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Sasol and burger king research task

Rationale: How can Sasol utilise their strategic alliance with Burger King to combat challenges and risks in the macro environment?

Businesses have no control over what takes place in the macro environment, and thus can only create strategies to either combat any challenges, mitigate any risks or pursue any opportunities. Through partnering with Burger King and allowing this fast-food chain to reside in their forecourt, Sasol has given itself a competitive advantage within the petrol station industry, as consumers who are interested in purchasing a Burger King product will most likely purchase fuel from Sasol due to the convenience. As Burger King is an international brand that was first founded and introduced in America, Sasol can receive money from Burger King in terms of rent and per their agreement, both within South Africa and internationally. By using this money earned from Burger King, Sasol can initiate Corporate Social Responsibility/Investment programmes in an attempt to improve the South African economy in terms of education, literacy, employment and skill development. Partnering with Burger King, where Burger King chains are then set up in almost all Sasol forecourts, results in more jobs being created. Working at Burger King does not require a quality education or quality skills and knowledge, so those living in poverty in South Africa are able to be employed and earn an income of sort. This lowers the unemployment rate, inadvertently improving the South African economy. The same can be said for CSR/CSI programmes – Sasol and Burger King give back to the South African community through CSR/CSI programmes, such as Sasol’s community affairs programme, which focuses on employment, skills development and education, and Burger King’s Burger King McLamore Foundation, which focusses on education and literacy rates. These programmes aim to improve the education, literacy, knowledge and skills of people within South Africa who had not received quality, or any, education. This improves these people’s chances of being employed and obtaining an income, which slowly will pull them out of poverty, improving the poverty rate and unemployment rate within South Africa.

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Focusing on the South African economy is vital at the moment. In 2018, South Africa reached junk status. This resulted in many foreign investors disinvesting in the country (Uctrf.co.za, 2019). Due to this status and the weak South African currency, some businesses have resorted to closing down a number of their physical branches in South Africa, namely Standard Bank. Starbucks has also confirmed that they will not be opening any more stores in South Africa due to the economic status. If Sasol and Burger King focus on using the money earned to initiate CSR/CSI programmes in South Africa, it could improve the South African economy.

Executive Summary

Sasol had installed their first domestic oil reserves in South Africa in 1955. Since then, Sasol has been its own supplier, refining its own oil before selling their own oil to the public. This means that Sasol is less impacted by supplier bargaining power than competitors. Sasol also then earns money by selling this oil as more than just petrol for motor vehicles. In 2015, Sasol had “handed over the Benzane health centre to government authorities in Mozambique” (Sasol.com, 2019). This health center had been a part of Sasol’s Corporate Social Responsibility programmes, which aimed to improve the accessibility of healthcare and welfare through developing infrastructure within the country. This health care centre is lies on the border of Gaza and Inhambane provinces, allowing it to assist over 18 000 people from Benzane (Sasol.com, 2019). This improves the health and welfare of people, allowing them to be able to work, learn and develop their skills. This center also created jobs, as it required doctors, nurses, cleaners, receptionists, etc., for this health center to be able to function efficiently.

Although Burger King is not as involved in CSR/CSI in South Africa as Sasol, the money that Sasol receives from Burger King as per their agreement can be put towards Sasol’s various CSR/CSI initiatives, or be used to create new initiatives aimed at indirectly improving South Africa’s economy.

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Background: Sasol

Sasol was first established in 1950, to make South Africa “self-sufficient in petroleum resources by converting coal to gasoline and diesel fuel” (Encyclopedia Britannica, 2019). Sasol limited was officially formed in 1979, in order to “hold the assets” (Encyclopedia Britannica, 2019) for the South African Coal, Oil and Gas Corporation (SASOL) and its subsidiaries. For many years, Sasol’s principal product – in other words, the main reason of business or the main product being sold – was synthetic fuel, derived from coal – this was their unique selling product (UPS). However, in the 1990’s, the company was forced to search for different products that could improve their competitive advantage in the global marketplace, due to the transition in South Africa to democracy. Since then, Sasol has changed its focus primarily to its petrochemical business, which are petroleum distillates, and on efforts to convert natural gas into crude oil. These petrochemical products are now Sasol’s UPS.

Sasol, the South African Coal, Oil and Gas Corporation, was first established in 1950, “as part of the process of industrialisation that the South African government considered essential for its economic development and autonomy” (Referenceforbusiness.com, 2019). South Africa had no “domestic” oil reserves, which refers to oil that is found within the country. This made the country vulnerable to any sort of disruption of supplies from outside the country. Despite it usually being more expensive to produce oil from coal than natural petroleum, the political and economic importance of achieving independence was significant enough to override any objections.

Successful operation of the first Sasol installation was opened in 1955. With the success in the industry functioning, private finance became available and, as a result, Sasol was able to be successfully privatised in 1979.

Sasol remained in the domestic “political foreground” due to international oil sanctions threatening South Africa’s oil supplies, as well as due to South African nationalists targeting the company’s installations, as it had become private after initially receiving help from state support.

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Political considerations also became international. As opposition to the involvement of the United States in South Africa’s finance and technology continued, the American multinational Fluor, a global engineering and construction company, withdrew from its South African subsidiary. Fluor had initially provided construction and engineering support for Sasol installations. Despite this withdrawal, Sasol continued to develop, managing to maintain and expand its role as the “supplier of an increasing proportion of South Africa’s fuel requirements” (Referenceforbusiness.com, 2019), as well as its role as a major producer of explosive polymers, fertilizers and other chemicals.

Sasol, as an entirety, was built on processes first developed by German chemists and engineers in the early 1990’s. Currently, Sasol is focussing on further growing their Gas-to-Liquid footprint, and state that “[their] GTL represents a compelling value proposition, offering countries the opportunity to make their gas reserves work harder by producing liquid fuels and chemicals” (Sasol.com, 2019).

In 2014, Sasol introduced a “new value chain-based operating model” (Sasol.com, 2019) which has resulted in the company being organised into “two upstream [operating] business units, three regional operating hubs and four customer-facing strategic business units” (Sasol.com, 2019). The operating business units encompasses mining and upstream oil and gas activities and focuses on securing feedstock supply. The regional operating hubs focus on “sustain[ing] asset management and performance while delivering to plan and optimizing the total cost of production” (Sasol.com, 2019).

Sasol is an “international integrated chemicals and energy company” (Sasol.com, 2019) and it uses technology and their employees’ skills as a “leverage” (Sasol.com, 2019). This use of technology and “integrated chemicals and energy” is a Unique Selling Point, and the fact that Sasol is an international company positively affects the business in terms of location, as Sasol is available world-wide.

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