Evaluation of Canada as an International Business Destination - Research Paper Example

The Road to Canada Evaluation of Canada as an International Business Destination By Submitted Contents Contents iv Table of Figures v List of Tables v Photo credits v Section I: Introduction 1 1.1 Brief history 1 1.2 Economics related to business 3 1.3 Culture 4 1.4 Legal differences 4 1.5 Demographics 4 1.6 Education 5 1.6.1 Workforce 5 1.6.2 Consumerism 6 1.7 1.7 Political system 6 1.8 Infrastructure 6 1.9 Use of technology 7 1.10 Religion 7 Section 2: Analysis 8 2.1 Nature of business 8 2.2 Objective of Study 8 2.3 Analytical Tools 8 Section 3:Inference 10 Bibliography 12 Appendix 1 13 Facts about Canada’s Economy 13 Appendix 2 14 Facts about Canada’s Economy 14 Appendix C 19 Canada’s Industry Strengths 19 Table of Figures Figure 1: Map of Canada 1 Figure 2: An Iroquois settlement. 2 Figure 3: Age group of Canadas population 4 List of Tables Table 1: Report of Analysis for suitability of doing business in Canada pertaining to the present business 9 Photo credits Cover page Image Credit: http://www.canadabook.info/book/images/1.jpg Section I: Introduction After Russia, Canada is the second largest country in the world in terms of land mass and coastline, but with a population of 33.8 million (UN, 2010; cited by BBC,2010), it has almost one fifth of the population of Russia. However, despite the vast expanse of land, nearly 90 percent of all Canadians live within 200 km of the border with United States. Close political, economic, and social relationship with the only super power of the world, is a defining factor for Canada; needless to say, the US and Canada have the largest trading partnership in the world (BBC, 2010). An overview of some facts about Canada is placed at Appendix 1. Figure 1: Map of Canada Note. From: http://news.bbcimg.co.uk/media/images/45837000/gif/_45837376_canada226.gif 1.1 Brief history Human habitations in Canada began as early as the Pleistocene Ice Age, nearly 18,000 years ago (Microsoft Encarta, 2003). The name of Canada is derived from a St. Lawrence Iroquoian word ‘kanata’, which meant village or settlement (Canada.info, 2009). An European Norse merchant by name BjarniHerjolfsson was the first person to see Canada, when he was blown off course while sailing from Iceland to Greenland in the summer of 986 (Canada.info, 2009). Later, by 1545 A.D. the entire area subject toDonnacona was referred to as Canada by Cartier. Subsequently, the European books and maps had started to refer this region as Canada (Canada.info, 2009). Figure 2: An Iroquois settlement. Note. From: Bridgeman Art Library, London/New York; cited by Microsoft Encarta,2003. The figure depicts Iroquois Village Iroquoian peoples lived in villages of longhouses, large, bark-covered communal houses. To defend their villages against enemies, they sometimes erected palisades, tall walls made from sharpened logs stuck upright in the earth.Bridgeman. From the middle of the last millennium until towards the end, collision between the native people and the newly arrived Europeans continued for almost 500 years (Microsoft Encarta, 2003). This period was followed by an era of conflict among the European colonies and their expansion. During the 17th and 18th centuries, Britain and France repeatedly went to war converting their colonial empires into the battlefields; particularly in around Canada, where the main land battles were fought. After 1867, the European colonisers gave way for a Canadian nation-state (Microsoft Encarta, 2003). By early 20th century, Canada was among one of the wealthiest, highly industrialised, technologically advanced and heavily urbanised democracies in the world (Microsoft Encarta, 2003). 1.2 Economics related to business Canada’s economy is one of the highly advanced and is in the trillion-dollar class (CIA, 2010). With a high-tech and affluent society it resembles the United States in its market oriented economic system and production pattern (CIA, 2010). Canada provides many economic advantages such as a well-managed fiscal policy, low inflation, low inflation and low unemployment rates coupled with a corporate tax system that is considered as one of the best in the world (investincanada.gc.ca, 2010). During the recent global financial meltdown, Canada showed considerable resilience to worldwide recession primarily due to three factors as (1) its robust macroeconomic policy management, (2) focus on financial stability and (3) proactive response (investincanada.gc.ca, 2010). Owing to the comparative mild slowdown experienced during the global credit crisis, Dun & Bradstreet rates Canada as one of the World’s safest destinations to invest. Further, Canada ranks first among the G7 countries in the ‘Canadian Business’ Prosperity Potential Index (October 2009) for likelihood of a continuing as a strong and healthy economy even in the year 2020 (investincanada.gc.ca, 2010). Canada already enjoys an AAA International credit rating (the highest rating) from the Moody’s Investors Services since 2002 due to improved fiscal balance sheet and excellent long-term growth prospects (investincanada.gc.ca, 2010). Continuing to work on its total net debt-to-GDP ratio it has made the lowest among the G7 countries currently bringing down from the second highest in the mid-1990 (investincanada.gc.ca, 2010). Endowed with great natural resources, skilled labour force and modern capital plants, Canada enjoyed uninterrupted substantial economic growth from 1993 to 2007, only to have its first fiscal deficit in 2009 in over a decade. With a tradition of conservative lending practices and strong capitalisation, Canadian Banking system is one of the best in the world (CIA, 2010). Added with this, Canada invests heavily on a strategic basis in technology, education and health, making it an ideal destination for businesses to flourish (investincanada.gc.ca, 2010). 1.3 Culture Canada has a strong and ethical business and work culture which resembles those of UK. 1.4 Legal differences Canada being a former British colony and closely followed the monarchical system of democracy as Britain, there is not much difference in the legal systems of the two countries. 1.5 Demographics 1 As on July 2010 the estimated population of Canada is 33,759,742. The age structure of which is as follows: Figure 3: Age group of Canadas population Note. From: CIA. (2010, November 09). The World Factbook - Canada. Retrieved November 24, 2010, from www.cia.gov: https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html 0-14 years: 16.1% (male 2,761,711/female 2,626,836) 15-64 years: 68.7% (male 11,633,950/female 11,381,735) 65 years and over: 15.2% (male 2,220,189/female 2,862,787) (2010 est.) The median age of male population is 39.6 years, while that of females is 41.8 years and the total median age is 40.7 years. The sex ratio of the population is as follows: at birth: 1.056 male(s)/female under 15 years: 1.05 male(s)/female 15-64 years: 1.02 male(s)/female 65 years and over: 0.78 male(s)/female total population: 0.98 male(s)/female Population growth rate is 0.804 percent. Number of births per thousand is 10.28, while death rate is 7.87 per thousand. The rate of net immigration is 5.64 immigrants per thousand population. Eighty percent of Canada’s population live in urban areas and the rate of increase in urbanisation is about one percent. The ethnic groups comprise of British Isles origin 28%, French origin 23%, other European 15%, Amerindian 2%, other, mostly Asian, African, Arab 6%, mixed background 26% 1.6 Education Canada spends about 4.9 percent of its GDP towards education (2007), and has achieved the literacy rate of 99 percent of population over 15 years and above, who can read and write, which includes both male and females (2003). School life expectancy for both males and females is 17 years (CIA, 2010). Official language is English and French spoken by 58.8 percent and 21.6 percent respectively. Other languages are spoken by 19.6 percent of population (2006 Census) (CIA, 2010). 1.6.1 Workforce The workforce of Canada, its educational system and urban planning have been strongly influenced by Canada’sstrong history of immigration. Presently employers are facing human resource challenges such as aging Canadian workforce, demand for shift in skill and increasing importance of immigrants for sourcing new workers (www.statcan.gc.ca, 2009). 1.6.2 Consumerism As Canada has evolved from commodities economy to a manufacturing economy to a services economy, and now to an experience economy, consumerism is also changing keeping pace with it(McGill Reporter, 2006). With strong consumerism, Canadian consumers are learned and feel they are in charge.They not only have fair idea about the value of the consumer goods, but also know their experiential expectations from consumer goods very well(McGill Reporter, 2006). 1.7 1.7 Political system Canada a constitutional monarchy, with powers vested in the Constitution of Canada and functions under the structure of a federal government operated by a parliamentary democracy (Canada.info, 2009). Canadian Constitution is made up of unwritten and written act, customs, traditions and judicial decision taken over the years (CIA, 2010). Of these, the written part of the constitution comprises the Constitution Act of 29 March 1867, which enabled creation federation of four provinces(Canada.info, 2009). Subsequently, formal control over the constitution from Britain to Canada was transferred by the Constitution Act of 17 April 1982, by which the Canadian Charter of Rights and Freedom and procedures for constitutional amendments were added(CIA, 2010). 1.8 Infrastructure Canada’s both social and physical infrastructures are among the best in the world. Its communication network provides excellent services to the consumers by modern technology. With an over 18.251 million main line telephones (2009) and 23.081 million (2009) mobile cellular connection, it has one of the best telephone penetration statistics. Moreover, with 7.77 million internet hosts (2010) and 25.086 million (2008) internet users, its internet penetration is among the best in the world. With an elaborate network of airports (1,404 (2010)), road and rail and pipeline network, Canada is choicest industrial destination. The details of industrial infrastructure and strong points are placed at Appendix C. 1.9 Use of technology Canada invests heavily in technology and encourages use of technology through an elaborate IT infrastructure. 1.10 Religion Christianity is the predominant religion practiced in Canada. The composition of religion is Roman Catholic 42.6%, Protestant 23.3% (including United Church 9.5%, Anglican 6.8%, Baptist 2.4%, Lutheran 2%), other Christian 4.4%, Muslim 1.9%, other and unspecified 11.8%, none 16% (2001 census). Section 2: Analysis The impact of the factors discussed above vis-à-vis the nature of business is discussed in the succeeding paragraphs. 2.1 Nature of business The nature of the current business is in the field of IT industry, which undertakes customisation of ERP products such as SAP. The business is currently located at Plymouth, UK, which employs about 25 staff and meets a variety of domestic and international clientele. 2.2 Objective of Study The current study would evaluate Canada as an international business destination. At the end of the analysis, if it is inferred that Canada is an Ideal destination, a subsidiary office will be established at an ideal destination but preferably either in Toronto or Ottawa. 2.3 Analytical Tools Since the traditional SWOT (Strength, Weakness, Opportunity, Threat) analysis may not be adequate in providing a complete picture, it is felt that an extended PESTLE analysis comprising of political, economic, social, Technological, legal and environmental and all other factors discussed would be more appropriate. The report of the analysis is placed in the table below. In the analysis, a special scale of suitability of the factor under consideration is graded according to the conduciveness it provided to the present business as: A – highly conducive, B-moderately conducive, C-lightly conducive D-neutral, and E-it will be a deterrent to the growth of the present business. The reason for the particular assignment of the graded is placed at the remark column. Table 1: Report of Analysis for suitability of doing business in Canada pertaining to the present business Nature of business: IT service industry Current location: UK Factor Suitability Remark Political A The political system of Canada is highly conducive to the business Economic B Canada’s economy is growing though not to the extent of China or other BRIC countries, yet it is number one when compared to other members of the G7 countries Socio/cultural A Canada’s social fabric and cultural ethos are a perfect fit to the present business and its current location UK. Technological A Canada is a technologically highly advanced and is still investing heavily in technology sector, which will ensure future compatibility with the IT business model of the business. Legal A Canada has a highly advanced and independent judiciary. Besides, the laws of the countries do not conflict in any way with the current business requirement. Environmental D The environmental regulations are conducive. Being a service industry, it does not cause conflict or deteriorate Canadian environment in any way. Educational A Canada has one of the highly advanced education system in the world. This will ensure supply of well-qualified workforce required for the business. Infrastructure A Canada’s physical and social infrastructure such as energy, roads, sea, rail, air transportation, communication, and health care and education is among the best in the world. The key physical infrastructure requirement for the business being energy and communication are abundantly available. Other factors Immigration policy A Canada’s immigration policy has brought much success and riches and it is one of the few countries in the world it is still taking immigrants. This would provide two important advantages e.g. (1) the Asian immigrants especially those from SE Asian countries would provide comparatively cheaper but highly skilled workforce, which will provide the key competitive edge in this type of IT service industries. (2) Expansion of business to these countries would be possible through generation of contacts and networking with the immigrants. This region, especially India is emerging as an IT hub. This would be a strategic advantage for the business. Global climatological change A Even the global climatological change and its consequences such as global warming and sea level rise, which are considered to be having deleterious effect on many other parts of the world has been forecasted to be beneficial to Canada. Section 3:Inference From the above analysis, it is inferred that the current business IT services would be highly suitable in Canadian business environment. Canadian government provides excellent incentives and promotes growth of IT related business through growth through rich R&D tax credits. It also has the lowest operating costs among the G7 countries (investincanada.gc.ca, 2010).Besides providing advantage in the short and medium term, it will be an excellent business destination strategically. Bibliography BBC. (2010, October 14). Canada country profile. Retrieved November 24, 2010, from news.bbc.co.uk: http://news.bbc.co.uk/2/hi/americas/country_profiles/1198865.stm Canada.info. (2009). Canada Book. Retrieved November 24, 2010, from http://www.canadabook.info: http://www.canadabook.info/book/ CIA. (2010, November 09). The World Factbook - Canada. Retrieved November 24, 2010, from www.cia.gov: https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html investincanada.gc.ca. (2010, November 04). Competitive Advantages. Retrieved November 23, 2010, from investincanada.gc.ca: http://investincanada.gc.ca/eng/advantage-canada.aspx Scott, T., Korbin, M., & Chu, M. (2010). Doing Business in Canada. Retrieved November 22, 2010, from www.farris.com: http://www.farris.com/images/uploads/Guide_to_Doing_Business_in_Canada_(2010).pdf World Trade Organisation. (n.d.). Canada and the WTO. Retrieved November 24, 2010, from www.wto.org: http://www.wto.org/english/thewto_e/countries_e/canada_e.htm www.canada2010.gc.ca. (2009, 12 15). Investing or Doing Business with Canada. Retrieved November 23, 2010, from www.canada2010.gc.ca: http://www.canada2010.gc.ca/intrntl/invstcan/080301-eng.cfm Appendix 1 Facts about Canada’s Economy (1) Full name: Canada (2) Population: 33.8 million (UN, 2010) (3) Capital: Ottawa (4) Largest city: Toronto (5) Area: 9.9 million sq km (3.8 million sq miles) (6) Major languages: English, French (both official) (7) Major religion: Christianity (8) Life expectancy: 79 years (men), 84 years (women) (UN) (9) Monetary unit: 1 Canadian dollar = 100 cents (10) Main exports: Machinery and equipment, automotive products, metals and plastics, forestry products, agricultural and fishing products, energy products (11) GNI per capita: US $42,170 (World Bank, 2009) (12) Internet domain: .ca (13) International dialling code: +1 Note. From: BBC. (2010, October 14). Canada country profile. Retrieved November 24, 2010, from news.bbc.co.uk: http://news.bbc.co.uk/2/hi/americas/country_profiles/1198865.stm Appendix 2 Facts about Canada’s Economy GDP (purchasing power parity): country comparison to the world: 15 $1.279 trillion (2009 est.) $1.312 trillion (2008 est.) $1.305 trillion (2007 est.) note: data are in 2009 US dollars GDP (official exchange rate):$1.336 trillion (2009 est.) GDP - real growth rate:-2.5% (2009 est.)country comparison to the world: 156 0.5% (2008 est.) 2.2% (2007 est.) GDP - per capita (PPP):$38,200 (2009 est.)country comparison to the world: 26 $39,500 (2008 est.) $39,600 (2007 est.) note: data are in 2009 US dollars GDP - composition by sector:agriculture: 2.3% industry: 26.4% services: 71.3% (2008 est.) Labor force:18.39 million (2009 est.)country comparison to the world: 32 Labor force - by occupation: agriculture: 2% manufacturing: 13% construction: 6% services: 76% other: 3% (2006) Unemployment rate:8.3% (2009 est.)country comparison to the world: 95 6.2% (2008 est.) Population below poverty line:10.8%; note - this figure is the Low Income Cut-Off (LICO), a calculation that results in higher figures than found in many comparable economies; Canada does not have an official poverty line (2005) Household income or consumption by percentage share: lowest 10%: 2.6% highest 10%: 24.8% (2000) Distribution of family income - Gini index:32.1 (2005) country comparison to the world: 100 31.5 (1994) Investment (gross fixed):20.9% of GDP (2009 est.) country comparison to the world: 72 Budget: revenues: $521.6 billion expenditures: $578.7 billion (2009 est.) Public debt:75.4% of GDP (2009 est.) country comparison to the world: 13 64.9% of GDP (2008 est.) Inflation rate (consumer prices):0.3% (2009 est.) country comparison to the world: 32 2.4% (2008 est.) Central bank discount rate:0.5% (31 December 2009) country comparison to the world: 132 1.75% (31 December 2008) Commercial bank prime lending rate:2.4% (31 December 2009 ) country comparison to the world: 151 4.73% (31 December 2008 ) Stock of narrow money:$356.2 billion (31 December 2008) $391.6 billion (31 December 2007) Stock of broad money:(31 December 2009) $1.666 trillion (31 December 2008) Stock of domestic credit:$2.335 trillion (31 December 2008 est.) country comparison to the world: 10 $2.382 trillion (31 December 2007 est.) Market value of publicly traded shares:$NA (31 December 2009) country comparison to the world: 10 $1.002 trillion (31 December 2008) $2.187 trillion (31 December 2007) Agriculture - products:wheat, barley, oilseed, tobacco, fruits, vegetables; dairy products; forest products; fish Industries:transportation equipment, chemicals, processed and unprocessed minerals, food products, wood and paper products, fish products, petroleum and natural gas Industrial production growth rate -13% (2009 est.) country comparison to the world: 142 Electricity – production: 620.7 billion kWh (2007 est.) country comparison to the world: 7 Electricity - consumption:536.1 billion kWh (2007 est.) country comparison to the world: 8 Electricity – export:55.73 billion kWh (2008 est.) Electricity - imports:23.5 billion kWh (2008 est.) Oil - production:3.289 million bbl/day (2009 est.) country comparison to the world: 6 Oil - consumption:2.151 million bbl/day (2009 est.) country comparison to the world: 11 Oil - exports:2.001 million bbl/day (2008 est.) country comparison to the world: 10 Oil - impots:1.192 million bbl/day (2008 est.) country comparison to the world: 15 Oil - proved reserves:175.2 billion bbl country comparison to the world: 2 note: includes oil sands (1 January 2010 est.) Natural gas - production:161.3 billion cu m (2009 est.) country comparison to the world: 4 Natural gas - consumption:94.62 billion cu m (2009 est.) country comparison to the world: 7 Natural gas - exports:94.67 billion cu m (2009 est.) country comparison to the world: 3 Natural gas - imports:16.59 billion cu m (2009 est.) country comparison to the world: 16 Natural gas - proved reserves:1.754 trillion cu m (1 January 2010 est.) country comparison to the world: 21 Current account balance:-$36.13 billion (2009 est.) country comparison to the world: 185 $7.61 billion (2008 est.) Exports:$323.4 billion (2009 est.) country comparison to the world: 11 $459.1 billion (2008 est.) Exports - commodities:motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment; chemicals, plastics, fertilizers; wood pulp, timber, crude petroleum, natural gas, electricity, aluminum Exports - partners:US 75.02%, UK 3.37%, China 3.09% (2009) Imp: $327.2 billion (2009 est.) country comparison to the world: 11 $415.2 billion (2008 est.) Imports - commodities:machinery and equipment, motor vehicles and parts, crude oil, chemicals, electricity, durable consumer goods Imports - partners:US 51.1%, China 10.88%, Mexico 4.56% (2009) Reserves of foreign exchange and gold:$54.36 billion (31 December 2009 est.) country comparison to the world: 28 $43.87 billion (31 December 2008 est.) Debt - external:$833.8 billion (30 June 2009) country comparison to the world: 12 $781.1 billion (31 December 2008) Stock of direct foreign investment - at home:$494.6 billion (31 December 2009 est.) country comparison to the world: 10 $412.3 billion (31 December 2008 est.) Stock of direct foreign investment - abroad:$576.2 billion (31 December 2009 est.) country comparison to the world: 11 $520.4 billion (31 December 2008 est.) Exchange rates:Canadian dollars (CAD) per US dollar - 1.1548 (2009), 1.0364 (2008), 1.0724 (2007), 1.1334 (2006), 1.2118 (2005) Note. From: CIA. (2010, November 09). The World Factbook - Canada. Retrieved November 24, 2010, from www.cia.gov: https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html Appendix C Canada’s Industry Strengths Aerospace: Canada’s global share of aerospace activity has tripled in the last 20 years, making Canada the world’s 5th largest aerospace producer. Ag-biotech: Canadian firms’ revenues exceed those of US agro-based companies and are more than double those of Japan and the UK. Agri-food: Canada is the world’s fourth-largest exporter of agricultural products. Automotive: Canada is among the Top 10 automotive countries and the 3rd largest exporter of automotive products after Japan and the U.S. Bio-Products: Cutting-edge Canadian firms are converting energy crops and other agricultural residues into bio-fibres, bio-fuels and bio-industrial oils – environmentally beneficial alternatives to conventional products that are as healthy for the pocket book as they are for the planet. Biotechnology: Canada is a leader in biotechnology—one of the top five countries in the world.  Business Services: Canada’s business services sector is a critical node in todays multinational, multi-value chain model,generating over $57 billion in 2007 and employing 1.1 million Chemicals: Nine of the top 10 chemical companies in the world have production facilities in Canada. Digital Media - Games: Canadian companies are global leaders across the entire gaming value chain – from tools development to casual games and serious games, to both mobile games and gameware development. Financial Services: Canadas banks are ranked #1 globallyby the World Economic Forum. Life Sciences: Canada’s life sciences innovators are at the very forefront of discovery. Bio-Pharma: Canada leads the G8 in growth of health research patents, and ranks fourth internationally. Contract Services: Canada has the highest rate of increase in the G7 in life sciences R&D workers, external patent applications and business expenditures on R&D, and the lowest life sciences labour costs. Medical Devices: Canada is a global leader in digital radiography, in vitro diagnostics, cardiovascular devices, dental implants and materials, and home health-care products. Pharmaceuticals: Canada is the fourth fastest growing market in the world for pharmaceuticals . Plastics: Canada is the world’s fourth largest exporter of moulds and eighth largest exporter of plastics processing machinery.  Renewable Energy: With 430 companies, a rapidly growing workforce, and quality wind resources, Canadas Wind energy sector is the fastest growing renewable energy source in Canada Software: Canada encourages growth through rich R&D tax credits and the lowest operating costs in the G7.  Wireless: A high-talent, low-cost labour force, R&D advantages, smart regulations and centres of research excellence makes Canada a rewarding location for enterprising investors. Note. From: www.canada2010.gc.ca. (2009, 12 15). Investing or Doing Business with Canada. Retrieved November 23, 2010, from www.canada2010.gc.ca: http://www.canada2010.gc.ca/intrntl/invstcan/080301-eng.cfm Read More