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Case #1: Canadian Briefing Note (LCBO)

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Introduction

Case #1: Canadian Briefing Note (LCBO) P700 Business, Government and the Global Environment October 22, 2004 (Total words: 1233) TABLE OF CONTENTS 1. Introduction .............................................................................1 2. Importance of the Issue .............................................................. 1 2.1. Revenue ........................................................................... 2 2.2. Pricing and Marketing .......................................................... 2 2.3. Employment ...................................................................... 2 2.4. Society Influence ................................................................. 3 3. Analysis of Privatization ............................................................. 3 3.1. Government ....................................................................... 3 3.2. Business ........................................................................... 3 3.3. Public ............................................................................... 4 4. Recommendation and Conclusion ................................................... 4 Endnotes ..................................................................................... 6 Bibliography .......................................................................................................7 1. Introduction The Liquor Control Board of Ontario (LCBO) is a Crown Corporation established in 1927. It operates nearly 600 stores across the province and has a monopoly on the sale of spirits in Ontario.1 LCBO generated nearly $2.9 billion annually for the people of Ontario - including $2 billion in taxes and another $900 million in profits each year, making it the second largest government liquor distributor in the world.2 The former Tories planed to sell the board's revenue stream while retaining actual ownership. Now, Dalton McGuinty's Liberals was handing out a workbook to focus groups it had convened, saying that the 600 stores could be sold as franchises. There's something about the prospect of a $5.6-billion deficit that has encouraged the government to obtain funds from selling its prime asset. However, the Ontario Liquor Board Employees' Union has been running a successful campaign against privatizing the LCBO, and at same time, National Union of ...read more.

Middle

3. Analysis of Privatization 3.1. Government From the aspect of government, it is a current trend that government should not put more intervention in business. Tory said in throne speech: "The government will sell businesses it should not operate and assets it should not own." 5 Thus it is reasonable that the former and current minister planned to sell off or partly sell the LCBO. Another reason for privatization may attribute to fiscal deficit, because ministers want to cut its deficit during their terms. The sale of LCBO will obviously resolve its financial problem in short term. However, if we consider it as a financial decision in the long term, it may not be a good choice. Because LCBO is running very well now, it brings an annual dividend of $975 million to government or people of Ontario in 2002-03.6 3.2. Business Many private investors would prefer to buy the franchise of LCBO or directly buy its retail shop. Because LCBO has already established its stable customer base, and have its brand recognizing advantage, it will be a little easy to develop their business in such situation. But due to limit of small scale, its operating cost would be higher than the LCBO, this may lead to high sale price of liquor. And at same reason, it may not control the quality of product as LCBO does. ...read more.

Conclusion

In order to achieve this goal, the LCBO and ministry must be more transparent in their decision-making, and more open to consideration of public health interests. From this point of view, government could organize a board which has enough members from different stakeholders, such as employees of LCBO, representative of Ontario citizen, expert of public health and safety, economists, private investor and government officer. They could regularly meet together to discuss the possible method of privatization and collect all kinds of opinion and feedback from society. Although this method may spend more time during policy-decision process, only when the issue is thoroughly discussed and known by public, the rational policy could be made to reflect all party's interest and untimely encounter less resistance while it is applied. Endnotes: 1. LCBO, "Business Information", http://www.lcbo.com/aboutlcbo/businessinformation.shtml (accessed 16 October 2004). 2. LCBO Annual Report 2003, 44, http://www.lcbo.com/aboutlcbo/annualreport2003.shtml(accessed 17 October 2004). 3. Ontario Liquor Boards Employee's Union, "LCBO Revenues", http://www.ourlcbo.com/revenues.htm (accessed 18 October 2004). 4. LCBO Annual Report 2003, 44, http://www.lcbo.com/aboutlcbo/annualreport2003.shtml (accessed 18 October 2004). 5. The National Union of Public and General Employees, "Ontario opening 150 private rural liquor outlets", http://www.nupge.ca/news_2001/news_se01/n26se01a.htm (accessed 19 October 2004). 6. LCBO Annual Report 2003, 11, http://www.lcbo.com/aboutlcbo/annualreport2003.shtml (accessed 19 October 2004). 7. LCBO, "Today's LCBO", http://www.lcbo.com/aboutlcbo/todayslcbo.shtml#social (accessed 20 October 2004). 8. Glen E. Randall & David S. Barrows, Business P700 Lecture (McMaster University, 15 October 2004). ...read more.

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