Strategic Challenges Faced by Global Businesses

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This document provides a critical analysis of the strategic challenges faced by global businesses due to globalization. It explores the impact of foreign laws, language barriers, environmental conservation, currency rates, licensing of new technologies, employee retention, and supply chain complexities. The document also discusses the key drivers of globalization and the complexity of strategic challenges faced by global businesses. It offers insights into the diversification strategies and risks associated with globalization.

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Table of Contents
1.1 An analysis of the key drivers of globalization.............................................................................4
2.0 An explanation on the complexity of strategic challenges faced by global businesses..........6
2.1 A critical analysis on the strategic challenges caused by globalization on risk, diversification
strategies and supply chain...............................................................................................................9
2.2 A critical evaluation of the global business environment............................................................9
3.0 (a) An evaluation of the influences of globalisation on organisational governance and
leadership..........................................................................................................................................9
b) An evaluation of the influences of globalisation on organisational structure.............................10
c) An evaluation of the influences of globalisation on organisational culture.................................10
d) An evaluation of the influences of globalisation on organisational functions.............................12
3.1 a) An evaluation of the influences of ethics on organisational functions..................................12
b) An evaluation of the influences of global sustainability on organisational function...................13
3. 2 (a) Application of McKinSey 7S Model on organisational structure in case the of Shell Plc......13
Application of Hofstede's Cultural Dimensions theory in the case of Shell Plc............................14
in a global context...........................................................................................................................14
(b) Ways (strategies) to enter global markets.................................................................................16
(.......................................................................................................................................................16
(c) A critical evaluation of the key barriers to globalization and recommendations to overcome
them................................................................................................................................................17
(d) A critique of the strategies adopted when entering the global market and valid and justified
recommendations of how Shell Plc should adapt its organisational structure and decision-making
processes.........................................................................................................................................18
REFERENCES........................................................................................................................................20
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Task 1
1.0 Introduction to the concept of globalization
Globalization is the process where the people, companies and the different nation
governments tends to have the proper interaction and integrations on the basis of the
international trade and investment on have the further level of effect on the environment,
culture, political systems, economic development and on the human physical well-being in
societies around the world (Beck, 2018). In addition to that’s with effect to the globalization,
the development of the internet media and international business, the world fees to be more
connects ever the before situation.
On the other hand, the globalization is the process in which countries can have the
establishment of the easy level of communications in order to make the sell of the
products attributed to the major changes in the telecommunication and transportation
industries. This tends have made the clear allowing for the goods to be made sold all over
the worlds in perfect manner.
Globalization is not only there have limitation to the trade aspect only but also have the
development of cultural aspects as through it there different culture have the significant level
of meet, know and understand various level of ways of life and their acceptability in perfect
manner. the companies tend to have the establishments on the way to compete customer for
the nationality of different countries which make the firm to have the operation where the
selections of the place as making the production cost low. This can be understood as there
with the help of internet, the US based company can have the hiring o the accountant form
India to perform its taxes (Pieterse, 2019). The increase in the technology is the positive
aspects of the globalization as to have the production of the standardized goods as invariant
to locations as the common property of the whole humanity. The countries have started in
developing there significant policy in order to have the proper level of mitigation of the risks
at the economic levels and seeking the internationals action in the erect manner.
1.1 An analysis of the key drivers of globalization
Globalization have turned out be the way of the living the life in the 21 st century as more
level of development of the transportation , communication and technology have the
significant decreased the distances along with increasing speed of transactions across the
various broad geographical borders. There have been the existences of the types of the
market drivers but to have the common convergence of the global trends in the ecosystems as
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to have the proper understanding regarding landscape and being prepares to have the act in
acting the opportunities for the key to success.
To have the discussion on the globalization and the international business have the
discussion on the significant drivers as they can basically have the segmented into the
different group:
Technological drivers
this have the significant level of shaping and setting the foundations for the modern
globalizations as the innovation have revolutionize the industry (Martell, 2016). This have
lead o have the major improvement for the global connectivity, mobility and communications
to make the proper fossilisation in the different sector as the agricultural in production lines
and finances. As the positive impacts of the drivers have enabled the world to be highly
computing and communication’s as the latest technological changes to be created global
business and e commerce.
Political drivers
There has been the proper level of liberalizing the in term of trading rules and deregulated
level of markets which have led to substantial lowering of the tariff and properly allowed the
foreign direct investments in term of the almost all over the world. This tends to have the
rapid advancements in term of technology as culture, economics and politics. As the
company have there have the proper level of expansion with providing the economic motives
which is leading their political solution. There is the advantage of the lower wages to have
the outsourcing the productions by masking the influencing of the politicians to have the
opening up the trade and reduction in the term of the trade barriers in globalization .
Market drivers
Market tends as the domestic markets have turned out to be becoming more level of saturates
as the growth of opportunities have growth which are limited and global expansions to have
the choosing the overcoming the situations. Markets have the providing the opportunity to the
national economy to be became the global economy through the common customers have the
need to make the optimum utilization of the resources as the helps o the global challenges
(Hawkesworth, 2018). The increase in the technology is the positive aspects of the
globalization as to have the production of the standardized goods as invariant to locations as
the common property of the whole humanity.
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Cost drivers
This have the source the efficiency along with cost vary the country to the country to make
the development of the global firms to have the taking the advantage of the significant facts.
There other level of cost drivers to have the globalization in term, of opportunity to be the
building of the global scale’s economies and high products development of the cost is
nowadays. As the negative impacts the low-cost labour doesn’t have their application to the
low skills works and their higher professional’s skill workers in the emerging economy to be
employed their companies one of the developed countries with another developing countries.
Competitive drivers
With the global markets have inter firm competitions have the proper level of the increasing
the organizations which are faced as the international business (Brown, McIlwraith and de
González, 2020). There is the strong dependencies among the different countries having the
high two ways trades the FCI actions by making the support this drivers. This will make the
proper integrations in their business actuals situations by appropriately describing there
today.
2.0 An explanation on the complexity of strategic challenges faced by global businesses
Foreign laws and regulations
This is one of the biggest challenge which is being faced by organizations when they
decide to go in different international markets. Each and every country has its own
regulations as well as laws which the organizations have to comply with in order to perform
their operations efficiently. From the tax implications to the trading laws, organizations face a
great difficulty in understanding these different implications. Along with this, for entering the
foreign markets organizations have to pay a great amount of legal cost to become eligible for
trade within that location. For example- while expanding its business in the international
market of US, Shell plc have to first analyze the legal regulations as well as foreign policies
in that market (Lasserre, 2017).
Language barrier
This is the another most important as well as fundamental challenge which the
organizations faces during its expansion in international markets. Employees have to deal
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with the customers from each and every culture as well as language and when the
organization expands in the international region, then learning their language as well as
culture takes time which poses great impact upon organizations and their customer base. For
example- When shell plc will expand in the foreign markets of say China then it will be
difficult for the organization to become aware about their culture as well as language. They
will incur a high amount of cost on training employees on communication.
Environmental conservation
A large number of countries now have become highly aware as well as takes keen
interest in preserving the environment and reducing effects of the global warming. Therefore,
in this view each and every country develops their own environmental protection rules and
regulations for dealing with issues like pollution. Thus, this is the biggest challenge which
organizations planning to expand faces where they require a thorough and careful planning of
every country and its environmental policies. They have to comply with various
environmental practices which sometimes become difficult for them. For example- Shell plc
would have to invest a huge amount on studying the environmental policies of every country
and will face challenge of adapting to various policies (Yeo and Saboori-Deilami, 2017).
Currency rates
While setting the prices as well as payment methods are one of the important aspect,
fluctuation in currency rate is the biggest challenge which most of the organizations faces in
international market. Monitoring these exchange rates is therefore the central part in
international business. Currency of each and every country tends to fluctuate according to the
changing market and consumer trends which impacts organizations to a great extent. For
example- if Shell plc is paying the production cost to suppliers in dollars but selling within
markets with unpredictable currency then organization can end up with smaller margin.
Besides this, if shell plc pays producers in currency without knowing its actual current value
then this will eventually affect their profit margin.
Licensing of the new technologies
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This is one of the diversification strategy which becomes the greatest barrier for
organizations while entering the international market. When organizations develop the new
products and services for their chosen market then it is highly essential to have a license of
these in order to avoid the stealing of idea. Licensing if the new technologies basically mean
that owner of the technological intellectual property allows license to use or sell it in
exchange of compensation. For example- when Shell plc will enter the new market then it
will be highly essential for the company to license its products as this will help them to rely
upon expertise and skills of licensee for selling the products. Licensing calls for high cost as
well as expertise which become a challenge for company.
Retention of employees
One of the major diversification strategy is merger in which two organizations unites
for running the new company. Organizations when enter the international market through
merger then employee retention becomes greatest challenge. As due to merger, employees
also come together and there occurs the conflict of interest as well as attitudes. For example-
when shell plc will merge with another organization for entering new market then their
employees might due to cultural difference, communication gap leave the organization and
thus will increase its turnover rate. Therefore, employee retention becomes one of the greatest
challenge for the organizations which ultimately affects their overall profitability ratio as well
as penetration within the foreign market (Oyedele, 2016).
Supply chain
For entering the new international market, organizations have to access and bring a
change in its overall supply chain. When organizations tap the new market, then supply chain
also diversifies. One of the greatest challenge and problem which organizations face in their
supply chain is the increased cost of suppliers. Suppliers generally demand a high price from
organizations in order to generate profit. The costs mainly creep up throughout supply chain
channel. These suppliers mainly charge the high commodity prices and increase the cost of
their raw material. Along with this, they charge a high amount of transport ad labor costs
from company. For example- Shell plc might incur this challenge where they might end up
offering high price to suppliers and purchasing raw material at much high cost.
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2.1 A critical analysis on the strategic challenges caused by globalization on risk,
diversification strategies and supply chain
Each and every organization which enters the new foreign market basically comes across the
various challenges as well as barriers as the international market remains a new one for them.
Some of the major challenges which they face are mainly related with three main categories
like diversification, risk challenges and supply chain. For example- shell plc might face the
challenge of licensing of their technologies in merger which is one of the most important
diversification strategy. Various risk challenges are foreign laws, language barrier,
fluctuation within the currency rates etc. company also faces the challenge of supply chain
where suppliers charges a high cost from companies (Puklavec, Oliveira and Popovič, 2018).
2.2 A critical evaluation of the global business environment
The major challenge which is being faced by the organizations when they enter the
international market is fluctuation with the currency rates as well as political instability.
Besides this, the major opportunities which are being available to the organizations in
expanding its business are access to the new distribution network and most importantly
enlarging the customer base for gaining competitive advantage. There are also some
advantages and disadvantages of operating globally (Kasemsap, 2016). The major advantage
of going international is that it enables the organizations to expand and gain economies of
scale. It helps the organizations to bring innovation within their products and services and
increase their profitability ratio. Major disadvantage of performing globally is that
organizations have to face a high level of cultural barriers. Besides this, cost of entering the
international market is also high and requires a well through planning.
Task 2
3.0 (a) An evaluation of the influences of globalisation on organisational governance and
leadership
Organizational governance and leadership
The globalization has a great influence over the organizational governance as well as
leadership. Globalization has basically affected the management as well as leadership through
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the customer base. This globalization has resulted in transfer of employees to the
international locations and this has increased need for greater communication. Thus, this calls
for leaders having great understanding of management. Besides this, due to the increase in
globalization scale there has been an enhancement of communication within organizations
and thus greater communication has eventually impacted the hierarchical structure within the
firm. For example- due to globalization, there has been a blend of culture within Shell plc
thus this has resulted in change within organizational structure for greater communication
(Kozubikova and et.al.,2019).
b) An evaluation of the influences of globalisation on organisational structure
Organizational structure
Globalization is one of the determining factor for success as well as failure of the
organization. Globalization basically means tapping the new markets and accessing the new
and different suppliers as well as establishing relation with new partners. Thus, when
organization takes its products and services overseas then they requires new strategy as well
as resources for coping with the new customers and markets. This eventually calls for the
new organizational structure and a change in the overall aspect of the business results in
formation of new structure. For example- when Shell plc will take its products and services to
the international market then they would have to develop new strategy as well as would
require additional resources like human capital. This will ultimately influence planning and a
shift in organizational structure (Amponsah and Ahmed, 2017).
c) An evaluation of the influences of globalisation on organisational culture
Organizational culture
Globalization tends to result in the inflow of various culture as well as values. When
an organization enters the international market, then they recruit employees from that
particular location. This gives rise to blend of employees from different cultural background
and different perception. Thus, this impacts the organizational culture to great extent. For
example- when Shell Plc will recruit the employees from different locations then they will
have to adapt their organizational culture accordingly in order to reduce conflict among
employees (Schwertner, 2017).
Mckinsey 7s model
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This is basically the framework which is being used by organizations for analyzing
their key elements for achieving organizational goals.
Strategy
This is basically plan developed by organizations for achieving sustained competitive
advantage within the international market. For example- strategy of Shell plc is to target the
new customer segment in international market with new product.
Structure
Ways in which business divisions are mainly organized is known as the structure.
When organizations enter the international market, their whole business units and structure
changes. For example- Shell plc for knowing new customers in international market will
develop teams like market research, sales team etc (Brenkert, 2019).
Systems
These are the processes as well as procedures of company which includes their daily
activities. These influences organizational culture to great extent s these contain information
system which mainly supports the business.
Staff
This element is majorly concerned with the number of employees that word be
required for the international market. For example- Shell plc will recruit highly experienced
and technical staff for its new branch in the international market. This will eventually have a
impact on organizational culture.
Skills
These consist of abilities of the employees for performing their job effectively. For
the international expansion, employees should have the great skill set and should be highly
experienced to deal with customers. For example- Shell plc will require employees who have
better experience within international market and have great abilities.
Style
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It is the way in which company is basically managed and way in which they interact.
For example- leaders in shell plc should allow input from employees for the idea generation
and should encourage their participation (Miftari, 2018).
Shared values
These are norms as well as standards which guide the behaviour of employees and
thus impact the organizational culture to high extent. For example- shell plc should instil
effective communication and cultural awareness among employees for entering international
market.
d) An evaluation of the influences of globalisation on organisational functions
Organizational functions
Globalization also influences and affects the organizational functions to a great extent.
When organizations enter the new international market then they have to change their
organizational functions according to that market. For example- when shell will enter
international market then there will be a change in major aspects like people in that market,
competitors, currency rates etc. Thus in this sense their organizational functions like
recruitment, finance will eventually change and thus will be according to the new market.
3.1 a) An evaluation of the influences of ethics on organisational functions
Ethics
The ethics forms the core strength as well as fundamental aspect of each and every
organization and is one of the determining factor in success of the organization. In this sense,
globalization plays an imperative role. It means that when organization conducts their
business in the international market then they have to take care of the values and beliefs of
the people of that country. The ethics have a great impact on the organizational function in
the global sense as when company will follow the ethical way as well as will remain
transparent to their employees then the employees will perform their functions effectively
like customer service, marketing etc. This will eventually influence the organizational
functions like HR, finance in positive way. For example- when Shell plc will expand its
business in international market or will conduct their activities in foreign market then their
ethics will be of utmost importance (Aguilera and Crespi-Cladera, 2016). If company will
remain transparent to their employees regarding financial position of company in that country
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etc then this will give a boost to these various functions. Ethics plays a great role within the
organizations and when it comes to the international marketing, ethics forms the central part
of each and every organization. The ethical globalization is basically the integrative approach
when organization seeks to integrate the human rights as well as their standards in the ethical
manner. When organizations enter the international markets then they are expected to
perform their functions in the ethical manner and towards the interest of every stakeholder.
b) An evaluation of the influences of global sustainability on organisational function
Sustainability
Sustainability is basically not only related with contribution towards the environment
but is also associated with focusing on meeting the needs of employees and fulfilling their
demands. Sustainability has a great impact upon the organizational functions and thus
influences them to a large extent. When company will expand its operations in the foreign
market then it has to remain transparent to their stakeholders in terms of the disclosure of
financial and nonfinancial information (Cepel and et.al.,2019). For example- when shell plc
will incorporate sustainable environment within its organization like communicating with
employees. Disclosure of financial information to shareholders, performing functions in
ethical manner they the commitment of employees towards organization as well as their work
will increase. This will eventually lead to their higher productivity and hence they will
perform their organizational functions efficiently. Sustainable globalization is the another
most important aspect of organizations and thus helps the organization to meet the various
standards. Sustainability has a great impact upon the various organizational functions and
thus helps to align them with the strategic view of organization. When organizations perform
their functions in the sustainable manner for example provides products and services for
betterment of the society then this eventually increases their goodwill in the market. Besides
this, when organizations comply with the environmental standards and contribute towards the
sustainability then this eventually shapes their overall functions and employees perform their
work with greater responsibility.
3. 2 (a) Application of McKinSey 7S Model on organisational structure in case the of Shell
Plc
The Mckinsey 7S model basically explains how the organizational culture is impacted in
international market. This model shows that globalization have a great impact upon the
organizational culture. For example- shell plc can use this model to know that what skills will
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be required in the international market, what style leaders should have, what strategy they
have to use etc. Thus, at the end this model will help shell to know that which organizational
design will be highly suitable in new international market (Nambisan, Zahra and Luo, 2019).
Application of Hofstede's Cultural Dimensions theory in the case of Shell Plc
The another model which is Hofstede model that shows that for entering the international market,
the major issue which organization faces is communication which have a great impact upon
organizational culture. For example- shell plc should analyze the power differences, perception of
people in that particular market. This will help them to overcome the communication issues (Kotabe
and Helsen, 2020).
4.0 (a) An evaluation of different ways decision making can work effectively
in a global context
Decision making is basically process of continuously managing the activities of organization
through selecting right alternative. Decision making primarily helps in achieving the
organizational goals and objectives as it emphasizes upon thorough planning and gathering
all the possible information and choosing the best one.
Methods
Command
This is the very first method in decision making where decisions are mainly made
without involving other employees. This is regarded as authoritative.
Consult
This is the another method in which management basically takes the input from
employees and take the decisions. This will help Shell plc to increase motivation among
employees and will help in having pool of ideas for decision making (Huo, Levchenko and
Pandalai-Nayar, 2019).
Vote
In this method, each and every employee presents their opinions and voting is done of
whichever option or idea is most suitable for particular scenario. This method basically will
help organization to make employees participate in decision making.
Consensus
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In this, group discusses various options and recommendations until everyone agrees to
the one decision. This is basically time consuming but will help organization to take high
quality decision.
Delphi method
In this, group members of organizations mainly forecasts and give anonymous
feedback in rounds and the best answer is selected for sound decision. In short, this is
forecasting on basis of results of the questionnaire which is being sent to experts (Buckley,
Enderwick and Cross, 2018).
Ways in which decision-making can be effective
Identifying the problem
For making effective decisions, company should first identify that what the problem
is. This mainly calls for recognizing critical problem and what is the need for taking decision.
Gathering information
After identifying the problem, company should collect all the relevant information
regarding problem. For example- product attributes competitor’s products etc.
Identifying alternatives
After gathering information, company should identify the possible paths or alternative
actions for solving the problem. For example- modifying characteristics of products,
changing packaging, increasing its promotion etc.
Choosing among alternatives
Once there is pool of alternatives, company should select the most suitable one or
which seems to be best in present scenario. For example- to increase sale of product, Shell plc
should bring a change in its packaging as the older packaging does not attracts customers
(Skripak, 2016).
Taking action
Lastly is the step for implementing this decision which is taken. Company should
implement the decision in every possible manner. For example- offering the product with
modification in its packaging which makes it a whole new product (Oyedele, 2016).
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(b) Ways (strategies) to enter global markets
(
There are generally various routes through which organizations can enter the international
markets.
Franchising
This is one of the most common yet fundamental route for entering the international
markets. Franchising is basically the concept in which franchisor grants the license to
franchisee for using their products and services. It is one of the rapid expansion strategy
which Shell plc can use for entering the international markets as this will help the company to
build the brand name as well as reaching the target customers at low cost (Puklavec, Oliveira
and Popovič, 2018).
Licensing
This is the another most important as well as common route which organizations
mainly uses for entering the international markets. In licensing, firms primarily transfers
rights for using their products and services to the another firms. This is a useful strategy if
purchaser of license has great market share within chosen market. Shell plc can rely on this
strategy for expanding its business as main advantage of this is that company will require low
amount of capital (Kasemsap, 2016).
Direct exporting
This is the concept and arrangement of selling products as well as services directly
into the chosen market through using company’s own resources. Companies usually sell
products by seeking the support of some agents or distributors for representing their firm.
Shell plc can use this strategy as its main advantage is that company will have full control
over prices and other mix within foreign market.
Joint ventures
This is arrangement where two or more organizations pool the resources for
accomplishing the specific task. This is actually the 1+1=3 process. The major advantage of
this strategy which will help shell plc to expand effectively is that they will have the access of
new distribution network. Besides this, this will also reduce the risk for them due to sharing
(Kozubikova and et.al.,2019).
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Piggybacking
This is the another most useful strategy which organizations mainly uses for entering
the international markets. This is basically the low cost strategy wherein two and more than
two firms actually represent complementary products of each other within the respective
markets. Shell plc can use this strategy for expanding its operations in the new international
market as this will help company to increase its efficiency and will allow for the better use of
the channel bandwidth.
(c) A critical evaluation of the key barriers to globalization and recommendations to
overcome them.
Key barriers
The major key barriers which organizations generally faces while conducting their
operations are as follows
Export and import
This is one of the major barrier which organizations come across while performing
their operations globally. These are mainly the trade barriers. When organizations go on
international platform then they have to pay a high amount of tax in importing and exporting
its goods and services. Shell plc might face this barrier in international market. For
overcoming this barrier, Shell plc can select the market where trade barriers are less and thus
there is less custom duties (Amponsah and Ahmed, 2017).
Custom tariffs
This is the another major barrier which organizations faces in international market.
This mainly includes the custom which is being levied on the goods as well as service
entering within country. In order to overcome this barrier, shell plc can develop the value-
added services within target market like after-sale activity which are mainly not subject to the
tariffs.
Trade sanctions
These are mainly the trade penalties which are being imposed by one country on
another one. In short, it is the law passes for restricting trade within certain countries. Thus,
when organizations enter the particular country then this law prevents them from trading. To
reduce the effect of this barrier, shell plc can enter the market which is not mainly affected by
the economic and trade sanctions (Schwertner, 2017).
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Government subsidies
This is the another barrier which is being faced by the organizations operating
globally. Subsidy is mainly given to the domestics producers for increasing international
competitiveness thus when organization enter the new market then it becomes difficult for
them to gain subsidy. To overcome this, shell plc can adapt products as well as services for
giving it more appealing and can justify the increased prices (Brenkert, 2019).
Political instability
The political situation of the country matters to high extent for organizations when
they decide to perform on international platform. The high corruption rate, political instability
of country makes it difficult for organizations to perform their functions. Shell plc can cope
up with this barrier by entering the market which has great political situation or where
corruption rate is low.
(d) A critique of the strategies adopted when entering the global market and valid and
justified recommendations of how Shell Plc should adapt its organisational structure and
decision-making processes
There are various ways through which business can enter the international market. These are
Routes Positive Negative
Franchising Low supplier cost Initial investment is
expensive
Licensing New opportunities for
business
For limited time
Joint venture Sharing of risks Restricted flexibility
Piggybacking Low risk method Expensive
Direct exporting High potential profits Require additional expenses
as well as time.
Among all these routes, the most appropriate as well as best method through which shell plc
can enter the international market is joint venture. Shell plc can work together with the well-
known organization. This is the best method for Shell plc because firstly, company will have
the access to greater resources like technology, finance as resources of two companies will be
combined. Another benefit of using this strategy for Shell plc is that there will be inflow of
highly experienced and skilled people in the company. Due to the cooperation of two
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organizations, there will be a mix of employees and this will help company to meet the needs
of customers more effectively (Miftari, 2018).
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REFERENCES
Books & Journals
Aguilera, R.V. and Crespi-Cladera, R., 2016. Global corporate governance: On the relevance
of firms’ ownership structure. Journal of World Business.51(1). pp.50-57.
Amponsah, C.T. and Ahmed, G., 2017. New global dimensions of business
excellence. International Journal of Business Excellence.13(1). pp.60-78.
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