carried out the
activities. This report will define elements that affect globalisation and effect of digital
technology on globalisation. The explanation of organisation culture through McKinsey's 7s and
apply Hofstede's dimensions culture on company. The evaluation of moral and sustainable
components which are to be included in global market and how these factors have impact on the
decision-making. The assessment of strategic expansion route which provide benefit and
negative effect on organisation.
PART 1
Introduction to the concept of globalization
Globalization is that concept that is used to defined increasing economic, social, and
political interrelationship all over the national boarders and cultures. This statement helps in the
free motion of products, services, capital, flow of finance, and people across the world. After the
globalization its become simple for various businesses to operate the activities at global level. In
the context of SASOL limited, as they are expanding their business in various countries due to
which they will be take benefit of it. Globalization term is very beneficial to them because by
expanding their business they can take benefit of others countries business plans, technologist
etc. It assist them to grow its activities in the marketplace so they able to increase their
productivity and profitability. Moreover, globalization is have some advantage or some
disadvantage also which should considered by the SASOL limited before adopting the concept of
globalization. At one side, it helps them to increase their brand value because it helps them to
increase the standard of living in poor and less developed counties by providing employment
options, easy adopt foreign culture and improves accession to goods and services. On the other
side, it can destroy the high developed countries as their ideas and processes can go out the
country. Globalization is an effective term which can be idealistic and sometimes opportunistic
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both, so SASOL limited can adopt this term after considering its both positive and negative
impact on their business(Ahmadi and et. al., 2014)
Explaining driving factors of globalisation.
There are several driver of globalization which affects the strategies formed for the global
market and these are the factor which are responsible for flourishing the globalisation. The major
drivers are described below-
 Government- This includes common product and standard of technology with a kind
regulatory climate and trade polices which are favourable. These all factors are essential
to produce competitive environment due to presence of favourable conditions. Sasol
Limited operates in a favourable trade policies formed by government.
 Competitors- The action performed by the competitors are drivers for competitive
globalisation which formulate interdependence within geographical markets. The changes
in industry, increase in trade and high level of competitive density are the competitive
drivers of globalisation for Sasol Limited.
 Cost- The difference in cost and global scope are drivers for cost globalisation. The
increase in magnitude of marketplace supports the Sasol limited to decrease the price and
provide support to make a competitive strategy.
 Market- These drivers specify that how the pattern of customer distribution develop and
the focus is on emerging of customer needs. The customer of different region require
similar product is a driver of organisation. Sasol limited provide their product to the
region where it is highly demanded.
 Technology- The change in technology is allowing the world to communicate with each
other easily which enhances the trade in Globalisation. Sasol Limited uses new
technology for the process of communication which increases their trade.
The significant impact of digital technology upon globalization
Globalization and technology has a great relation with each other as they are connected
with each other. Technology plays an important role in the expanding of the business because
technology has the power to develop and increase networks of every business throughout the
world. As Sasol limited want to adopt globalization in their business, so the without technology
they can not expand their business in a successful manner. There are various digital technologies
which help them to expand their business, these are described below:-
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 Social media: It is a great platform of expanding the business among the various people
though the various social websites. These sites are Facebook, twitter and Instagram, in
these websites most of the population are connected. Sasol limited can interact with a
range of people through these website and can increase promote their products, boost
their sales, establish their brand and many others befits they can get through these
websites(Alcácer, Cantwell and Piscitello 2016).
 Buying and selling online: At present days everyone wants purchase everything online
so the Sasol limited develop the online procedure in their company. So they can able to
continues grow and can providing customers with various goods and services as per their
demands. By help of this technology they can attract customers from all over the world, it
also help them to save their time and money and to grow in the market.
 Websites: This technology factor has great impact on the people mind as it is a most
common way where many of people can easily access it. Sasol limited should adopt those
strategies which help them to introduce various people with their websites so the
customers can easily reach to their products and services and can take benefits of their
services. It help Sasol limited to increase their productivity and profitability that enables
them to sustain in the market for a longer span of time(Zhang, Duysters and Filippov
2012).
PESTLE Analysis of Sasol Limited-
PESTLE is a strategic instrument that is utilised by Sasol Limited for the process of
decision-making as the company operates in a dynamic environment which is influenced by
various factors such as customers or government etc. The factors are briefly discussed below-
 Political Factors- The diverse regulations such as minimum wages act present in the
market of South Africa changed how chemical manufacturing will operate and policies
change by government and political stability are the factors which affect the
manufacturing of Sasol as compliance of laws is necessary which enhance the value for
company.
 Economic Factors- The economical stipulation of south Africa which is found that it
will remain stable in next 5-10 years
(http://blueoceanuniversity.com/frontpage/pestelcoanalysis/21878-sasol-ltd) as the
demand will be stable due to increase in investment in new industries. The inflation rate
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and exchange rate factors are considered by Sasol which affect the activities as if
inflation rate is high then the price of gas will be high.
 Social factors- The factors such as Gender, power structure, migration or education
level etc allow Sasol to better understand the culture and customer preferences in the
society which allow Sasol to form good image in the market. For Example, Sasol is
performing various test to supper the emerging role of gender in South Africa.
 Technological Factors- The factors such as innovation in product or in customer
service, supply chain and rate of technology driven rate. The Sasol is using latest
technology for lower the cost of production which increases profitability for the Sasol.
 Environmental Factors- The factors such as increased focus on laws regulating
pollution and climate change. The Sasol limited generate awareness and keep
environmental factors at core at the time of forming strategy which makes Sasol coping
up with the changing environment(Boateng and et. al., 2016).
 Legal factors- The factors such as justice system or discrimination laws or intellectual
property right protection act. The Sasol limited follows all the laws made for the
chemical manufacturing company which enhances their brand image at global level.
Challenges and important challenges of globalisation of Sasol Limited-
There are several type of situations in globalisation and these challenges are faced by
Sasol Limited as it is operating at global level. The brief explanation of challenges are as
follows-
 Organisational Structure- Every organisation has their own structure and this has
becomes a major challenge for the company as it will create issue in the effective
incorporation in new region. As it is difficult to determine the corporate structure and the
supply chain in new region. The formation of new structure require huge investment as it
involves some business strategy for operations of Sasol Ltd at worldwide(van and et. al.,
2012).
 Ethical business practices- There are some ethical issues which influences the
operation of the company at global level. The issues are Safety of product, protection of
labour and many laws are there which are to be followed by the Sasol Limited while
operating business at global level. The Sasol Limited has to face this challenge and chose
a region where compliance of these laws results in increased profit of the company.
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 Legal and Regulatory Structure- Each nation has their own rules and standard which
create complexity in the operation of business and this has become a challenge in doing
business at global level(Gulati, Wohlgezogen and Zhelyazkov 2012).
Recommendations to overcome the challenges-
The above explained challenges has emerged with the emergence of globalisation and the
Sasol Limited is require to overcome these challenges to operate their business at global level.
The operation at global level require to understand all the aspects that effects the working in
international level and the company is need to follow all the laws that are formed for the
companies who are operating at global which will help in building good image in the new
location.
The organisation has to analyse all the areas and form plan and policies specially for operating at
global level so that the company will be able to overcome all the challenges which will arise by
following various ways such as utilisation of resources etc.
PART 2
An explanation of the structure, culture and governance of the organization. Applying
McKinsey’s 7S model and checklist to illustrate an overview of the organization.
The structure, culture, and governance, these three terms are effects an organization
overall performance. These terms are very beneficial for any organization as it is those factors
which influenced the organization and also responsible for the behavior of the organization
members. In context of Sasol limited, they are adopting flat organizational structure in their
organization where the managers and their staff are well connected with each other. It is very
beneficial for any organization as they can create healthy environment in their organization that
enables them to achieve their objectives and goals easily. They also believe in adopting
aspiration culture in their organization which defines that trust, respect, and engagement in
organization activities is necessary(O'shaughnessy 2014).
For surviving in the market Sasol limited needs to have a good knowledge about how work can
be done more efficiently. The 7S model providing them this understanding which is described
below:
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 Strategy: It determines how one can succeed in their mission as it is related to those
strategies which helps Sasol limited to make a plan to achieve a competitive advantage
over its competitors.
 Structure: It is related to the organizational structure which the company adopts for its
operations. In reference to Sasol limited they are applying flat structure, it will help them
to make interest of their employees in their organization. So they can achieve their
organizational goals and objectives easily and can sustain in the market(Rudelj 2012).
 System: Systems are the resources and processes that is adopted by people of Sasol
Limited to do their work in efficient manner.
 Skills: It refers to all those activities in which company is specialized and for which they
are known. It helps the firm to attain higher position. In the Sasol limited if their
employees have sufficient abilities then they able to develop new strategy and new
products.
 Staff: Staff refers to employees of the Sasol Limited and how they are recruited, trained
and motivated should be considered.
 Style: It is related to the leadership styles and behavior patterns adopted in Sasol Limited
which helps them to know about how the company is being managed by top-level
mangers, how they interact with their subordinates and what necessary actions they
should take for accomplishing the organization's goals and objectives.
 Shared value: This is related to all aspects and areas of the companies. In reference to
Sasol limited, shared values are the core values of their organization because it describes
the corporate culture and general work ethics of their organization(Hillary 2017).
Application: These above strategies are used by Sasol Limited to track the performance of
organization and to make subsequent changes to improve the performance. It is important for
Sasol Limited to compare the present condition with desired and future conditions as if one
element of Mckinsey framework changes it affects all the other elements. This framework helps
to trace and adjust all inconsistencies which made it possible to develop actions plans to achieve
the intended state. In order to achieve predetermined goals and objectives, employees must have
a proper combination of hard skills and soft skills as all the seven areas are interconnected which
helps to achieve effectiveness in company.
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Hofstede's dimensions of culture.
This theory forms outer look for cross-cultural communication and defines the culture of
society and its effect on its members. There are five dimensions of this theory which is used by
Sasol Limited to understand the culture of employees which are as follows-
 Power distance Index- Sasol operates at South Africa and at America. The power index
is higher in Africa as there is unequal distribution of power which affects operations of
company and its structure whereas in America the power index is low and power is
shared which affects positively to the structure of the company(Ho 2012).
 Individualism vs. collectivism- In South Africa, people prefer organisation structure of
individualism which result in independent organisation structure and create weak
interpersonal relationship whereas in America, the collectivism is followed which makes
strong relationship between personal.
 Masculinity and Femininity- In south Africa, the role is not distributed equally between
men and women which create conflicts in organisation structure whereas in America, the
role between men and women are distributed equally which creates strong organisation
structure.
 Uncertainty Avoidance index- In south Africa, people tend to face uncertainty and they
do not try to avoid it which result in enhanced organisation structure whereas America
people tend to avoid certainty which affects on the performance in organisation.
 Long versus Short term orientation- If the company is working with long term
objective the company will focus on enhancing their organisation structure and vice-
versa.
Evaluation of ethical and sustainable factor of Sasol Limited in global market.
There are many factors which are ethical and sustainable for the Sasol Limited within
global market and the explanation of these factors are as follows-
 Focus on integrity in business relationship- This is a ethical and sustainable factor as if
company want to survive in global market than company has to maintain good relations
with other companies and it is a ethical factor as if company will maintain good relation
within organisation and outside organisation it will result in effective operations and it
help Sasol to sustain in the global market(Medcalf 2014).
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 Treat employees fairly- This is a ethical approach as providing fair treatment to
employees by providing them safety and security at workplace. The remuneration should
be based on the their work efficiency which will maintain good working environment in
the company which gives Sasol competitive advantage in the global market.
 Involve in sustainable processing activity- The Sasol focus on producing products
which are ethical and eco-friendly environment by using wastage policies and decision
regarding formation of strategy as the company involves producing oil and transforming
it into natural gas, waxes and fuel. This makes the firm position in positive manner and
effectiveness in operation of business.
Ethical and sustainable factors affect decision making of Company.
There are various ethical and sustainable factor is present in the global market which
influences the operation of the company. It is important for the company to form decision after
analysing all the factor to sustain in the global market. These factor affect the profitability of the
company at global level so the analysis of these factor is necessary as when company will follow
the ethical standards it will benefit the company in various ways and allow company to remain in
the global market with a good position(Levy and Lichtenstein 2012).
Assessment of strategic expansion based on the company and analysing advantages and
disadvantage.
The strategic expansion can be done through using franchising, licensing, joint venture
and partnership and so on. The Sasol is using Franchising and partnership as a way to enter into
global market. The franchising and partnership is a easiest way of expanding the business as it
involves support of the other company in a new region.
Advantage- Sasol can develop their brand name globally through using franchising as a
way of expansion and this increases brand image in mind of consumer of the new region. The
partnership allows Sasol to develop relation with other company in a new region which also help
company to get information about that particular region.
Disadvantage-The process of franchising is a expensive process and it require
arrangement of huge fund as expansion is at global level. The partnership in international market
is a time consuming process which do not allow easy expansion in the market as the formalities
related to formation of partnership require a procedure to be followed as each country has their
own rules and regulations(Liobikienė, Mandravickaitė and Bernatonienė 2016)
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Routes to internationalization:
There are various routes by which an organisation can enter into a international market.
These are described below:
Licensing: It refers to that method in which an organisation can making an agreement
with any of the existing company which is already leading its business in market. The
organisation who will give the right to sell its products and services will charge fee or royalty.
This is best method as it will helps them earn a better income by expanding its business in
various markets.
Merger and Acquisition: Merger refers to the combination of two companies whereas
acquisition occurs when a company take by another company. By adopting merger and
acquisition sasol Ltd will be able to utilize the resource and manpower of another companies in
order to sustain in the international market. Increase in cost efficiency, market share, reducing
risks etc. are some main benefits of this method, to move business internationally.
Join Venture: It is a business agreement that occurs when two companies are ready to
pool their resources for accomplishing a specific purpose or task. In this business form all the
participants are liable to take the profit, loss and cost.
After discussed all these routes to internationalization it can be say that the merger and
acquisition is perfect for the Sasol Ltd as it will help them to take advantage of various resources
of other businesses which are required to compete in the global market.
Barriers of internationalisation
While expanding the business in the international market, Sasol Ltd have to face the
various barriers which are defined beneath:
Financial barrier: It is the major problem which is faced by the business while
expanding their business. This issues refers to the lack of capital for operating the business
activities smoothly.
Managerial barrier: This create a big issue for the company as because of this company
have to changes their organisational structure, culture, working procedures and many others .
Market-based barrier: It is the another issue which is faced by the organisation as it is
related to the lack of knowledge about the foreign market, demand of customers, government
regulations etc. which hinder the success and growth of the business in the international market.
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CONCLUSION
From the above report it can be concluded that globalisation is a process of interaction
with other companies and customer at global level and there are factor such as market,
competitors etc which affect the operations of business at global level. The digital technology
has impacted globalisation in a positive manner and challenges of globalisation such as
organisation structure or laws can be overcome through proper compliance of rules and
regulation and assessment of factors. The organisation structure and governance affect the
operations of organisation which is analysed through McKinsey's and Hofstede's models. The
strategic expansion is done by the company and it has influenced the company at global level.
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REFERENCES
Books and Journals
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