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Great Lakes, Great Decisions (Case Study)

4668 words - 19 pages

Executive Summary

I have been requested to evaluate the ethical dilemma surrounding the product offering of Great Lakes Chemical Corporation. The company produces tetraethyl lead (TEL), which is an additive for gasoline. Surmounting studies from the past few decades have proven the extensive harmful effects leaded gasoline has on the environment, which has caused considerable vocal opposition from environmental organizations against the company. The dilemma arises in the fact that TEL is a huge financial success for Great Lakes; the company controls 90% of the market and the product accounts for 59% of their annual profit.

Great Lakes should cease all operations involving the sale of ...view middle of the document...

However, Octel was also a producer of TEL, a business which Great Lakes accepted by default.

In the early 1900s lead was accepted as an efficient additive to automobile gasoline, despite the National Lead Company admitting it is poisonous. By the 1930s, 90% of gasoline sold in the US was lead-based, and studies over the next few decades continued to show linkage between air pollution and auto emissions. In 1970 the Clean Air Act was passed, and the next 15 years saw leaded gasoline gradually phased out of the US economy. Other developed nations followed suit, and therefore Great Lakes currently operates their TEL distributions in under-developed regions of South America, Africa, and the Middle East.

With the basic facts surrounding the dilemma laid out, it is now important to evaluate the strengths, weaknesses, opportunities, and threats of Great Lakes before considering any alternative courses of action.

* Great Lakes has near monopolistic domination of the TEL industry. There are no major competitors and thus Great Lakes controls 90% of the market.

* Great Lakes has a solid customer base. In developing countries where there are no alternatives for leaded fuel, TEL offers utilitarian value and is a necessity to those who drive. Coupled with the fact that there is little competition, Great Lakes does not have to do much advertising to attract customers; they simply need to be present in the markets that exhibit demand.

* Great Lakes has a solid history of year to year growth. In 1995, the company saw $5 billion in annual revenue and a continued profit margin standing healthy at 15%. Wall Street analysts predict that the revenue from Octel and TEL sales will continue to account for at least half of Great Lakes’ profits for years to come.

* Great Lakes successfully penetrates new markets. They have built a strong overall global presence by identifying areas where both TEL is in demand and the local government permits the sale of this known-to-be-dangerous chemical.

* Great Lakes is financially sound, as evidenced by their outstanding credit rating. In 1995, S&P raised the corporation’s credit rating from AA- to A+.

Ignoring the downfalls of TEL as a consumer good and looking at Great Lakes from purely a business standpoint, these strengths jump off the page as everything a successful company should have. Great Lakes has a solid credit score backed by yearly revenue growth, and have consistently shown the ability to enter new markets and then take over as the leading provider to a global customer base. One of the strengths that warrants further discussion is the fact that Great Lakes controls the TEL market at a near-monopolistic level. This is not necessarily because they have a competitive advantage in the lead additives industry; they have reached market leadership by default due to the ethical issues surrounding TEL and the exit of their competitors from the widely criticized market....

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