Course Code: MGN578 Course Title: International Business

Environment

Course Instructor: Dr. Sheetal

Academic Task No. : 03 Academic Task Title: Situation Based

Problem

Date of Allotment: 15/08/2019 Date of submission: 15/09/2019

Student’s Roll No. : B47 Student’s Reg. no: 11907761

Evaluation Parameters:

Learning Outcomes: Various Factors that affect the Organization in International

Environment. International Concern of Organization and various Strategies for growth of
the company

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other
student’s work or from any other source except where due acknowledgement is made explicitly
in the text, nor has any part been written for me by any other person.

Student’s Signature: Prerna Kumari

Evaluator’s comments (For Instructor’s use only)

General Observations Suggestions for Best part of assignment

Improvement

Evaluator’s Signature and Date:

Marks Obtained: _______________ Max. Marks: ______________

Sasol
History of Company: Sasol Limited headquartered in Sandton, South Africa was founded in
1950. It is an energy and chemical based company under the Oil and Gas Chemical Industry.
Initially company was formed in Sasolburg and it was built on German Chemists and Engineers
Processes of early 1900s. Germans built a number of plants to provide the bulk of the fuel for
their Military to carry out various operations during World War 2. Sasol, today develop, build
and commercialize technologies to operate world class facilities. Sasol produce high-value
products, including chemicals, liquid fuels and carbon electricity. In 2014, Sasol introduced an
operating model based on new value chain.

CEO and Investors: Bongani Nqwababa and Stephen Cornell are the joint CEOs of Sasol. Sasol
is registered as the Johannesburg Stock Exchange and traded as JSE: SOL, and as New York
Stock Exchange and traded as NYSE: SSL. The largest corporate taxpayer in South Africa is
Sasol. South African Government Employees Pension Fund, Coronation Fund Managers, Allan
Gray Investment Counsel Industrial Development Corporation of South Africa Limited, and
Investec Asset Management are the major shareholders of Sasol.

Operations and Services: Sasol Limited is structured in two business units, three regional
operating hubs and four customer strategic business units. The structure of Sasol is supported by
fit-for-purpose functions. Sasol has development, exploration, marketing, production, and sales
operations in 36 countries, including Southern Africa, Europe, Middle East and Far East, Asia ;
Northern Asia, Southeast Asia, the America, and Australasia.

Operation Business Units (OBUs): Sasol comprises of Mining Division and Exploration and
Production of oil and gas activities. Sasol Mining supplies Feed Stock for Sasol Synfuels
(Secunda) and Sasolburg Operations (Sasolburg). Sasol Exploration and Production
International (SEPI) is involved in developing and managing the company’s interests in oil and
gas production across South Africa, Canada, Australia and Mozambique.

Major Projects of Sasol Limited:

1. US Ethane Cracker and Derivatives Plant

2. Joint Venture between Sasol and Qatar Petroleum, Oryx GTL plant in Qatar.

3. Sasol gas-fired electricity generation plant in Mozambique.

4. Uzbekistan GTL project, a partnership between Sasol, Uzbekistan and Petronas.

Products: The main products Sasol produce are chemical components, fuel components and co-
products. From these main products Sasol delivers other products that includes petrol, diesel,
kerosene, LPG, naphtha, olefins, polymers, alcohols, surfactants, solvents, ammonia, methanol,
co-monomers, crude tar acids, Sulphur, bitumen, illuminating paraffin, and fuel oil. Numerous
additional products after further processing are also offered by Sasol.
Sasol supplies globally to industries such as Agriculture and Forestry, Adhesives, Automotive
and Transportation, Burner fuels, Chemicals, Construction and Materials, Corrosion Protection,
Electronics and Electrical, Flavors, Fragrances, Furniture, Health and Medical, Household and
Consumer goods, Industrial Products, Lubricants, Mining, Manufacturing, Packaging, Paints and
Coatings, Personal Care, Pharmaceuticals, Plastics and Polymers, Publishing and Inks, Pulp and
Paper, Rubber and Tyres, Steel, Foundry, Specialty Graphite, Textile and Leather, Water
Treatment and many other industries.

Financial Stability of Sasol: Revenue generated by the company is US$21.78 billion. Operating
Income is recorded as US$21.78 billion while Net Income is US$3.11 billion. Company has also
recorded an increase in earnings per share by 112%. Earnings growth was found slower than the
expected growth due to the volatility in oil price. Also production and sales volume was recorded
low, hence contributing to slow growth of earnings. Company is confident that the LCCP project
will deliver the steady EBITDA run-rate of US$1.3 billion in FY2022, though incremental cash
flow is deferred due to delay in schedule. Headline Earnings and Core Headline Earnings per
share up by 32% and 18% respectively. Total assets available with the company are 472,461
whereas Total Liabilities are 236,464. Overall Sasol has recorded revenue increase in all the
segments including energy segment (33%), chemical segment (14%), exploration and production
international segment (37%). Thus Sasol is Financially Stable.

SWOT Analysis of Sasol

1. Strengths
 Diverse and Extensive Business Portfolio that includes mining, chemicals, gas and
synthetic fuels.
 Operations across International Market helps Sasol in spreading its cost and achieving
operational efficiency.

2. Weakness

 Fragile presence in Asia Pacific deprives its opportunity to increase growth of revenue.

 Interruptions faced for Power and Supply Generation from Eskom.

3. Opportunities

 Growth in global energy demand will help Sasol to leverage its oil operations.

 Sasol determination to improve Carbon and energy efficiency will enhance its
environment friendly image

4. Threats :

 Sasol is earning a weighty part of its revenue from International Business, thus foreign
operations related risks are also threats for Sasol.

 Rigorous Govt. Regulations in South Africa may impose new liabilities on Sasol
History of Entering Into Foreign Market
South African Coal, Oil and Gas Corporation (Sasol) was formed in 1950. In year 1979 Sasol
Limited came to existence to hold Sasol’s assets. The principal product of Sasol was synthetic
fuel, a business that was protected by South Africa during Apartheid year. But during transition
to democracy in 1990s has pushed the company to explore the products that will provide
competitive edge to Sasol in the global marketplace.

1950-80: Period of Growth and Origin

The first Sasol plant was established in 1955. But it had to face delay in successful operation for
more than a year due to initial technical issues. Budgetary achievement was conceivable simply
because an arrangement of levy assurance and sponsorship worked. In 1966, Sasol's association
in National Petroleum Refiners of South Africa (NATREF) refined imported oil. With the
business working, private investment became accessible, and Sasol was effectively privatized in
1979.

1964-94: Period of Post-Apartheid Economy

Kuwait banned petroleum exports in 1964 to South Africa. 1974 and 1978 oil crises had given a
significant lift for Sasol, higher world prices enabled it to increase prices and make the cost of
production closer to the world oil price. Sasol was made public in 1979 and 70 percent of its
shares were placed on the market. Firstly 490 million shares were upraised by reserved
engagement of shares and another 17.5 million shares were made open to the public. Pension
funds, South African institutional investors and large companies acquired the lead. To attract
small investors, promises of privileged distribution treatment was taken in account. Foreign
investors had shown interest because they were allowed to make their acquisitions using the
monetary rand and dividends would be compensated at the conventional commercial exchange
rate.

Sasol placed significant prominence on exploration and expansion during this period which had
been the platform for significant technical advancement. On this basis South Africa it also
provided technical facilities overseas. Most prominent was technical provision for U.S. gas
companies. Company also provided general consultancy for a gasification plant in North Dakota,

1994-2001: After Apartheid and International Expansion

Nigeria: Sasol signed a $1 billion agreement with Chevron in 1999 to build a natural gas treating
plant in Nigeria. The ultimate objective of agreement was to produce artificial crude oil at the
rate of 30,000 barrels a day. The joint venture emerged into a new company by 2000 as Sasol
Chevron Holdings. The venture devoted itself in founding similar natural gas-to-oil refineries
around the world.

Qatar: In year 2007, Sasol partnered with Qatar Petroleum. The first GTL venture of Sasol
named as Oryx GTL.
India: Indian Government announced in March 2009 that it will be awarding the north Arkhapal
coal block in Orissa to Strategic Energy Technology Systems Limited that will be a joint venture
of 50:50 of Tata Group and Sasol Synfuels International.

China: Sasol is also looking forward to a CTL plant in China with Shenhua Group. In 2009
Sasol signed a memorandum of understanding with Indonesia to investigate 80,000 barrel-a-day
CTF plant. Sasol and Shenhua submitted an application in 2009 to China's National
Development and Reform Commission (NDRC) to build a 94,000 barrel-a-day plant to convert
coal into motor fuel in the Ningxia Hui autonomous region.

America: On Dec 3, 2012, Sasol announced that it will expand its GTL from South Africa and
Qatar to America. It will build America’s first commercial plant that will convert Natural Gas to
diesel and other liquid fuels. Louisiana and Canada are the two plants that Sasol holds. Louisiana
is one of the largest foreign investment manufacturing plant.

Iran: Sasol owns 50% in Arya Sasol Polymer where Iran’s Government owned National
Petrochemical Company owns 50%.

Sasol v/s Shell in Foreign Market

Energy and petrochemical company, Royal Dutch Shell is in Netherlands with overseas business
all over the world. Shell works using different modes of market development to gain and enlarge
the share in the local market that Sasol does not do. The results shows that the mode choices
based on different situations are suitable and progressive, which gives vital position to Shell as a
leader in the oil and gas industry.

In Australia, Shell Energy Holdings Australia Ltd. and its partner Petro China International
Investment Company Ltd. have entered into an arrangement with Australia-based Arrow Energy
Limited in which Arrow chooses to sell its 100% shares to Shell and PetroChina at a complete
cost of $3.5 billion (Arrow Energy, 2010, web). Acquisition of excellent quality resources in
combination with high quality emissions. Sasol is not having quality assets in this case.

Another important strategy in Shell's process of internationalization is to build fully owned

subsidiaries. For instance, in Nigeria it has built several subsidiaries. Shell first exported oil to
Nigeria market in 1958.

Shell is also expanding its company in the form of licensing to assist other refiners create
company applications of cutting-edge techniques. Shell Global Solutions is such a corporation
that by licensing sophisticated technologies offers assistance to its clients. The customer could
obtain a specific technical help or operational consultancy with a permit granted by Shell Global
Solutions.

The main factor affecting Shell's internationalization route is the unique organizational structure.
PESTEL ANALYSIS OF SASOL MOZAMBIQUE

Political Factors:
There are quite varied political variables that can affect the company's profitability or likelihood
of survival. The political dangers differ from abrupt modifications to civil unrest in current
political regimes to significant public choices. In the case of potential multinationals, political
variables may also be included that impact not only the target nation but also all nations.

1. In 2018, an Islamist group in the marginalized and poor north of Mozambique escalated
its assaults. Unauthorized debt buildup has led donors to cancel budget support. Thus
Mozambique is not politically stable.

2. There is a legal framework for fighting corruption, but it is scarcely used.

3. Senior representatives in government often have disputes of concern in their private

business interests.

4. Mozambique continues a difficult company location thus entrepreneurs will find it risky
to invest in Sasol

Economic Factors:
Economic variables are all those related to the country's economy that Sasol Limited, such as
inflation rate modifications, foreign exchange rates, interest rates, gross domestic product, and
the present economic cycle phase. These variables and their consequent effect on aggregate
demand, aggregate investment and the overall company climate have the ability to produce:

1. Mozambique has an unsustainable internal debt burden, and a dramatic fall in investment
inflows and comparatively fragile financial development threatens macroeconomic
stabilization.

2. The continuing "concealed debt" scandal of Mozambique vividly shows the significant
organizational deficiencies that damage long-term economic development, such as
corruption and political impact on the judiciary.

3. Government expenditure has risen to 33.2% of the country's production (GDP) over the
previous three years, and budget deficits averaged 6.3% of GDP. Public debt corresponds
to 102.2% of GDP. Thus it will slower down the growth of Sasol Limited.

4. Sustaining elevated development levels in the medium term, however, is a task. A

development route that is more inclusive is required. For instance, investors stay worried
with complicated licensing processes, hard property access, time-consuming processes,
the complexity of obtaining skilled labor and executing initiatives outside Maputo.
Social Factors:
1. Mozambique's literacy rates are very small. The state has improved the amount of
colleges, educators, and launched classes for adult literacy. However, while Maputo
supports most of this advancement, the remainder of the nation still has low-quality
educational infrastructure and at a very young era, particularly women, students fall out
of college. Sasol may get low paid labor but not skilled labor.

Technological Factors:
1. Due to its growing event in the nation, HIV / AIDS is regarded a huge risk to the
Mozambican economy. Mozambique is one of the world's 10 nations most impacted.
HIV / AIDS primarily influences young adults, thus affecting the labor force's
performance and effectiveness. The function of businesses in tackling HIV / AIDS-
related problems is essential, for example through employee education.

Environmental Factors:
1. The present climate may have a significant effect on Sasol Limited's capacity to handle
both resource and finished item transportation. This, in turn, would affect the final
product delivery dates for, say, an unexpected monsoon.

2. Climate change would make some products pointless as well.

News:

1. Chemicals giant Sasol, whose share price has almost halved since the beginning of May,
yet again delayed the release of financial results on Friday saying it had expanded the
scope of a probe into its embattled Lake Charles project in the US
References:

1. https://www.sasol.com/mozambique

2. https://www.sasol.com/mozambique

3. https://www.marketresearchreports.com/countries/mozambique

4. https://www.owler.com/company/shell