Sample Questions for Midterm

Americans opened branches of their domestic companies

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Americans opened branches of their domestic companies, often to better access Canadian natural resources, or to avoid the tariffs of the National Policy. Why didn’t Canadians start their own companies? o US firms had the enormous advantage of much greater capital and experience and strongly established, valuable connections in the larger US marketplace. o A Canadian firm catering only to the domestic market could not compete with the economies of scale enjoyed by US branch companies. o Canadians were already familiar with American products through advertising in American publications readily available in Canada and due to the extensive travel that Canadians did to the US. o Given these advantages, Canadian firms had a tougher time establishing themselves. o Many that did become successful were ultimately purchased by larger US firms. 4. What are some of the concerns around foreign ownership and of Canadian companies and interests? (10 marks) Higher level functions (research and development, finance, marketing) are often done at the parent company’s head office depriving Canada of this high skilled labour. Any profits from the business activities conducted in Canada reside with the parent company, meaning these profits are leaving Canada.
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Concerns around foreign ownership of Canadian companies and interests are: o The ability of head office to establish prices for both inputs and outputs or to transfer assets to their subsidiaries. o “The possibility of a foreign government less than fully committed to free- market economics, law and liberalism. Such a company might attempt to tie politics and business, or might exert pressure to secure preferential treatment for a state-owned company operating in Canada.” Executive “brain drain” as Canadian executives are moved out of the country. Ancillary operations often done outside Canada: Research and Development, Marketing, etc. “While our free-market system sees competition and profit-maximizing behaviour as the best guarantors of economically efficient outcomes, a foreign government owning Canadian resources might choose to make an inefficient use of those resources for the sake of propping up government-controlled firms or sectors at home.” 5. What other case that we covered parallels what we are seeing in the retail sector? (2 marks) The Auto Sector. Why? o US owned companies coming in directly to set up shop in Canada to access our market. o Due to economies of scale and greater capital, they were able to outperform domestic industries. o Often Canadian companies were bought up by US companies to increase their hold in market. The case on Eatons and Simpson’s does NOT apply here. o The question was what case parallels what we are seeing in the retail sector. A case on the retail sector is on the retail sector, not paralleling it!
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