Great Lakes: Great Decisions
Business Administration Capstone
April 9, 2011
This paper addresses the company of Great Lakes along with one of its subsidiaries Octel and its??™ place in the industry regarding the production of the chemical lead additive tetraethyl lead (TEL). According to a Chemical and Engineering News Journal (2006) article, ???Octel was spun out of Great Lakes Chemical in 1997, with a mandate to manage the declining business of making and supplying TEL??? (p. 26). In doing research, I found that Octel went through some transformation over the years and according to the Chemical and Engineering News Journal article (2006), Octel changed its name and ???is now known as Innospec??? (p. 26). Additionally, Great Lakes Solutions formed with another company to create the Chemtura Corporation. As a result, for the purpose of this paper, we will refer to the company as Great Lakes, Octel, and Innospec interchangeably as it relates to research references for this paper, and associated business practices with a focus on the lead fuel additives industry.
Great Lakes ??“ Analysis of General and Industrial Environment Segments
The external factors of the general and industrial environments all have the ability of impacting a company as it seeks strategic competitiveness with the ability to have above average returns while competing in the marketplace. According to Hitt, Ireland, and Hoskisson (2011), ???the general environment is composed of dimensions in the broader society that influence and industry and the firms within it??? (p. 37). To that end, we look at how general environment factors, which cannot be directly controlled, impact the operations of Great Lakes.
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.
Hitt et al. (2011) stated that ???the socio-cultural segment is concerned with a society??™s attitudes and cultural values??? (p. 46) and ???the demographic segment is concerned with a population??™s size, age structure, geographic distribution, ethnic mix, and income distribution??? (p. 43). Based on that definition, there is very little impact of the demographic segment regarding the continued use of TEL in the world. The use of TEL in gasoline products is not specific to the demographics of the world and the five most populous nations in the world already ban the use of lead in their nations. So this segment does not provide the company with any opportunities to expand their market share regarding the sale of TEL. The use of TEL has been found to directly affect the population as documented by Hitt et al. (2011, p.157) indicating that studies showed a direct impact of leaded gasoline on the neurological, cardiovascular systems, kidneys, and blood pressure. Certainly the use and production of TEL in some nations has an impact to the nation??™s society which in turn impacts the political and legal landscape of that nation. We will follow up with those impacts later in the paper with the mitigation strategies by Innospec.
According to Hitt et al. (2011) ???the technological segment includes the institutions and activities involved with creating new knowledge, and translating that knowledge into new outputs, products, processes, and materials??? (p. 47). From the aspect of producing TEL there is very little associated with new technological advancements and achievements. On the other hand, Innospec continues technology advances in other areas of the chemical industry. According to the Innospec website the firm has grown and expanded its innovation and technology base with ???ground breaking fuel additives??¦and the development of biodegradable agents.??? As a result, while the production of TEL is still a product without much technological improvement, the firm continues to expand its base with other product development.
Hitt et al. (2011) stated that ???the economic segment refers to the nature and direction of the economy in which a firm competes or may compete??? (p. 45). As a result of the ban of TEL in gasoline throughout the world, the firm has changed its name and looking for other ways to build a base of products in order to produce revenue. According the Innospec web site, the firm is breaking new ground with fuel additives while still supporting the TEL lead additive as it slowly moves away from it. By expanding its product base, the firm is keeping up with the changes in the economy and creating a revenue base at the same time. The Chemical and Engineering News article (2006) indicated that ???now gets two-thirds of its sales from non-lead fuel additives and other specialty chemical businesses it has built over the years??? (p. 26).
The Environmental/Geographic Segment known according to Hitt et al. (2011) as ???the physical environment segment refers to potential and actual changes in the physical environment and business practices that are intended to positively respond to and deal with those changes??? (p. 49). In this case the use of TEL certainly has a direct impact to the physical environment where it is still in use. According to Hitt et al. (2011) ???numerous reports outlined the dangers of leaded gasoline, widely considered the fastest and most efficient means of sending lead particles into the atmosphere??¦and then into the soil, where they could remain indefinitely??? (p. 156). Based on those reports over the years many nations have banned the use of TEL in gasoline which has impacted the revenue of the firm. Certainly this has a direct impact to the firm as the sale of TEL is a major revenue maker.
According to Hitt et al. (2011) ???the political/legal segment is the arena in which organization and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulation guiding interactions among nations as well as between firms and various governmental agencies??? (p. 46). By definition, this is the segment that changed the outlook of the sale of TEL around the world. As discussed in the previous discussions in a couple of the segments above, this segment of society had the largest impact on use of TEL in gasoline around the world. As stated earlier, the top five most populous nations have already banned TEL and there are many other nations that followed suit over the years. As a result, the firm has had to take a serious look at what it could do to alleviate the impact of decreasing revenue from TEL. Additionally, to be a firm ???in good standing??? in the community, Innospec has made significant investment in helping nations work toward the ban of TEL. As a result, according the Innospec web site, acknowledges that they ???are in a great position to help these countries make the transition to unleaded fuel smoothly. Once a customers lead alkyls blending plant is no longer required, we offer a complete remediation service to clean up redundant plants and leading facilities through our growing Innospec Environmental business. This includes safety training, technical and engineering support.???
Lead Additives Industry and the Five Forces of Competition Model
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.
Threat of New Entrants
In the case of TEL sales and production due to the governmental decisions on lead additives, there is no threat of new entrants into the market. According to the Chemical and Engineering News article, ???at the time of its spin-off from Great Lakes, Octel owned five plants that manufactured lead fuel additives, Jennings says. Only one now remains, in Ellesmere Port, Cheshire, England, where Innospec also has its headquarters??? (p. 26). The reduction and consolidation of production along with the continued bans makes the threat of new entrants into the market unlikely.
Bargaining Power of Suppliers
Since the production of TEL resides within the firm itself there does not appear to be any issue regarding the power of suppliers.
Bargaining Power of Buyers
At this time, the buyers of TEL are countries that are still dependent on the product for their gasoline and transportation needs. They are not really in a position to exert much pressure on Innospec regarding the purchasing of TEL. In fact there is a concerted effort in many nations to get away from the use of lead additives in gasoline.
Threat of Substitute Products
Once again this issue is mute since the use of lead additives in gasoline is banned in the majority of the world and is slowly being phased out in others. Certainly the push for other fuel enhancers is part of the technology innovation and Innospec has positioned itself has one of the leaders in that marketplace today.
Rivalry among the Firms
Again has stated earlier, due to the marketplace decline of lead additives in gasoline, there is no other firms currently producing TEL.
Competitors of Great Lakes
Describe who Great Lakes??™ immediate, impending, and invisible competitors are and how Great Lakes measures up against these competitors.
As stated in the introduction of this research paper, we focused the majority of this paper on the lead fuel additives portion of the marketplace and how that impacts Great Lakes and Innospec with regard to competition. In the case of Innospec the production of TEL does not meet the standard of competition. The banning of the substance is critical in keeping new entrants into the market thereby alleviating any real competition.
In order to better respond to the question of competition, we will discuss the overall business environment of Great Lakes. Great Lakes Solutions according to the Chemtura Corporation web site is ???one of the three largest developers and manufacturers of bromine and bromine-based products??? (para. 3). An article by Lee (2010) indicated that ???the structural change in the global bromine sector has brought it under the control of three companies: ICL-IP, Albemarle and Chemtura, with the latter gradually becoming a marketing company in the wake of contracts signed with Albemarle. Chemtura had applied for court protection from creditors, and Albemarle stepped in to help Chemtura, on condition that the latter cease manufacturing flame retardants and outsource that activity to Albemarle??? (para. 8). As a result of this information, it appears that Great Lakes Solutions/Chemtura indeed finds itself struggling in the marketplace.
Great Lakes Solutions Capabilities
Describe the main capabilities of Great Lakes.
The capabilities of Great Lakes Solutions today consist of ???providing bromine and phosphorous flame retardants and brominated performance products??? (para. 1). They have manufacturing sites in the United States, Mexico, England, and Isarel.
In the case of Innospec capabilities, they include fuel specialties, active chemicals and octane additives of which TEL is one. Innospec is located in twenty different countries around the world.
Chemtura Corporation. (2011). Home Page. Retrieved April 6, 2011 from
Great Lakes Solutions. (2011). Home Page. Retrieved April 6, 2011 from http://www.greatlakes.com/pdf/Chemtura-Overview-Brochure.pdf
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic Management Concepts (2011 Custom Edition). Mason, OH: South-Western Cengage Learning.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic Management Concepts Concepts and Cases: Competitiveness and Globalization (2011 Custom Edition). Mason, OH: South-Western Cengage Learning.
Innospec Inc. (2011). Home Page. Retrieved April 6, 2011 from http://www.innospecinc.com/
Lee, T.A. (2010, May 25). ICL making hay as China eases out of bromine production. Retrieved April 7, 2011 from http://www.firstexind.com/news/May10/25.html
Reisch, M. (2006, April 24). Getting the Lead Out: Innospec??™s new name and stock listing are part of ongoing specialties strategy. Chemical & Engineering News, Vol 84, Number 17. Retrieved April 7, 2011 from http://pubs.acs.org/cen/business/84/8417bus2.html