INTERNATIONAL BUSINESS

ANGLO AMERICAN PLC CASE STUDY

BY SUJEET KUMAR (55)

1. Trace the history of Anglo American from 1917 to date in South Africa and other Businesses? ANS: Anglo American is one of the worlds largest mining companies having portfolio of high quality mining assets and natural resources spans bulk commodities iron ore and manganese, metallurgical coal and thermal coal; base metals copper and nickel; and precious metals and minerals in which it is a global leader in both platinum and diamonds. Countries of operation are Africa, Europe, South and North America, Australia and Asia. This company is headquartered in London, United Kingdom. Anglo American has a long and
storied history dates back to 1917 and the drive and determination of one man, Sir Ernest Oppenheimer. He saw the opportunity to capitalise on a region that was beginning to explode on to the global mining scene. TIMELINE of Anglo American

1917 - Company founded by Sir Ernest Oppenheimer along with American J.P Morgan. Initial investment was 1 million pounds raised from various sources in UK and US. The company was headquartered in London, United Kingdom. 1926 - AAC becomes the largest single shareholder in De Beers.

1928 - AAC began mining in the Zambian copper belt. 1942 - AAC's involvement in coal becomes significant through SA Coal Estates 1945 - AAC moved into the coal industry by acquiring Coal Estates 1957 - Sir Ernest died in Johannesburg and was succeeded by his son, Harry Oppenheimer, who also became chairman of De Beers. 1961 - AAC expanded outside of southern Africa for the first time and became a major investor in the Hudson Bay Mining and Smelting Company in Canada. 1963 - The major industrial and commercial interests of AAC are incorporated into Anglo
American Industrial Corporation (Amic); Scaw Metals is acquired as a prologue to entering the steel industry on a large scale.

1967 - Moved into the steel industry by acquiring Scaw Metals. Upto 1975 - Continued to grow and established a number of ventures, including the Mondi Group (timber, pulp and paper), Amgold (later AngloGold Ashanti) and then Amcoal (through the consolidation of several of its mining operations in South Africa
1981 - AAC becomes the first South African mining house to encourage the recognition of black trade unions.

1982 - Anglo American Corporation merged with Minorco on 24 May 1999 to form Anglo American plc with its primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange
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1993 - Minorco acquires the non-African assets of AAC, excluding diamonds, while AAC acquires all the African assets of Minorco.

1998 - AAC combines with Minorco to establish Anglo American PLC 1999 - Anglo American PLC lists on the London Stock Exchange and enters the FTSE 100. 2001 - Anglo American PLC eliminates its cross-holding with De Beers, increasing its
interest in De Beers from 32 percent to 45 percent.

2002 - Anglo American acquired Tarmac, a supplier of building materials and Shell Petroleum Companys Australian coal assets. South Africas Mining Charter was approved and Anglo American and other mining companies with operations in the country were mandated to transfer a percentage of their South African production to historically disadvantaged South Africans. Also, in 2002, Anglo Base Metals acquired the Disputada copper operations in Chile from Exxon Mobil Corporation and opened a representative office in Beijing, China. 2003 - Anglo American acquired a major stake in iron ore producer Kumba Resources. Upto 2009 - Anglo American opened a representative office in New Delhi, India, acquired control of the Michiquillay copper project in northern Peru and the MMX Minas-Rio and Amapa iron ore projects in Brazil and later acquired stakes in the Pebble copper project in Alaska and Foxleigh coal mine in Australia. 2011 - Anglo American had agreed to acquire the Oppenheimer family's 40% stake in De
Beers.

2. What are the pros and cons of Anglo Americans adoptions of a strategy in combating HIV/AIDS among its South African workforce? What recommendation would you give the company concerning its HIV / AIDS policy? ANS: Anglo American was South Africas first home based public limited company . It had huge investment in South Africa and was hard hit by the HIV / AIDS epidemic . It was one of the first corporation to develop a comprehensive, proactive strategy to combat the ravages of the disease on its workforce and the repercussions for its operations. . The pros and cons of Anglo Americans adoptions of a strategy in combating HIV/AIDS among its South African workforce are : PROS Anglo American PLC got good response from WHO, Global Business Council for HIV / AIDS and other NGOs, thus making it as a socially responsible organization in Global business. Due to its long term operational knowledge in South Africa even under extreme unfavourable conditions, it has gained goodwill or government and residents of South Africa. The message WE ARE HERE TO STAY sends a strong commitment signal to the country residents. The strategies would help the company in creating long term good will, which can help it enter new countries for setting up its business. The early adoption strategy helped it to prevent further loss in operating expenses by providing awareness and ART to its employee in earlier stage.

It also prevented the possible higher loss to the company i.e. if in case the worker were left untreated then losses would have been higher than providing ART . Because of Anglo Americans aggressive strategy towards fighting HIV/AIDS in the long run they can benefit from the changing approach of government towards this issue

Anglo American became the trend setter for being the first private sector company to fight against HIV/AIDS. Many other MNEs like Coke, Ford, Colgate-Pamolive followed Anglo Americans initiative. This also helped in building their brand image.

CONS The program as of now is NOT very effective, instead of a decrease in the number of workers having contracted HIV/AIDS, there is actually an increase of 2%. It faced the problems of spiralling costs of the program as the cost of distributing ART remained very high. It encountered outright opposition of the South African government and its political leaders. This led to a hostile environment.

RECOMMENDATIONS It should try to improve its work conditions and create a stable environment for its workforce as it will lead to greater adherence to the ART course and improve its operational efficiency. It should try to collaborate with South African Government before rolling out it plans to combat HIV/AIDS as it will provide it with more resources and infrastructure to combat the problem and moreover government support is of paramount importance for a company to operate in that country. Workers who got benefitted from its programs can be asked to campaign for it and take the initiative further.

3. Because such a large percentage of its workforce consists of migrant workers who are more likely to acquire and spread HIV/AIDS, should Anglo American adopt the policy of not hiring migrant workers? Should the South African government close the doors to migrant workers?

ANS:-

A straight away YES or NO as an answer for above concern will not do justice towards the complexity of the problem. The company has to keep certain points in mind while deciding upon any action in regard of migration workers. The decision of the Anglo American company about recruiting the migrant workers should be in line with the host countries policy towards the migrant workers and the labour laws in the country. Any act of discrimination against migration works and curbing them from getting equal opportunities of employment may have a negative impact on the companys image. Stopping recruitment from migrant workers due to AIDS will also attract criticism from world organizations like WHO and will dent the image of the company on the global platform The availability and cost of the skill set required in local markets also play a significant role upon reaching any conclusive decision in this regard.

The Government should try to discourage migration of workers by developing local skill set and creating policies that will encourage MNEs to hire locals over migrants. This will also lead to increased availability of employment for the local people leading to reducing the wide gap between the aspirations level of people and what the govt. is able to provide. The government should allow migration of skilled labour if it is not able to generate the same in the home country so that the country remains attractive for MNEs.

4. What role do pharmaceutical companies play in responding to the HIV/AIDS epidemic in South Africa? What policies or courses of action would you recommend to a company that produces HIV/AIDS drugs? ANS: Despite criticism, cynicism and contempt in medias portrayal of the pharmaceutical industries efforts to help mitigate some of the developing worlds worst health crisis , companies like GlaxoSmithKline along with others remain more committed than ever to bringing relief to the suffering, particularly to those affected with HIV/AIDS in Africa. Several pharmaceutical companies provide not-for-profit medicines , GlaxoSmithKline pioneered not-for-profit preferential pricing for HIV/AIDS medicines in 1997. All private employers in sub-Saharan Africa who provide care and treatment to their uninsured staff can purchase antiretrovirals at not-for-profit prices. GSK doesnt make a profit on them but cover costs to ensure they can sustain supply of these high-quality medicines for as long as they are needed. The World Health Organization has estimated that more than two billion people in the developing world do not receive vital medicines due to drug diversion, distribution and administration difficulties. Through its AmpliCare program, Hoffman LaRoche delivers HIV viral load tests to sub-Saharan Africa and South Africa, as well as education to local doctors and nurses on the latest advances in HIV/ AIDS care. Merck Frossts African Comprehensive HIV/AIDS Partnerships in Botswana support and enhance that countrys response to the HIV/AIDS epidemic through a comprehensive approach to prevention, care and treatment. GlaxoSmithKline has international program of HIV education, care and community support. Of those who do receive medicines, there are often issues with drug adherence, drug resistance and general follow-up to ensure they continue taking the medications for life. Add to that political and military instability, constantly changing economic policies and insufficient healthcare funding, and one can begin to get a sense of the enormity of this public health issue. Recommendations: Measures to check diversion and re-distribution of drugs in western markets. Special packaging of non-profit drugs with separate and exclusive distribution channels can be used. Investment in Research and Development for alternative cheaper medicines for AIDS should be encouraged. The companies can invest in manufacturing in South Africa via licensing. This will ensure that there is no reverse engineering that is done on the drug and the patent will be active. Government of affected countries should be contacted to provide subsides on curative medicines of HIV/AIDS.

5. Elsewhere in the chapter, we described the more aggressive policies of the Brazilian and Thai governments in the battle against HIV/AIDS. Should the South African government adopt a similarly aggressive approach? Why or why not? ANS: As we saw in case of Brazilian and Thai governments, they carried out prosecution of a law that allowed easy production and import of generics. Similar policies can be adopted by the South African government too in the battle against HIV/AIDS. Governments and private foundations should attempt to solve the problem of developing-country access to drugs and vaccines through an International Finance Facility for Immunization contract and/or advance-purchase contracts. The manufacture and export of generic drugs was not only a turning point in terms of the price of ARVs, but also helped to revolutionise treatment for resource-poor settings by simplifying HIV/AIDS treatment. Compulsory licensing should be implemented. A compulsory licence is a government licence that enables someone other than the patent holder to copy patented products and processes without fear of prosecution. Governments can issue them if a patent owner abuses their rights by, for example, failing to offer their product on the market, or offering it at a price that is too high for potential buyers to afford. Usually the generic company has to negotiate with the original manufacturer to agree royalties (money paid to the patent holder to make up for the loss of profit exclusivity). However, following the 2001 Doha agreement a country can issue a compulsory licence for a drug that treats a disease causing a severe health emergency in that country without royalties being paid.

6. Recommendations for Anglo American PLC, government of South Africa and for MNEs (pharmaceuticals) like GSK.

ANS:GOVERNMENT: Social awareness campaigns with help of public figures need to be carried out . The health care infrastructure must be improved to enable a strong distribution network for the medical assistance to be offered to the people. Subsidies for MNEs indulged in mass production and distribution of drugs for HIV/AIDS.

Strong rules to protect patent rights should be implemented. The government must help in establishing companies which will produce generic drugs for local consumption. The nations must licence the patented drug from the patent holder. This will remove the inhibition that most pharmaceutical companies have in regard to selling generic drugs.

Greater share of National GDP should be diverted towards handling of HIV/AIDS crisis.

ANGLO AMERICAN PLC:

. The company must educate the employee about prevention of the disease and help in early detection The company must link with and support community and local authority programmes aimed at prevention and management of HIV/AIDS, including orphan care, improved housing, strengthening female/family roles and enhancing literacy.
It should take support from WHO and NGOs to spread AIDS prevention programme and ART medication. Usually an MNE is looked with suspicion by a host countrys government but a similar work done by an NGO or through WHO will be accepted by the same government.

OTHER MNEs (PHARMACEUTICALS): Tiered Pricing or differential pricing should be adopted. Differential pricing, also known as tiered pricing, means that different classes of buyers are charged different prices for the same product.

Measures to check diversion and re-distribution of drugs in western markets. Special packaging of non-profit drugs with separate and exclusive distribution channels can be used.

Investment in Research and Development for alternative cheaper medicines for AIDS should be encouraged. The companies can invest in manufacturing in South Africa via licensing. This will ensure that there is no reverse engineering that is done on the drug and the patent will be active.

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