Canadian Briefing Note (LCBO) Essay Example for Free

Canadian Briefing Note (LCBO) Essay1. IntroductionThe hard liquor Control Board of Ontario (LCBO) is a Cr cause Corporation established in 1927. It operates nearly 600 stores across the province and has a monopoly on the change of spirits in Ontario.1 LCBO generated nearly $2.9 billion yearlyly for the people of Ontario including $2 billion in taxes and nearly other $900 million in profits each year, making it the second largest administration liquor distributor in the world.2The source Tories planed to sell the boards revenue stream while retaining actual ownership. Now, Dalton McGuintys Liberals was handing out a workbook to focus groups it had convened, verbalism that the 600 stores could be sold as franchises. Theres something about the prospect of a $5.6-billion deficit that has encouraged the government to generate funds from selling its prime asset.However, the Ontario Liquor Board Employees Union has been running a successful endure against privatizing the LCBO , and at same time, National Union of Public and General Employees threw its full support behind a campaign to stop government of from privatizing the phenomenally-profitable Liquor Control Board of Ontario.Should LCBO be privatized now? In this report, primary of all, the importance of the issue is discussed, then a detailed analysis of the interests among government, business and ordinary is presented, finally I will draw the conclusion and make a few of recommendations for privatization of LCBO.2. Importance of the Issue2.1. RevenueThe LCBO is a highly profitable business owned by the government of Ontario. It is also a significant instalment of the economy of the province. It generates $2.9 billion a year in taxes and profits. The LCBO also contributes to the economy of Ontario in salaries, rents, and the purchase of various goods and goods. This sum of money has a multiplier effect on the provincial economy, larger than the original sum total injected into the economy. 32 .2. Pricing and MarketingThe LCBO carries a very wide selection of quality-tested produces throughout the province at uniform prices. The liquor statement boards can, as single debaseers, bargain for lower prices and greater special discounts from suppliers and carriers. The privately-owned outlets ar fragmented and multiply rapidly and are consequently not centralized in their operations and dispersion network. Privately-owned retail outlets also require higher rates of return on their capital costs than control boards, and these higher costs, among others, antedate to higher alcohol prices under privatization.2.3. EmploymentThe LCBO is a progressive employer of a pull and customer oriented workforce who are classified as permanent (amount 3362) and casual, and full-time and part-time.4 LCBO privatization means the put off of LCBO employees that will lead to huge losses to the treasury and economy of Ontario. Thus the union struggles to uprise campaign against the privati zation.2.4. Society InfluencePrivatizing the LCBO would likely lead to change magnitude access to alcohol, increased consumption and therefore more alcohol-related costs. The significant potential consequences of the privatization of alcohol monopolies include increased overall population consumption increased sales to under-aged and inebriated patrons increased problems with monitoring and enforcement.3. Analysis of Privatization3.1. GovernmentFrom the aspect of government, it is a current leaning that government should not put more intervention in business. Tory said in throne terminology The government will sell businesses it should not operate and assets it should not own. 5 Thus it is tenablenessable that the causation 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 descend its financial problem i n short term. However, if we consider it as a financial ending 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 2002-03.63.2. billetMany 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 keep back its brand recognizing advantage, it will be a little easy to develop their business in such(prenominal) 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.Until now, too many small towns didnt get LCBO service because they couldnt support the overhead of a full-sized LCBO store. Sterling, the former minister of consumer and business services, told reporters. With our go-ahead to offer franchises to exi sting retailers in very small markets, well mend service for residents and visitors, while preserving the LCBOs social responsibility standards. 53.3. PublicMost people are slaked the LCBOs product and service, and support the board control. Alcohol is special commodity, thus government intervention is needed at this situation, even though LCBO has monopoly status in Ontario area. All LCBO retail employees are trained to Challenge and spurn service to anyone who appears underage and cannot provide valid ID or appears intoxicated. Last year, LCBO frontline staff challenged 1.2 million would-be customers and refused service to nearly 70,000, about two-thirds of whom appeared underage and could not provide valid ID.7 It is difficult to imagine what will pop off if all these retail shops are sold to private investors, they may consider more on their own economic benefit and neglect social liability. Increased alcohol problems such as sale to under-aged and intoxicated patron are very likely happen.4. Recommendation and ConclusionThe privatization of LCBO is a complicated issue, because we should consider the relationship and interests among government, business, and public. On one hand, normally government should not act as a policy decision maker and business operator at same time, which will easily lead to monopoly and against good faith.8 On another hand, we have to consider that alcohol is special commodity, which should be effectively controlled by government found on public interest. Therefore my suggestion is to partly privatize LCBO, it will decrease business monopoly in the market, but government could still occupy large part of share, so it can effectively define the operation of business.There are many methods of privatization, and some ideas had been mentioned by government in LCBO history, such as franchise store in rural area, merge with Beer Store, and income trust. The main concern is to find an appropriate appearance to balance the interests of all parties, and make the privatization go smoothly during a period, not suddenly hit some partys interests, and ill-timed be accepted by all groups. 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 heap up all kinds of opinion and feedback from society. Although this method may spend more time during policy-decision process, only when the issue is soundly discussed and known by public, the rational policy could be made to reflect all partys interest and untimely encounter less resistance while it is applied.Endnotes1. L CBO, 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 Employees 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 cl 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, Todays LCBO, http//www.lcbo.com/aboutlcbo/todayslcbo.shtmlsocial (accessed 20 October 2004).8. Glen E. Randall David S. Barrows, Business P700 Lecture (McMaster University, 15 October 2004).Bibliography1. Daniel Girard. Liquor stores could stil l be up for sale, Harris says. The TorontoStar, 27 May 1999.2. Ian Urquhart. McGuinty puts controversial Tory ideas into play. The TorontoStar, 2 Oct. 2004.3. Nuri T. Jazairi. The Impact of Privatizing the Liquor Control Board of Ontario.http//www.yorku.ca/nuri/lcbo.htm (accessed 18 October 2004).4. Robert Benzie. Eves talked of selling LCBO, insiders say. The Toronto Star, 31Oct. 2003.5. Robert Benzie. Eves sought list of assets to be sold. The Toronto Star, 2November 2003.