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). Rio Tinto is the world’s third-largest mining company, a heavyweight in commodities such as iron ore, copper, industrial metals, diamonds and bauxite, a key ingredient in the production of aluminum. The purchase of this Canadian company worried some Canadians who assert that Canada’s corporate sector is being hollowed out by a lot of foreign takeovers, especially in our resource sector. In the recent past, foreign companies have taken over Canadian miners Inco, Falconbridge and LionOre, and steel makers Dofasco, Algoma and Ipsco. Other Canadian companies including computer chip maker ATI, Four Seasons Hotels and Hudson’s Bay Co. have also gone to foreign buyers in recent years. The deal made Alcan a subsidiary of Rio Tinto a global company headquartered in Britain (and Australia). Alcan is now helping its new parent Rio Tinto expand into India and China. Together, Rio Tinto and Alcan now form the world’s No.1 aluminum producer. Some critics have suggested that the loss of control of Alcan is devastating for Canada. When you lose the guts of your economy to foreign owners, you lose the heart and soul of your country, one observer said. In addition, some have called on the Canadian government to use the reins of power to curtail these kinds of takeovers in Canada. It’s not just the loss of a business, it’s the further erosion of independence and the ability to control our own destiny, say some Canadian observers. Rio Tinto executives have tried to reduce Canadians fears about the loss of Canadian assets, saying the company is committed to Quebec and Canada. In addition, government representatives such as the Bank of Canada governor have tried to reduce fears of these foreign takeovers, saying that the quality of management is more important than the nationality (foreign origin) of a company’s ownership. According to the Bank of Canada governor Dodge, What matters, really, is that firms are well managed, and that they make the investments that are necessary to take advantage of global opportunitiesthen in fact that would actually be positive for Canadian employment and output. Critics of this foreign takeover, including business writer David Olive, argue that such takeovers are putting Canada further behind on the global business scene and turning us further into a branch plant economy. Olive makes the following cynical observation: There are advantages to working in a plantation [ie., the Canadian branch plant] economy. No responsibilities, for one thing, no need to innovate, or to recruit and retrain the best workers, or to understand the culture and buying habits of potential customers in faraway markets. There’s no need to strive when someone else is giving the orders. CASE QUESTIONS (TOTAL 1 MARKS) Answer the following two (2) concept application questions. Keep in mind that in addressing the questions below, you must apply the concepts, theories or frameworks discussed in class or in the assigned readings. Make any assumptions that you feel are necessary. Question 1: Define globalization and identify the three central elements of globalization that are reflected in this case reflects Question 2: Describe 4 factors that may likely have pushed/pulled Rio Tinto to go global (i.e. to come to Canada)?
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