This memo seeks to advice the board of directors of Great Lakes Chemical Corporation on the best policy issue the company should pursue in dealing with the problem of Tetraethyl
Lead (TEL) additive the company produces through its subsidiary – Octel Associates.
Making the corresponding recommendation, I have considered three options suggested by the board. According to independent research, there are some other options that may be adopted by the company.
I highly recommend the Board that the company should go with the first option: the Company should get out of the business of selling leaded gasoline in the near future.
This recommendation is due to the following reasons. As we all already know, the pressure is building up from pressure groups like the Environmentalists and the general public for the company stop selling Leaded additives. Most companies stopped selling the product long time ago. The only reason why Great Lakes Corporation is still in this business is because of the lucrative profit the group is getting from the Octel business segment.
This pressure will not die until the trade in this product ceases completely. As a matter of fact, it can only get worse if Great Lakes continues with the business. The fear that the company will take a huge financial hit is real but when looking into a long term perspective, the company is a going concern and will continue to operate into the foreseeable future. The short term gains should not supersede long term benefits.
Great Lakes Corporation should also be in tune with Corporate Social responsibility which looks beyond the Company profits and encompasses the greater good of the society at large. In fact, studies have shown that companies which adopt this policy are better placed to succeed than those who do not.
The overriding factor in making this recommendation is the devastating negative health hazards caused people and especially children by gasoline in less developed countries. The effect ranges from lowering their IQs to causing high blood pressure and damaging the kidneys and their cardiovascular system among others.
The Company has to critically consider the argument that pollution control and managing natural resources are the key to successful business development and all leading companies should think of taking this route. In Green to Gold, Esty and Winston show how to increase their revenues and reduce business risk and create lasting value by including environmental thinking into their strategies, smart companies can also cut the costs. Therefore, Great Lakes Corporation should choose this option.
The second policy of continuing to supply the lead additives to developing countries should not be considered because besides the financial benefits to the company, the policy ignores negative effects the lead additives have on the people of these countries.
Taking into account the argument that developing countries have some economic benefits from the lead additives surpassed by the devastating effects of death, bad health and infant mortality are caused by the effect of gasoline imported by the governments. Besides, if the transition from lead to unleaded gasoline is left to the governments in the most developing countries, it might take a very long time and a lot of lives would continue to be lost every day.
Despite the high demands from these countries and less competition, it is better for Great Lakes Corporation to be proactive and to stop the exportation all together rather than wait for a natural transition. In this case pressure would continue coming from the environmentalists and the like.
The adopting of the third policy may be considered as an attempt to strike the middle ground. However, it is not good enough as far as the problem is caused by lead gasoline in developing countries. Five years is a very long period of time and many people’s lives may be in danger and even lost during this “transition” period.
The company considers persuading the developing countries to change from leaded to unleaded gasoline during this five year period but there is always a risk that this period may be pushed forward, especially if the persuasion does not work as it has been originally expected.
This might not work well with the environmentalists and other stakeholders who might not been convinced that the company is doing well enough. This would be exacerbated by the fact that Great Lakes Corporation would still be earning the huge profits from the sale of leaded gasoline to these countries.
Business restructuring is always a difficult step to take, moreover, if it requires discontinuing the business segment that is more profitable. That is the situation facing Great Lakes at the moment but a decision has to be made and it must be the right decision. Either the company stops selling leaded gasoline to the poorer countries straight away or continue, hoping that the trade will die naturally like it has happened in USA.
I suggest Great Lakes Corporation to go with the former option for the sake of people and children who die every day in developed countries as a result of the effect of leaded gasoline. This should be done for good business practice, by applying the theory of Corporate social responsibility and cleaning the environment as a whole.
Reference List
Esty C. D.,& Winston S. A. (2009). Green to gold: how smart companies use environmental strategy to innovate. USA: Canada: Wiley J., & Sons.
Mahmood A. M. (1991). P.K. Srivastava. Marketing Management in a Developing Economy. Business Library. Web.
Winston A. (2011). The definitive guide to the greening of business. [Review of the book Green to gold]. Eco-advantage: how business is catching the green wave. Web.