Great Lakes, Great Decisions - Case Study Example

? Case Study 11: Great Lakes: Great Decisions ID Number: of the Assignment: Great Lakes: Great Decisions of School Teacher's Name Word Count: 1,712 Date: July 11, 2011 PESTLE – a thorough environmental scanning that affects a business can be done if one follows a procedure of PESTLE that means all these external factors which are political, economic, social, technological, legal and environmental factors that impinge on a business. What follows is an analysis based on this formula on how Great Lakes will be affected. Political – the political environment for leaded gasoline had changed markedly due to the intense lobbying of environmental groups. Politicians who plan to seek office and those already in office but are seeking re-election have no choice but to listen to advocacy groups. By the end of the twentieth century, various scientific studies have established that lead can really cause adverse health conditions such as brain damage in children, respiratory problems in adults and overall lowering of the air quality (Mead, Wicks, Werhane and Freeman 156). In such a politically-charged atmosphere, not only politicians but businesses as well have to also take into consideration how their products may harm the environment and listen to opinion. A big company like Great Lakes has to exercise its responsibilities as a corporate citizen too. A new operating environment has to be taken into consideration when making strategic plans in business decision making like compliance with stricter emission standards as required under new policies by the Clean Air Act (1970) that banned the use of leaded gasoline. Economic – the economics of mass transportation such as private cars and buses has been going in the direction of clean and renewable energy such as ethanol or through the use of lower-rated unleaded gasoline through the use of catalytic converters the prices of which are going down because these previously specialized products are now becoming generic. At any rate, the cost of transitioning away from leaded gasoline is not that expensive as studied by both the World Bank (WB) and the World Health Organization (WHO); the net negative impact on economic growth rates is not that substantial anyway as thought (ibid. 158). Social – people are getting sick from all the lead pollution in the air they breathe and now realized how harmful some of their lifestyles have been on themselves and environment. To such an extent, a growing social movement towards healthy living and health awareness is making the changeover to unleaded gasoline a mandatory strategic move for big businesses. It is unrealistic for a business enterprise to ignore these social movements which determine to a large extent the buying patterns of consumers. Sooner or later, people would see the healthy benefits of using unleaded gasoline for themselves and their children. Using macro-economic environmental analysis allows business leaders to anticipate future trends (Fleischer 172). Technological – energy production has been shifting towards a renewable and clean energy source for cars such as bio-fuels like bio-ethanol derived from alcohol produced by a fermentation process of the sugar components of plants like sugarcane and starch crops. Shift to clean energy sources has been partly driven by a combination of factors such as peak oil (a realization that fossil fuels production is now on a downtrend due to fast depletion of known reserves which are non-renewable), the political instability of crude oil supplier-countries, the high gasoline prices, concern over the environment and government subsidies for bio-fuels. A shift to renewable energy sources is inevitable as new production techniques lower its costs. Legal – as can be seen from the experience with the markets in developed countries, new environmental regulations and laws pertaining to preservation of the environment are all being strictly enforced such as clean air standards requiring lower sulfur emissions. All those developing countries in foreign markets will eventually follow suit once they can feel adverse effects of leaded gasoline in their local environments and the lowering of air quality. They too will pass their own environmental laws sooner or later as it becomes economically feasible. A penalty for polluting the environment can likewise add to the costs of doing business. Environmental – this is perhaps one of the most influential external factor that drives the movement towards a cleaner and renewable energy sources because people are seeing all the adverse effects of leaded gasoline on their health and their environment. Beyond the mere economics of whether using leaded or unleaded gasoline, the costs to the health of children as well as the costs of health care for the adults affected by lead pollution in the air will force all people to demand from their political and business leaders environmentally-healthy options. A firm like Great Lakes has to acknowledge that its line of business is incompatible with its overall vision and mission statements which is to be a responsible global citizen and also to produce safer and healthier products. Products like leaded gasoline which is no longer legal in developed countries should no longer be marketed in developing countries as a policy. Five-Forces Model of Industry Competition – this model for analyzing the forces in an industry was first postulated or formulated by Harvard professor Porter which is a big help in making a disciplined industry analysis for crafting corporate strategic planning. All the five forces impinge on an industry but to varying degrees of influence, depending on which factor is most dominant. This framework of analysis is helpful in determining the level of profits in an industry due to competitive rivalry as enumerated below (Mehta 13). The five forces are grouped into the external (macro-environmental factors) which are threat of substitute products, threats from existing rival firms and threat of new entrants. The internal (micro-environmental factors) are bargaining power of suppliers and bargaining power of buyers (Hill and Jones 45). This will be format for the analysis on Great Lakes. Substitute products – the threat comes not from another product that will substitute a lead-based gasoline product but rather comes from an entirely substitute product which is the ethanol and other bio-based fuels. This makes demand for leaded gasoline go lower; because unleaded gasoline has almost the same power as that produced by ethanol-based fuels. Other newer substitutes will be the electric cars which can now run longer without re-charging too often, unlike the previous car batteries which easily drain their electric juices. Threat from existing rivals – Great Lakes is in an enviable industry position of few rivals making the same lead-based products; this is primarily due to the wide bad publicity by environmental advocacy groups such that other firms had stopped their production and newer firms had opted not to enter this industry altogether. The company had even eclipsed the great Dow Chemical Corporation in the production of bromine used in lead additives for gasoline. In other words, the firm is almost a near monopoly with very few rivals to speak of. All other major producers of tetraethyl lead (TEL) had stopped making it (Mead et al. 157). Threat of new entrants – the bad publicity of producing harmful lead products and a shift in consumer behaviors toward more environmentally-healthy products will make entry a risky business proposition for anyone planning to enter the industry. Like the previous section about being a monopoly, Great Lakes will most probably continue to retain its lead industry position if it decides to continue producing TEL because there are no new entrants either. It is only its corporate conscience that will impel it to leave this business if it decides to do so. It is the primary reason why it continues to enjoy huge profit margins despite falling revenues. Bargaining power of suppliers – the main source of bromine is located in the United States of America, specifically in southern Arkansas in the Columbia and Union counties. It means there is security in terms of its supplies while the two other main producers of bromine are China (Shandong province) and Israel (regions near the Dead Sea). Because demand for lead additives will eventually decline as developing countries will gradually shift to unleaded gasoline, it is expected the bargaining power of suppliers will decline unless other uses of the bromine and lead can be found which can approximate its demand in the gasoline industry. Bargaining power of buyers – it is expected their bargaining power will be increased as there is growing awareness of the harmful effects of lead-based products like additives and paint. Great Lakes will have to prepare for a bleak future unless it shifts to other products not as harmful as lead. Its main product of TEL will have to be replaced with another product that is politically, socially and environmentally acceptable. Buyers will drive down its price. Great Lake's Competitors – the immediate competitors of the company are countries that have substantial deposits of bromine to be used in lead additives such as China and Israel which in the case of China, it is not so strict with environmental protection laws as can seen from its fast economic growth to attain its target of becoming a global economic superpower. Impending competitors are the producers of ethanol and other bio-fuels which are now more economically feasible due to new production technologies and government incentives. This will further encourage the shift to cleaner energy sources which are also renewable. Invisible competitors are those who produce electric cars and longer-lasting car batteries which make the use of gasoline a financial disincentive because electric cars are getting cheaper and also getting more mileage per re-charging. These cars are now comparable to gasoline-using cars in terms of actual handling and performance. The growing acceptance of the peak oil concept makes more people realize crude oil supplies will soon run out and gas prices remain high. SWOT Analysis – although Porter's five-forces model is a good help in analysis, the SWOT format is still greatly useful when analyzing a firm's threats and opportunities based on its strengths and weaknesses (internally). The greatest threats to Great Lakes are political, social and technological as lead-based products fall into disfavor among consumers. Greatest opportunities for the company will be to enhance its production facilities towards other uses of bromine such as in fire retardants in textiles and plastics, even in unlikely places such as an airplane. Its core capabilities are having an excellent management team and good production. Reference List Fleischer, C. S. & Bensoussan, B. E. (2008). Analysis Without Paralysis: 10 Tools to Make Better Strategic Decisions. Upper Saddle River, NJ, USA: FT Press. Hill, C. W. L. & Jones, G. R. (2008). Strategic Management: An Integrated Approach. Boston, MA, USA: Houghton Mifflin Company. Mead, J., Wicks, A. C., Werhane, P. H. & Freeman, R. E. (2009). Great Lakes: Great Decisions. In Michael A. Hitt, R. Duane Ireland & Robert E. Hoskisson (Eds.), Strategic Management: Text and Cases (pp. 155-159). Mason, OH, USA: Cengage Learning. Mehta, S. S. (2008). Commercializing Successful Biomedical Technologies: Basic Principles for the Development of Drugs, Diagnostics and Devices. 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