Great Lakes: Great Decisions

Leah Lasco

BUS 499-BUSINESS ADMINISTRATION CAPSTONE

Professor Bari Courts

October 14, 2011

Perform an analysis of the social/demographic, technological, economic, environmental/geographic, and political/legal/government segments to understand the general environment facing Great Lakes. Describe how Great Lakes will be affected by each of these external factors. Social/demographic: Great Lakes started as a successful, low-key corporation. With the acquisition of Octel, they stumbled on a gold mine. They had the ability to create more bromine but also but them as owner of a lead additive called tetraethyl lead (TEL). Socially, this has made them an enemy. TEL has caused the death and disablement of many. Society is not looking at Great Lakes as a hero. They are looking at them as a problem that needs to be dealt with. The terminated use of TEL would make them more favorable here in the U.S. as well as in other developed and developing countries. As they venture into more un-chartered territory to expand the use of lead gasoline, more lives will be put at risk. Mortality and disability rates will increase. Technological: Great Lakes does not have any technological issues. They have the capability to remove the lead additives and to stop producing them as well. Their products were sold not only in the US and other developed countries but developing countries as well. Some developing countries did not have the capacity or know how to make the change from lead to unleaded gas which meant Great Lakes could still make a profit off of lead additives. It would be in their power to help those developing countries with the necessary technology to make the switch but the switch would also hurt them economically. Economics: By 1995, Great Lakes’ annual revenue was $5 billion. They were an economically sound business. Their finances would take a slight turn with the ban on tetraethyl lead (TEL). As TEL will phase out, they will take a financial hit. It will not be significant for most of those they supply to have converted. It would have a massive impact on future sales and growth. Their product line would now go from lead and unleaded to just unleaded, removing their money making market in which they control 100%. It was suggested that they assist financially with the transition away from TEL. This is a venture that they would not partake in for it would reduce the time they had to capitalize on the lead gasoline supplied to other developing countries. Environmental/geographic: In the 60’s, research had shown that lead was a major cause in brain damage in children due to their ingestion of the poison being 40-50 percent absorption. Lead was causing health issues in adults and poisoning the air as well. Environmentalist put the pressure on Great Lakes to clean up the mess they were causing by removing the lead additive. Great Lakes confessed to being committed to protecting the environment. World Health Organization (WHO) did research to discover that the numbers were in the millions when it came to children affected by lead in developing countries. If governmental authorities would crack down on the poisoning of the environment in the developing countries, the use of TEL would cease. Geographically, Great Lakes is founded in the US but has operations in other countries. According to FundingUniverse.com, “The company had grown to hold plants at 32 locations in 14 states and eight foreign countries, with operations around the world. More than half of net sales to unaffiliated customers were derived from transactions with foreign companies.” They could discontinue manufacturing TEL here in America and develop it in a foreign country but that could prove to be costly. Political/Legal/Government: The US government regulated the discontinuation of lead gasoline. This process was also followed by other developed countries due to the health risks involved. Law suits could arise due to the neglect of Great Lakes to cease the use of TEL completely. They know the ramifications of the toxin being released into the atmosphere yet long for the profit more than the life of others.
Analyze the lead additives industry in the U.S. using the Five Forces of Competition Model. Describe the impact of each of the five (5) forces on the industry and based on this analysis, determine if the industry is attractive or unattractive. Let’s first identify the five forces of the competition model. They are threat of new entrants; bargaining power of suppliers; bargaining power of buyers; threat of substitute products; and rivalry among competing firms. There are currently no threats of new entry to the lead additive industry. Great Lakes has the industry on lock down being the head contender and supplier. So there is no bargaining power for suppliers. They are looking to expand their lead gasoline in developing countries as long as it is permissible for profitable gain. There is the threat of unleaded gas being the replacement for leaded gas. As far as rivalry among competitors, if there was to be any, it was dissolved with the merger of Crompton Corporation and Great Lakes Chemical Corporation back in 2005 to create Chemtura which makes this an unattractive industry.
Describe who Great Lakes’ immediate, impending and invisible competitors are and how Great Lakes measures up against these competitors.
Great Lakes (now Chemtura) does not have any immediate, impending or invisible competitors at this time. They control 90% of the market making competition obsolete and them the industry giant.
Describe the main capabilities of Great Lakes.
Great Lakes has the lead industry hands down. They have the ability to continue the market or have it fold completely. They have the capability to create a safer environment around the world but will not do so because of profitability. As long as developing countries stay underdeveloped and behind on technology, Great Lakes will be their sole supplier of leaded gasoline. They will continue to create the additive as long as there is a need. The need may never go away. It is hopeful to think that they may reduce the amount of tetraethyl lead to help promote a healthier environment if not discontinuing its production completely. With no competitors around to drive pricing, the additives should remain at a reasonable rate. As the demand increases in other developing countries, the rate of production will unfortunately increase. Great Lakes has the capabilities to assist the developing worlds with their technology to introduce them to an unleaded experience. Because this would have an adverse affect on their profitability, they will not make that a priority. Money and growth is key for them.

References

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic Management: Competitiveness and Globalization, Concepts and Cases: 2011 International Edition (9th ed.). Mason, OH: South-Western Cengage Learning
Mead, Jenny; Wicks, Andrew C., Werhane, Patricia H., Freeman, R. Edward (2008): Great Lakes: Great Decisions: University of Virginia Darden School Foundation, Charlottesville, VA.
Retrieved on October 14, 2011: http://www.fundinguniverse.com/company-histories/Great-Lakes-Chemical-Corporation-Company-History.html