Globalization's Impact on SASOL: A Comprehensive Analysis

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GLOBAL BUSINESS ENVIRONMENT
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Table of Contents
Introduction......................................................................................................................................3
Part 1................................................................................................................................................4
Concept of globalization..............................................................................................................4
Driving factors of Globalization..................................................................................................4
Impact of digital technology on globalization.............................................................................5
PESTEL Analysis of SASOL......................................................................................................6
Challenges of globalization..........................................................................................................8
Strategic challenges for SASOL Ltd............................................................................................8
Recommendations for SASOL Ltd..............................................................................................9
Part 2..............................................................................................................................................10
McKinsey’s 7s model.................................................................................................................10
Hofstede’s cultural dimension theory........................................................................................13
Ethical and sustainable factors that need to be considered by an organization.........................14
Impacts on decision making.......................................................................................................14
Strategic expansion for the organization....................................................................................15
Conclusion.....................................................................................................................................16
References......................................................................................................................................17
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Introduction
The global business environment refers to the business platform involving the businesses of
world economies with the factors developing opportunities and challenges. The report aims at
throwing light on the different aspects of the global business environment. For attaining the
report aim, the report is divided into two parts. A South African company named SASOL Ltd has
been chosen for the report. Part one will contain mainly the drivers and challenges of the
globalization. It will illustrate the concept, driving factors and challenges of the globalization.
The second part will involve the impact of globalization and strategic direction. It will further
include the effect of globalization on organizational design, different factors of globalization to
be considered as well as the strategic expansion routes. SASOL has been operating in various
countries, including Canada, Australia, Mozambique, and Gabon. Therefore, it is significant for
SASOL to assess the key drivers, challenges and impact of globalization on the business
operations and decision-making.
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Part 1
Concept of globalization
Globalization defines clearly the operations of the business world on an international scale. It
means that globalization unifies all the cultural and political markets into a single business
market. This concept signifies the cross border integration of cultural and political economies
involving the flow of finance, technology, people, information and goods, and so on. With
globalization, it is meant the increased interdependence of all the economies through the way of
free trade. The globalization impacted all the organizations working in the global business
market (Liang et al., 2015). Globalization has provided several advantages to organizations such
as increased employment opportunities, free trade, and high access to products and services.
However, this concept has developed challenges such as enhanced competitiveness within the
business world, and uneven distribution of income. It would not be wrong to consider
globalization as a historical process since its roots can be seen in the Pre-World War I.
Driving factors of Globalization
Globalization has been pushed by numerous technological and political and other factors. It is
necessary for organizations to identify these factors and develop strategies accordingly to deal
with the challenges of globalization. Strong integration of world economies has become
encouraged mainly by technological advancements and free trade. Following are the critical
drivers due to which the globalization process has to gain the highest priority:
Technical factors
It would be correct to consider technology as the most significant driver of globalization. With
the help of technology, it becomes easier for companies to expand their operations and transition
of products and service beyond the national boundaries. The technological advancements have
enabled companies to communicate with the cross-border organizations conveniently and
resulted in robust connectivity (Choi et al., 2013). Apart from this, the emergence of E-
commerce and E-business has enhanced the opportunities for organizations to undertake cross-
border transactions. Increased internet usage and personal computers have strengthened the
connectivity among different world economies.
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Economic factors
The economic factors that encouraged the globalization across the world economies involve
mainly the reduction in investment and trade barriers. The movement of goods and services to
different countries has become highly economical for organizations due to free trade. Apart from
this, the financial industry has been overgrowing due to which integration of world financial
markets has been prevalent (Gurgul and Lach, 2014). In developing economies, the economic
liberalization indicates the removal of strict laws, rules and regulations for enabling the free flow
of finance.
Social and cultural factors
Decreased cost of exchanging information and ideas among people and organizations of different
economies has brought the world economies closer to each other. The flow of goods and services
at lower cost has encouraged the homogeneity of demand and supply within different economies.
The lower cost of communication and transportation has been taken advantage by the societies
who prefer the regulated goods and services from all over the world (Berggren and Nilsson,
2015). It results in the increment in homogeneity among the customers of different world
economies that pushes globalization.
Political factors
It has been seen that globalization emerged among developed countries. But emerging marketing
has become highly significant for the growth of the international market, which encouraged
globalization. The political factors mainly involve specific government policies that enabled the
convenient transmission of finance, goods and services. Foreign direct investment can be seen as
an excellent example in this regard (Rodrik, 2018). Certain institutes are operating at a national
and global scale for managing globalization and liberalization. These institutes assist in
decreasing international trade barriers such as WTO 1995 and GATT 1947.
Impact of digital technology on globalization
Globalization has indeed been leveraging primarily on digital technology. Digital technology has
been positively impacting the growth of globalization. Through technology, the costs of
communication, as well as transportation, have been decreased due to which connectivity of
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global businesses has become economical and convenient. It has enabled the sourcing of inputs
such as raw materials at a global scale (Audretsch et al., 2014). Apart from this, digital
technology has been connecting the developed, developing and under-developed markets to each
other. World Wide Web considers as a significant digital technology that has enabled the
business transactions with convenience by eliminating the barriers of place and time. The
transformation of digital technology has been encouraging investments in global business
markets. Ease of communication and business transactions are the main impact that has been
made by digital technology on globalization (Ghorbani and Bonab, 2013). The emergence of the
internet has resulted in E-Commerce that helps an individual operating in different countries
through a digital technology platform.
PESTEL Analysis of SASOL
SASOL operates in the energy and chemicals industry of South Africa and other countries. The
energy and chemical industry is highly dynamic and involves a significant number of laws and
policies.
Political factors
 Protest groups and non-government organizations also act as policy-makers in the
chemical and energy industry. Therefore, their policies may affect the operations of
SASOL Ltd.
 There are certain trade tariffs and regulations in the energy and chemical industry of
South Africa (Beresford, 2015).
 Changing government may bring new policies and regulations about finance, raw
materials and employment, and so on.
 New taxation policies for the carbon footprint in the energy and chemical sector of South
Africa may lead to a decrease in the profit margins.
 Government priorities and trends require regular monitoring by SASOL Ltd for
eliminating the losses.
Economic factors
 The stability of government performance in South Africa can lead to high investments in
the energy and chemical industry.
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 The company’s plans for investment may get impacted by the exchange rate of South
Africa is exceptionally volatile.
 The economic growth is continuously attaining by South Africa that can provide
opportunities to SASOL Ltd due to the best resource utilization and enhanced
globalization (Cant, and Wiid, 2013).
 Availability of skilled workforce in energy and chemical industry can be used by SASOL
Ltd for enhancing the services as well as attaining global opportunities.
Social factors
 Higher educational level may assist in the growth of business presence in South Africa.
 The increased attitude of people towards safety and health may bring negative impact to
SASOL Ltd when ignored.
 The negative attitude of migration in South Africa may help the company in recruiting
effective managers and leaders of global scale for better operations management (Fatoki,
2014).
 Increased media influence can bring opportunities to SASOL for marketing and product
positioning in a better way.
Technological factors
 SASOL can analyze the current innovative technologies in the energy and chemical
manufacturing industry for attaining a higher market share in the South African market.
 Integrating technological innovations in the supply chain may lead to better
communication with supply chain associates as well as key players of the industry
(Sewdass, and Du Toit, 2014).
 The implementation of technological advancements has been reducing the production
costs, which require the restructuring of the supply chain by SASOL Ltd.
Environmental factors
 Energy and chemical manufacturing companies in South Africa have to deal with a vast
number of environmental laws and regulations.
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 The regulation of scrutiny by environment-related organizations and extreme weather
may lead to the increase of operational costs of SASOL Ltd.
 The increased customer awareness of the environment has enhanced the corporate social
responsibilities of SASOL Ltd (Hamann et al., 2017).
 Recycling and waste management has become highly trending in South Africa economy,
which may require adherence by SASOL Ltd.
Legal factors
 SASOL Ltd may have to adhere to certain laws and regulations such as Employment
law, business laws, data protection laws and intellectual property laws and others.
 The high cost of failure in meeting employee and environment health and safety norms
may face by SASOL Ltd (Ntim and Soobaroyen, 2013).
 Business expansion to other countries will develop the requirement of adhering to the
international business laws by SASOL Ltd.
Challenges of globalization
 Increased competitiveness considers as one of the significant challenges of globalization.
The energy and chemical sector of South Africa has become highly competitive due to
the entry of multinational companies within the market.
 Integration of globalization is profoundly challenged by the need to enhance the standard
of living as well as the promotion of democratic governance (Rosenmann et al., 2016).
 There are certain challenges in South Africa due to globalization such as attaining self-
reliance, enhancement of economic growth and making South African market an
investor-friendly platform.
Strategic challenges for SASOL Ltd
The strategic challenges SASOL Ltd may face due to globalization challenges. The company
may deal with the issues of manufacturing job mobility due to the high number of competitor
firms. Due to the problem of attaining self-reliance and attracting global investors, the company
requires making changes in organizational structure and leadership. Enhanced competition may
bring technological challenges for SASOL, such as integration of advanced technologies and
high technology costs due to sourcing from developed countries (Potrafke, 2013).
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Recommendations for SASOL Ltd
Job mobility issues, change in leadership and organizational structure; and technological
challenges have been identified as the issues that may face by the company. Job mobility issues
can be resolved by providing more profitable packages, growth and development opportunities
and adherence to employment laws and regulations.For dealing with the organizational structure
challenges, the structure must be developed in a way that:
 Align the global corporate principles and corporate people requirements in the structure
 Promotes sustainable business practices as well as business processes
 Developed after an in-depth analysis of the global organizations for identifying the
effective tactics and strategies
 Encourages the people for showcasing their full potential
The technological challenges are faced by many organizations, even in developed economies.
SASOL will require dealing with these technical challenges wisely for eliminating the likelihood
of enormous failure cost. Initially, the company requires identifying innovative ways by
increasing investment in research and development (Ford, 2014). Sourcing of technologies from
countries was available at the lowest prices should be chosen. Regulations regarding
technological innovations require high consideration.
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Part 2
Impacts and strategic direction
There are different effects of globalization on the various functions of an organization. The
structure, culture and different functions of an organization could be affected by the globalization
in many ways. The impact of globalization can be understood by knowing the following
abstracts related to an organization.
McKinsey’s 7s model
The model was introduced for providing support to the owner of an organization and the
managers can also understand how they can bring into line their different works. By the help of
this model, the managers can know about the areas where they need to improve. There are seven
factors included in this model and these factors can play a vital role in the success of an
organization. The model could be understood easily as it is classified into two parts. Hard
elements and soft elements.
The Hard ingredient
• Strategy: It is the higher level viewpoint for an organization and an idea about the strategies
that can be implemented by the management for making a better competition level. The better
strategies could be planned at the beginning of a process and provides the idea about the
resources of a firm. Future possibilities and threats could be identified by effective strategic
planning.
• Structure: The organizational structure could be analyzed in the form of a chart or the other
papers that can provide the idea about the reporting of each other. The documents can provide an
idea about the whole organizational structure and it also classified the different departments of an
organization. The idea about structure helps the management to know about the link between
various organizational departments.
• System: The system analyzed the strategies that can become helpful to get the job done. The
system of an organization explains about continues running of processes. The manager analyzed
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whether the workers are doing their tasks or not by the effective system of the organization. It
explains the procedures and processes of the organization (Cania, 2014).
The soft elements
• Shared values: The share value could be referring to the employees of an organization. it
also explains the collaboration and communication process of workers.
• Style: In this section, the cultural style of an organization could be recognized. The behavior
and attitudes of managers towards achieving the job could be recognized in it. The effective and
ineffective leadership of managers could be understood.
• Staff: It is the responsibility of a leader to understand the strength and weaknesses of their
teammates. The leaders must try to know about the skills that can improve the productivity of
their team members.
• Skills: The point can be related to the employees as well and it represents the capabilities of
an individual employee. The managers need to know how they can monitor and use the skills of
them (Harris, et. al., 2014).
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Strategic planning checklist
Constituent Status Comments
Mission  Completed
Vision  Completed
Strategic budget Not cleared but
recognized
Strategic objectives Several are strong
Strategic map Not created need
serious attention
Perspectives Not balanced
Customer value
proportion

Strategic plan Developed but not
followed as well
Reporting plan Some important
reports are in
process
Local plans Some local plan
created
When an organization created its strategic management plans, it’s important for them to maintain
a checklist. The checklist can be helpful for maintaining all the important elements regarding a
process. Maintaining a checklist can ensure the perfect strategic planning of an organization.
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