Strategic Challenges Faced by Global Organizations: A Report

This report provides a comprehensive analysis of the strategic challenges faced by organizations operating in a global environment, with a specific focus on SASOL Limited. The report begins by defining globalization and its drivers, including technological, political, and competitive factors. It then critically analyzes the impact of globalization on the business environment, exploring both benefits and challenges, such as legislative complexities and linguistic barriers. A PESTLE analysis is conducted to evaluate the external factors influencing SASOL Limited's operations. The report further identifies strategic challenges related to product changes, financial constraints, and supply chain risks. Recommendations are offered to overcome these challenges. The report also examines the company's structure, culture, and governance using McKinsey’s 7S model, and applies Hofstede's cultural dimensions to demonstrate the influence of culture on the organization. Ethical and sustainable factors are evaluated, and strategic expansion routes are analyzed. The report concludes with a summary of key findings and recommendations for navigating the complexities of global business.

P2 Explain the complexity of strategic challenges faced by organisations when operating in a global
environment supported by specific examples.
Global Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1 - Drivers and challenges for globalisation.........................................................................1
1. Introduction to the concept of globalization.......................................................................1
M1 Critically analyses the impact on global business environment in terms of benefit and
challenges...............................................................................................................................2
D1 figure out various opportunities and challenges faced by organization at global level....2
2. Driving factors of globalization..........................................................................................2
3. Significant impact of digital technology upon globalization.............................................3
4. PEST/LE analysis of the organization................................................................................3
5. Challenges of globalization and the strategic challenges...................................................4
6. Recommendations on how to overcome these challenges.................................................5
M2 Identify strategic challenges in context of risk diversification in supply chain flow......5
PART 2 - Impact and Strategic Direction........................................................................................5
1. An explanation of the structure, culture and governance of the organization by Applying
McKinsey’s 7S model............................................................................................................5
2. Applying Hofstede's Dimensions of Culture to demonstrate how the organization has been
influenced...............................................................................................................................6
M3 Evaluate global market and its application to theories and models in the aspect of
organizational structure..........................................................................................................7
D2 Examine strategies which can be adopted by organization operating in global business
environment............................................................................................................................7
3. Evaluation of ethical and sustainable factors.....................................................................8
4. Factors have affected decision making in a global context................................................8
M4 identify key barriers while doing business internationally and recommendations..........9
5. Strategic expansion routes the organization took and analyze both advantages and
disadvantages..........................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Global business environment refers to the collaborative working of more than two
companies with one another in order to enhance their prof9itabilirt at international market place.
It includes both the internal as well as external environmental factor which influences its
operational activities in positive and negative manner (Alqahtani and Saba, 2013). SASOL
Limited is a South Africa based company which is taken into consideration for completing this
project. The company belonging energy and chemical industry. The present report explains
various key factors which drives globalisation. It also determines different kind of strategic
complexities which are faced by business organisations at the time of operating their business
activities at global environment. Furthermore, it also shows how business activities of companies
at international level affects company's culture, functions and structure. Last but not the least it
describes influence of globalisation over organisational decision making and its business
strategies.
PART 1 - Drivers and challenges for globalisation
P1 Introduction to the concept of globalization.
Globalization refers to the integration of two or more businesses through the medium of
exchange of products and services for the common motive of earning profits. It is seen as
business concept but still it is not limited to the business organization only. Concept of
globalization has developed various growth opportunities for the individuals as they are now able
to approach their desirable company working in other nation. Along with this, globalization has
also helped customers in reaching to the products and services from their native nation only.
Overall it can be said that globalization has developed standard of living of people as the with
this concept economical position of every nation is developing day by day (Black, Morrison and
Gregersen, 2013). While analyzing negative influence of the same concept it has been seen that it
creates numerous of tax policies for the companies operating at different nations. This makes it
complex for business organization to deal with high number of legal terms. As per the present
scenario, it has been seen that SASOL Limited is already operating its business activities in
Mozambique, Australia, Gabon and Canada and its superior team is also planning to expand its
business in other nations too. FDI foreign direct investment is the place when an investor
establishes foreign business operations or acquires foreign business assets in a foreign company.
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However, FDI are distinguished from portfolio investments in which an investor merely
purchases equities of foreign based companies.
International economic integration: Economic integration is an arrangement among
nations that typically includes the reduction or elimination of trade barriers and the coordination
of monetary and fiscal policies which are useful for the company as well as for the economy.
International business: International business encompasses all commercial activities
that take place to promote the transfer of goods, services, resources, people, ideas, and
technologies across national boundaries as this help in expansion and growth.
M1 Critically analyses the impact on global business environment in terms of benefit and
challenges.
Global business environment is changing rapidly so as the company have to change
accordingly in order to sustain in business. There are some challenges such as complexity in
business which create confusion among organization and for consumers. Another challenge is
legislative structure where every country have their own legal environment so company must
have proper knowledge regarding laws before launching their new product. There are some
benefits in globalization which help firm to grow instantly. One of the major benefit is expansion
in which company can operates there business beyond the boundaries and can generate revenue.
Globalisation has also allowed a important rise in the level of application used in today’s
world. Many businessperson and internationally bound firms have obtained the help of
technology to exploit new enterprise opportunities. With the assistance of globalisation the job
opportunities has been emerged and people have different opportunities for company to grow
and expand the business effectively.
D1 figure out various opportunities and challenges faced by organization at global level
Global environment is highly uncertainty which influence global change. Global forces
and trends regularly change which directly effect the business. There are some challenges which
are faced by company are growing urban population, rise of emerging market, technological
advancements and climate change. And there are several other opportunities such as untapped
market, expansion and diversification. Company can focus on providing quality product and
services which provide opportunities for SASOL to capture large market share effectively.
Hence this is also improve the brand image which help in providing better model for growth and
expansion respectively. Along with this company has to face different rules and regulation while
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entering in the market so management should improvise the working culture in order to be
successful at a global level.
2. Driving factors of globalization.
Driving factors are seen as those elements which uplifts business activities effectively.
With reference to the term globalization, it has been analyzed that driving factor for globalization
are helpful for the companies like SASOL Limited for facilitating their business activities
smoother in international market place. Some of the core driving factors of Globalization which
helps SASOL Limited in smoothing its business activities at international marketplace are
described as below: Technological Drivers: Advance form of technology helps business organisation in
exchanging goods and services effectively at international marketplace. So that, with the
help of Digital Technology, management team of SASOL Limited can operate business
activities without facing any kind of difficulty (Cavusgil and et. al., 2014). Political Drivers: Reducing tariff rates and leniency in trade laws can be seen as the
strongest form of political influence which drives functioning of SASOL Limited at
international market place in effective manner.
 Competitive drivers: Continuous based increment in competition has influenced top most
team of SASAOL Limited to expand their business at international scale. This is because,
by going global the company can easily approach to more number of customers that will
enhance their profitability in effective manner.
3. Significant impact of digital technology upon globalization
Technology is considered as the broad term which has numerous of components that
supports in its efficiency. Digital form of technology includes digital form of resources such as
internet which helps businesses in communicating to one another. It has been analyzed that
digital technology places huge impact over the globalization as well as accounted company that
is SASOL Limited. While considering influence digital technology over globalization and
SASOL Limited it has been seen that digital form of technology has helped individuals to
communicate to one another from long distances too (Ferraro and Briody, 2013). It also make it
easier for the companies to make their financial transaction from their native place with just one
click only. It can be said that Digital technology has also influenced SASOL Limited in selling
and buying their products and services at international scale. Along with this, digital technology
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has also developed chances of fraudulence as hackers are considering this technology as
opportunity through which they can execute their unethical plan in quick manner.
4. PEST/LE analysis of the organization
External analysis is helpful for every business organisation through which they enhance
their knowledge over the market. It helps them in identifying business opportunity and possible
threat present at market place for company (Kasemsap, 2014). With reference to SASOL
Limited, its top management team has conducted PEST analysis before expanding their business
at international market place. All of the consisting components of this framework are described
as below:
Political:
SASOL Ltd is engaged across the world in the dealing associated with oil and gas. The
political state of nations in which it trades is crucial for its success. In this regard, it can be said
that unstable political state of some countries would generate risk for entity while the vice versa
also holds true. Also, it comprises of taxation laws, labeling of products, wage laws which have
to be duly complied by company.
Economic:
This includes interest rate, inflation, economic growth, employment rate and other
essential economic factors. All such aspects have a significant impact upon the operations of
business. The beneficial factors for SASOL Ltd are high purchasing power of buyers and high
growth rate of Oil and Gas sector that helps it in paving its success trajectory (Zhang and Huang,
2012). There are other factor which are include in the inflation rate and currencies exchange rate
which indicates the performance of the company in the well define manner.
Social:
These consists of consumer lifestyles and trends that impact upon the demand and supply
of companies. Positive attitudes and ideologies of people towards the oil and gas offered by
corporation favorably impact upon the sales as well as profits of SASOL Ltd.
Technological:
The constant advancements taking place within the Oil & Gas industry hold the capacity
for SASOL Ltd to disrupt the sector and thereby gain high satisfaction from customers (Laudon
and Laudon, 2015).
Legal:
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There were different challenges face by the company such as international trade laws as
there different nation have different nation law to perform business activities. In this case
company like SASOL must ensure about the international laws for smooth fuctioniong.
5. Challenges of globalization and the strategic challenges
Globalization provides numerous of benefits to the business organizations but at the same
time concept is also associated with numerous of challenges. Manager of SASOL Limited has
identified that some common challenges as well as strategic challenges of globalization. All
these challenges are stated as below:
Challenges of globalization
Lingual barrier is considered as the main challenge for SASOL Limited at the time
expanding their business at international level. This is because, manager of the company are not
able to communicate to other business associated people as as will not be able to express their
thoughts with one another (Lee, Olson and Trimi, 2012). As a result, it becomes difficult for
them to make decision with other culture people.
Strategic challenges of globalization
 Products or technological changes: Any changes on technological grounds at global
scale can be considered as major strategic challenge of globalization for SASOL Limited.
Due to this, manager of SASOL Limited will not be able to perform their work
effectively.
 Financial: SASOL Limited requires adequate amount of funds in order to execute their
business activities effectively at international grounds. It becomes crucial challenge for
SASOL Limited to arrange appropriate amount of finance for the company for becoming
successful at global level.
6. Recommendations on how to overcome these challenges
For overcoming above described challenges it is advised to management team of SASOL
Limited to provide hire some localize employees from the operating country in order to avoid
lingual problems. At next, it is essential for managers to go for only those strategies which are
available in all nations (Ramamurti, 2012). Along with this, they can also conduct some training
session for the employees so that they can understand new technology in effective manner. For
raising financial funds, managers can approach banks for loan.
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M2 Identify strategic challenges in context of risk diversification in supply chain flow
There are numerous amount of challenges in a supply chain flow such as natural
disasters, electronic attack, politics, inflation and unstable economic situation which effect the
organization operational activities. Without the robust supply chain company can fulfill the
demand of customers effectively. Supply chain diversification reduce the risk of firm by making
sure company have different supplier base, no matter what problem arise. It is more than a back
plan, had it is important that business must hire trusted suppliers which provide flexibility in any
situation. Keeping track on suppliers ensure that company is serving the best quality product and
completing the demand present in market.
PART 2 - Impact and Strategic Direction
1. An explanation of the structure, culture and governance of the organization by Applying
McKinney's 7S model
The top management team of SASOL Limited has used McKinsey 7s Model in order to
improve their organizational structure, culture and governance. The model is consist of hard and
soft elements which are described as below:
Hard:
 Strategy(Governance): The top management team of SASOL Limited uses rules and
regulation for ensuring that all activities of company at the time of expansion are
completed within the provided time frame.
 Structure: Functional organizational structure is being used by management team of
company. In this work of company are divided among according to their skills and
knowledge only (Savrul, Incekara and Sener, 2014).
 System: The company follows its own system according to which all of the business
activities are completed by associated people in effective manner.
Soft:
 Shared values: SASOL Limited gives prefers to the ethical norms of company while
executing all business activities effectively.
 Skills: Human resource department of SASOL Limited hires employees on the basis of
their skills and knowledge.
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 Staff: Influence of Globalization will increase requirement of more employees in order to
operate business transaction.
 Style: SASOL Limited is following democratic leadership style in order to maintain
freedom at workplace.
This model help the organization like SASOL to make effective decision which is useful
in improving the decision for the company. Along with this, it help in maintain the alignment and
performance during other changes. These changes could include restructuring, new processes, an
organizational merger, new systems, and change of leadership in SASOL. Further this method
help in organization to remain competitive in the industry and make sure help in making healthy
relationship with the customers.
2. Applying Hofstede's Dimensions of Culture to demonstrate how the organization has been
influenced
SASOL Limited is an organisation which has been carrying out their operations in
numerous countries. There are numerous factors which tend to influence operations of business
which can be analysed through undertaking of Hofstede's cultural dimensions (Simic and
Dimitrijevic, 2012). The major dimensions which are covered in this culture are as follows:
Power Distance Index: This section focuses on the inequality which is persistent in the
different regions of the society. For instance: when there is an high PDI amongst the host and
other nations, there tends to be more focus on centralised operations and large gaps in authority
and responsibility.
Individualism and collectivism: This dimension of model signifies how the work is
accomplished within organisation. The host nation focuses on individualist society which means
people are more inclined to finish their individual tasks and there is less focus on team efforts.
Masculinity: This dimension indicates that society will be focused on competition
achievement. The impact of this cultural dimension is that managers working with this
organisation will be more decisive and will be assertive in order to get the work done.
Uncertainty Avoidance Index: The people belonging to this region are more inclined to
control their own life and avoid the uncertainties which may arise in the near future (Solomon
and et. al., 2014). The managers in low UAI are not tempted to control their lives and are open to
new experiences.
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Long term orientation: This determines approach which has been opted for organisation
while making decisions. In context of this business,normative culture is emphasized as status quo
of organisation are maintained. The traditions are considered supreme in this culture which short
term results are appreciated.
Indulgence: This is last dimension in this cultural model which focuses on ability of
humans to control their desires (Voegtlin, Patzer and Scherer, 2012). The culture in context of
SASOL Limited can be considered as indulgent as they are optimistic and carry a positive
outlook towards business decisions.
M3 Evaluate global market and its application to theories and models in the aspect of
organizational structure
Company mostly rely on vertical and horizontal linkage which create structure in which
company can fulfill organization goals and objective. There are basically four types of
organizational structures such as simple, functional, multi divisional and matrix. Simple structure
depends upon division of labor and organization charts are not needed. If the firm is sole
proprietorship, in this case single person perform all the task. In functional employees are
divided into two groups and every individual have different task according the requirement of
organization. In the case of multi divisional employees are divided into department based
product and also geographical location. At last in matrix firm engage in project in which
company use matrix structure where employees are give task as per their creativity.
D2 Examine strategies which can be adopted by organization operating in global business
environment.
Global business environment refers to growth of trade and investment, accompanied by
the growth in international platform. There safe some strategies which can be adopt by company
while operating their business in global environment are explain below.
 Technological advancements have increased as they provide ease of communication and
travel international;y within no time.
 Effective communications and travel have made worlds smaller and become easier to
interact with various customer within no time.
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P5 . Evaluation of ethical and sustainable factors
Ethics are considered as the morale of individual which govern or regulate their pattern of
working activity. It has been seen that SASOL Limited is required to focus on some ethical and
sustainable factors which helps them in effectively expanding their business in international
marketplace. Some of these factors are described as below:
Corporate Social Responsibility (CSR): CSR activirties are considered as the initiation
of comapny towards the society in which they contribtues their proprtion of help towards societal
development. Some CSR activities which is being performed by SASOL Limited for maintaining
their good will in soceity are described as below:
 Providing employment opprtunities to unkilled youth.
 Conducting medical camps for orphange Conducting skill development sessions
Compliance with laws and regulations: The management team of SASOL Limited
focuses on following all laws and guidelines in order to ensure that all activities are conducted
within the legal parameter only. The company follows health and safety, equality act, laws of
employment, trade barriers and other associated legal laws (Wetherly, 2014). Compliance of
these laws helps company in expanding their business in international marketplace in effective
manner.
Sustainable globalization represents a insight and a fundamental transformation in how
people approach doing business in a global world in the 21st century. Sustainable globalization is
principle centered, operating on relation values of service, collaboration, and the triple bottom
line. This has bring the immense technological advancements in the recent days and help the
organization like SASOL to grow and expand effectively.
4. Factors have affected decision making in a global context
It has been seen that there are numerous of factors which influences decision making of
company at global scale. They includes corporate social responsibility, plans and procedures and
cultural values. All of these stated affects decision making of SASOL Limited while operating
their business at international scale. It can be said that managers of this company have to make
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certain plans and procedures according to the operation country as they have make decision on
the same accordingly. This development of plans will help the company in achieving their
targeted aims and objectives in South Africa. It can further be said that CSR activities of the
company are also planned according to the market situation and global requirement.
M4 identify key barriers while doing business internationally and recommendations
While performing business internationally company have to face various kind of barriers
which can reduce the effectiveness of company. Few barriers are language differentiation,
culture barriers, working time zone, indulge in multiple currencies, legislative barriers and
infrastructural issues. Some recommendations which may increase productivity of organisation
which are company should focus on local market expertise because they know the market and
can provide guidance to new company. Another option is that company should cultivate
partnership with region so that they can capture large market share and also help in increasing
profitability.
5. Strategic expansion routes the organization took and analyze both advantages and
disadvantages
A company has various option available for executing business activities at international
market effectively. With reference to SASOL Limited, it has been analysed that its top
management team have adopted two alternative ways in order to enhance their business
operation in international marketplace in effective manner. At first the company can go for
merger with another successful company in order to get support of one another in right form.
Along with this, the company can buy another company of same field in new country. Here, it
can be said that the main advantage of buying already established company is that whole set up
is ready for the organisation which saves their time (Wild, Wild and Han, 2014). At the same
time, it the drawback of this method is that the company might not approach to right and required
employee as they are not worthy for the company.
Advantage: The major advantage of expansion is that company can capture large market
share and increase the market share effectively. Apart from this, it help in developing better
brand image which automatically improve the sales and revenue for the company.
Disadvantages: The another route is merger and acquisition where company can
Increased market share can lead to monopoly power and higher prices for consumers. Beside this
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it also increase the cost which tend to loose market share . This also loose affordability hence this
reduce market monopoly and also hamper the business model of sustainability for company.
CONCLUSION
On the basis of above describe report, it has been concluded that globalisation is an
beneficial concept as it has helped all in their development. The term also includes various
challenges like issues developed due to change in technology which can be overcome with the
help of training to employees on new technology. Usage of PEST analysis have helped
businesses in identifying opportunities at marketplace.
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