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The Impact of Privatization of the Liquor Control Board of Ontario on Economics - Case Study Example

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The paper 'The Impact of Privatization of the Liquor Control Board of Ontario on Economics" states that the economic and social costs of alcohol abuse will be increased; privatization will cause unemployment rising in Ontario; it also will support the underground economy blossoming…
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The Impact of Privatization of the Liquor Control Board of Ontario on Economics
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Download file to see previous pages The LCBO develops wine and beer production in Ontario, its price and marketing policies are very supportive. The LSBO has successfully achieved all these objectives. "The LCBO" is one of the most profitable public agencies in Canada. It has delivered billions in profits and sales taxes to the taxpayers of Ontario over the past decade..." (Retail alcohol monopolies, 1993). So there is a question: will it be more efficient to divide the alcohol beverages market among smaller private firms which are not easy to be controlled rather than to provide reasonable policy in this market This paper will discuss possible impacts of privatization of the liquor control board of Ontario (LCBO) on economics and social sphere of Ontario. Privatization of alcohol beverages industry is a serious step touching all main spheres of the Ontario population, so it can result in many (basically negative) consequences for the province.
The LCBO is a monopoly in the market which has its efficient network of stores, so it can "bargain for lower prices and greater special discounts from suppliers and carriers" (The Legislative Assembly, 2005). It also is able to provide efficient costs: "The liquor control boards are also likely to have lower operating costs. The privately-owned outlets are fragmented and multiply rapidly, while the control stores are open for fewer hours, and are integrated and centralized in their operations and distribution network" (The Legislative Assembly, 2005). In addition, privately-owned firms have higher capital costs than the LCBO that also leads to the price increase. Experience analysis of other areas and countries follows the same tendency. In Alberta "the price of beer rose from 5 to 6%, the price of whisky from 6 to 8% and the price of certain liqueurs rose up to 23% compared to ALCB prices" (Bernard M. and Lauzon L.-P., 1995). One more example: "Iowa, privatized the wine trade in 1985, and the sale of spirits in 1987. After a short period of stability, sale prices gradually rose by 7% within a year, mainly to ensure a margin of profit for new private firms." (Bernard M. and Lauzon L.-P., 1995).
Another impact of the LCBO privatization is a smaller product selection. At first, it seems strange, but a corporation has more possibilities for providing consumer choice. It "consolidates orders and makes it possible to obtain a greater number of brands; a small retailer cannot afford to order items which are not best-sellers" (Bernard M. and Lauzon L.-P., 1995). An example of Alberta illustrates the tendency: "before privatization, certain ALCB stores displayed over 2000 products; after privatization, the choice offered to consumers was reduced to less than 500 products. Inventories were reduced and discontinued items became a frequent occurrence". ...Download file to see next pagesRead More
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