Comprehensive Analysis of the Global Business Environment for SASOL

This report provides a comprehensive analysis of the global business environment, specifically focusing on SASOL Limited, a South African energy and chemical company. The report begins by defining globalization and identifying key factors driving it, such as international economic integration, digital revolution, cost considerations, market dynamics, competition, and foreign direct investment. It then explores the benefits and challenges of globalization, including competitive advantages, increased consumer awareness, and market expansion, while also addressing challenges like building public relations and navigating diverse legal and technological landscapes. The report further examines the strategic challenges faced by SASOL, including the impact of political, economic, social, technological, environmental, and legal factors. It delves into strategic challenges in diversification strategies and supply chain management, emphasizing the influence of political structures, inflation rates, and trade laws. Finally, the report discusses how globalization impacts organizational governance, leadership, structure, culture, and function, including an analysis using McKinsey's 7-S model. The report concludes with recommendations for organizational structure and decision-making processes in a global context.

Global Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1 Factors driving globalisation.............................................................................................1
M1 Benefits and challenges of factors impacting globalization............................................2
D1 Challenges and opportunities faced by SASOL Limited.................................................3
LO2..................................................................................................................................................3
P2 Strategic challenges faced by company............................................................................3
M2 Strategic challenges in diversification strategies and supple chain flow.........................5
LO3 .................................................................................................................................................6
P3 How globalization influence organizational governance, leadership, structure, culture and
function...................................................................................................................................6
P4 How organizational function is influenced by ethics and sustainable globalization.........8
M3 How global markets influence organizational structure and culture...............................9
D2 Recommendation of organization structure and decision making process.......................9
LO4..................................................................................................................................................9
P5 Different ways of decision making in global context.......................................................9
P6 routes to internationalisation an organisation may adopt...............................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

INTRODUCTION
Globalisation refers to expand the business globally. Business develops international
relations and do trade globally. Globalisation is done because of change in technology and
change in demand of products and services. Globalisation benefits company to enter in new
markets and increase productivity and profitability. The present report is based on SASOL
limited who is energy and chemical company established in 1950 in south Africa. Its net income
is US$3.11 billion and is growing fast to expand globally (Hamilton and Webster, 2018). Further
report will contain factors that drive globalisation, benefits and challenges and how strategic
challenges influence globalisation.
LO1
P1 Factors driving globalisation
Globalization:
It is a process where economy is increasingly interconnected as a result of increased
trade worldwide. Production of goods and services have increased due to globalisation. It has
resulted in entering new markets, international trade, free movement of goods, services and
capital. It helps in creation of wealth in countries (Doh, Luthans and Slocum, 2016 ). There are
various factors that drive globalisation for SASOL Limited:
International economic integration- Economic integration is an arrangement between
different regions that often includes the reduction or elimination of trade barriers, and the
coordination of monetary and fiscal policies. Economic integration aims to reduce costs for both
consumers and producers and to increase trade between the countries involved in the agreement.
Digital revolution- Increase in the consumer mobility, wealth, information transfer and
technological revolution has increase the demand of products and services globally. Technology
has changed the environment of doing business. Global players will take advantage of new
technologies in increasing trade. As SASOL Limited is fast growing company, they need to look
out in the market for new technologies and provide products globally to customers. Company
need not to build plant in every location but serve them on manufacturing bases (Heisig and
et.al., 2016 ).
Cost: Companies who are in single-nation are not large enough to expand their business
in other countries, especially when market changes. SASOL Limited need to globalize in terms
of advertising and promotion to make product available to customers globally, thus entering in
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new market. The main objective for globalization is to expand the business in other countries to
grab new customer segment and focus on product positioning. Price leadership strategy is used in
the global market to offer product at low price then its competitor. This strategy benefits the
company to attract new customers and expand globally.
Market: Consumers are becoming advance in income, education and lifestyle, which
increases the purchasing power (Gaspar and et.al., 2016). Marketers found ready buyers in
countries having high purchasing power. Globalization does not mean that company need to be
in every country but company need to decide certain areas to spend resources. As customers are
becoming advance in the market then SASOL Limited need to expand their markets.
Competition: To exist in the market company need to be competitive enough to stand in
the market. SASOL Limited need to upgrade its products, process and introduce new products
and services to gain competitive advantage, identify new customer segments and target
customers. This will be beneficial for company to enter in new markets and increase profitability.
Foreign direct investment- A foreign direct investment is an investment in the form of a
controlling ownership in a business in one country by an entity based in another country. It is
thus distinguished from a foreign portfolio investment by a notion of direct control.
International trade- It means that the products and services are been sold out globally in different
countries.
M1 Benefits and challenges of factors impacting globalization
Cost and competition are considered as major elements which impact on global business
environment of company, as due to high competition firm fails to establish itself in the new
location which is the major challenge for the firm. On other hand competition helps in raising
firm’s capabilities which supports in generating more sales and gaining attention of potential
buyers.
Market and environment are other factors which also impact upon the entire business
environment. Political environment, economic condition are some major elements which
influence the overall working efficiency of the firm in global market hence if political conditions
are favorable then it may support the enterprise in trading in such location easily but if it is
unfavorable then it may impact negative on sustainability of business unit.
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Foreign direct investment- A foreign direct investment is an investment in the form of a
controlling ownership in a business in one country by an entity based in another country. It is
thus distinguished from a foreign portfolio investment by a notion of direct control.
Benefits of globalization:
 Competitive advantage in gaining new ideas, skills, strategies and technologies.
 Increase awareness of products among consumers.
 Entering in new market enhanced growth of company which leads to high profitability.
Challenges of globalization:
 Building public relation in new region is a challenge (Hooper, 2016 ).
 Legal structure plays an important role in globalization. Every country has different laws,
this impact SASOL Limited to understand the law.
 Technological development of a particular country is also a challenge.
D1 Challenges and opportunities faced by SASOL Limited
There are various opportunities for SASOL limited are:
 Increasing demand of energy must help company to leverage oil operations.
 SASOL has capability to grow in international market as company is good in coal
conversion technology.
 Company is improving efficiency of energy and carbon which can help company in
building Eco-friendly brand image.
Challenges faced by the company can be as follows:
 Change in fuel prices by government of other countries effect the revenue of the
company.
 Building relation with customers is a challenge (Cavusgil and Knight, 2015 ).
LO2
P2 Strategic challenges faced by company
Changes in the economic environment has a direct impact on the company. If these
factors are not kept in mind while setting up business then there is a risk in diversification of
business.
Political factor: Political factor has a major role in affecting the profitability of company
for long term in some countries. Every country have different rules and regulation laid by the
government which affects the way of doing business in particular country. SASOL limited is oil
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and chemical company where fluctuation in the price of fuel has an adverse effect on the revenue
of company. Political risk effect the decision making of company. For e.g. high level of tax can
demotivate company and restrict it from entering new markets (Kasemsap, 2016 ).
Economical factor: Economic factors such as change in interest rate, foreign exchange
rate, inflation rate and GDP affects in the globalization of company. These all factors affect the
demand and supply of products of SASOL limited. Change in the economic cycle of country
directly decreases the revenue generation and productivity of company. Country having high
unemployment rate means that people want employment, SASOL ltd. Can provide employment
at lower wages which decreases the cost of company. Purchasing power of consumers also
affects the company. For e.g. if a country face inflation then this will reduce the purchasing
power of the consumers (Amankwah-Amoah, 2016). Government lay some restrictions regarding
tariff, subsidies and quotas for import and export which may create challenges for company in
operating business internationally. National income provides information of pattern emerging in
economic activity. Change in the national income of the economy will benefit company in
building strategies and policies.
Social factor: Culture of every country affects the company in globalization. It can be
difficult for the company to understand the attitudes and beliefs of the company. SASOL ltd.
Need to understand the demographics, education, power structure and interest of people. Without
knowing class of people selling products to them can make company suffer from loss. For e.g. if
majority of population in country is lower class then it is pointless for company to sell premium
products.
Technological factor: Technological development also impacts globalization of
company. Company need to analysis technological factor while entering in new country or
market. If company encounters new technology in the market and is becoming popular in the
industry, it is necessary to evaluate competitors revenue and how fast technology is been adapted
by them. SASOL ltd. Need to improve its products by use of technology (Acs, Szerb and Autio,
2015 ).
Environmental factors: While entering in new markets company need to evaluate the
standards of environment to be maintained in a particular country. Maintaining environmental
standards impacts profitability of company. Some environmental factors that company need to
take in mind is:
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 weather
 laws and policies regarding environment pollution
 recycling
 waste management water and air pollution
Legal factors: The legal frame work of every country is different, it is not strong enough
to keep intellectual property safe. SASOL ltd. Need to evaluate such laws before entering in the
country. There can be a chance of theft of intellectual property (Hopkinson and et.al., 2018). For
e.g. if there are no such laws and company is expanding its business there then there can be loss
of their data and intellectual property. International trade law includes the appropriate rules and
customs for handling trade between countries. However, it is also used in legal writings as trade
between private sectors, which is not right. Company need to evaluate following legal factors:
 discrimination law
 safety of copyrights, intellectual property and patents
 data protection
 health and safety law
International trade law: It includes the rules and regulation for handling trades among
different countries. It is an independent field, most of the government are now part of world
trade. It is an international trade which is used by government in taking corrective actions for
imports which are causing material injury. It also affects SASOL ltd. As it provides chemicals
which may be harmful. Company need to follow these law in order to sustain in international
market.
M2 Strategic challenges in diversification strategies and supple chain flow
Supply chain management is affected by the strategic challenges. Change in the political
structure (taxation policies, political stability) affect the flow of supply in different countries.
Change in inflation rates affect the price of products. A country in which there is low leisure
interest will affect supply chain because supply chain gives preference to innovative products
and services (Frynas and Mellahi, 2015). If there are restricted trade laws then enterprise will not
be able to import material or export its products to other countries, in such condition firm may
face strategical challenges and it would affect its supply chain badly. Apart from this, if there is
developed economy then enterprise can offer wide range of products, this will strengthen the
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diversification strategies of the company. International trade laws and government restriction in
import, export policies, subsidies and tariffs affect the supply chain of the company. It will also
affect business in diversification as SASOL ltd need to formulate policies and strategies in order
to carter those restrictions and changes.
LO3
P3 How globalization influence organizational governance, leadership, structure, culture and
function
SASOL limited follows market culture which focuses on end results. Employees of the
company are competitive in nature and focus in achieving goals. Company following this type of
culture has productive and competitive leaders.
McKinsey's 7 S model:
Strategy: The major challenge for the company is environmental issues. As SASOL is
chemical company it has to produce products in such a way that environment is protected.
Company can use nuclear energy to produce electricity which will lower the loss of environment.
Effective growth and development strategy support SOSOL in knowing more about market and
aligning strategies with business objectives. SOSOL believes that if employees are being
involved into growth decisions then it may give better results to the firm. This strategy of the
enterprise help in enhancing communication between employees and supports in improving
culture as well.
Structure: SASOL follows vertical structure in which information flows from top level
to lower level which benefits company in implementing strategies and achieving business goals
and influencing globalization (Ganamotse and et.al., 2017 ). SASOL has vertical structure ,this
kind of structuring support the firm in making clear communication. By this way different
departments can exchange their views easily that help the firm in improving workplace culture
and accomplishing its objectives effectively.
System: Top level assign the work to their employees and expect them to give their full
effort in achieving goals. Manager further provides rewards to employees according to their
performance. Top management of SASOL has simplified its operational system so that business
gain be on track and performance appraisal system has been implemented which has helped the
firm in retaining staff in the firm for longer duration.
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Shared values: Company is using nuclear energy to protect environment thus giving
value to societies. SASOL has strong workplace culture and it has clear vision. This share values
of the firm help the company in working better in international market.
Style: SASOL company follows visionary leadership style as its vision is to grow fast
globally. Leaders of the SASOL firm involve people in decision making as they have democratic
leadership style. This kind of arrangement always help the firm in motivating workers and
retaining staff in firm for longer duration.
Staff and skills: Company is dealing with chemicals and nuclear energy thus it is
important to employ people who have skills and knowledge to deal with the chemicals in
uncertain situation (Rezaee, 2016 ). Staff of SASOL company are skilled ,they are experienced
enough. Employees have job satisfaction and company gives them training to improve their
capabilities. These skills and staff arrangement help SASOL in performing better in the market.
Hofstede’s Dimensions:
This theory tells that company has high power distance then information flows from top
level to bottom level and employees work in systematic manner and centralized way. Company
also have individualism in which people don't share information. When entity has to work in
global market then it has to make its arrangement accordingly so that it can sustain in new
market easily.
Power distance show that inequality in the country, if there is low power distance that means
people are treated equally but if score is high that means inequality is high. In such condition
leaders have to make changes in their culture, leading style so that people accept things and work
accordingly.
Individualism means people like to work individually and collectivism means people like to
leave together. If the country has collectivism culture, then SASOL firm will have to make
changes in its organizational culture accordingly so that employees can work together.
Masculinity vs feminity is another aspect of this model, in low MAS scoring countries women
are given respect hence SASOL will have to change its structuring so that male and female can
be treated equally.
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Uncertainty vs avoidance is the element of this cultural model, SASOL has to consider whether
degree of anxiety is high in society or low and accordingly it has to make setup in firm so that
workers can work comfortably in new country.
Short vs long orientation is the aspect of this model, here SASOL firm will have to make
changes in its practices ,if country has low score that means creativity is promoted in such
condition entity will have to implement some unique ideas so that employees feel happy.
P4 How organizational function is influenced by ethics and sustainable globalization
As a part of global market, it is important for every organization to follow ethics in their
workplace (Kasemsap, 2016).
Provide healthy environment: SASOL provides healthy environment to its employees
so that they move towards attaining goals. Company also provide motivation to employees by
giving appraisals for their hard work (Hamilton and Webster, 2018). This boost the performance
of employee and increase morale. It benefits company in retaining employee for longer period.
Corporate social responsibilities: It is the responsibility of every company to undergo
CSR activities which is beneficial for both society and company. SASOL is trying to reduce
harmful things which damages environment. Company uses nuclear energy to save environment.
Managing waste, recycling and air and water pollution is the best way to contribute to CSR
activity for chemical industries. Company is responsible for this ethical practice. . Corporate
governance is considered as biggest factor which influence the working of every firm,
stakeholders set some rules and regulation and companies are managed according to these
guidelines. If there is poor participation between stakeholders, then firm will not be able to give
benefit to its stakeholders which will negatively influence the working of business unit.
Dynamic environment: Changes in the social, economical, political, environmental and
legal factors affect the organization function i.e. planning and organizing of company. Change in
those factors influence the organization to change its planning process, policies and strategies.
To sustain in the global markets it is necessary to have a look on these factors (Doh, Luthans and
Slocum, 2016 ).
Knowledge management: To sustain in the global market it is essential to be updated
with the new skills, knowledge and approaches. To compete globally SASOL need to be learn
about the new approaches and encourage employees to adapt changes and learn new strategies to
be on top.
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M3 How global markets influence organizational structure and culture
Global markets influence the structure and culture of organization:
There are many factors that influence the performance of company at global level to great
extent. But if there is equal involvement of stakeholders then it would be beneficial in order to
meet the goal of organization at global level. Leadership is another major concern point which
influences the performance of enterprise at global level.
 McKinsey's 7 S MODEL: This model says that there are 7 factors i.e. strategy, structure,
system, shared values, skills, style and staff that company need to reinforce in order to be
successful.
 Hofstede’s Dimensions: this theory tells that there are 4 dimensions that distinguish
organization culture in low power/ high power distance, individualism/ collectivism, low
avoidance/ high avoidance uncertainty and short term/ long term orientation which
influences global markets (Gaspar and et.al., 2016).
D2 Recommendation of organization structure and decision making process
SASOL need to use team-based organizational structure so that employee coordinates
with each other in achieving goals and it is flexible to make decision. Decision making can be
easy because team members work together to achieve a common goal and agree upon decision.
This increases employee engagement and give ideas and strategies to attract customers.
Company should improve its leadership style and have to adopt participative leadership style. if
it involves all stakeholders then it would be beneficial in order to know more about needs and
interest of each stakeholder.
LO4
P5 Different ways of decision making in global context
These are the factor which are used to improve the growth of the business of the company in the
new country and global level and help for the decision making. These are the different ways of
decision making (Heisig and et.al., 2016).
 Ethical and sustainable– social culture impact on the culture of the company's
environment. Sasol limited work at the global level and they check all social factor like
population, age factor, career attribute of the area. Population of country will decide the
sell of the company's product and age factor decide the which product is more suitable for
the market. Theses factor help to understand the requirement of the people of those
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particular country and then they know which product is more effective on these country
this helps the company to grow the business in global level.
 Economic – this is the main factor of business. Sasol company check the all economic
factor like economic growth, exchange rates, foreign exchange, disposable income of
consumer. Country's economic growth help the company to grow the business in the
global level. Exchange rates helps to set rates of the product if exchange rate is high
then product cost will be high or if exchange rate is low then product cost will be. These
all economic factor help in the decision making (Hooper, 2016 ).
 Environment- Environmental rules and regulation are different in the every country.
Every time Sasol limited start new business at the global level they check the
environment rules like air pollution Rules, water pollution rules, waste management
rules etc. then company decide to set new market in any country. Sasol limited is a
chemical company so Environment rules are more important for that Which help the
company set the business easily in the country and the company will grow fast in.
These are the main factor which help the Sasol limited for the decision making at the
global level. To start a new business and how grow the business and create the more profit
(Cavusgil and Knight, 2015 ).
P6 routes to internationalisation an organisation may adopt
Internationalisation are known as how to enter in the foreign market with rules and regulation to
start the business in other country. These are some strategies to enter a new foreign market.
 Franchising the brand- Franchising is a strategic way to reduce the dependence of
domestic market and set the business to grow the profit across the worldwide and expand
the business. In this strategy a franchisor will run the business and selling the product
under the company's successful business model. It helps the company to fast grow the
business and take less time to set in the market (Kasemsap, 2016 ).
 Direct exporting- Direct exporting is most common strategy. In this strategy company
direct export there good to the foreign buyers rather than the third party Distributor. In
this strategy company gets more profit and also they have command on the customer. In
this strategy comp-any have to done market strategy, logistic shipment, foreign
distribution.
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