Great Lakes: Great Decisions

Great Lakes: Great Decisions

Great Lake, Great Decisions

1. Perform an analysis of the Social/Demographic, Technological, Economic, Environmental/Geographic, and Political/Legal/Governmental segments to understand the general environment facing Great Lakes. Describe how Great Lakes will be affected by each of these external factors.

Technological:

The problem for Great Lakes lies with the developing countries they serve, not necessarily with Technology. Until these countries are able to switch over their existing inventory of vehicles to unleaded gas, they will continue to rely on the products supplied by Great Lakes. Also, there will be a need for additional refineries to supply unleaded gas, as the need for that gas spikes. To help offset the loss in profits from the switch from leaded to unleaded gas, Great Lakes has an opportunity to invest in the transition process partner with the countries.

Social/Demographic:

The future direction of Great Lakes will certainly have an effect on different regions of the world, as their product fills a need for their leaded gas supply. Great Lakes major consumers of lead additive products are developing countries such as China, Middle East, and many African countries. These countries are vast in population size and have very low-income families who cannot afford leaded gasoline vehicles. This need will potentially impact both businesses within those regions as well as individual's livelihood. There is also the possible risk of health related problems as "the globalization of leaded gasoline has made TEL responsible for nearly 90 percent of airborne lead pollution in Third World cities today" (www.corpwatch.org, 1997). Great Lakes will have to strategically plan and determine what their future business deals and decisions will mean to the regions they service.

Economic:

At the moment Great Lakes had positioned itself as a world leader in the production of additives for leaded gasoline. Through acquisitions, they control 90% of the market, which provides a considerable source or revenue. As pressure mounts from environmental groups, the future of those profits could be in question. At some point in time, the company will see their profits affected as developing countries move away from lead based gas. Therefore the trend to move into leaded fuel vehicles is still many years away. And the cost of converting cannot be support by these poor countries. The US as well is going through a recession in recent years that has lead for many businesses to seek global alternatives.

Yet, they sit at a cross roads where they need to determine their fate as a company. Do they continue producing and selling harmful materials to maintain the revenues, or do they phase out production and put the company at risk?

Environmental/Geographic:

With the growing pressure from environmental groups, the company now finds itself in the middle of the spotlight and dealing with a potential public relations crisis. While the production and sale of the additives is still legal, the company faces growing pressure due to the health and environmental concerns TEL is shown to have, as well as harsh OSHA regulations and environmental compliance.

The demands being made on the company will have significant effects on the regions they serve as they are currently in no position to switch to unleaded gas. Until alternatives forms of revenue are found, Great Lakes are in no position to stop supporting these locations.

Political/Legal/Governmental:

When they purchased Octel 1989, Great lakes understood they would be facing both ethical and public relation scrutiny. While leaded gas is no longer legal in the United States, the additives manufactured and sold by Great Lakes still are. In fact the company is not breaking any existing laws but still faces increasing pressure from environmental groups to stop due to respective investigations on the causes of bromine and brominated products in the industry. Although in the US leaded gasoline has been obsolete for years, overseas it is still used even though the public and government is aware of the detrimental causes to health.

Great Lakes was content to fly under the radar as a company but over time found themselves in a position to make decision that have global ramifications. The countries they service do not have the resources of the governments needed to make the move away from leaded gas. The company finds itself in a position where, their decisions will have a large impact of future growth of these countries. Yet, with the intense pressure, they find themselves in a place where they now have to consider their options to avoid any legal ramifications in the future.

2. Analyze the lead additives industry in the U.S. using the Five Forces of Competition Model. Describe the impact of each of the five forces on the industry and based on this analysis, determine if the industry is attractive or unattractive.

Threats Posed by New Entrants:

There are two different beliefs on this matter. One being that since Great Lakes controls 90% of the market, it does not have major foreseeable threat of a new company taking away market share. The other belief is that Great Lakes major new entrants threats is from those new entrants that want to produce the same or similar products, as well as businesses producing products intended for similar use at a more affordable price bracket. My belief is that Great Lakes Chemical has no foreseeable competition. As of 1994, Octel comprised of 59% of their operating

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