MEGlobal Finance : Brand Image and customer loyalty consideration in Credit Limit revocation - Case Study Example

ME Global Background Ethylene glycol is a compound that is utilized primarily in the manufacture of polyester fibers and in the manufacture of antifreeze and in other industrial chemicals. MEGlobal is among the world’s biggest producers of ethylene glycol. At the moment, it is able to manufacture a total of 1.0 million metric tonnes of ethylene glycol in its three manufacturing plants located in Alberta, Canada. The company was created in 2004 as the result of the partnership between The Dow Chemical Company of the United States and the Petrochemical Industries Company (PIC) of Kuwait.

The company believes that it creates value for its clients in the following ways:Through its foundation – the company believes that being able to become a reliable supplier of the product means that it has to be a responsible company committed to the protection of the environment, health and safety and being responsible;Through its market - the company has substantial market knowledge, experience and understanding; andThrough its supply – the company sees itself as a valuable logistics and supply chain company as it transports its finished product to its clients around the world (ME Global, 2014).

Currently, the company embarked on its FOCUS 2020 Project. This is a project that builds on its previous sustainability strategies. The goals of this project were created to include the inputs of the employees, the management and the community. The three major areas under this project are: to maximize environment, health and safety (EH&S) performance, to reduce the environmental footprint of the firm, and to improve its social performance (ME Global, 2014). The company also has another ongoing concern termed as Responsible Care.

In this project, initiatives within the global chemical industry to lead to the safer handling of the inputs and products along the entire supply chain are promoted. While the company is currently in the accreditation list of Responsible Care, it continues to create more initiatives such that it has been re-verified last November2013. Finally, the company is also planning to build a new grassroots facility in North America. This facility will help the firm expand its production capacity and increase its production efficiency.

This decision is based on the forecasted increase in demand of ethylene glycol of 5-6% annually for the next few years (Suratman, 2012).Introduction This case study hopes to provide recommendations for the steps that MEGlobal can take at the moment in order to address the issue of whether or not it should continue to offer credit up to the amount of USD 3 million to PreFreeze. Clearly, the company would like to maintain good customer relations with PreFreeze, as it has not defaulted on its payments in the past.

It should be noted that PreFreeze has been a loyal customer of MEGlobal for the last several years. However, its parent company could be said to be in dire financial straits. The parent company had been borrowing heavily, and its financial statements show losses for the last three years. Borrowing had to be resorted to in order to keep the company operational. However, PreFreeze has outperformed its mother company by being the only company to turn in a profit. Recently, MEGlobal, PreFreeze and Credit Insurance Company representatives have met in order to determine up to what amount of credit by MEGlobal to PreFreeze can be insured by Credit Insurance Company.

The insurable amount of credit was pegged at USD 2 million. However, the desired credit exposure that must be insured was at USD 5 million. Therefore there remains a credit exposure of USD 3 million that will not be covered or insured by the Credit Insurance Company. MEGlobal therefore has to make a decision on whether or not to revoke the credit limit of PreFreeze. If it decides to revoke the credit limit, then it stands a very good chance of losing the USD 5 million sales from PreFreeze. It also stands a very good chance of losing the goodwill and the good relations with the representatives of the company.

It is PreFreeze’s mother company, after all, that has been performing badly. However, if it decides to accept the uninsured credit exposure of USD 3 million, it may unnecessarily open itself to risk, and if PreFreeze does default on the USD 5 million then it will have to write off the uninsured part equivalent to USD 3 million. When this occurs, it may incur the ire of the Credit Insurance Company, with the latter refusing to do business with them.ReferenceMEGlobal. (2014). “About ME Global”. [Online]. Accessed from: http://www.meglobal.biz/about [16 March 2014]. MEGlobal. (2014).

“FOCUS 2020 Goals”. [Online]. Accessed from: http://www.meglobal.biz/environment/2020-goalsSuratman, N. (2012). “ME Global Eyes North American Expansion”. [Online]. Accessed from: http://www.icis.com/resources/news/2012/11/29/9619697/meglobal-eyes-north-american-expansion/