Chat with AIExam 9: Section 2: The Leadership Challenge
Foreign takeovers of Canadian-owned businesses continue to happen. One of the biggest foreign takeovers in Canadian history a number of years ago, triggered a great concern among many Canadian observers that there is a "hollowing out" of corporate Canada. That takeover was by Rio Tinto, a mining company from Britain, that completed a $38-billion (U.S.) deal to buy the 105-year-old Canadian aluminum maker Alcan Inc. (headquartered in Montreal). The deal made Alcan a subsidiary of Rio Tinto - a global company headquartered in Britain (and Australia). Some critics have suggested that the loss of control of Alcan was very bad for Canada. Those opposed to these foreign takeovers argue that Canadian business is losing control and independence to foreign countries. Consequently, there has been concern that the Canadian government should try to curtail this foreign takeover trend before Canadian is transformed completely into a "branch plant economy".
What are three potential benefits and three potential negative consequences for the host country (Canada) of this acquisition?
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VerifiedThree Potential Benefits for the host country
1. Offers management expertise - Bank of Canada Governor claim that the "quality of management more important than nationality"
2. Provides financial support to underdeveloped regions of the world - China, India
3. Encourages International Trade
4. Brings different countries together
5. Facilitates global co-operation and worldwide economic development
6. Creates employment - If they stay in Canada long-term
Potential Negative consequences for the host country
1. MNCs do not have any particular allegiance or commitment to their host country
2. Profits made are mobile - go back to head office
3. Decision making and other key functions of MNCs are highly centralized in home country i.e. Britain/Australia
4. Difficult to control and hold them accountable - loss of Alcan devastating Canada
Foreign takeovers of Canadian-owned businesses continue to happen. One of the biggest foreign takeovers in Canadian history a number of years ago, triggered a great concern among many Canadian observers that there is a "hollowing out" of corporate Canada. That takeover was by Rio Tinto, a mining company from Britain, that completed a $38-billion (U.S.) deal to buy the 105-year-old Canadian aluminum maker Alcan Inc. (headquartered in Montreal). The deal made Alcan a subsidiary of Rio Tinto - a global company headquartered in Britain (and Australia). Some critics have suggested that the loss of control of Alcan was very bad for Canada. Those opposed to these foreign takeovers argue that Canadian business is losing control and independence to foreign countries. Consequently, there has been concern that the Canadian government should try to curtail this foreign takeover trend before Canadian is transformed completely into a "branch plant economy".
Identify the three central elements of globalization and describe how this case reflects each of these three elements? Students need to begin with a definition of globalization .
(42) Verified1. Globalization can be considered a process that is expanding the degree and forms of cross border transactions among people, assets, goods and services.
2. Rio Tinto is a Britain/Australian company doing business across border in Canada
3. Globalization refers to the growth of direct foreign investment in regions across the world.
4. Buying out Canadian owned Alcan, continuing to operate in Canada and is now expanding into China and India represents direct foreign investment.
5. Shift toward increasing economic interdependence: the process of generating one, single, world economic system or a global system.
6. The purchase of Alcan by Rio Tinto is an erosion of Canadian independence. The case also mentions the Hudson Bay and other companies that have been bought out by none Canadian firms making the Canadian economy more interdependent.
Foreign takeovers of Canadian-owned businesses continue to happen. One of the biggest foreign takeovers in Canadian history a number of years ago, triggered a great concern among many Canadian observers that there is a "hollowing out" of corporate Canada. That takeover was by Rio Tinto, a mining company from Britain, that completed a $38-billion (U.S.) deal to buy the 105-year-old Canadian aluminum maker Alcan Inc. (headquartered in Montreal). The deal made Alcan a subsidiary of Rio Tinto - a global company headquartered in Britain (and Australia). Some critics have suggested that the loss of control of Alcan was very bad for Canada. Those opposed to these foreign takeovers argue that Canadian business is losing control and independence to foreign countries. Consequently, there has been concern that the Canadian government should try to curtail this foreign takeover trend before Canadian is transformed completely into a "branch plant economy".
What six major arguments can you make for the Canadian government to play the role of guardian of Canadian businesses (like Alcan) by preventing such foreign takeovers and also by offering subsidies to Canadian companies (like Alcan) in order to help them compete against foreign companies (like Rio Tinto)?
(32) Verified1. Nurturing young industries: Perhaps the most convincing argument for subsidies in general. To avoid this type of takeover, the government needs to help Alcan in the form of subsidies. This way they can grow and maintain a dominant share in the Canadian market and eventually compete globally.
2. Offering subsidies to compete globally: Government can provide subsidies to help Alcan compete globally with foreign competitors like Rio Tinto
3. Maintaining adequate level of domestic employment Creating/maintaining domestic jobs. While Alcan remain in Canada, this holds true. However, they have no allegiance to Canada and can choose to move their business offshore where they can access cheaper resources such as labour. It is our government's responsibility to ensure that that does not happen
4. Protecting against unfair global competition: Protect Alcan from dumping by foreign competitors creates a more even playing field.
5. Encouraging Foreign Direct Investment (FDI): Perhaps foreign producers will be attracted by subsidies encourages them to invest $ in Canada by setting up their operations here. This will increase employment and contributes to economic growth
6. Maintaining favourable balance of trade: Increase exports and reduce imports to avoid running a trade deficit. Government would need subsidize Alcan to encourage growth in their export
Foreign takeovers of Canadian-owned businesses continue to happen. One of the biggest foreign takeovers in Canadian history a number of years ago, triggered a great concern among many Canadian observers that there is a "hollowing out" of corporate Canada. That takeover was by Rio Tinto, a mining company from Britain, that completed a $38-billion (U.S.) deal to buy the 105-year-old Canadian aluminum maker Alcan Inc. (headquartered in Montreal). The deal made Alcan a subsidiary of Rio Tinto - a global company headquartered in Britain (and Australia). Some critics have suggested that the loss of control of Alcan was very bad for Canada. Those opposed to these foreign takeovers argue that Canadian business is losing control and independence to foreign countries. Consequently, there has been concern that the Canadian government should try to curtail this foreign takeover trend before Canadian is transformed completely into a "branch plant economy".
Based on the text material, describe five factors that may likely have pushed/ pulled Rio Tinto to go global (i.e. to Canada)?
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