ASSIGNMENT 1
GREAT LAKES: GREAT DECISION

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.
A. Social/Demographic: The future direction of Great Lakes will have an effect on different regions of the world, as their product continues to fill a need for leaded gas. This has the potential to impact both business and the livelihood of thousands of individual’s. There are also the potential health related problems as “the globalization of leaded gasoline has made Tetraethyl Lead (TEL) responsible for nearly 90 percent of airborne lead pollution in Third World cities today” (CorpWatch, 1997). Great Lakes will need to determine and understand what their decisions mean to the developing regions they service.
B. Technological: Technology is not the issue for Great Lakes, instead the problems lies with the developing countries they serve. Until those countries are able to switch over the existing inventory of vehicles to unleaded gas, they will rely on the products supplied by Great Lakes. Additionally, 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.
C. 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. 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?
D. Environmental/Geographic: With the growing pressure from environmental groups, the company now finds itself flying “above the radar” 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. 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 is no position to stop supporting these locations. Both sides currently depend on each other and it will take further partnering to ensure a smooth transition.
E. Political/Legal/Governmental: When they purchased Octel in1989, 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. 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.
A. Threats Posed by New Entrants: Great Lakes controls 90% of the market and does not have major foreseeable threat of a new company taking away market share. As of 1994, Octel comprised of 59% of their operating profits from the production and sale of TEL fuel additives. Until newer additives are found that are more environmentally friendly or a witch to unleaded gas, Great Lakes does not face any new serious threats to their market share.
B. The Power of Suppliers: Great Lakes owns 90% of the market in lead gas additives which gives them leverage, with no real competition. The oil industry as a whole is very powerful, since the products they supply are in demand all over the world. This gives them a great deal of leverage in all the markets they service.
C. The Power of Buyers: The customers’ demands for Great Lakes products have a direct influence on the direction of the company and its profits. Great Lakes sells their lead fuel additives to developing countries in the Middles East, Africa, and China. This is especially significant because these sales accounts for such a large portion of their overall profits. This makes it difficult to walk away from without having another source of income.
D. Product Substitutes: Substitute products is a huge concern that Great Lakes must concern itself with. When developing countries move away from leaded gas, the need for Great Lakes product will diminish. Instead they will need to face the prospect of unleaded gas being used and going up against companies with an existing track record while operating under the most up to date regulations.
E. Intensity of Rivalry among Competitors: As countries begin to move away from lead gas, the company will begin to see an increased competition. With the loss of profits from its lead gas additives, Great Lakes must look into alternate sources of revenue. If they are unable to find ways to generate profits from non-lead based gasoline products, they may face the reality that that business model no longer works for them. Also, the competition for unleaded gas products will be stiff as it is an already established product in developed nations. This may be an opportunity for Great Lakes to become a “New entrant” and work to gain market share.
3. Describe who Great Lakes’ immediate, impending, and invisible competitors are and how Great Lakes measures up against these competitors. This appears to be a combination of the environment and their public image that makes up their immediate, impending, and invisible competitors. Great Lakes has demonstrated to be very business savvy, and has grown over the years and benefited from some timely acquisitions. They benefited the most when they purchased Octel, as they increased share in the bromine market but also brought on the TEL market. Once studies found that leaded gas was harmful to both humans and the environment, developed nations began the process of outlawing the use of it. The problem is, developing nations were not so fortunate, as they do not have the resources to switch and they continue to rely on the TEL additive for the gas. Great Lakes owns 90% of the TEL market for the countries and profits well from it and that profit is hard to give up without an alternative source. “Meanwhile, the globalization of leaded gasoline has made TEL responsible for nearly 90 percent of airborne lead pollution in Third World cities today” (CorpWatch, 1997). This pollution finds its way into the water sources, the ground and then is ingested by humans and animals. Knowing this information, Great Lakes continue their production of TEL. Their growths in this market and profits have put them under intense scrutiny. It give the perception that instead of the socially and moral dilemma they face with the harmful effect of TEL, Great Lakes is casting that aside for profit. This has not gone on unseen, as environmental groups have made their case known against the continued use of TEL. Great Lakes has been inserted into the public eye, a place they were not initially comfortable with. Their public image has taken a hit, as many see them as taking advantage of these developing countries by profiting off the sales of TEL. Environmental groups instead feel the company should take some for the profit and use it to help these countries get away from lead gas. It is a matter of time before other world governments take action because of the pressure put on then by environmentalists. How Great Lakes responds will be vital to their image as a company, will they choose to look greedy or will they choose to do the right thing for everyone involved?
4. Describe the main capabilities of Great Lakes. Great Lakes main capabilities lie in chemical production, especially bromine and TEL. Through the acquisition of Octel, they were able to increase their market share of bromine production, which is used in water treatment, household cleaners, fire suppressants and performance chemicals. With that acquisition, they added TEL to their capabilities and that entered them into the lead gas additive business. This additional resource helped the company grow, which accounted for 59% of their revenue. Great Lakes has not lost sight of its bromine operation, but it was the addition of TEL, and the profits generated from it, that made it into a major force in the chemical market.

CorpWatch. (1997, March 31). Great Lakes Chemical Corporation. Retrieved October 12, 2011, from Bromide Baron Rap Sheet #2: http://www.corpwatch.org/article.php?id=904