Unit 18 - Global Business Environment: Key Factors, Strategic Challenges, and Impact of Globalisation on Organisational Governance, Leadership, Culture, Structure and Functions

This report analyses the impact of key drivers of cost, market, environment and competition on the global trade and business. It evaluates the complexities related to strategic challenges which the company can face when initiating operations in global environment. It also highlights the impact of globalisation on the governance and leadership, structure, culture as well as on different functions of the company.

Unit 18 – Global Business
Environment

Table of Contents
Introduction......................................................................................................................................1
MAIN BODY...................................................................................................................................1
Part-1................................................................................................................................................1
Analysing the Key factors that drives the global business trade and commerce.........................1
Critically evaluating the influence of key factors on the global business environment..............2
Examining the complexities of strategic challenges faced by the company when operating in
the international business environment........................................................................................3
Part-2:...............................................................................................................................................5
Evaluating the impact of globalisation on organisational governance along with leadership,
culture, structure and functions....................................................................................................5
Evaluating the impact of ethical as well as sustainable globalisation on functions of company.7
Evaluating the various methods in which decision-making can work effectively in global
context..........................................................................................................................................8
Evaluating the different routes to internationalisation that the firm can adopt including key
barriers.........................................................................................................................................9
References......................................................................................................................................12

Introduction
The global business environment can be referred as international business activities
which allows the organisation to explore into external market conditions after taking into
consideration many factors like resources, skills and knowledge. The globalisation of the
business helps the company to take advantage of newer technology, infrastructure development,
providing many jobs, providing better services as well as investing more capital. For this report,
the SASOL limited firm is taken into consideration. The company is the south African based
company and is considered the fastest growing energy and chemical organisation. This report
will critically analyse the impact of key drivers of cost, market, environment and competition on
the global trade and business. In addition to this, the report will also evaluate the complexities
related to strategic challenges which the company can face when initiating operations in global
environment. This report will also highlight the impact of globalisation on the governance and
leadership, structure, culture as well as on different functions of the company. Moreover, it will
also assess the impact of ethical as well as sustainable globalisation on the functions of the firm.
Furthermore, this report will also analyse the influence of global factors on decision making and
strategy(Hamilton and Webster, 2018).
MAIN BODY
Part-1
Analysing the Key factors that drives the global business trade and commerce
The globalisation is termed as process in which ideas, knowledge, skills and goods and
services are transferred from one country to the another. The globalisation promotes the free
flow of goods, labour and capital in order to maximise the return and sales. The globalisation
process allows the organisation to increase its sale and ensures higher growth in customer market
share. This process helps the companies to take advantage of new technologies and skilled labour
of unexplored markets(Dzwigol, Dzwigol-Barosz and Kwilinski, 2020).
The below mentioned points represent the key drivers of the globalisation in context to
SASOL company are:
Cost:
The cost is one of the major factor that motivates the company to invest on international
market for gaining customers present in new market conditions. The globalisation activities can
1

allow the SASOL company in taking the advantage of economies of scale which will be the by-
product of initiating in large scale operations. This will support the firm in making necessary
reductions in its cost structure that will directly lead into high attraction of customers in most
effective manner.
Market:
This is the another factor which makes the firm ready to initiate market developmental
activities. In context to SASOL, the company can take advantage of established market present
in international country by selling products in the low cost manner. The company can take the
advantage of high purchasing power of customers as well as well developed infrastructure of
foreign market(Contractor and et.al., 2020). This can help in using newer technologies for
optimising its business processes.
Environment:
The major revolutions in the technology, increase in customer wealth, easy transfer of
ideas across border etc. are considered as critical factor that influence the company in entering
into new market conditions. In context to SASOL firm, the development in communication
technologies has supported the firm to internationalise its operations. This will allow it to easily
schedule international meetings by taking use of collaborative tools.
Competition:
The rise in competition level can also be considered as major reason for the company to
tap into the unexplored market conditions. In context to SASOL company, the high competition
in South African market has enabled the company to take advantage of international operations
as it helps the firm to intensify the marketing activities leading to more customer share.
Critically evaluating the influence of key factors on the global business environment
The key factor such as cost, market, environment and competition can influence the
global business environment in both positive and negative manner(Contractor and et.al., 2019).
In context to SASOL organisation, the cost factor can support the company to initiate activities
of international operations as it will allow the firm in reducing its cost structure by taking
advantage of large scale operations. This will directly help the SASOL organisation in drawing
attention of large number of customers present in international market. However, the difference
in tax systems can negatively impact market position of company if the tax system of
international country is more complex and high. In addition to this, the positive response from
2

the political bodies of world regarding ease of trade also helped the firm to run international
operations in the smoothest manner. Moreover, the technological advantages in international
markets has also opened the gateway for SASOL company to enter into unexplored market and
take the advantage of new innovative technologies for optimising business operations. This
assists the organisation in taking new marketing initiatives design marketing communication
objectives leading to higher profits and growth(Fuller, Jacobides and Reeves, 2019).
Examining the complexities of strategic challenges faced by the company when operating in the
international business environment
The globalisation has provided the golden opportunity for the company in increasing its
market share in terms of customer and operations. But, there are also some challenges which can
be faced by the SASOL organisation when tapping into international markets. The globalisation
also makes formulation of strategic decisions more difficult due to the rapid unpredictable
changes and uncertainty of systems. The strategic complexities are explained with the support of
PESTLE model in the below mentioned points:
PESTLE business model:
The application of this model will allow the SASOL company to consider the main forces
of international business environment that can negatively impact its international operations. It
will help the firm to analyse external market conditions in most effective manner. The elements
of this framework are:
Political force:
The political factor consider analysis of certain elements such as Legislation acts, tax
policies, import and export duty as well as other rules implemented by the government. In
context to SASOL company, the firm can face difficulties when undergoing into entering in
international markets due to many uncertainties such as whether the political environment of
foreign country will remain stable to not. In addition to this, it will be also difficult to predict the
future tax policies of the government(Liu and Atuahene-Gima, 2018). Hence, the foreign trade
regulations cannot be predicted in accurate manner.
Economical force:
These type of factor involves the element such as interest rate of banks, employment and
unemployment rate, depression , inflation rate and many more. In context to SASOL firm, the
firm can face difficult times when predicting the trend of economic factors due to high level of
3

uncertain global economic environment. For instance, the unsolved problem related to Brexit
have further enhanced the economic condition of UK market. So, it can be come very tedious for
the company in deciding whether the interest rate of the country will be favourable or whether
the economy will keep growing as it is or not(Björkdahl, 2020).
Social force:
The social factor studies the socio-cultural values of society such as lifestyle trends,
consumer preferences, religious beliefs and many more. In relation to SASOL organisation, in
this, the strategic complexity can take birth because of changes in lifestyle, demographics of
foreign country as well as social responsibility awareness. The globalisation has also fostered the
fast flow of information among consumers due to large number usage of social media platforms.
This has made rapid changes in respect to customer demands and wants which can become
difficult for the company to properly analyse the demands of customer.
Technological force:
The technological factor involves innovative as well as technological tools that can
enable the organisation in boosting its business process in effective manner. In context to
SASOL company, the difference in the rates of technological innovations in various countries
can also become a source of strategic complexity. As there are some countries like China which
restricts the usage of social media platforms and other internet applications. This situation can
negatively affect the company to know the demands of customer in proper manner. There can
also be some countries who embrace new technologies and some may not.
Legal force:
The legal force contains elements such as civil law, labour laws, sustainable environment
laws and many more. In relation to SASOL company, the difference in the legal system of
various countries can become complex situation when making international marketing strategies.
For example, there are many laws that govern society like Common and Religious laws(Butt,
2021). This diversified laws can constrains the ability of firm in making effective strategic plans
for entering into new market conditions. In addition to this, the complexities in international
trade law can also impact its future decision making process.
Environmental force:
This force involves the sustainable practises, climatic conditions and many other factors.
In context to SASOL firm, the increased awareness about implementation of sustainable
4

practises has arisen the strategic complexity as it can negatively affect the reputation of company
if any of the condition was not followed properly. The differences in environmental protection
act and waste disposal laws can be extremely difficult for the organisation to predict when
formulating business strategies(Hampden-Turner, Trompenaars, and Hampden-Turner, 2020).
Recommendations:
In context to SASOL Ltd., It has been recommended that the company should take
necessary actions in reducing the negative effect entering into the market of different country.
The first step that they can take is to invest more on understanding current customer demands as
well as the problems they are experiencing. In addition to this, the goal should be to learn best
innovative practises from the external markets in order to deal with problems in most sustainable
manner. Moreover, it should also connect with interest of many stakeholders so that suppliers
and customers remain satisfied.
Part-2:
Evaluating the impact of globalisation on organisational governance along with leadership,
culture, structure and functions
The application of McKinsey's 7s model can be supportive in providing the effective
solutions to the organisation problem due to the effect of globalisation. In context to SASOL
company, the following points describes the main elements of McKinsey model that are:
Strategy( Governance):
This element involves the plan of organisation which represents the different types of
strategies developed by management in order to attain long term objectives in effective manner.
In context to SASOL, the strategies are made after evaluating the impact of various
environmental factors of global environment(Gillespie and Swan, 2021). The company practises
low pricing strategy with an objective to gain attention of large number of customers.
Structure:
This is connected with the hierarchy constructed by management in order to make the
functions of business in most systematic manner. In context to SASOL, the organisation
practises divisional structure in which the whole management are divided in various sections of
department. This allows it to manage international operations in effective manner.
System:
5

The system cover the work patterns that should be followed in order to support
employees to accomplish their team goals in effective manner. In context to SASOL, the
company follows effective system which allows it make complex business functions into simpler
to perform. For instance, the firm has adopted the GTL technology process system for facilitating
smooth business operations when entering into global business. It resulted in necessary
innovations by reforming natural gas with support of oxygen and steam into useful gas(Ballance
and Sinclair, 2021).
Shared values:
The SASOL company ensures in improving the climate of working environment by
focusing on boosting positive shared values. It helps the worker of company to improve their
performance in most effective manner.
Skills:
This refers to the various type of skills and knowledge practised by managers as well as
employees for improving their work performance in proper manner. This provide assistance to
the leader of SASOL company to attain the possible outcomes in proper manner. The
globalisation has supported the company to gain knowledge of diverse skills such as
communication skills, problem solving and many more.
Style:
The SASOL company takes into consideration the democratic style of leadership so that
the company gets benefit to increase its market share by taking recommendations from the staff
members. This results in improving motivation level of employees as they get opportunity to
deliver their opinions(Chiu, Ho and Lui, 2019).
Staff:
This is connected with the group of persons that work within the company like employee,
managers as well as top level managers. In order to reduce the staff turnover ratio, the
management of SASOL company follows various safety methods such as providing job security
to workers, providing safe working environment free from exploitation and also providing the
proper fire extinguisher services. In addition to this, they can also launch various training
programs in order to make employees competent enough to solve international job problems in
proper manner.
Applying the organisational culture with the support of Hofstede model:
6

This business model helps the organisation to understand the type of business culture in
the country in which it is planning to launch business operations. This also supports in leading
the marketplace in proper manner. The element of this model are mentioned below in context to
SASOL Ltd company are:
Power distance:
The concept of this model allows the organisation to bridge the gap between the top level
and lower level management. The power distance supports the SASOL company in developing
decision making process connected with establishing positive culture(Cosenz and Noto, 2018).
The lower the power distance, the greater would be the motivation of employees in doing best
performance.
Individualism v/s community:
The SASOL firm needs to focus on developing the skills of individual workers or the
team as a whole. In this the individualism indicates that there is greater importance on achieving
the personal goals. On the other hand, the collectivism lays more attention on attaining the
objectives of team member as the whole.
Masculinity v/s feminity:
The society that favours masculinity type of culture basically reflects the characteristics
such as diverse gender roles, assertive behaviour and puts more focus on material achievements
as well as wealth building. Whereas, the feminity type of culture shows certain features like
nurturing behaviour, fluid roles of gender as well as they are more concerned towards gaining
good quality of life. It can support the SASOL firm to follow ethical practises in maintaining
equality at the workplace.
Evaluating the impact of ethical as well as sustainable globalisation on functions of company
The business company needs to give focus on adopting the ethical and sustainable factors
that are critical for ensuring overall development in short span of time. The following are the
ethical and sustainable factors that the SASOL company can take into consideration when
entering into international market place(Deng and et.al., 2020).
Follow environment policy:
In order to establish sustainable practises the firm should lay focus on following the
policy of environment in most appropriate manner. The designing of environmental policy by
legal bodies supports the company to implement strategies related to sustainable activities. In
7

context to SASOL firm, for successfully launching their products the company must adopt with
environmental policies formed by foreign country in which its planning to explore. In relation to
this, the organisation also needs to convey the message regarding protecting the nature by
participating in planet saving activities.
Workplace safety and management:
The workplace safety measures can allow the company in gaining faith from their team
members in most appropriate manner. For ensuring the safety of workers, the business
organisation should follow employment legislation practises launched by government bodies.
This will assist the firm in forming the legal and ethical type of workplace. In context to SASOL
firm, the management of firm must follow diverse safety measures within company like job
security for workers, effective fire extinguisher setups and easy to utilise safest working
environment. In relation to this, the organisation can also provide training sessions for the
purpose of upgrading skills and knowledge(Nylund, Ferras-Hernandez and Brem, 2019).
The global strategies will impact the structural image related to business operations and is
also crucial for the re-building the organisational culture in effective manner. The SASOL
company can select the ADKAR model for analysing the influence of global market.
In this type of model, the SASOL company undertake necessary steps for creating
awareness among staff. The workers are also asked about their desires about situation necessary
for the global expansion. The strategic capabilities will provide knowledge for changing methods
and provide benefit in terms of resource maximization.
Evaluating the various methods in which decision-making can work effectively in global context
The management of the company must focus on internal as well as external forces while
initiating the operations in international market. There are various type of factors given below
that shows the influence of decision-making.
Political fluctuations:
The government of the south African country has launched different policies within
country that plays a key role in fluctuating the business market in significant manner. The
fluctuations in the political environment can influence the business of SASOL company in both
as well as negative manner. Hence, it is critical for the company to take necessary decisions so
that negative effect of ever-changing political climate can be reduced.
Technological development:
8

The new and innovative technology within the market can also impact the business
activities of SASOL company in positive manner. This can allow the company to effectively
draw attention of large number of customers. In relation to this, the new technology can make the
workers to reduce their extra efforts leading to higher motivation levels and positive work
culture.
Global business climate:
The outcome of pandemic situation has negatively impacted the growth of market due to
disturbance in global economy(Darko and Chan, 2018). In relation to SASOL firm, the lower
growth of market can pose various difficulties in terms of lower customer demand, high inflation
rates and many more. This has impacted its operation in negative manner as the drastic
reductions in fuel prices along with imbalances in global supply chain leads into the huge loss of
revenue.
Evaluating the different routes to internationalisation that the firm can adopt including key
barriers
There are different ways of entering into international market that can be utilised by the
SASOL company. These are:
Exporting:
In this, the firm can transfer its product and services into the external market condition.
This can allow the organisation to gain large number of customers without loosing its ownership
in the decision making process. However, the process of exporting process is tedious and
involves heavy documentation.
Licensing:
This can be described as the agreement between the two or more number of companies to
perform business activities. In this, the domestic organisation can acquire the product selling
rights of already established international company so that large number of customers can be
attracted in proper manner. However, the firm can loose decision making ownership and can also
lead to leakage of confidential data(Vermesan and Friess, 2022).
Franchising:
In this, the company can adopt this method if it does not have enough capital or resources
to start a new business in international market. The franchising is connected with products and
services of franchisor that develops trademark of business and sells it to the franchisee where it
9

pays the fees to the franchisor. This can support the company to take advantage of goodwill of
the company.
Recommendation:
It has been recommended that the SASOL company should adopt the exporting process
which can benefit the organisation to take advantage of foreign market technologies and can also
allow the company to not share the profits with any parties. This can result into attraction of
large number of customers in effective manner.
Barriers for entering into international market:
Economies of scale:
The entering into the international market can force the firm to either come on a large
scale that will risk strong reactions from incumbents or to come in small scale which can
increase the cost of its product.
Product differentiation:
In order to explore into new market conditions, the SASOL firm should spend heavily to
make their products different from the products sold in international market. If the company
fails to so, then it may face the failure(Antony and Gupta, 2018).
Diverse culture and language:
The organisation can face the barriers of entry if it fails to gain insight the cultural
standards of foreign country as well as language. This can also leads to permanent closing of
company if the company brings wrong marketing message that hurts the feeling of community
members.
10

Conclusion
It has bee analysed from the above report that globalisation has benefited the company to
make large number of foreign customers and also increase in sales and profits. It was also
evaluated that the organisation can achieve higher success by taking the advantage of economies
of scale leading to driving the level of cost structure in most effective manner. It has been
assessed from the above report that key factors such as cost, market, environment as well as
competition are the main drivers for booming international operations. It was evaluated that
international operations can also become a strategic complex situations that can cause a huge loss
in the future. Apart from this. It was also evaluated that operating on global environment can also
impact organisation's culture, functions, leadership as well as governance. Moreover, the report
has also explained about impact of ethical and sustainable practises on functions of company.
Furthermore, the report has also showed the impact of globalisation on the decision making
process and its strategy. It has also involved the various routes for entering into international
operations along with the barriers to entry.
11

References
Books and journal
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Dzwigol, H., Dzwigol-Barosz, M. and Kwilinski, A., 2020. Formation of global competitive
enterprise environment based on industry 4.0 concept. International Journal of
Entrepreneurship, 24(1), pp.1-5.
Contractor and et.al., 2020. How do country regulations and business environment impact
foreign direct investment (FDI) inflows?. International Business Review, 29(2),
p.101640.
Contractor and et.al., 2019. Viewing global strategy through a microfoundations lens. Global
Strategy Journal, 9(1), pp.3-18.
Fuller, J., Jacobides, M.G. and Reeves, M., 2019. The myths and realities of business
ecosystems. MIT Sloan Management Review, 60(3), pp.1-9.
Liu, W. and Atuahene-Gima, K., 2018. Enhancing product innovation performance in a
dysfunctional competitive environment: The roles of competitive strategies and market-
based assets. Industrial Marketing Management, 73, pp.7-20.
Björkdahl, J., 2020. Strategies for digitalization in manufacturing firms. California Management
Review, 62(4), pp.17-36.
Butt, A.S., 2021. Strategies to mitigate the impact of COVID-19 on supply chain disruptions: a
multiple case analysis of buyers and distributors. The International Journal of Logistics
Management.
Hampden-Turner, C., Trompenaars, F. and Hampden-Turner, C., 2020. Riding the waves of
culture: Understanding diversity in global business. Hachette UK.
Gillespie, K. and Swan, K.S., 2021. Global marketing. Routledge.
Ballance, R. and Sinclair, S., 2021. Collapse and survival: industry strategies in a changing
world. Routledge.
Chiu, S.W., Ho, K.C. and Lui, T.L., 2019. City-states in the global economy: Industrial
restructuring in Hong Kong and Singapore. Routledge.
Cosenz, F. and Noto, G., 2018. A dynamic business modelling approach to design and
experiment new business venture strategies. Long Range Planning, 51(1), pp.127-140.
Deng and et.al., 2020. An enhanced MSIQDE algorithm with novel multiple strategies for global
optimization problems. IEEE Transactions on Systems, Man, and Cybernetics: Systems.
Nylund, P.A., Ferras-Hernandez, X. and Brem, A., 2019. Strategies for activating innovation
ecosystems: introduction of a taxonomy. IEEE Engineering Management
Review, 47(4), pp.60-66.
Darko, A. and Chan, A.P.C., 2018. Strategies to promote green building technologies adoption in
developing countries: The case of Ghana. Building and Environment, 130, pp.74-84.
Vermesan, O. and Friess, P. eds., 2022. Internet of things-global technological and societal
trends from smart environments and spaces to green ICT. CRC Press.
Antony, J. and Gupta, S., 2018. Top ten reasons for process improvement project
failures. International Journal of Lean Six Sigma.
12

13