Country Analysis of Canada

Group Members: Iman Adem

Clark Bridgman Victoria Cannon Taylor Gaines Daniel Latto

Maryclair McDonald Teva Seale

Kirby Stewart

Table of Contents: Legal and Political Systems …………………………………………………. 2

Cultural Differences and similarities to US ………………………………... 4

Economic Characteristics …………………………………………………… 6

Foreign Direct Investment Issues ………………………………………….. 12

Key Industries and Trading Partners ……………………………………... 14

Human Resource Management issues and practice ……………………… 16

Risks of Doing Business in Canada ………………………………………... 22

Work Cited ………………………………………………………………….. 26

1

Legal and Political Systems:

A brief History of Canadian politics and legal system begins in 1945, where Canada

became a founding member of the United Nations; it has continued to play a peacekeeping role

for the UN since. In 1963, under liberal prime minister Lester Pearson, Canada had gained

medical care and a social security system for citizens, as well as gaining a national flag. The

Canadian government then agreed on prearrangement of an amended constitution, proposing that

they replace the British North America Act and make future amendments to be the privilege of

Canada. The Canada Act of 1982 was the final act adopted by UK Parliament in Canadian

constitutional development, and gave Canada power to change the Constitution with regards to

the Constitutional Act 1982(Turner).

The Canadian Parliamentary System includes three branches working together:

legislative, executive, and judicial. This system is somewhat similar to our own in the United

States. The parliament of Canada is the legislative section of the government, which includes the

Senate, the Monarch, head of state, and the House of Commons, the lower house of elected

members of parliament. The executive branch, is where the decisions are made, consisting of the

Prime Minister, the Monarch, who is usually represented by the Governor General, and the

Cabinet, the council advising the sovereign. The judicial branch is multiple independent court

systems that interpret the laws that have been passed by two branches listed above(Overview).

The parliamentary cabinet has it where there is a concentration of powers instead of a separation.

Any government bill that is introduced has to be introduced by the minister themselves or

someone that is speaking on his/her behalf. Also, all ministers have to be in Parliament to answer

questions and rebuttal issues on policies as well as to be in defense of the bills.

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The terms of the Canadian office is very different from our own in the US. All the

publicly funded bills have to be introduced by the government and neither of the houses are able

to raise the amount of money involved. An interesting fact with their government is that as long

as they have majority of support from the House of Commons, it is able to pass any legislation

that it sees fit(Canadian and American Gov.).

The method of Canada regarding elections does not contain a syllable when it comes to

prime minister qualifications, or on the method of their election and removal of someone from

their office. When majority of support is lost from the House of Commons, it has to call for a

new election or allow another party from government intervene; this is very different from our

own approach in the United States because the house opinion does not have such a strong

influence(Canadian and American Gov.).

Canada is a monarchy, it has been for centuries, which means that one person reigns the

government system. It currently recognizes Queen Elizabeth as the Monarch, and Justin Trudeau

was appointed as their Prime Minister/Head of their Government in 2015. If there is any change

to the Queen’s position, or her representatives, in Canada it now would require the unanimous

consent of the House of Commons, the Senate, and all provinces legislatures. There are currently

three territories, and ten provinces of Canada, each having a separate administration and

Lieutenant Governors (Canada). There are five women and five men as individual lieutenant

governors at the present time, They each have an important social and constitutional role, being

able to give the royal assent of legislation for the Queen. Their social impact is giving their

support to a wide variety of community events and causes, empowering Canadians to continue to

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give their best. The Lieutenant governors each represent the Queen in a personal style, which is

reflective of their own province (The Monarchist).

There are also many interesting facts when comparing Canada and the United States’

political system. They are actually both federal states, as well as democracies. Some Canadian

provinces actually has two official languages, put in place by the Fathers of Confederation,

French and English. Quebec, New Brunswick, and Manitoba must have these as their official

languages, but every other province, under the Constitution, is allowed to have as many official

languages as they please. The United States doesn’t have an official language, but of course

English is the primary language used.

Cultural Differences and similarities to US:

Canada and United States are two of the largest countries in the world, Canada being

second, the State's third. Although both are found in North America, those in the United States

are referred to as Americans. They are known as friendly neighbors sharing the longest

international (and undefended) border in the world. Canadians, just like the rest of the world,

know a lot more about Americans than they know about Canadians. It’s not very likely that

Americans will have equal knowledge about countries around the world as they do about

America. Citizens across the globe have their eyes on the United States, and due to that

Americans think they are superior. They have the media, the most influential tool, to thank for

that. The media is seen molding the world today. And the culture of the States is greatly

influenced by the development of mass media. Although they have a number of cultural

differences, Canadians and Americans are more alike than assumed. The two can be easily

understood when compared in regional societies. For example, Quebec, the Canadian province

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with English and French as official languages, and the U.S. conservative South share many of the

same attitudes and behaviors. The rest of English Canada can be compared to what Americans

refer to as ‘the North’. Those residing in Toronto, Canada, are similar to those in New York.

Majority of Canadians live extremely close to the U.S border; this explains why they are

influenced by nearby cities. Some even argue the East and West coasts of America and have

more cultural differences than the general Canada and America.

Despite all of their similarities, the two do have several minor differences. The

government of Canada has a great influence on their culture. Canadians are viewed as peace

seekers that promote support within their societies. Americans are known to be all about

individuality and personal freedom. They take pride in what they believe in and are very self

driven. Canada, comes from the Iroquian word Kanata meaning village or community. And

Canadians truly seem to care about the wellbeing of their societies. Americans on the other hand

have a strong gun culture compared to Canadians, who have strict gun laws but dramatically less

crime rates. Furthermore, Canadians are stereotyped to be polite, while Americans are generally

loud or rude. Americans are known to have an urge to fight while Canadians try and

compromise.

The United States is evidently viewed as a melting pot filled with people of different

countries, races, beliefs, etc. Additionally, 1 in 5 Canadians is foreign born. Americans are

generally more religious, and this is proven through its influence on government. Canadians are

less conservative and reject religious influences when running a government. Canada has an

apparent French culture in certain locations and has a similar sense with America and Hispanic

countries. However, the English region of Canada has created some vocabulary differences with

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the States. Canada is the world's most educated country; this explains why their world status is so

highly respected. They definitely admire key aspects of America, but are smart enough to learn

from their mistakes as a whole. The Canadian government generates high taxes, yet provides

healthcare for all citizens giving them a major win.

Economic Characteristics:

Canada’s Economy as you will see in the next few images (Images from Trading

Economics) follow a very similar pattern to that of the United States. Or that we are similar to

them. Either way our economies Gross Domestic Product is very similar with Canada. We seem

to go up and down with each other. When we had a sharp fall or peak they also seemed to of fell

or raised with us, not at the same slope or level, but the movements occur at the same time. This

was not just a one time occurrence. It has happened throughout time.

While on the subject of Canada’s GDP. This year Canada’s GDP outlook for 2016 has

been decreased from 1.6% increase to 1.4% by the Think Tank (a group of experts on politics

and economics). Canada have had an outburst of wildfires in Alberta, Canada in May. Alberta

had many drilling sites where the wildfires occurred. These wildfires this summer have since

halted the production of energy oil in this area. With this occurrence there is also a halting in

investments in Canada’s energy industry.

This set back in the second quarter is why the outlook decreased. The Think Tank thinks

that the momentum in the first quarter has been set back by this and it will be difficult for the

Canadian GDP to rise back to where it would have been if not for the wildfires. The Think Tank

says that without a raise in non energy exports the GDP will not raise this year, but should

improve by 2017. (Mackrael)

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These two charts are The GDP for 2016 Starting in January

Top represents Canada, Bottom represents US for all Charts

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These two charts are the GDP over the Last Five Years

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These two charts are GDP for the Last 10 Years

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Canada tariff codes include a list of what is imported with and without the tariff on the

item. Out of live animals the only animals to have tariff charges are certain foul that is imported

for non­breeding purposes. Primates are imported without a tariff charge. Out of imported

chemicals the only chemical that has a tariff is Mercury.

Canada uses the dollar and cent currency system. The Canadian Banknotes (Bills) are

different colors for the different bank notes (see image below). In (insert year) Canada switched

to a new type of banknote to help end counterfeiting of the bills. The Bank of Canada added

several security factors such as raised ink, holographic imaging, hidden numbers, and (insert

other stuff) Canada uses similar coins as the United States. They just look slightly different (see

image below) and the Canadian Dollar is a coin instead of a bill. They also have a two dollar

coin. (Images are from Bank of Canada)

One currently alarming issue for Canada is their currency exchange rate has been

decreasing over the last two years and has dropped significantly in the last few months. The

Canadian Dollar is Currently exchanging at 75 cents to the American Dollar. The Canadian

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Dollar is also exchanging at 68 cents to the Euro. In the early 2010s the Canadian Dollar was

almost equal to the United States Dollar, but since 2014 its value has been steadily falling.

Canadian Dollar to Euro has fell and raised since the early 2010s differently from Canada

compared to the United States. However it is much lower trading in both the United States Dollar

and Euro compared from 2012 to today. (Images from Canada Foreign Exchange)

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Foreign Direct Investment Issues:

Canada’s External investing in other country’s industries is extensive and diverse. They

have a strong focus in financial and insurance companies via their outstanding stocks. The focus

is outlined by owning double the amount of capital in the financial and insurance than the closest

industry of mining and oil extraction. That being said, there is no shortage of funds being

invested in many realms of the market. Besides the already mentioned industries, Canada also

has a major stake in managing companies and enterprises. An exact number for the three in 2014

is $587,730,000,000 and individually stand out from the 4th industry by double, 60 billion.

http://www.international.gc.ca/economist­economiste/statistics­statistiques/investments­investissements.aspx?lang=eng

Among other barriers that individuals and companies face to push their investments to an

international such as currency, added risk, and market research difficulties, Canada has an act

that prevents individuals and companies from entering their market without a process. There is

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an extensive application and acceptance process that ensures all investments are going to be

profitable for the country as well as safe. Only 15 applications were approved just last year

totaling 21.8 billion in assets acquired by foreign investors. This exclusive crowd joins a select

group of investors that are totaling 42.7 billion in assets across the nation which they are still

looking to grow which is a very good thing for external investors looking to enter the strong

market. However there is a minimum entry value of 369 million that the initial investment must

total other wise it is filed under a notification that will not be reviewed. Though this is a large

sum of money to invest, the Canadian market is showing growth over the past year that is worthy

of the challenges. “Canada led all G­7 countries in economic growth over the past decade

(2006–2015).” (international.gc.ca) With Canada’s consistent growth and stable economic

conditions, it is a no brainer to look into investing in the Canadian market.

Moving into the Canadian market in 2016 moving soon into the 2017 year is a healthy

business move right now. The close proximity and good relations America has with them opens

up many opportunities just as long there is a market for the product. America and the world has

invested heavily in the manufacturing market because of the good healthcare and wages offered

to the workers. Canada is becoming a leader in the manufacturing field boasting 21 different

areas of manufacturing ranging from food to petroleum. These 21 areas also generate 215 billion

worth of investments fueling investors pockets to further their stake in Canada. There is still a

fear from the 2008 recession that is holding back many investors and business expansions, yet

there is growth to be seen since that year of 2008. This company will have to do some research

in their selected field and ensure that regulations are being followed and the right actions are

being followed through the company’s policies. Making this move cannot be a rash decision and

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needs to be well funded and thought out. Whether the investment be starting an operation

buying in, or simply investing they all have their risks associated with their reward. The more

risk is associated with the larger reward when it comes to investing in the industry or the

production. The move that is best with the company is what can ensure the company will grow

at a steady maintainable rate.

Key Industries and Trading Partners:

Canada’s top 5 export partners are the United States, China, United Kingdom, Japan, and

Mexico. The top 5 import partners are the United States, China, Mexico, Germany, and Japan.

(“Canada: Trade Statistics”) U.S. goods and services trade with Canada totaled an estimated

$662.7 billion in 2015. Exports were $337.3 billion; imports were $325.4 billion. The U.S. goods

and services trade surplus with Canada was $11.9 billion in 2015. (“Canada…”) The top five

goods exported by Canada are oil & mineral fuels, motor vehicles and parts, industrial

machinery, precious stones and metals, and items not otherwise specified. The top 5 goods

imported by Canada are motor vehicles and parts, industrial machinery, oil & mineral fuels,

electrical machinery, and plastics. (“Canada: Trade Statistics”) As of 2014 Canada had a positive

trade balance of $7.49B in net exports. As compared to their trade balance in 1995 when they

still had a positive trade balance of $30.4B in net exports. (Simoes) As part of the World Trade

Organization, Canada practices fair­trading by ensuring whatever it puts on the market

agriculturally doesn’t influence the price of crops in other countries. Canada’s agricultural sector

is steadily growing every year and accounts for 8% of the country’s Gross Domestic Product. It’s

hard to ignore the fact that Canada’s industries are booming. With the abundant natural

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resources, government incentives, and stellar workforce, it’ll continue to prosper for years to

come. (Groff)

According to The World Factbook, the key industries in Canada are transportation

equipment, chemicals, processed and unprocessed minerals, food products, wood and paper

products, fish products, petroleum, natural gas. Canada not only has the third largest oil reserve

in the world, it’s also a world leader in hydroelectric power with Quebec, Ontario, and

Saskatchewan all using vast amounts of hydroelectric energy. Canada also contains 9% of the

world’s renewable water supply and is one of the largest suppliers of agricultural products in the

world. (Groff) American and Japanese auto industries are attracted to Canada’s highly educated

workforce and low labor costs making it a go­to destination for automobile manufacturing.

Automotive parts production is one of the fastest growing manufacturing sectors in the country.

Because of the abundant energy resources available, Canada’s oil exporting and other energy

related products make up for 2.9% of the country’s Gross Domestic Product. Canada has also

adopted solar and wind energy production as the next major industry in the energy sector. (Groff)

Although the global financial crisis took its toll on Canada from 2008 to 2010, the country’s

manufacturing industries are on the rebound and make up for 14% of Canada’s GDP. The

Canadian economy’s recovery from the recession has had wide­ranging impacts on domestic

industries over the past five years. The ten fastest­growing industries over the past five years,

measured by average growth in sales per year and compiled from IBIS World’s 424 Canadian

industry reports, feature industries from a variety of sectors, including heavy manufacturing,

wholesaling and professional business services. (“The 10 Fastest…”)

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Human Resource Management issues and practice:

There are many factors that must be considered before moving a U.S. based company

into Canada. One of the most important factors to be considered is the human resource

management issues and practices. Human resource management (HRM) is defined as the

process of hiring and enriching the employees to become more valuable to the company.

Examples of these practices include: training, benefits and incentives, promotions,

communication with the employee, and much more.

While researching the human resource management practices in Canada there seems to be

only relatively small differences between the practices of large and small firms. Typically the

small firms in the Canadian economy play a huge role considering they provide more than 50%

of the new jobs in the country. The large firms in Canada compete for new employees with

smaller firms, when they are needed, by providing a substantial wage differences compared to

that of the small businesses. There are four major HRM items that were identified in the surveys

that researched Canadian firms large and small which include: workforce characteristics,

recruitment strategies, selection instruments used, and other HRM practices (Golbar).

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The first item to be familiar with in a Canadian companies HRM department should be

workforce characteristics. There are nine workforce characteristics that are important to human

resource management practices. The important functions include; firm’s success, worker

flexibility, ability to work in groups, ability to inspect their work, problem solving skills,

self­disciplined, communication skills, multi­skilled workforce, and quantitative skills (Golbar).

All nine characteristics are ranked in the picture below by how important they are to a large and

small manufacturing firm.

By looking at the graph above we can tell that most of the characteristics are of the same

importance in small and large firms, with a few differences. One of the biggest differences is that

in a smaller firm you should be able to inspect your own work and be self­disciplined, while in a

larger firm you have the ability to work more in groups and have more flexibility with your

work.

Recruitment strategies are useful in Canada’s HRM practices. The 10 different

recruitment strategies that are used include job posting and bidding, laid off workers, promotion,

advertisements, transfers, educational institutions, employees’ reference, previous applicants,

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temporaries, and employment agencies (Golbar). The picture below ranks them in both large and

small firms.

Canadian firms use both internal and external efforts to hunt for employees. Although

with small firms they tend to get out beat by some larger firms in the search for job candidates

since the large firms can offer more benefits and compensation packages than smaller firms can.

Both small and large firms in Canada lean toward hiring from within the company first to save

money on having to search for talent outside of the company.

When the recruitment process is in full swing it moves on to the selection process, where

instruments are used to help evaluate job candidates. The selection process instruments are part

of the four items of HRM that are widely used in Canada. “Selection instruments are used by

firms to process a high number of applicants by evaluating their knowledge, meaningful

responses, and other abilities. There are four main selection instruments used in Canada

including; one­on­one interview, written tests, panel interview, and job tryouts (Golbar).” The

instruments and their ranking of how they are used in large and small firms are shown below.

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Large firms and small firms before prefer to have one­on­one interviews with job

candidates. A one­on­one interview is the used more widely since employers are able to get a

better understanding of the person they are interviewing since they can give more meaningful

answers to the questions that they are asked (Golbar).

The last item that is used is other HRM practices. There are 17 HRM practices

that are used in Canadian firms large and small. The HRM practices are open communications,

employee participation initiatives, training for new employees, competitive wages, training to

enhance group orientation, pay based on performance, job security for employees, collective

responsibility, training to enhance quantitative skills, job rotation, pay based on acquired skills,

individual incentive programs, specialized career paths, group incentive programs, profit sharing

schemes, pay based on seniority, and rapid promotions. They are listed by ranking of importance

to each type of firm in the graph below.

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There are no big differences in the rankings of the HRM practices used at large and small

firms in Canada. They both lean toward making open communication and employee participation

at the top of the list. The biggest difference is of course the difference in competitive wages.

Large firms in Canada are able to provide larger wages and more incentives than most smaller

firms. The HRM practices used in firms are aimed at reinforcing workforce characteristics that

the firms believe are important to the success of their firms.

Successful entry into Canada for American companies is no simple feat, but is fortunately

aided by the North American Free Trade Agreement. Because of NAFTA, economic activity has

been strongly promoted and encourages international business relationships throughout the North

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American continent. American ventures setting up shop in Canada have the benefit of operating

within a country with close economic, political, and social ties. Last year alone Canada’s “33

million citizens purchased $204 billion worth of American goods last year (ICN)” which is a

sure testament to the similarity in culture. These aforementioned factors cause many companies

to seriously consider the idea of starting business operations in Canada.

Many American companies have attempted to enter the Canadian market, some with

tremendous success and others landing on the other end of the spectrum. Companies that achieve

success and companies who unfortunately fail to successfully enter the market can both attribute

their fate to their strategic entry decisions. These decisions relate to understanding many facets

of the market such as understanding the potential trade barriers within the country as well as

what type of entry strategy would best suit the company upon entrance. There are trade barriers

that seem somewhat universal and include things such as: the local government restrictions,

regulations, tariffs, and taxation, as well as location, population, the market, competition/

industry saturation, infrastructure, demand for goods, government policy and taxing, as well as

many other barriers which are also present in Canada. Some of the strategies that should be

explored before beginning international business would be to decide whether or not partnership,

joint ventures, franchising, or buying a company would be appropriate for the given business

model.

One of the most perfect examples of a recognizable and successful company failing to

successfully enter a foreign market is actually an American based company attempting to enter

Canada: Target. The American retail giant failed to appropriately calculate many strategic fields

of entry and subsequently folded after only two abysmal years of operation in Canada, losing

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upwards of “some $2 billion (Wahba)” in revenue. One of the first mistakes the American based

company made was failing to recognize a proper time to expand into another country, the retail

giant was in the midst of reinventing itself at home and somewhat struggling when they decided

to enter a new foreign market. The aforementioned comment coupled with the strategy Target

used to enter the market was more less doomed from the start: purchasing another company.

Target purchased “Canadian discount chain, Zellers, for $1.8 billion (Wahba)” which was a

dying company and described as dumpy amidst Targets own fiscal and image troubles.

On top of Targets poor entry strategy the location of their new Zellers locations were also

a negative for the company. The locations of their new stores were “in areas not frequented by

the middle class customers (Wahba)” which given Targets targeted population is a huge issue for

the retail company. Target falls into the same category like many other Americans having the

misconception that “Canada looks big on a map, it has a big consumer population. It doesn't

(Klonksy)” which they seem to have grossly miscalculated given they set up “133 stores in

Canada (Wahba),” despite the fact that the Canadian market was already somewhat saturated

with competition in the form of Wal­Mart “which has been in Canada since 1994 (Wahba)”.

Had Target successfully identified and calculated their strategic entry decisions the retail

giant very well may have become a household name of sorts similar to the likes of walmart and

tapped into the growing middle class of Canada and become a successful international company.

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Risks of Doing Business in Canada:

When thinking of taking a company based out of the U.S. and doing business in Canada,

it’s important to understand the type of market that they would be heading into. Currently the

risks of doing business in Canada for U.S. companies that want to enter are very scarce, however

though they are scarce, they’re very important to get right. To name a few of the different risks

that a company could face in the Canadian market would be things such as different

demographics, a higher labor and operating cost than the United States, a heavy dependency on

the U.S. economy , and a general lack of research by a company before going into the market.

To start out with let’s think about one of the more important risks on the list, dependency on

another countries economy and more specifically ours.

The U.S. is currently Canada’s biggest buyer of two of its biggest exports, oil, gas and

even electric energy (“Canada:Economy”). This dependency on a foreign economy to run its

own means that the day that Americans stop spending, or cut spending on any of these resources

the economy of Canada would dramatically decrease because its largest supplier for export

capital would be gone. So though the Canadian economy is stable, it’s best to look at our own

economy in accord with theirs when deciding whether to enter from a business standpoint

because chances are if we start to struggle so will they.

To help with showing the risks to a specific type of U.S. business let’s think about a retail

store as basis for the next few points. The second biggest risk that I came across in my research

was the fact that Canadian demographics were so much more different than our own even though

they’re out neighbor to the North and our countries seem a bit similar when compared at a

surface level. A few things according to a study done by TD Economics is that the average age

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of a consumer in Canada is older than the average aged consumer in the United States. This

means that their tastes no matter what the product or service is going to differ than what

American companies are used to selling stateside. That also means they have to do research to

see what would appeal to their specific aged tastes to get their products off the shelf. Another

part of demographics they found that differed from the U.S. to Canada is that more people in

Canada are foreign born than here. They stated that over 20% of their population is born from a

foreign background whereas here in the U.S. its right under 13% (Petramala,Gulati). Combined

these can make up a consumer preference that can impact and has impacted an American

company’s success when entering into Canada.

The one clear example to show that retail stores can succeed in Canada was that of the

ever present Walmart. Part of their success as mentioned was knowing their demographic and

how the people of Canada differed in their tastes than Americans. This is still the key today

because it was said in 2012 that the Walmart stores in Canada only offered about 20 percent of

what their American counterpart stores offered on their shelves. (Austen, Clifford)

The next risk to look at and be aware of is the costs associated with entering into

Canada’s market to do business. The costs aren’t astronomical if you look at it objectively

before and anticipate that at first it’s going to be a bit more expensive than at home. The reason

for this is that Canada has a higher labor cost, meaning that their average minimum wage is

higher than ours is. The average minimum wage in Canada is about $10.50 (“Minimum wage in

Canada”), whereas here its $7.25, which may not look like much at first glance but can definitely

start to add up as the company continues to expand in Canada. On top of paying the labor force

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you have to think about the price of getting products and inventory across the border into Canada

with customs and taxes that accompany such moves.

The combination of the two could be disastrous for a company that doesn’t do its due

diligence in research before attempting to enter into the Canadian market. So in short when

looking into entering Canada’s open market it’s going to be smart to consider the risks of their

economy counting on ours to succeed in large part, as well looking at how different the

consumers are in Canada as opposed to here by understanding what they need and want, then

finally being prepared to undertake a little bit more operating expenses than in the U.S..

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