Global Business Environment: An Analysis of SASOL Limited's Operations

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GLOBAL BUSINESS ENVIRONMENT
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Contents
INTRODUCTION...........................................................................................................................3
PART 1 - DRIVERS AND CHALLENGES FOR GLOBALIZATION.........................................3
LO1 ANALYSE THE KEY FACTORS WHICH DRIVE GLOBALIZATION........................3
LO2 DETERMINE THE STRATEGIC COMPLEXITIES ASSOCIATED WITH
OPERATING IN A GLOBAL ENVIRONMENT......................................................................6
PART 2 - IMPACT AND STRATEGIC DIRECTION..................................................................9
LO3. EVALUATE HOW OPERATING IN A GLOBAL MARKET INFLUENCES AN
ORGANISATION’S STRUCTURE, CULTURE AND FUNCTIONS......................................9
LO4. EVALUATE THE INFLUENCE OF GLOBALIZATION ON ORGANIZATIONAL
DECISION MAKING AND STRATEGY................................................................................15
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19
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INTRODUCTION
Globalization can be defined as an integration of ideas, products, services, technology across
the borders. Globalization encourages multinational companies to operate in the foreign
market for expanding its business and market share. The global business environment can be
defined as an environment of different countries in which the company operates but it is
different from the home country. The environmental factors of different countries affect the
decision of the utilization of resources and capabilities. The global business environment is
divided into two categories such as internal and external business environment (Hamilton and
Webster, 2018). The companies have to consider so many factors before entering the foreign
market such as political, social, legal, technological, cultural and many more. The company must
consider all these factors for running its operation efficiently and effectively. The companies
have to adapt themselves according to the language or culture of the host country. SASOL
Limited operates its business by considering all these factors. SASOL Limited is fast-emerging
energy and chemical industry and it expanded its business in many countries such as Canada,
Australia, etc. and wants to expand its business in other countries as well. The report includes
the drivers and challenges faced by the company when it expands its business with other
countries.
PART 1 - DRIVERS AND CHALLENGES FOR GLOBALIZATION
LO1 ANALYSE THE KEY FACTORS WHICH DRIVE GLOBALIZATION.
Key factors of costs, market, an environment that drives global commerce and trade
Globalization is driven by majorly by four factors such as costs, market, environment, and
business. The main aim of the SASOL Limited is to maximize their investment by obtaining
economies of scale in their operations. The market also plays an important role in driving the
global trade and commerce because the target consumers become more aware of the products
and also the companies found many similarities in terms of lifestyle, education, income, etc.
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The other factor driving the globalization is the environment. The environment of the SASOL
Limited provides various benefits through advanced technology increases the global demand of
the products. The drivers of the globalization that helps in expanding global trade and
commerce are as follows:
 International economic integration
International economic integration eliminates the trade barriers and brings coordination of the
fiscal and monetary policies. The aim of economic integration is to reduce the cost of products
for the customers as well as producers. International economic integration facilitates the trade
between the two countries that are involved in the agreement. SASOL Limited makes an
agreement with the local companies for selling energy and chemicals (Bozyk, 2019).
 Foreign direct investment (FDI)
FDI plays a very significant role in driving global trade and commerce. FDI can be defined as the
investment done by one company into other countries for business interests. If the SASOL
Limited purchase and controls the assets, land or building in other countries for the purpose of
establishing or increasing the business. FDI has become one of the major driver contributing to
the globalization of the business because it allows the company to make investment across the
border. The requirement of physical resources and capital investment becomes obsolete in the
era of the internet. The internet allows SASOL Limited to do their business with less capital and
physical resources (Iamsiraroj, 2016).
 International business and trade
International trade and business allow SASOL Limited to expand its market by selling the energy
and chemicals in the other countries that might not be possible without globalization.
International trade and business bring more competition and competition results in low prices
that provide cheap products to its customers. International trade and business influences the
price, demand, and supply of the host countries. The globalization also helps the SASOL Limited
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to find its customers for expanding its market that was not possible before international trade
and business of SASOL Limited (Rugman and Verbeke, 2017).
The impact that key factors have upon the global business environment in terms of benefits
and challenges
Benefits of globalization
 Trade opportunities
The globalization of the business creates new opportunities for SASOL Limited for importing or
exporting its energy and chemicals. Globalization also gives choice to the company to selects its
own market according to the availability of the resources and capital.
 Procurement and outsourcing
Once the company starts its operation in the international market, it can also outsource its
business operation to other company or country. With the enhancement in intercultural
communication, the company can source high quality and low-cost labor and materials (Bozyk,
2019).
Challenges of globalization
The challenges faced by SASOL Limited at the time of doing business in the new global market
are as follows:
 Ethical business practices
The major challenge faced by SASOL Limited is following ethical business practices of the
country in which it operates. This includes product safety, labor, regulatory compliance, etc.
These practices decide the success or failure of the company in the global market. It is very
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important for SASOL Limited to maintain highest ethical consideration at the time of operating
in any other nation.
 Change in climatic conditions
Any change in the climatic condition affects the demand and supply of energy. The demand for
energy and chemicals can be said as derived demand. Their demand is totally affected by the
demand made by its customers. The customers of SASOL Limited are farmers, manufacturing
companies, coal industries and many more. The fluctuation in demand for the energy and
chemicals affects the business and profitability of the SASOL Limited (Lerch, 2017).
LO2 DETERMINE THE STRATEGIC COMPLEXITIES ASSOCIATED
WITH OPERATING IN A GLOBAL ENVIRONMENT
The complexity of strategic challenges faced by organizations when operating in a global
environment
SASOL Limited is been operated in Mozambique, Canada, Gabon, and Australia and expand its
business by entering the different market. Following are the challenges faced by SASOL Limited
for increasing its market presence in different geographical regions.
Ineffective leadership
Due to globalization, the company is not able to evaluate the most effective leadership style
that suits the requirement of the market. It becomes difficult for the company to find out
appropriate knowledge and skills so that they can easily approach to the target market. For
every country or region, it has to develop a unique set of policies and strategies that fit
according to language, management culture, and style of the particular region. In the process of
making an effective global strategy, the company is not able to attract competent and talented
personnel for the organization (Pucciarelli and Kaplan, 2016).
 Regulatory and legal structure
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The legal and regulatory structure of every country is different from others. Moreover, the rules
and regulations of the chemical and energy industry are strict compared to other industries.
The SASOL Limited need to appoint the legal experts for managing the in-country laws and
regulations followed in this industry. The company should evaluate and understand the
regulations of this industry so that they can implement it at the time of taking strategic
decisions.
 Organizational structure
The other strategic challenge faced by the company while operating in the global environment
is to incorporate the new regions into the existing organization structure and value chain. The
whole operation of the company gets disturbed when the new factory of SASOL Limited
established in the international market. All the methods of entering the international market
require huge capital investment and the development of each strategic business unit (SBU) for
managing the business operations and accounts.
Strategic challenges in the context of risk and diversification strategies and the supply chain
flow
The strategic challenge in the context of risk
SASOL Limited operates in a global market benefited from various business portfolios but on
the other hand, it also increases the risk of country, currency and the instability of local growth.
In order to capture emerging market opportunity the company indirectly enter into the area of
unfamiliar risk that is even difficult to evaluate. But the company uses the skills and right-
management infrastructure to determine the diversity in its operations. However, there is some
risk on which the company has no control i.e. the risk of currency fluctuation. The company has
to continuously change their terms, policies, transactions and even future projects as per the
currency fluctuate (Madon and Krishna, 2018).
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The strategic challenge in the context of diversification strategies
The challenge faced by the SASOL Limited while diversifying its business is that it is unable to
get talented, skilled and competent employees for its business operations. In addition to this,
the unnecessary cost of operation is also increased such as employee training and travel
expenses. The company should analyze this cost before operating in the international market.
The strategic challenge in the context of supply chain flow
Political, natural disasters, labor strikes and many more have a direct effect of the supply chain
of SASOL Limited. The supply chain of SASOL Limited is also affected by the scarcity of the raw
material and transportation problem. Even the supply of energy and chemical is affected by the
demand of the customers that is more seasonal (Mangan et al., 2016).
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PART 2 - IMPACT AND STRATEGIC DIRECTION
LO3. EVALUATE HOW OPERATING IN A GLOBAL MARKET
INFLUENCES AN ORGANISATION’S STRUCTURE, CULTURE AND
FUNCTIONS.
Globalization is a complex phenomenon which subsequently affects the structure of the
organization. The impact of globalization can be seen on the culture, structure, governance, and
functions of the business enterprise. It is important for the company to keep itself aware of the
trends of global trade which affect its strategies and business in both the positive and negative
manner (Gleeson, 2019).
The method or tool which can be used by SASOL limited in order to achieve the business
objectives and goals with the help of the factors and components of the company such as the
structure, systems, shared values, staff, style, skills, and strategy is known as McKinsey 7S
Model. These factors of the business entity should be aligned with each other to attain the aims
of business organization (Business Dictionary, 2019). The seven factors of McKinsey 7S Model of
SASOL limited are described as follows:
Strategy
The planning of a company to stand in the market and to give a tough competition to its rivals is
known as the strategy of the business. The strategy of the business of SASOL limited is focused
on growth and long term sustainable development of the company.
Structure
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The functional divisions of the company which has allotted different roles and responsibilities
for conducting their function are called structure. SASOL limited has production, sales,
marketing, and research and development for carrying out its functions.
Systems
Systems are the procedures and processes of the company which are undertaken for carrying
the decisions of the management. The system of SASOL limited includes the highest level of the
process which helps in ensuring commitment and other authorization within the company.
Style
The manner in which the managers and leaders interact with the parties internal and external
to the business organization is known as style. The company like SASOL limited has responsible
leadership style which controls and direct the company in a better manner.
Staff
The need and requirement of employees for the conduct of business operations within the
company along with their procedure of training, recruitment, selection, and motivation is
known as staff. SASOL limited has efficient employees which include responsible trade unions
and the company has provided exceptional working conditions to its employees.
Skills
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Skills are the capabilities required by the employees of the company for conducting business
operations. The organization of SASOL limited include skills employees and workforce who are
ultimately responsible for attaining competitive position by the company in the market.
Shared Values
The values, standards, and norms shared within the business entity that provides direction to
the employees are known as shared values. The main values shared by SASOL limited include
the growth of the company along with attaining sustainability and profitability.
Hofstede's Cultural Dimensions
When the company is taking its operations in the global markets, the factors of business such as
strategy, skills, values, style, structure, systems, and staffs are continuously affected by the
operations in international markets. SASOL limited is affected by the global forces around the
world which include the availability of raw material, political factors, supply chain maintenance,
regulations of local government, the demand of products and services, expectations of new
customers as well as workers of the company, and wages (Sarokin, 2019). The company may
also face a barrier of culture as well as language in the international market along with the
difficulties for communication and technologies (Durden, 2019). The
Hofstede's Cultural Dimensions can be used by the company for measuring the influence of
global operations of the business in the international markets.
The theory of Hofstede's Cultural Dimensions was devised by Geert Hofstede which lays
emphasis on the communication the markets of the cross-cultural countries. The theory is used
for analyzing the cultural differences between different nations which has an impact within the
operations and functions carried on by the business entity like SASOL limited. This theory of
Hofstede's Cultural Dimensions was introduced initially with four main cultural dimensions
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which were afterward brought with an introduction of two more additional cultural dimensions
of the theory.
The six cultural dimensions of the theory of Hofstede's Cultural Dimensions are explained as
follows:
Power distance
The index of power distance is the distance felt by the people of the company due to the
difference in power and authority. The index is used for measuring the general distance
between the people with power and the people without power. SASOL limited can use power
distance index for measuring its position in different countries where it conducts its operations.
Uncertainty avoidance
It is the cultural dimension which helps the company in managing and measuring the degree of
tolerance for the uncertainties and ambiguity in the business. SASOL limited can reduce the
level of ambiguity and uncertainty in the business with the help of regulations and strict rules.
Individualism vs. collectivism
When the goals of individuals are given more importance by the management of the company
it is known as individualism. When importance is given to the group goals and objectives within
the company it is known as collectivism.
Masculinity vs. Femininity
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