Global Business Environment: Strategic Expansion Route Analysis

This report provides a comprehensive analysis of the global business environment, focusing on strategic expansion routes for companies like SASOL Limited. It elucidates organizational structure, culture, and governance using McKinsey’s 7S model, and applies Hofstede's Dimensions of Culture to demonstrate how global operations influence these factors. The report also examines ethical and sustainable considerations crucial for success in a global market, along with effective decision-making strategies in a global context. Furthermore, it critically analyzes various strategic expansion routes available to organizations, including mergers and acquisitions, providing insights into the challenges and opportunities of operating in the international marketplace. The document is available on Desklib, a platform offering a wealth of study resources for students.

Global Business
Environment
(PART – 2)
CONTENTS

INTRODUCTION......................................................................................................................1
MAIN BODY.............................................................................................................................1
Elucidation of the structure, culture and governance of the organisation by application of
McKinsey’s 7S model............................................................................................................1
Application of Hofstede's Dimensions of Culture for demonstrating the way in which the
organisation has been influenced............................................................................................2
Analysis of ethical and sustainable factors that needs to be considered in a global market. .4
Different ways decision making can work effectively in a global context............................4
Critically analysing the range of strategic expansion routes available to the organisation....5
CONCLUSION..........................................................................................................................6
REFERENCES...........................................................................................................................7

INTRODUCTION
Business environment is being defined as all the external along with the internal
factors which impacts the key operational activities of the company. It can be attributed that
with the altering time, firms are not extending their reach in the global market. the global
business environment encompasses trading amid two or more firms who carries out business
transactions together for generating more profits (Burlacu, Gutu and Matei, 2018). The
current research report is being based on SASOL limited, the firm which is dealing in
chemical and energy products. The overall report will cover the impact that globalization has
on organisational structures, cultures and functions and will finally defines the impact of
globalization on the decision making and strategy of the company.
MAIN BODY
Elucidation of the structure, culture and governance of the organisation by application of
McKinsey’s 7S model
McKinsey model denotes the interdependency of 7s key component which belongs to
the hard as well as soft elements of the firm. Hard component encompasses the structure,
system and the strategy. On the other hand, the soft components encompass styles, values,
staff and skills of the firm. In the context of SASOL limited, the manager has adopted this
model for comprehending the real condition of the company in context of culture, structure
and governance (Gökdeniz, Kartal and Kömürcü, 2017). The model is being explained
underneath:
Hard element – These components can be determined by the management team of the firm
because it comprises structure, system and strategies. In relation with the SASOL limited, the
hard elements are being described below:
 Strategy (Governance) – The top management of the company are formulating
different types of strategies for expanding their business in novel nations for
augmenting their command at the global marketplace.
 Structures – The company considers the organizational structure in which the firm is
sub-divided into small segments which are finalised on particular functions like
information technology, operations, human resource management and marketing.
 Systems – It is being defined as the working pattern of the workers for carrying out the
activities of the business. in the context of the SASOL limited, the workers of the
firms perform as per the needs of the project (Solomon and et.al., 2018).
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Soft element (Culture) – Talking about the soft elements, they are minimal tangible and
majorly impacted with the culture of the firm. In other words, it can be attributed that the soft
components are equally vital for the company’s success like hard elements. They comprise
different aspects such as shared values, styles, staff and skills and are being explained
underneath:
 Shared values (Culture) – The value of the company characterizes the ethics of the
business. it can be uttered that the culture of the firm is grounded on the complete
corporate culture. However, the workers are being trained enough to not ignore the
organizational ethics at the same time carrying out activities of the business.
 Skills – The management staff of SASOL limited recruits skilled workers for
enhancing the efficiency of the work at the workplace. Further, workers are highly
qualified as per the need of the job position (Cherunilam, 2021).
 Style – The company follows the democratic leadership style because it offers
significance to all the workers at the time of crucial decision-making process. further,
in such kind of leadership, the leader delegates the accountability between the
working employees and this in turn creates interest of the workers in the allotted task.
 Staff – There are around 30000 employees being maintained and handled by SASOL
limited. The major strength of these employees is that they possess the ability to carry
out activities of the firm effectively. they are well trained, qualified and skilled such
that they can manage every complex situation easily.
Application of Hofstede's Dimensions of Culture for demonstrating the way in which the
organisation has been influenced
The structure, culture along with governance are being majorly impacted by the
global operations as these factors vary from one nation to other. further, it is quite
challenging for the companies to manage the culture and structure accordingly when they are
expanding in the international market. varied laws in varied nations makes the performance
level of the business very ineffective and difficult. The ways in which the SASAOL limited is
being influenced by these factors can be evaluated by seeking help of Hofstede’s cultural
model (Cherunilam, 2021). It is being developed in the year 1970 by Dr Geert Hofstede and
is being based on varied cultural dimension which differs from country to country. Since, the
case company is entering into the global market through adding some more nations in the list
of their trading nations, it is essential for the firm to refresh their own management system,
strategy and operational activities for meeting the global standards. There are varied
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dimensions of culture based on which functioning of the SASOL limited will be highly
impacted and these are being described in the subsequent section:
 Power distance – It describes the inequality among employees of SASOL limited with
power or without power. The employees of the company have scored quite low in PDI
which means that they do not support inequality within the firm. It is essential for the
company distribute power equally for making the workers encouraged towards work.
 Uncertainty avoidance – It explains the degree to which people in the community are
not at the ease with ambiguity and uncertainties (Ferraro and Briody, 2017). The
employees scored quite high in uncertainty avoidance index which indicates that there
is a low tolerance for uncertainty, ambiguity, and risk-taking. The employees must be
prepared and trained for facing any sort of contingencies when expanding globally
and must take suitable steps for overcoming the challenges.
 Masculinity vs Femininity – It signifies the preference of the community for
assertiveness and heroism. On the other side, the femininity depicts the cooperation
and modesty. It is crucial on the part of the company to emphasize on both the factors
and must evade cultural variation for gaining profit while expanding globally.
 Individualism vs collectivism – It considers the extent to which the employees are
integrated into groups and their apparent responsibilities and requirement on groups.
In relation with the SASOL limited, it can be said that some of them desires to work
alone and some desires to work in team or groups. This sometimes develops a
situation of conflicts between the workers and impacts their performance level.
 Long term vs short term orientation – It considers the disposition of the community
for attaining the long-term profits and some of the requires immediate profits or gains.
In long term orientation, the workers of the firm emphasize on virtues and
responsibilities as in short term orientation, workers shoes lesser willingness towards
compromise. This directly impacts the overall working of the company (Black,
Morrison and Gregersen, 2019).
 Indulgence vs Restraint – Those workers who have high level of indulgence enjoys
their life on their emotions. On the other side, the restraint workers are more worried
about their behaviour as per the social norms. Such kind of cultural variations impacts
the performance level of the SASOL limited.
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Analysis of ethical and sustainable factors that needs to be considered in a global market
Ethics and sustainable factors of the company required to come up with different
rules, laws, principles, and norms of conduct that helps in making cooperation, freedom and
justice possible which again supports in implementing the programmes at the international
marketplace. In has been evaluated here that if the firms such as SASOL limited do not
emphasize on the ethical and sustainable factors than they might not obtain their desired new
level. Thus, it can be said that ethics and sustainability are the inseparable part when talking
in respect with the cultural and social power. Here is the list of ethical as well as sustainable
factors that needs to be taken into account by SASOL limited when expanding in the global
market:
 Corporate social responsibility (CSR) – This is regarded as the most important
element of the global business environment which is required to be considered by
each and every company at the time of carrying out operations at the global
marketplace. As SASOL limited is conducting business at international level,
however if they do not take into account CSR activities and does not do anything for
the community in which they operate than the firm might not sustain for longer period
of time (Hopkinson and et.al., 2018).
 Legislations – Firm is conducting business at the global level and thus, it is more
likely to ample number of antithetic legislations being developed by governments of
varied countries. When it is the question of performing effectively at the international
level, SASOL limited is required to consider each and every single legislation of the
country in which they are doing their business. If in case the company fails in
following these rules than they might face issues or their license get cancel as well.
 Environmental factors – Further, it is also important on the part of the firm to ensure
that their operations do not pollute the environment and the community. SASOL
limited has to make decisions as per the nation in which they are operating. They must
maintain ethical and behavioural norms.
Different ways decision making can work effectively in a global context
A business which performs at the international level are required to be competitive in
different facets like utilization of innovative and creative technologies, better transportation
facilities and most crucial, management of effective communication throughout the world.
further, at the time of working globally, there are different decisions that the SASOL limited
have to make based on different cultural aspects, time zone, rules, norms and regulation of
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the foreign marketplace. It is quite challenging to comprehend as well as measure the aspects
of vague foreign market and therefore, decision making actions should be done rapidly. This
will enable the firm to grab the prospects prior to their competitors (Lang and Tavares, 2018).
There are two ways which can be used by the firm for effective decision making in the global
context and these are:
 Reactive Decision-making – This decision-making approach stated the stage which is
being established from being inactive. Even though it is operative in some situations,
it is not being regarded as optimum in most of the cases. Reactive decision making is
only utilized when required. It might lead to losing of crucial opportunities
 Proactive Decision-making – This is the most strategic way in business which enables
the firm to look for the probable solutions and making effective utilization of the
same. additionally, it also allows the firm to make use of knowledge and experience.
Through this, more logical actions are being selected by the firm.
When the firm is active instead of passive in the market than the firm is making
proactive decisions. Operating in the international markets needs some added variables to be
taken into account in the working process (Stevenson, 2019). different aspects can later
globally without demonstrating any sign or symbol and the firm are required to undertake
varied decisions based on that.
Critically analysing the range of strategic expansion routes available to the organisation
 Merger and acquisitions – Merger and acquisition are being referred as the process
wherein the firms take over another organization or give securities of one company to
stakeholders. Both these routes are quite effective for ending the business. there are
many advantages of this method to SASOL limited that is they can gain control over
acquired business through integration of the management of the firm into overall
strategies. However, it might develop some liabilities as well.
 Franchising – Another important method of strategic expansion available with the
firm is franchising. In this approach, the firm can function their business by the name
of another firm, who is called as franchisor. For this help, the franchisee is required to
pay the amount of fee to the firm whose name they are using. The main benefit of this
route is lower financial risks and lesser cost of evaluating the potential of the market.
however, dependency on the franchisee and limited number of prospects in
profitability are regarded as the key drawbacks of this approach (Shen, Puig and Paul,
2017).
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 Licensing – It involves franchising and turnkey contracts. It is also being known as
contract manufacturing and involves the process of charging royalty for the utilization
of the brand name of the firm. Example includes, McDonalds.
Barriers to internationalization
 Financial – This is the common barrier which is being faced by each and every
organization while expanding in the global market. lack of physical and financial
resources, uncertain cost, scarcity of resources and limited access to capital are some
of the examples that might come across in the way of expansion by SASOL limited.
 Industry specific – It is very significant barrier and it majorly includes competition
from the companies operating in the same market in the global market. the supply and
demand of the SASOL limited might be impacted by this factor (Ahi and et.al., 2017).
 Managerial and market-based barriers – This can be also be a crucial barrier or the
company. It majorly encompasses attitude and behaviours of the managers, lack of
skills and knowledge regarding the foreign market.
CONCLUSION
From the above evaluation, it can be stated that the globalization process has helped
the firm in reaching to the clients at the global level. Due to the reduction in the trade
barriers, business organization might be in a position to carry out their business without fear
of problems concerning to varied policies of the government of varied counties. On the other
hand, it has also been summarised that the structure, culture and the governance have a huge
influence on the business of the world. Thus, this requires an organization to focus on ethical
and sustainable factors for effective growth and development internationally.
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REFERENCES
Books and journals
Ahi, A., Baronchelli, G., Kuivalainen, O. and Piantoni, M., 2017. International market entry:
how do small and medium-sized enterprises make decisions? Journal of International
Marketing. 25(1). pp.1-21.
Black, J.S., Morrison, A.J. and Gregersen, H.B., 2019. Global explorers: The next generation
of leaders. Routledge.
Burlacu, S., Gutu, C. and Matei, F.O., 2018. Globalization–pros and cons. Calitatea. 19(S1).
pp.122-125.
Cherunilam, F., 2021. Business environment. Himalaya Publishing House Pvt. Ltd.
Ferraro, G.P. and Briody, E.K., 2017. The cultural dimension of global business. Upper
Saddle River: Pearson.
Gökdeniz, I., Kartal, C. and Kömürcü, K., 2017. Strategic assessment based on 7S McKinsey
model for a business by using analytic network process (ANP). International Journal
of Academic Research in Business and Social Sciences. 7(6). pp.342-353.
Hopkinson, P., Zils, M., Hawkins, P. and Roper, S., 2018. Managing a complex global
circular economy business model: opportunities and challenges. California
Management Review. 60(3). pp.71-94.
Lang, V.F. and Tavares, M.M.M., 2018. The distribution of gains from globalization.
International Monetary Fund.
Shen, Z., Puig, F. and Paul, J., 2017. Foreign market entry mode research: A review and
research agenda. The International Trade Journal. 31(5). pp.429-456.
Solomon, M.R. and et.al., 2018. Consumer behaviour: Buying, having, and being (Vol. 10).
London: Pearson.
Stevenson, H., 2019. LEADERSHIP AND GLOBALISATION. Principles of Educational
Leadership & Management.
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