Canadian Branch plant economies

3002 Words Feb 12th, 2003 13 Pages
Modern industrial organizations in Canada are synonymous with the branch plant economy phenomenon. In general, "the term branch plant economy refers to a convenient shorthand term to describe a regional economy where a large proportion of the employees are in establishments owned by firms whose head office lies outside the region" (Watts 1). In Canada, branch plant economies are subsidiaries of companies based abroad, mostly in the U.S.

A branch plant economy is a strategic tool used by transnational corporations to maximize profits, avoid tariff fees and encourage exports. "Branch plant economies have been established in Canada for two essential purposes; the first is to gain access to the domestic Canadian market and the second is to
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"As the 1970's came to a close Canada reached an all time low with only nineteen percent of Canadians being employed in the manufacturing sector" (http://www.Canadainternationalbureauofstatistics/dominion/quart/dev/icj.html October 23, 2001).

Currently, Canada is economically heavily dependent on larger economic countries for research and development and new technologies. Canada also has always been dependent on the extraction of its primary products for export to other countries. "As far back as 1963 as much as sixty percent of the manufacturing industry was owned by firms whose head office lay outside the region or in foreign countries" (www.Statisticscanada/local/stateprov/ont.html. October 5, 2001).

The Canadian auto industry is a model case study of a branch plant economy. The auto industry's rich history dates back to the beginning of the twentieth century where a bright young entrepreneur named Sam McLaughlin who initially was an apprentice in his father's carriage workshop went into the automobile manufacturing business with his brother and father. By l9l8, with increasing competition in the North American automobile industry, McLaughlin decided to sell his firm to the recently organized General Motors Company, owned by Durrant and associates. Thus, McLaughlin's company became a Canadian subsidiary of General Motors, with McLaughlin as president and as vice-president of the American company. During this process, the Oshawa plant gained the distinction of
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