External factors such as demographic, technological, economic, environmental, and government segments affect the general business environment for Great Lakes Corporation. However, internal factors such as planning, diversification, and competition also play vital roles.
Thus, this reflective paper attempts to classify effects of these factors on the business environment of the Great Lakes Chemical Corporation. Besides, the paper reveals the Great Lakes’ ability to survive in a competitive market by reviewing its capabilities. Generally, the above reflection touches on the lead additive industry in United States of America and position of the Great Lakes Chemical Corporation.
Among the external factors that affect business environment at the Great Lakes Chemical Corporation include the demographic, technological, economic, environmental, and government segments. These factors oscillate and simultaneously interact with one another to positively and negatively determine business operation atmosphere (Helfert, 2001).
To begin with, the legal aspect determined by government policy is straight on production of lead additives. Through a regulatory agency, the government has imposed stringent laws and bills on production of lead additives for gasoline fuel. Specifically, production and use of lead additive gasoline fuel was banned in 1986 and a law introduced to prohibit further use within the boundaries of America.
This has seriously affected the company since the market has been trimmed down to export trade in Africa and Asian continents. Environmental concerns have negatively affected production of lead additives in US. Specifically, research has proven that lead additives in gasoline contribute to ill health through heart complications, respiratory organ damages, and high blood pressure.
Thus, “phasing out lead internationally, many experts believed, was necessary to reduce human exposure to lead and prevent lead poisoning… an estimated 15 million to 18 million suffer permanent damage from lead poisoning resulting in lowered intelligence” (Mead, Wicks, & Werhane, 2002, p. 155).
Technological improvement has negatively hindered lead production in Great Lakes Cooperation. By 1991, most states in the US had phased out and modified engines which use lead additive gasoline into those that use gasoline without any additive.
As a result, production of lead additives was directed to a smaller market of Africa and Asia making the company to completely lose the America market. Finally, demographic population patterns and desire for sustainability has seriously and negatively eat into production of lead additives by the Great Lakes.
As the population growth surges forward, there is greater concern on environmental sustainability and pollution. Research has proven that lead is the lead cause of high blood pressure and respiratory organs complications. Besides, lead is non biodegradable and takes longer time to integrate in the soil. As a result of increase in death and illnesses associated with lead production, it was necessary to address demographic concern by banning its use in America in the transport industry.
Lead Additive Industry
The five forces of competition are the threat new entrants, bargaining power of supplier, bargaining power buyers, and threat of substitutes.
These factors directly influence profitability of a company since they demand intensity of returns on production and investment (Jone & Hill, 2009). The lead industry in the United States exhibits throat-neck competition. Due to the ban on use of lead additives in the beginning of the twenty first century, buyers and users of this product have identified alternatives that serve same purpose as the additive.
Besides, the government has phased out car engines that use lead additives. In addition, pressure from environmentalists has placed the company in a tight spot despite efforts to introduce financial incentives and commitments to environmental issues. In response, the company has diversified by producing a variety of other supplements such as household cleaners, polymer stabilizers, flame retardants, and fire supplements.
Besides, the company managed to buy its major competitor; Octel associates. This strategy has enabled the company to rejuvenate its plunging sales. Specifically, the strategy helped to rescue the company from a looming financial crisis. “In 1994, Octel represented 59% or $259 million of Great Lakes total operating profit of 439 million.
Some Wall Street analysts Octel share of profits from current operations would not fall below 50% for many year, despite an 8% decline in pounds of TEL sold” (Mead, Wicks, & Werhane, 2002, p. 157). Through diversification in products, the company has managed to secure itself from threat of competition from new entrants. Through production of bromine by its sister company Octel.
The company is assured of survival despite decline in profits. Besides, the company has been in the front line in production of supplements such as fire retardants, polymer stabilizers, and household cleaners in order to remain competitive as the world embrace clean energy and need for sustainability. Though the purchasing of Octel Associates, the company has managed to trim down the intensity of rivalry form their main competitor.
In addition, the company has proposed a policy to the market regulators and governments of potential consumers to revise the time limit for phasing out lead additives in gasoline. This proposal in meant to buy time and look for an alternative arguing that the 2010 deadline was unrealistic since many engines stint lack instant converters.
Status of the Industry
From the analysis, it is apparent that this industry is an attractive due to opposition from the demand forces, environmentalists, governments, and sustainability issues. Despite efforts to survive the turbulence, survival may only be in short term unless the company fully adopts alternative products other than lead additives. Besides, the motor industry has embraced the instant converter technology which enables engine to operate minus these additives.
The current competitors of Great Lakes Chemical Corporation are those companies that manufacture biodegradable additives. These companies have embraced the issue of sustainability and environmental friendliness. Besides, engine manufacturers have embraced the technology of instant converters in motor engines.
This development has made lead additives an alternative and not necessarily a condition. In addition, the impending competitors are manufacturers of non fossil gasoline which do not require additives. The projected competitors will be commercial production of electric vehicles and solar propelled engines. The company will eventually fade off when the market for electric and green energy engine stabilizes.
As the need for greener and sustainable environment grows, it is factual that the company will experience heated competition from companies with green energy technology. Naturally, human beings will opt for the best alternative in satisfaction of needs (Jone & Hill, 2009). When green energy alternative becomes viable in motor industry, it will be difficult for the company to remain feasible.
Capabilities of Great Lakes Chemical Corporation
The company has a strong financial base of almost 440 million dollar in operating profits. Besides, the company controls an expansive market in the continents of Africa and Asia that are still underdeveloped and rely on lead products.
Due to stable demand from developing countries, the company remains a force in the industry. Besides, the company has an option of phasing out lead additives production but with a dire consequence on profitability and returns on investments from its share holders.
When this option is adopted, it will mean the company has to adopt a short term plan of implementing a complete phase out of its lead additive industry. According to projections, this option is possible within a five year plan. However, its adoption is likely to affect the developing countries that cannot afford the improved engines and products that are lead additive free.
Helfert, E. (2001). Financial analysis, tools and techniques: Assessment of business performance, New York: McGraw-Hill books.
Jone, G., & Hill, C. (2009). Strategic Management Theory: An Integrated Approach. Alabama: Cangage Learning.
Mead, J., Wicks, A.C., & Werhane, P.H. (2002). Great Lakes: Great Decisions: Virginia: University of Virginia, Darden School Foundation.