Analyzing Globalisation's Effects on Business Strategies

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Introduction
Globalisation is a process by which the big business enters new overseas markets to expand their
business further. Globalisation provides exchange in terms of culture and trade for the
organisations. The organisations that have firms and subsidiaries in different countries are the
multinational companies that have analysed and understood the need and requirement of the
consumers of that country. The research is important in terms of understanding the consumer
needs, thus, it is an essential process for the multinational companies. There are various
advantages of globalisation for both the business as well as the people. For people there are
multiple options to buy a single product they can choose the product as per their buying capacity
and on the basis of the brand value of the organisation. For business organisations they have
increased trade in the overseas market, instead of depending on a single county’s economy they
are dependent on the global economy, the movement of services, capital and products has
become free and for companies like McDonalds, BMW, etc. have found recognition in various
part of the world. With globalisation not only the organisations are developing but the countries
are developing as well, because these organisations provide employment in the country where
they have their firms. In this report, the discussion will be made on the impact of globalisation on
the business and its risks and benefits.

PART 1 - Drivers and challenges for globalisation
LO1 Analyse the key factors which drive globalisation.
Globalisation has increased the financial growth of various organisations, before globalisation
they were dependent on the national economy of the country but now they are dependent on the
global economy. Many organisations have entered the global market and they are successful in it.
For Sasol Limited an energy and chemical based company in South Africa, have seen the impact
of globalisation on their business as they have expanded to countries like Mozambique, Canada,
Gabon and Australia and are planning to expand their business to the other countries.
Globalisation has benefits as well as disadvantages, like for instance the advantages of
globalisation are that it has improved the standard of living for the people of the developing
nations, as per the reports of world bank 1.1 people are out of the state of extreme poverty, the
poverty rate was supposed to be reduced till 2015 but this target was achieved in 2010, with the
help of globalisation. Other major advantages are that cost of the services and products have
lowered, innovation and creativity have been enhanced and the foreign culture is easily
accessible for people who need it (Adnan, et. al., 2018).
Impact of digital technology upon globalisation
The factors that are responsible for achieving the peak globalisation are the technological
advancement. The technological growth is decreasing the entry cost for the creation of business.
Digitalization has made the working easier and less complex, the cost of physical record
maintaining was alarmingly high but now it is done in absolutely no cost. The record
maintenance and other data related to the organisation once saved in the physical files are now
saved digitally that has reduced the cost very much. Other impacts of digitalization are that cost
of transportation have ben decreased with increase in communication physically. The
technological advancement like e-commerce has made the trade system easier worldwide, now
the consumers can order whatever they want from the brands that they like. Globalisation has
been improved with the help of digitally advanced world, some organisation are based in one
country but are global as they provide the service online (Alshaher, 2017).

PESTEL Analysis
The PESTEL analysis provides the external macro factors that affect the organisation. Changes
in the macro factors have a major impact on the business functions of the Sasol Limited.
PESTEL is and abbreviation for Political, Economic, Social, Technological, Environmental and
Legal factors (Pan, et. al., 2018).
Table 1: PESTEL Analysis of Sasol Limited
PESTEL Factors Analysis
Political Factor: For Sasol Limited, the
profitability for the long run is impacted by
these factors in a market. The Sasol
Limited has its operation in the field of
energy and chemical in many countries and
thus it is vulnerable to the different
political risks. The major factors are for
Sasol Limited to enter new market-
 As the chemical and energy field is the
major sector for country’s economy than
political factors are major factors for this.
 For the enforcement of contract legal
framework is required.
 The rules and regulations related to the
tariffs on the materials
 Governmental regulations related to the
pricing and taxation
 The labor laws and other acts set by the
government for organisations to follow for
the employee welfare
 Regulations related to industrial safety
Economic Factor: Various factors related
to the economy are there that affect the
business in other countries. Factors for
Sasol Limited related to economy are-
 Rate of inflation
 Rate of interest
 Rate of saving , and
 Rate of foreign exchange
 In case of Sasol Limited as it is an energy
and chemical company the inflation and
growth rate are different
 Financial market efficiency
 Quality of infrastructure for chemical and
energy
Social Factors: The culture and diversity  Structure of class and structure of power

related to the society also impacts the
business culture. The attitudes and beliefs
of the people in terms of the energy and
chemical company Sasol Limited has a
great impact on the business. The social
factors that Sasol Limited needs to
consider to enter new market are:
of the society
 Safety of products
 Inspection of product
 Customization of product related to the
customer need
Technological Factor: The organisation
needs to be technologically advanced in
terms of increasing their business growth.
The digital advancement in the business
has enhanced the pace of business. The
technological factors that the Sasol limited
needs to consider to enter new market-
 Structure of cost for Sasol Limited has
impact on its business
 Value chain structure’s impact on sector
of material
 Technological diffusion rate
 Advancement of the product based on the
advanced technology
 Increase in quality of product based on
technological growth.
 The chain of supply is digitized
 Increasing the technology based on
sustainability
Environmental Factors: The
environmental laws and regulations are
different for different countries. They are
different even for the states of the country,
i.e. different states of a country have
different environmental regulations. The
environmental factors that the organisation
needs to consider for entering new market
are-
 Change in climate
 Environmental pollution regulations
 Recycling
 For energy and chemical organisation the
air and water pollution factors needs to be
considered
 Management of waste materials
 Renewable energy
 Reduction in the carbon footprint
 Carbon dioxide emission
Legal Factors: Legal frameworks are less
robust for protecting the organisations
 Laws of discrimination
 Consumer protection law

rights. The legalities related to the emission
of carbon and other chemical from the firm
comes under legal actions. Thus, the
factors that the Sasol Limited needs to
consider for entering new market as per
the legal factors are-
 Health and safety law
 Law of employment
 Protection of data
 Laws related to the patents and copyright
 Law of Anti-trust
 In chemical and energy company, rights
of intellectual property
Figure 1: PESTEL Analysis
Source: (Businesstoyou, 2019)

LO2 Determine the strategic complexities associated with operating in a global
environment
Now the factors that are responsible for the challenges of globalisation and strategic challenges
are:
 For global trade system the job shipping is a major cause of concern, in terms of job
manufacturing, this problem is for both developed as well as the developing countries. The
workers that do the low skilled jobs of manufacturing are unable to find the new job. Loss of
job in the developed countries are creating a problem for the welfare system for that country.
This is also a problem for the Sasol Limited as they are unable to provide the low skilled jobs
for the local people of the country in which they work (Buehring and Liedtka, 2018).
 With globalisation, emerging markets are growing tremendously, but the western countries
have the major authority over the capital flow from one nation to the other. Like for instance
World Bank and the international monetary fund makes the loan process simple but as the
value of currency is different for developed western countries to the developing non-western
countries applying the loan disbursal for these countries would make the process more
difficult. In this case, Sasol Limited, is suffering from this problem as they are based in a
developing country.
 Cultural identity loss is a major cause of concern, as the foreign cultures for the people can
access easily but are also responsible for losing their own culture, they are influenced by the
movies and other media platforms for accessing the foreign culture but are not aware of their
own culture. The cultural gap has been increased due to this factor and globalisation is held
responsible for this.
 One of the major challenges of globalisation is that it works in favor of the rich countries and
is responsible for increasing the gap between poor and richer (Costinot and Rodríguez-Clare,
2017).
The challenge possessed by the organisation can be overcome by implementing different
processes. First of all various challenges can be mitigated for the organisation if they want to
enter a new market, firstly they needed to have a research and development section that
researches the market where the organisation wanted to establish their business. This department
analyses the market sector for the growth and development needs. The needs and requirement of
the consumers are analysed and provided to the company in order to provide the service and

product based on it. It helps the organisation to initiate the business on a positive note and thus
increase in profit motivates the organisation to grow the business even more (Garza-Reyes, et.
al., 2016).

PART 2 - Impact and Strategic Direction
LO3 Evaluate how operating in a global market influences an organisation’s structure,
culture and functions
When an organisation expands its business in different countries there are various factors it has
to consider for sustainable development and financial growth of the organisation. The structure
of the organisation is in such a way that it gets change as per the requirement of the specific
market. As the organisational structure cannot be same for the organisation in one country to
organisation based in other country. There are various strategies that can be implemented in an
organisation for the growth (Jalonen, et. al., 2018). The strategies are:
Reactive strategy: In this strategy the internal procedure of the organisation are changed to
increase the legitimacy. The advantages of this strategy are the structure of the organisation
becomes flexible so that any change can be implemented as per the requirement, the internal
procedures changes efficiently, the organisation needs to provide training for its employee as per
the needs of the local market in terms of the organisational procedures and functions.
Strategy of adjustment: The stakeholders’ demands are considered for maintaining the
presence in current market. The advantages are that the social capital are raised and enhanced
and for maintaining the current market position social networks needs to be activated (Janssens,
et. al., 2019).
Defensive Strategy: In this strategy the changing market demands are considered for
competitive advantage gain. The benefits are investment for the protection of environment, the
changing demands of the market are implemented with the help of the emply9ing professionals.
Proactive Strategy: In this strategy the modelling and redefining of the actions are considered
and the fundamental values of the organisation are correlated as per the consumers. The benefits
of this strategy are social culture influencement and for guiding the social culture in the right
direction this strategy is proved to be helpful (Jiang, et. al., 2018).
For the Sasol limited which is operating in the chemical and energy market, there needs to be
proper strategies as there are various factors of this industry that are related to the environment,
thus they have the challenge to grow in the market by considering the environmental needs. For
sustainable growth, Sasol limited has a greater responsibility as it is consuming the natural
resources for their business, thus for the greater benefit for both company and the environment,

the organisation has to work further in the field for greater good.
McKinsey 7s model
In order to understand the organisational design McKinsey 7s model is incorporated, for this
seven essential internal elements are considered, that are:
 Shared values
 Skills
 Staff
 Strategy
 Structure
 Style, and
 Systems
Figure 2: McKinsey’s 7S model
Source: (Jurevicius, 2013)

This model is divided into two types of “S” of the 7S model, i.e. hard S and soft S. The hard S
are Strategy, Structure and System and the soft S are Style, Staff, Skills and Shared Values. As
Sasol limited is planning to grow their business in more countries thus they can implement this
model for their organisational establishment. They can implement various different strategies
based on their experience of working in different countries (Olhager and Feldmann, 2018).
The model is helpful for the organisation in various factors such as:
 For change in organisation
 New strategy implementation
 Future perspective of the change in area
 For organisational merging
The model can be evaluated for different S as:
 Strategy: It is the plan that the organisation implements in order to achieve the
sustainable competitive advantage, so that they can compete successfully in the market.
These strategies are created on the basis of the market analysis and considering the needs
of the consumers (Plenkina, et. al., 2018).
 Structure: It is the division of the departments in the organisation, which defines how
different departments are organised in an organisation. It defines in an organisation that
who is responsible for what work. Different departments such as marketing, analysis, and
production and how they are interrelated with each other for the working.
 System: These are the procedures that the organisations follow in order to design the
daily activities of the organisation. This the area where the managers the managers are
concerned for, as the system of the organisation needs to be properly managed.
 Staff: This is the element in which organisation considers their employees according to
the market needs. It decides what kind of employees are required for the recruitment. The
staff for the Sasol limited are recruited based in the experience they have in the industry
(Salvioni and Astori, 2013).
 Skills: These are the abilities that the employees needs to have for the organisational
growth. The Sasol limited considers the employees with relevant skills in the industry.
 Style: It is the factor by which the top level management of the organisation is
considered, in this the organisational style of working is considered, where the evaluation
is made on the basis of the working of the top level management.

 Shared Values: It is considered as the core of the model, as it provides the guidance for
the behaviour of employees within the organisation. This develops the organisational
foundation based on different factors such as employees’ behaviour and the upper level
management (Shiri, et. al., 2014).

LO4 Evaluate the influence of globalisation on organisational decision making and strategy
In order to understand the cultural differences for an organisation the Hofstede's Six Dimensions
of Culture is applied on the organisation. It provides the factors that are responsible for the
organisations change in terms of culture as per the local market they are operated in, thus this
will be helpful for the Sasol limited to understand the cultural need as they wanted to expand
their business in different countries. The six dimensions are: Individualism versus Collectivism,
Indulgence versus Restraint, Long Versus Short-Term Orientation, and Masculinity versus
Femininity, Power Distance Index, and Uncertainty Avoidance Index (Simone, et. al., 2018).
 Individualism versus Collectivism (IDV)
This factor is divided in two parts high and low.
High Individualism versus Collectivism: Privacy requirement, people’s time is considered as
the highest value, individuals are rewarded for the hard work that they perform and privacy is
respected. The individuals achievement is acknowledged, social and work life are not mixed and
people’s own ideas are considered.
Low Individualism versus Collectivism: In this the emphasis are made on skill building, here
employees work for the intrinsic reward and personal growth. The moral issue are over driven by
maintain the harmony in the team. Giving the employees with negative feedbacks in public needs
to be avoided (Song, et. al., 2018).
 Indulgence versus Restraint (IVR)
This factor of the model is also divided into two parts, high indulgence and high restraint.
High indulgence: The characteristics of this factor are optimism, freedom of speech, and
personal happiness. In this employee views are considered for any organisational decision
making, coaching, feedback and mentoring are given high priority and the work life balance is
considered by implementing flexible working (Steffen and Boßelmann, 2018).
High Restraint: In this the characteristic are pessimistic with controlled and rigid behaviour. In
this the factors are considered as per the formal ethics and professionalism. In the informal
meetings the negative factors can be considered.
 Long versus Short-Term Orientation
This factor is also divided in to two parts long term and short term orientation.
Long-Term Orientation: The characteristics of this factor are that the positive values are
considered from education and thrift, modesty and obligations and virtues are emphasised. For