Great Lakes: Great Decisions - Assignment Example

Great Lakes: Great Decisions Question 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 Factors Lead is very harmful as it has caused brain damage in children, respiratory problems in the elderly and has damaged the quality of the air we breathe. Studies have also shown that there is a direct relationship between lead exposure and IQ deficits in children. The statistics on leaded gasoline is very frightening. Some of the major health problems that have been related to the leaded gasoline which is the main contributor to lead in the atmosphere include its effects on the neurological system, the kidneys and the cardiovascular system. Over exposure to lead is said to cause increased blood pressure, hypertension and a higher risk of cardio-vascular disease. Children are adversely affected by lead and in developing countries where leaded gasoline and leaded paint is still being used a significant percentage of children from age zero to five have blood lead levels that exceed World Health Organization (WHO) standards. In the mid 1990’s it led to numerous strokes, heart attacks and premature death of adults and children in Egypt. Technological The slow pace at which technological changes are taking place in developing countries has contributed significantly to Great Lakes continued viability. The developing countries do not have enough refineries that are capable of producing unleaded gas. Additionally, many of the cars being used have no catalytic converters. Economic Factors The banning of the use of lead additives in the U.S. has affected the sales of TEL which Great Lakes produce. The company’s only market is in developing countries. They have no yet done so because they are not yet equipped to transition from the use leaded to unleaded gasoline. However, with the growing need to reduce carbon emission all countries will soon be taking similar steps. The fact that many of the major producers of TEL have ceased production of the product has helped Great Lakes to remain economically viable. The company will remain viable until the developing countries see the benefits of a speedy conversion to unleaded gasoline or companies in those countries decide to produce the additive themselves. Octel Associates is the most successful of Great Lakes subsidiaries since it has accounted for well over half of Great Lakes total operating profit each year. This has been so despite the fact that its main product has been banned in the US and other developed countries. Environmental/Geographic Lead has damaged the quality of air. Octel Associates which is one of Great Lakes subsidiaries is a producer of the lead additive, TEL. Lead additives are banned in the United States and most developed countries and though it is still being used in many developing countries environmentalists are pressuring Great Lakes to stop producing it. This would have a significant impact on the company’s profits. It would also negatively affect countries that have not yet transitioned from using leaded to unleaded gasoline in their cars and machinery. In the 1990s the United Nations Conference on Environment and Development which is commonly known as the Rio de Janeiro Environmental Summit called for the world-wide phasing out of lead.. Political/Legal/Government Factors Leaded gasoline has been banned in most of the developed world but many developing countries have not yet eliminated lead as an additive because there are no government regulations preventing its use. The Energy Tax Act of 1978 has provided ethanol tax incentive in order to encourage and expand the use of ethanol in the U.S. In 2000 the European Union (EU) banned the use of leaded gasoline Question 2 Analyze the lead additives industry in the US using the five forces of competition model. Describe the impact of the five on the industry based on the analysis. Determine if the industry is attractive or unattractive Barriers to Entry The market for tetraethyl led (TEL) has been declining because of the ban that has been placed on its use in developed countries including the U.S. Profits are therefore dwindling because a substitute which is acceptable to environmentalists has been found in the form of unleaded gas. Tax incentives are also been given for ethanol to become more widely used. Even while the competition has dwindled there are still a lot of profits to be earned as major producers discontinued making the product. The market for the product is also unappealing because of the environmental concerns relating to its use. Additionally, the capital costs in building new plants would be too high amidst the mounting pressures from environmentalists. The US has however, banned the use of the product and so there is really no market there. All the markets are in developing countries and so the market in the US is unattractive. Power of Suppliers Great Lakes controls 90 per cent of the market and therefore has a lot of power which could ultimately lead to developing countries speeding up the process of converting their equipment and other facilities to accommodate the transition to the use the alternative unleaded gas. The company however, only has power in the developing world as the US and other developed countries have banned both the additive and either completely phased out the use of leaded gas or banned it completely. If e suppliers stop producing the additives thus resulting in the non-supply of leaded gas in the developing world, development would suffer. In the US this is not so as the government has made the necessary changes to allow for the efficient use of unleaded gas. The market for TEL is dwindling due to its adverse social and environmental impact and so the market is unattractive in the US. However, the export market still needs to be filled and so the additive is exported to developing countries where the market is attractive. Power of Buyers Buyers in the US are very powerful as they have choices. Their increasing concern for the environment makes them willing to forgo any economic benefits that they would be able to derive from the use of unleaded gas and therefore the need for TEL will be negligible due to the ban imposed on its use. The company has however been able to supply buyers in developing countries where it is still in high demand thus making it very attractive. Substitute Products A substitute has been found that is more environmentally friendly. Unleaded gas is more environmentally friendly and do not impact negatively on the health and wellbeing of humans. This makes TEL unattractive in the US market. However, its production for customers outside of the US market remains attractive. Rivalry among competitors Great Lakes have no real competitor as other major producers have long discontinued making TEL. Therefore, the company has flourished up to this point as it controls 90 per cent of the market. This makes the business very attractive. Question 3 Describe who Great Lakes immediate impending and invisible competitors are and how Great Lakes Measures up against those competitors. Great lakes immediate impending and invisible competitors are the companies that see the opportunity to make high profits producing led additives based on the limited competition which currently exist in the market. These are likely to include companies in developing nations and in China, Africa and the Middle East where the demand is still high for TEL. The company has competitors in the bromine business where it is expected to compete aggressively in the future in order to increase its profits. Question 4 Describe the main capabilities of Great Lakes Great Lakes’ has unique bromine producing capabilities. The company’s main reason for acquiring Octel Associates is its unique saltwater bromine extraction process. The company has produced a variety of chemical products for treating water, for cleaning households, for retarding flames and suppressing fires. During the 1950s the company was in production of petroleum but has changed its focus on bromine and chemicals. The company still serves that industry with its production of clear brine fluids for oil drilling. References Mead, J., Wicks, A.C., Werhane, P.H. and freeman, R.E. (n.d.). Case 11- Great Lakes: Great Decisions. 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