BUSI 601-07-GROUP 8. Discussion Forum Week 8

docx

School

University Canada West *

*We aren’t endorsed by this school

Course

601

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by ProfElectronGorilla32

1 Week 8 Discussion Forum BUSI 601 – 07 – GROUP 8 University Canada West BUSI 601: Ethics, CSR & Business Analysis (HBD-FALL23-07) Professor: Abhinav Tomer November 19, 2023

2 Question 1: 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. Globalization is a phenomenon characterized by disseminating and exchanging financial products, commodities, technology, information, and employment opportunities across international boundaries and diverse cultural contexts. From an economic perspective, it delineates the interconnectedness of countries around the world facilitated by unrestricted commerce. The three central elements of globalization are reflected in this case: The case highlights three key components of globalization: the Establishment of Subsidiaries, Mergers and Acquisitions, and Direct Investment in Foreign Operations . Direct investment in foreign operations refers to the acquisition of tangible assets or a stake in a firm based in another country, with the aim of obtaining a degree of managerial authority. Based on the case study, Rio Tinto, a British mining firm, successfully executed a substantial acquisition of Alcan Inc., a Canadian aluminum manufacturer with a rich history spanning over a century. The transaction amounted to a significant $38 billion (U.S.), and Alcan Inc. is located in Montreal. The acquisition of Alcan Inc. by Rio Tinto, a foreign corporation, facilitated the attainment of a significant stake in the firm, enabling control over its operations. This strategic move was driven by leveraging Alcan Inc.'s resources and gaining expedient entry into a larger market. The establishment of subsidiaries involves the formation of new corporate entities to enter a previously untapped market and engage in the selling of products and services. As a result, this will lead to a rise in sales. Based on the case study, Alcan is now facilitating the

3 expansion of its newly acquired parent company, Rio Tinto, into the markets of India and China. Rio Tinto and Alcan have merged to become the leading global aluminum producer. This indicates that Rio Tinto is embarking on an expansion strategy targeting the Chinese and Indian markets, aiming to sell their goods and establish a worldwide competitive presence. This endeavor presents a chance for the company to access a substantial market for its products. Mergers and acquisitions refer to the process by which two foreign companies combine their operations or one firm acquires another. This strategic move is undertaken to access more resources and expertise and expand into new markets. The lawsuit indicates that Rio Tinto acquired Alcan Inc. via a takeover. Additionally, it should be noted that Rio Tinto plays a crucial role as a fundamental component in the aluminum manufacturing process. This analysis highlights the potential benefits of Rio Tinto's acquisition of Alcan Inc. since it would provide them access to Alcan's valuable resources and expertise in the aluminum industry, ultimately positioning them as the leading global aluminum manufacturer. Question 2: What are three potential benefits and three potential negative consequences for the host country (Canada) of this acquisition? Potential benefits: Rio Tinto's acquisition of Canadian aluminum manufacturer Alcan is surrounded by both anticipation and concerns. Rio Tinto which is a multinational mining company has undertaken this groundbreaking business transaction that requires a large financial outlay and may have both advantages and disadvantages for Canada, the host nation. An in-depth analysis of these factors is required to understand the wider economic and industrial consequences that foreign takeovers can have for the hosting country. In this context, we will examine three possible advantages and three potential drawbacks of this acquisition for the Canadian economy.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

4 Three Potential Advantages Caused by the Acquisition Overall Economic Growth: Rio Tinto acquired Alcan by investing $38 billion which is anticipated to contribute significantly to Canada's economic growth. This huge amount of capital represents a strong financial commitment that could spark a variety of advantages. Apart from the acquisition's immediate financial effects, a wave of new jobs could be created if Rio Tinto plans to upgrade or expand Alcan's operations. The increase in jobs caused by this expansion can boost the labor market and also has a knock-on effect on other industries which will create a more dynamic economy. This calculated investment puts Canada in a competitive position on the international stage and fits with the trend of steady economic growth. Technological Advancement: The acquisition presents an enormous opportunity for technology transfer, especially with regard to cutting-edge mining and aluminum industry technologies. An established international mining corporation as Rio Tinto, is most likely outfitted with state-of-the-art machinery and adheres to industry best practices. This acquisition paves the way for the transfer of such technological expertise to Canada, encouraging a creative surge in the aluminum industry there. The transfer of the latest technologies not only improves operational effectiveness but also pushes the boundaries of advancement in general which takes Canada at the forefront of developments in the aluminum sector. This information sharing could serve as a catalyst for sustained competitiveness and growth. Market Expansion: Significant advantages in market access are made possible for Canadian aluminum products by the acquisition. Canadian businesses can enter new and diverse global markets by integrating into Rio Tinto's extensive global network. This international reach expands the market for Canadian aluminum not only geographically but also provides access to a range of consumer and industry sectors. By enabling Canadian businesses to lessen their

5 dependence on particular markets and regions, diversification emerges as a crucial strategic advantage that can compensate for economic fluctuations in one, by continued demand and growth in other regions. This ultimately leads to improved overall market stability. Rio Tinto's international markets and the Canadian aluminum sector collaborate together to create a strong foundation for long-term market growth and resilience. Negatives consequences: Job Losses and Unemployment: Acquisitions usually harm the labor market, even though these kinds of companies give jobs if the host country has problems such as economics or politics, foreign companies just leave the country and do not take care of unemployed people and unemployment benefits. Rio Tinto can determine their contribution to jobs in the area. Loss of Control and Decision-making Process: When a foreign company acquires a Canadian company might affect the autonomy of the local workforce because now the foreign company has the power and right to influence the decision-making process of the area. Rio Tinto has the power to make decisions on the aluminum market. Impact on Development: Since the foreign company has acquired rights on the Canadian company, most of the profit made will be out of the country and it will hurt the development because the investment will be low and will not contribute to the growth. Question 3: 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)? Preservation of Jobs and Employment is a critical aspect of government intervention in economic policies, and it involves implementing strategies to protect and preserve employment

6 opportunities within a country. By establishing regulations to prevent foreign takeovers and offering subsidies to Canadian companies, the government can create a stable working environment and safeguard jobs for the citizens. If job security is threatened, the economy will be unstable, which leads to feelings of stress, depression, and a lack of mental fitness. of the citizens (Miles, 2022). Therefore, support from the government to protect the Canadian businesses from the foreign takeover will maintain a stable job market, support workers and their families, and contribute to overall economic well-being. Global Trade Negotiation Leverage is the country's ability to influence and shape international trade agreements in its favor during negotiations. A proactive approach by the Canadian government in protecting domestic industries strengthens its position in global trade negotiations. Therefore, having strong leverage in global trade negotiations provides a nation with the capacity to secure favorable terms, protect economic interests, and maximize the benefits of participating in the global marketplace. By demonstrating a commitment to supporting and safeguarding its businesses, Canada may be in a better position to negotiate favorable trade terms, ensuring reciprocity and fair treatment for its companies in foreign markets. For example, The European Union is one of the world’s largest traders and a heavyweight in the international political economy, which is why this is not easy for the bargainers to deal with their members. Maintaining Control Over Strategic Resources is a critical aspect that Canada needs to take into consideration to ensure economic security, national defense, and overall well-being. Allowing foreign ownership may jeopardize control over these strategic resources. Strategic resources need to be preserved and controlled to support the country's economic development and overall stability. Therefore, the government needs to prevent the loss of control over the

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

7 resources to support national security and sufficiency. Implementing legislation and regulatory frameworks for foreign takeovers is crucial for long-term availability and minimizing ecological impacts. Support for Innovation and Research: Subsidies for Canadian businesses have the potential to stimulate national innovation and research. The government incentivizes businesses to allocate funds towards technology, development, and research initiatives, thereby augmenting their competitiveness and enabling them to remain at the forefront of worldwide industry trends. Maintaining Social and Environmental Standards: The Canadian government's involvement can be justified on the grounds of upholding high social and environmental standards. By retaining control over domestic companies, the government can ensure that these businesses continue to adhere to rigorous Canadian regulations, contributing to sustainable and responsible business practices. Strategic Economic Diversification: One method of diversifying the economy is to subsidize Canadian companies. The government can mitigate the risk of the nation turning into a "branch plant economy" that is unduly dependent on foreign-owned subsidiaries by investing in and promoting a wide variety of industries and encouraging overall economic resilience. In summary, by preventing foreign takeovers and offering subsidies strategically, the government can safeguard and preserve jobs, enhance its position in global trade negotiations, control strategic resources, promote innovation and research, maintain social and environmental standard, and foster economic diversification.

8 References Carver, C. S., & Scheier, M. F. (1981). Attention and Self-Regulation: A Control-Theory Approach to Human Behavior . http://ci.nii.ac.jp/ncid/BA00726156 Clemons, E. K., & Row, M. C. (1991). Sustaining IT Advantage: The role of Structural differences. Management Information Systems Quarterly , 15 (3), 275. https://doi.org/10.2307/249639 Fernando, J. (2023, March 28). Globalization in business with history and pros and cons . Investopedia. https://www.investopedia.com/terms/g/globalization.asp Government of Canada, Statistics Canada. (2023b, April 28). The Daily — Foreign direct investment, 2022 . https://www150.statcan.gc.ca/n1/daily-quotidien/230428/dq230428b- eng.htm Miles. M (2022, February 22). The secret to achieving job security — and why it matters. Better Up. https://www.betterup.com/blog/job-security-stability Powell, W. W., Koput, K. W., & Smith‐Doerr, L. (1996). Interorganizational collaboration and the locus of innovation: Networks of Learning in Biotechnology. Administrative Science Quarterly , 41 (1), 116. https://doi.org/10.2307/2393988 Takefman, B. (2023, May 9). The effects of globalization on Economic Development . ResearchFDI. https://researchfdi.com/resources/articles/the-effects-of-globalization-on- economic-development/ The hollowing out of Canadian mining: Vale’s takeover of Inco, 10 years on - BNN Bloomberg . (2016, September 23). BNN. https://www.bnnbloomberg.ca/the-hollowing-out-of- canadian-mining-vale-s-takeover-of-inco-10-years-on-1.572202 Wolf, M. (2005). Why globalization works . Centre for Development and Enterprise.

BUSI 601-07-GROUP 8. Discussion Forum Week 8

Related Documents