Country Analysis: Canada - Research Paper Example

COUNTRY ANALYSIS: CANADA Introduction In the modern environment of radically enhanced financial and macroeconomic linkages, country analysis appears highly insufficient for informed decision making. Hence we propose the need for implementing a framework for monitoring and characterizing the global business cycle. International Business Analysis models The strengthening of the global linkages have become stronger which makes the interest in the understanding and dynamics of global activities to increase in both the academic as well as policy circles. The studies employed use simplified measures of global activity, which often are based on a country size weighted average of the major advanced country’s output growth. New econometrics methods have been found in recent developments as well as advances in technology (computing) have enabled the use of some sophisticated approaches such as the dynamic factor models. The models have been seen to be successful in getting the common fluctuations in the time series of larger cross section of countries. Some of these methods depend on single measures of aggregate activities as output while others use multiple indicators which include input, consumption and investment so that more reliable estimates may be used in global business cycle. In the international markets, there a number of factors that affects consumer behavior. It is necessary for marketing managers to understand the various factors that influence the decision making for most consumers when purchasing the products. This is attributed to the fact that the change in demand for the companys product would be as a result of changes in these variables. Marketers can exploit such factors with an aim of boosting their sales. The most significant aspect of this process is to understand consumer behavior. The marketer can utilize the dimensions of buying behavior support. This framework consists of the social, cultural, intellectual and physical or personal factors. 5D ANALYSIS OF CANADA Probably the leading modern theorist on culture is Geert Hofstede, who over the past thirty years has developed a system for classifying cultures. His original work measured culture according to four dimensions as the fifth one was added subsequently. The four dimensions include the power distance in which the United States leads other nations in the developing this distribution of power in the various stratified hierarchies. In the US, power is measured majorly in social status, wealth, laws and rules that protect those in positions of power (Fukao, 2006, p.29). Social class This is defined as a group of people with similar social ranks. They are classified on the basis of education, occupation, wealth, race, income, possessions and ethnic groups. It influences many of the decisions made by marketers. Americans in the upper middle class prefer driving luxury cars like Mercedes. It determines the types, quantity and quality of products that a consumer buys. Lower class consumers stay close to home when shopping. They rarely engage in gathering information before making a purchase. Uncertainty avoidance This measures the extent that people within United States are willing to tolerate uncertainty. Americans rate high on the Uncertainty Avoidance Index, indicating that they are not willing to tolerate uncertainty or ambiguity. They therefore develop laws, regulations, and controls to avoid uncertainty. A better example of such laws is the Dodd-Frank Act of 2008 that aims at protecting the consumers. Hofstede emphasizes that uncertainty is not equal to risk. Countries with high UAI score tend to have more regulations to protect the uncertainty. Panic among investors arose to high level as Enron and other companies tumbled from massive glory. Furthermore, the levels of uncertainty increased as the country went through depression in 2008, affecting returns on investments. Individualism measures the relative importance of the individual or the group. A high score on the individualism Index indicates that individualism and individual rights are important, whereas a low score indicates the society tends to favor a collective approach such as through family and relationships with others. America has a high score on individualism Index, hence the number of laws that protect individual freedoms and property rights. Furthermore, the fourth dimension includes the masculinity which measures the extent to which society values assertiveness, power and control (Characteristics viewed traditionally as masculine) rather than nurturing (traditionally viewed as a feminine trait). However, researchers have suggested another dimension, which Hofsted now includes it as part of this approach. This dimension arises from American investor’s long-term orientation. They focus on the long-term investment rather than short term. Americans score high on the Long-Term Orientation Index indicating the characteristics such as thrift and perseverance. In analysis of the country’s viability, it needs not to rank high according to each dimension, and there is no good or bad associated with the dimensions; they simply describe the culture. Hofstedes dimensions can be studied by looking at various cultural distances between countries. Statistical techniques allow us to compute one number that represents the difference between the scores for one country and those of another country. For instance, the culture between America and a European country, say Canada is quite different. However much they political structures are equally the same, the individual and national cultures are quite conservative. Managers in a particular country can encounter difficulty if the cultural distance is significant because they might not be familiar with business practices in that country. Or investing in a country that is significantly culturally distant may introduce risk into the investment, particularly if it is foreign direct investment rather than portfolio investment. These are areas that just now are being investigated through academic research. Management It is appropriate for the management to understand the environment and adopt the right management style. In the American society, democratic leadership is appropriate as every American believes in freedom. The society is highly educated and therefore, prefers doing what they feel is right for them. The same aspects apply to Canada, a country with highly educated personnel. However, the manager in Canada should exemplify both democratic leadership style coupled with authoritarian aspects. There are various laws that govern the conduct of expatriates in the every country. Every expatriate is required to acquaint himself with such knowledge. One has to understand the specific country cultures and avoid actions that would be a threat to the residents. Knowledge of the company and the about the local culture can enable the managers to be effective, especially in handling the employees. In Canada, for example, the society is more of Americanized in some aspects. This gives expatriates from American a cutting edge over the competitors from Asian nations. Culture-based assumptions can lead to inefficiencies within an organization that contribute to its inability to prosper. Mistakes made by businesses operating outside their own cultures, such as the inappropriate giving of gifts, and problems generated in cross-cultural contexts, such as misleading translations of key documents, are some of the failures seen to appreciate cultural difference. It might thus be expected that organizations that employ cross-culturally competent personnel will be more successful in the global market than those whose employees are culturally naïve. The US culture is considered to be the most individualistic of all national cultures, whereas in Latin America the sense of collectivism is highest. Organizations that function from within a highly individualistic framework would need to recognize the impact of collectivist’s viewpoints in their business dealings. Having a masculine trait, Americans ambition is accumulation of wealth, and competitiveness, whereas Canada, on the other hand exemplifies a feminine trait of relationship building. POPULATION DEMOGRAPHICS Canada is one the continents moderately populated countries with people of mixed tribes and races. Christians represent about 85% of the total population. English and Swahili are the official languages of the country. The country has maintained a sustainable peace record despite having more than12 tribes and the international community. This is compared to the United States which a number of states, with various nationals. They are widely used in education, business and commerce. The literacy rate is about 68% as the trend towards higher education in the urban society is noticeable. Ottawa is the capital city strategically placed to handle business from all over the Northern Europe region. It has proper connection of airlines to and from around the world (Rugman, 2006, p.54). However, American counterparts have a highly sophisticated commercial network as compared to Canada. Most Americans and Britons have made huge investments in this European country. The investments range from insurance, oil exploration, hospitality, transport and military training. Canada offers such a tranquil environment that most investors find comfortable to build on. Canada has made a major progress in improving the living standards of its people over the past one decade, since the year 2002. It has been able to manage the fertility rate accordingly and enhanced the literacy levels by offering compulsory free primary education to every child. Infant mortality rate has dropped to 20 per a thousand live births and life expectancy is now 70 years. This explains why most expatriates do not leave the country after expiry of their terms of service. This is attributed to the high level of hospitality offered there. The adult illiteracy rate has significantly fallen to 16%. COMPENSATION Economic Growth and Indicators During the past decade, the economy grew at an average rate of 8% which is further strengthened during the early years of 2000. This growth reflects continuation of the growth momentum in the recent past with respect to industry and services, enough the prolonged drought is affecting agricultural performance, and the rise in oil prices also has a negative impact on the industry and the service sectors. The fiscal deficit was however reported in the previous financial period as the government sort to stabilize the currency (Mitchell, 2000, p.5). The deficit stood at 8% of the GDP. Over the years, fiscal deficit has been less than 5% of the GDP. The government has initiated various measures for reducing this figure, especially in the areas of revenue and public investment. The per capita income hovers around $800. Currently, the services and current transfer accounts registered surpluses, while income account deficit widened. Reflecting these developments, the current account deficit stands at US dollars 107 million. Recently, inflows to the capital and financial accounts were not sufficient to finance the widening of current account deficit and this resulted in a significant BoP deficit, thereby exerting pressure on both exchange rate and external reserves of the country. Under the prevailing independently floating exchange rate regime, the exchange rate is determined by the demand and supply of foreign currencies. Recently, the shilling depreciated to its lowest point mainly due to widening trade and current account deficits and slowdown in the inflows of programme loans to the government. Current value of Canadan currency stands at Ksh 83.65 against the American dollar. RELIGION As stated above, majority of the population is majorly Christian. Muslims are relatively few in numbers. There are some aspects of religion that every manager in this country should observe. Special dates have to be considered accordingly as per the Christian calendar (Sharan, 2007, p.45). Such religious groups are a key object in decision making for any consumer and manager. The factors may consist of two or more individuals who meet with a common goal of accomplishing a task. They are therefore, in the form of trade unions, a formal setup and informal setups such as neighbors who share common shopping malls. For every marketing manager, the most salient aspect of a group is drawn from the reference section. These are people who serve as points of reference in consumption or purchasing decisions. Managers see them as having an influence on the ones behavior. In view of a marketing manager in a foreign country, it is noted that most companies’ reports observe that a family is a classic reference group for most consumers. Christians and Muslims value family aspects in the society. It is seen as the primary reference group for most consumers. This is because a family provides beliefs and values. BUSINESS ENVIRONMENT Political risk Political factors play an important role in influencing business growth. The government may decide to bailout start up business and this may prove advantageous to the company because of availability of resource to fund business activities. Most regulation in the form of laws is passed by the congress. Government policies such as licensing and taxation also influence greatly on start-up business. The government regulates the tax policies (Hechman, 1979, p. 162). Trade agreement and barriers also regulates on the markets which the company is allowed to operate in. Government intervention in the economy, domestically and international; the subsidising of other firms to include own organization. The government influences the fiscal policy, monetary policy and direct controls and these economic policies have an influence on the overall business performance and existence of expatriates. The congress can pass laws that affect the conduct of the managers, hence the need to understand the political environment Economic: Business growth is influenced by economic factors such as Gross Domestic Product of a country, rate of inflation in the country, the country’s balance of payment, changes in tax, economic growth and exchange rates. Low interest rate in United State was the main contributors to the global financial crisis. Environmental: These are also part of microenvironment and they include things such as earthquake prone zones in Ottawa and its environs. Areas which are prone to natural calamities are not suitable for business activities. It is therefore important that environmental evaluation be done before business is established in given region. Legal: Legal policies as set by the government plays an important role in enhancing business growth and development among these legal policies includes increase in minimum wage, age discrimination and disability discrimination legislation (James and Masaru, 2000, p.154). Canada has a democratic government that has been working as a coalition. This form of government arose from the need to have both the opposition incorporated in running of then government affairs. The government has been more responsive to the needs of foreign investors. The prime minister holds sessions with all investors encouraging more foreign investment in the country. In addition, the president encourages the investment from various countries. Recently, the presidency encouraged the Chinese government to finance the development of a massive port project that would see the country connected to all the East, Central and Southern business blocks in Europe. Most of the superhighway has been developed by the foreign companies operating in Canada. The government has offered incentives to investors and tax waivers on some commodities. In its ambitious plan of improving infrastructure in the country, the government does not charge taxes on construction material imported. This gesture encourages foreign investors, seeing the prominent international organizations flocking in the country. The government is committed towards ensuring security of every person on its soil. In the City, crime rates have dropped significantly as police patrol the streets regularly. Having hosted various international conferences, the government does not compromise the security of its borders (Gould, 1998). The country sees more possibilities of attracting more investors, especially after the American big names make constant visits. It has hosted Prince Williams from British, American vice-president, Joe Biden and Barrack Obama, American President. Other persons hosted on the Canada soil include Oprah Winfrey, Fifty cents, Kate Wimbledon, United Nations members, among other professionals. Business Possibilities Doing business in Canada is quite encouraging. The country has proper infrastructure that enables it to handle huge cargo from other countries. Last year’s conference in Ottawa on private investment took a look at the impact advancing technology has on the process of securing retail operations. The dynamic features, functionality and capabilities of new technology are transforming the way everyone, from individual retailers to malls and shopping centers are able to secure their operations, people and profits (Retail, 2010).” The information attained there is critical to SWOT analysis of the Canada. Strengths The country has favorable access to distribution networks which would facilitate supply of products and services tailored to one industry, to provide exclusive client advice and support which is mainly the retailing industry. The country has a strong support from its business partners in the region i.e North American Free Trade Agreement, hence to succeed a multinational will require minimal start-up costs due to contributions from partners and shareholders in the region. Weaknesses The main weakness of doing business in Canada arises from its association with NAFTA. This can be depicted from the observation below. Dispute in Canada: The Canadian government cannot cap the sale of Mexican and American products in the country at any one given moment. This implies that the government can control its trade even in the future. This provision is applicable to Canada’s natural resources like rivers and lakes. This creates fears as to the possibility of damaging Canadian ecosystem and water supply. Other fears originated from the negative effects NAFTA has on the law making process in Canada. Additive import was barred by the federal government of Canada. Under the NAFTA agreements, an American Company filed a suit arguing its additive was not a danger to the health of human beings and animals. It argued that the ban was causing huge damages to their company. Furthermore, an argument on Canada’s decision to impose a 27 percent duty on lumber imports on Canadian softwood, was to end being resolved Stephen Harper, the new Prime Minister of Canada who negotiated with the United States. A resolution was achieved July 1, 2006. In addition, domestic resistance in Canada led to shelving the settlement policy. Opportunities There is a positive outlook for risk management and security services market given the fact that the Country has large scope for growth and expansion;. There is also a robust growth in retail industry within the target markets in region. Threats The key threat to succeeding in the Canada has been the slowdown of the global economy that has affected leveraged and non-leveraged companies. It has also led to the loss of clientele base for some companies. Conclusion Precisely speaking, any American multinational corporation could boldly aspire to expand its business in Canada as the Canadian society like America is egalitarian, individualistic, where people value success and are open to novelty and change and aspire for short term success, profits and gains. However, the interested companies should not overlook the fact that Canada is a moderately masculine society, where people do aspire for success, but also tend to value family and society. Provided the HRM of these companies take care of this fact, they could expect a smooth sailing in Canada. References Fukao, K. 2006. Trade Diversion under NAFTA, in Robert M. Stern. Cheltenham, U.K.: Edward Elgar Publishing, Ltd. Gould, D. 1998. Has NAFTA Changed North American Trade?” Federal Reserve Bank of Dallas, Economic Review, First Quarter, p. 12-23. James, WE. & Masaru, U 2000. NAFTA Trade with East Asia: Rules of Origin and Market Access in Textiles, Apparel, Footwear, and Electrical Machinery. Mitchell, C. 2000. International Business Culture. California, World Trade Press. Rugman, H. 2006. The international business. New York, McGraw Hill Publishing Company. Sharan, V.2007. The International Business: Environment, Concept and Strategy. New Delhi, Pearson Education Publishers. Read More