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Electro-Motive decision: The game has changed

William Polushin is founding director of the Program for International Competitiveness at the Desautels Faculty of Management, McGill University, and President of AMAXIS, an international business and operational development services firm. The Competing to Win blog series can be found here.

Caterpillar's decision to close its Electro-Motive Diesel facility in London has generated a wide range of responses and opinions. Caterpillar's actions are distasteful and unfortunate, but there is a need in Canada for a serious reality check in our country about what it means live in an increasingly integrated and competitive global economy.

This is 2012, not 1949 - when Electro-Motive Diesel, Inc. (now a subsidiary of Caterpillar) opened its plant in London, Ont., - or even 2000 (the year before China became a member of the World Trade Organization) - or 2003 (the year before Facebook was launched).

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In a world that is being reshaped by technology, economic globalization, demographic shifts, ever-evolving labour markets, and the economic rise of Brazil, China, India, Indonesia, Mexico, Russia and other "emerging markets" on the world stage, the competitive dynamics driving industry is changing and changing quickly. Canada Inc., the Canadian and provincial governments, and Canadians in general have to understand, embrace and respond to the tectonic shifts that are taking place in a way that will ensure our country is on the positive side of the balance sheet when it comes to trade, investment, and economic and industrial development.

The alternative, more stories like Caterpillar, AstraZeneca (which recently announced it was going to close its research centre in Montreal), and RIM (a pioneer in the smart phone market, but subsequently outmanoeuvred by Apple) will dominate the headlines of national media outlets.

But, by no means, does the story line have to be so "glass half full." As illustrated in the following graphs, to 2010, the stock of Canadian Direct Investment Abroad exceeded the stock of Foreign Direct Investment in Canada by $55-billion (CIDA = $616.7 billion; FDIC = $561.7).

The challenge in Canada is to make sure these numbers are more diversified - not only by industry, but also by number of companies. Based on 2010 figures, 51.8 per cent of the stock of Canadian Direct Investment Abroad was held by companies in the finance and industry sector -- which are dominated by a small group of very large enterprises -- BMO, CIBC, RBC, Scotiabank, TD, Power Corporation etc. -- and another 23.6 per cent by companies in the energy and metallic energy industries.

It also means that we have to be ever-conscious of the global business environment. As quoted by Billy Ainsworth, CEO of Progress Rail, in his letter to employees, "All facilities within EMC, EMD and Progress Rail Services must achieve competitive costs, quality and operating flexibility to compete and win in the global marketplace, and expectations at the London plant were no different."

Welcome to the complex, unforgiving, and intensely competitive world of international business. Whether we in Canada like it or not, these are the new rules of the game.

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