Assignment One – 2 1) 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. Social/demographic
The social demographic segment reflects the population size, the age structure, the ethic and income mix, and the geographic distribution. The Great Lakes Corporation employs over 3700 people. (1) The population for Indianapolis, Indiana where the Great Lakes Corporation affects has increased at a rate of 6.6% from 2000 to 2010. (2) Technological
The Great Lakes Corporation will need to increase or expand its technology concerning the use of leaded gasoline. Technology can be costly when it comes to trying to come up with ways to eliminating a product that is harmful to consumers. Even though the corporation has had time to study what to do with the lead gasoline, there doesn’t seem to be a conclusion of the company’s next move.
The longer the company waits, the more it is going to cost them. As stated in the case study, developing countries are going to eventually switch to unleaded gasoline which will put the pressure on the company to react quicker and possibly make decisions that are not thought completely through. Economic/environmental
Any decision the Great Lake Corporation is going to affect the economic environment. If the company chooses to wait until they are forced to make a change, the effect to the economy could result in massive amounts of money needed to make the adjustment. Usually when that Assignment One - 3
occurs, the company has a layoff to help recoup some of the money. This also affects the economy. The environment is affected because the lead is considered harmful. The environment will also be affected if there is a leak at the company. The environmental penalties that will occur if this happens will cost the company a lot of money. There will also need to be money spent to implement procedures to prevent this from happening again. Political/legal/governmental
The political/legal/governmental segment could also cost the company money. Politically when it is an election year, politicians usually take a stand on certain environmental issues. Great Lakes could get caught in the middle of one of those issues. The effect could be severe but if the company’s name is thrown into the spotlight negatively, environmentalist could target, lobby and boycott the company which could be expensive. The company would need to go to great lengths to reverse the negative impact from being in the spotlight. That could include advertising and still a study to eliminate the use of lead gasoline.
The effect of all the social/demographic, technological, economic environmental/geographic and political/legal/governmental segments is going to cost the company money regardless of which approach they take. To minimize the cost or to spread out the cost, the company should start studying other uses of lead gasoline or analyzing ways to slowly eliminate the use of lead gasoline. 2) Analyze the lead additives industry in the U.S. using the Five Forces of Competition Model. Describe the impact of each of the five (5) forces on the industry and based on this analysis, determine if the industry is attractive or unattractive.
Assignment One - 4 The five forces of competition model are threats of new entrants, threat of substitute products, bargaining power of suppliers, bargaining powers of buyers and rivalry among competing firms. Threats of New Entrants
When Great Lakes make the total transformation into not using lead gasoline, they will enter into a new market. This is going to be a challenge for Great Lakes because there is going to be research needed to produce with unleaded gas. The study needed should be done with the notion of making above average returns for the company. Great Lakes may incur costs with the switching from lead to unlead. This will probably be a small price to pay for switching. This will also open up more channels for the company to pursue other unleaded opportunity with other companies. Threat of Substitute Products
The threat of substitute products could be an issue for Great Lakes. One way to minimize the issue would be to also look into substituting products. Great Lakes could make the transformation from lead to unleaded but they could also invest in alternatives such as going green. This may be costly initially but in the long run it will give the company a jump start on what will be considered the future. Bargaining Power of Suppliers
Great Lakes will need to consider the bargaining power of their new supplier. They will be entering a market that is already established by other companies. Great Lakes can take one of two approaches with the marketing of unleaded gasoline. They can take the aggressive marketing approach. I would not recommend this approach because of the money that may be Assignment One - 5
involved. The other approach would be to carefully analyze the supplier and establish credibility. Once credibility has been established with the supplier, the company should be able to move forward with its bargaining power. Bargaining Power of Buyers
The company, Great Lakes, is like most companies, they are looking to maximize on the return on their invested capital when they make the switch. They are also in to slightly different situation because they will be going through the process of eliminating one product and starting up another product. Rivalry among Competing Firms
The companies dealing with unleaded gasoline compete with customers aggressively. They are always seeking to differentiate themselves and their product from competitors. This comes in the form of pricing, customer service and new idea with the customers. If it is a slow growing market, Great Lakes can try to effectively use its resources to serve its expanding customer base. This could be risky because slow growth intensifies the company battle to gain the competitors customers. 3) Describe who Great Lakes’ immediate, impending and invisible competitors are and how Great Lakes measure up against these competitors.
The immediate and impending competitors would be the Iranian, Saudi Arabia and Venezuela companies overseas. These are the largest three oil companies. In the United States, the competitors would be companies like Exxon Mobil, Chevron and ConocoPhillips. These are the top three US oil companies.
Assignment One - 6 The invisible competitors are not really competitors but are agencies that could cause problems for Great Lakes as it tries to enter into the new market. The (EPA) Environment Protection Agency is in charge of improving and preserving the environment. They focus on developing programs that implement the statutes enacted by Congress. This the agency that Great Lakes may have issues with when going through their transformation. Another agency or commission would be the Interstate Oil and Gas Compact Commission.
The commission represents the governors of 30 states that produce all the oil and natural gas in the US. They promote the conservation and efficient recovery of domestic oil and gas natural resources, while protecting health, safety and the environment. The commission also produces petroleum-related publications and surveys on the effects of the recent price downturn. 4) Describe the main capabilities of Great Lakes.
The main capability of Great Lake is that the company has goals of being recognized as the premier company. This is also their mission. They state that they plan to reach this goal by providing world-class responsiveness as well as innovative products and services. This can be reached once they have made the transformation from lead to unleaded gasoline.
Assignment One – 7 References Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic Management Concept & Cases: Competitiveness & Globalization: 2011 custom edition (9th ed.). Mason, OH: South-Western Cengage Learning
Bloomberg Businessweek http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=276253
The Official Website of Indianapolis and Marion County (2012) http://www.indy.gov/eGov/City/DMD/Planning/Stats/Census/Pages/population.aspx Petrostrategies, Inc. (2000) http://www.petrostrategies.org/Links/worlds_largest_oil_and_gas_companies.htm Petrostrategies, Inc. (2000) http://www.petrostrategies.org/Links/government_agencies.htm