MAY 1993 Edition
NAFTA
Despite the fact that President Clinton's budget director
has claimed that NAFTA is "dead," no legislation has been presented
to Congress as yet. (Clinton said recently that "expanded trade is the
only way a rich country can grow richer").
Meanwhile, the private sector presses ahead. Pepsi-Cola
announced investment in Mexico of $750-million over the next five years and
Coca-Cola will spend $195-million this year. Also, Anheuser-Busch, the brewing
giant, is to invest $477-million while its competitor, Miller Brewing Co, is
working to complete a deal in Mexico worth $273-million with Molsons Breweries
of Canada.
Closer to home, the Okanagan fruit industry has come out
in favour of NAFTA because it will open up the Mexican apple market and could
see the country become the third-largest foreign market for Okanagan apples
behind the U.K. and U.S.
RETAILING
Research compiled by Management Horizons shows there are
four Canadian companies among the world's top 100 retail chains. They are:-
Loblaws (50th), Univa Inc (71st), Hudson's Bay (92nd) and the Oshawa Group
(Food City and IGA), 96th. Top two in the world are Wal-Mart Stores and K Mart
and 27 other US chains are on the list. Surprisingly, 55 European firms are
included but there are just 10 from Japan and two from Australia.
The average chain in the top 100 has more than 1,900
outlets, sales of $10-billion US and profits of $240-millions. However, the top
25 companies alone account for nearly half the list's sales and 79 per cent of
profit.
AUTOMOBILES
A strong performance by Chrysler Canada and a good one by
Ford Canada in April helped the Canadian subsidiaries of Detroit's Big Three
stay on the plus side. Chrysler had a 17 per cent increase in deliveries
compared to a year earlier and in the first four months of this year has sold
14 per cent more than in the same period in 1992. Ford, whose truck sales were
up 28 per cent in April, had a sales increase of 16 per cent for car and truck
sales combined. Japanese and European auto makers are not doing too well in
Canada. Honda sales were down 16 per cent in April and 26 per cent for the year
to date. Toyota was down 13 per cent in April and Volkswagen dropped 46 per
cent.
In the U.S., a strong yen and a rejuvenated Detroit have
caused Japan's drive into the American car market to falter, registering their
biggest sales decline since the 1970s. In the first three months of the year,
sales of the Honda Accord dropped almost 40%. Honda as a whole saw its sales
drop by 18.3 per cent in the same period. Toyota was down 7 per cent and Mazda
by 16 per cent.
Experts say there is a change in buyer sentiment and that
Detroit now has quality products at competitive prices. American workers have
adopted the techniques of flexible
teamwork and quality control learned from the Japanese. Proof of this is held
to be the transatlantic emigration of German makers. Last year BMW built an
American plant. Earlier this month, Mercedes said it would open an American
factory and Audi is studying the possibility.
Two years ago, Mercedes said that they would never open
an American assembly line. The reason for the change of heart is simple maths.
German manufacturing costs just over $22 an hour against $15 in the U.S. Also,
the company needs 122 man-hours of labour to build each of its 300-series cars
at its most efficient plant in Germany. At their new plant being built in South
Carolina, they estimate that a 3-series model will take only 53 man-hours to
build.
MANUFACTURING
Futurist John Kettle foresees a continuing decline in the
share of jobs devoted to making things. In 1976, there were 3.4-million
goods-producing jobs and 6.1-million service jobs. By 1992, 3.3-million people
were making goods, but 8.9-million were in services. Projecting these trends,
he estimates 3.6-million goods jobs and 11.9 service positions in ten years.
However, fewer people are making more. The 3M Company,
with 1992 profits of $1.2-billion on sales of $14-billion, keeps raising
targets for its workers. In the past decade, 3M has doubled its sales while
slightly reducing the size of its worldwide payroll, which stood at 87,015 in
December.
According to Rashi Glazer, chairman of the marketing
department at the University of California at Berkeley, "Service is about
seeing things through the customer's eyes. The minute you start doing that, you
shift from selling products to selling a relationship."
And Richard Whiteley of Forum Corp., Boston suggests,
"In a lot of organizations, people listen to the voice of hierarchy. The
boss becomes the customer. This is called internally focused behaviour. It is
one of the huge detriments to becoming a successful organization. Employees
spend all their time posturing and looking good."
TAIWAN
Until recently, few Canadian companies did business in
Taiwan which now has a per capita income of $10,000 (US) and foreign exchange
reserves of $80-billion, and those that did probably just shipped lumber and
coal to the island.
No longer. Taiwan is now Canada's 13th-largest trading
partner and many exports are in the high-tech and energy sectors as Taiwan
strives to upgrade its industrial base. Two-way trade in 1992 reached
$3-billion (Can) up from $70-million in 1970. This figure is almost equal to
Canada-China trade. In the 1980s, a restrictive Canadian visa policy resulted
in the U.S. having a preferred trade access. Last month, Taiwan agreed to lower
duties on imports of Canadian beef and if Taiwan joins the GATT this year as
expected, then the playing field will become level.
Taiwan is now letting out contracts under a six-year
$350-billion (US) infrastructure development program which is estimated to take
12 years to complete. Canadian officials are urging companies at home to investigate
the more than 700 projects which cover areas ranging from the environment and
transportation to tourism and housing which are expected to raise gross
domestic product per head to $14,000 per year.
MacDonald Dettwiler and Ebco Technologies have recently
been awarded large contracts and Canada Post Corporation has signed a contract
to help set up five mail distribution systems.
HOOVER REVISITED
Last month we recounted the marketing fiasco which found
this famous UK appliance manufacturer, a division of the Maytag Corporation,
with 200,000 applications for two free tickets to Europe or the US for anyone
who bought an appliance valued at $150. The damage control has now begun.
Hoover has chartered planes flying to Europe and the US
and has taken block bookings on 1,100 flights. The first charter, carrying 323
passengers, left in late April for Orlando, Florida. It is now estimated that
this promotion will cost $48-million. At Maytag's recent AGM, shareholders
complained about the Hoover promotion and executive compensation. The Chairman,
who earned $455,000 in 1992, defended the high salaries saying they were
necessary to attract quality leadership and assure the company's future!
THE ENVIRONMENT
We reported in December that the environment is going to
be a growth industry for the 1990s. A retired fire chief in Newfoundland
decided to pile up wood bark and fish heads on his hobby farm near Corner
Brook. This year, his Genesis Organic Inc. expects sales over $1-million and
1,000 tonnes of his rich compost was shipped this spring to Saudi Arabia. In
the company garden, Genesis is growing bumper crops of watermelons, peanuts and
300-pound pumpkins, all produce you are not supposed to be able to grow in
Newfoundland. The company is also shipping compost to Ontario and Maine and
half of the company's sales are outside Canada.
BEEF
Canada exports 38 per cent of cattle and beef production
to the U.S. worth over $1.5-billion a year. Now, Canadian cattlemen have asked
Ottawa to trade some of its best farm security packages for ones that Americans
will accept. Noting that U.S farmers have filed non-stop trade actions against
the Canadian pork industry for more than nine years, the Canadian Cattlemen's
Association wants to avoid this fearing that there would be a rapid decline in
Canadian market prices if they were hit with countervailing duties because of
unfair stabilization payments.
PORT OF VANCOUVER
11 shipping companies are ready to move to Vancouver's
International Maritime Centre now that the immigration hurdles have been
overcome. The Centre was set up in 1991 to assist foreign shipowners to move
their head offices to Vancouver. The federal government is to speed up the
process for permanent residence for the shipowners' essential employees. It is
estimated that from 35 to 40 people will seek permanent residence but around
200 jobs will be created for Canadians. Nine companies are based in Asia, one
in Latin America and one is in the U.S. They have from seven to 20 ships each.
Last year, container shipments through Vancouver were up
15 per cent to a record 441,055 units. Grain shipments reached 14.4 million
tonnes, up eight per cent over the previous year and also a record. Also, there
was an increase in Alaska cruise ship passengers to 449,239 from 423,928.
However, exports of coal were down 26 per cent, potash down 21 per cent and
sulphur
off by 19 per cent.
CATEGORY-KILLERS
These are fast-growing, low price, high volume retailers
who are significant players in the commercial real estate industry nowadays.
Their stores are huge, some as big as 140,000 square feet which must be
surrounded by about 800 parking spots and they all have aggressive expansion
plans. Traditional supermarkets object to these stores because they usually
locate on industrial-zoned land which is often a fraction of the cost of
commercial-zoned property.
Toys "R" Us opened with four stores in Ontario
in 1984. Today they have 44 outlets across the country and will open another
five this year. Costco opened in Burnaby in 1985 and now has 13 stores in the
west and shortly will move into Ontario and Quebec. Price Club launched their
first store in 1986 in Quebec. It now has 17 outlets and plans to expand to the
west. Business Depot opened in Toronto in 1991. Now it has 13 stores in the
east and plans to have 26 by the end of the year. Aikenhead's Home Improvement
Warehouse first built in Scarborough, Ontario in 1992. They now have four
stores and plan to have 10 stores in the Toronto area alone by 1995. Two of
their Ontario stores are adjacent to Price Club outlets.
MANUSERVICE SECTOR
The distinction between services and manufacturing is
losing its meaning. General Motors is the archetypal manufacturer yet its
biggest single supplier is not a steel or glass firm but a health-care
provider, Blue Cross Shield. In terms of output, one of GM's biggest `products'
is financial and insurance services which along with EDS, its computing
services arm, now accounts for a fifth of total revenue.
TOILETS!
Founded in 1985, the Japanese Toilet Association
describes itself as a "voluntary network of researchers, architects,
government officials, toilet manufacturers, sanitation and transportation
enterprises dedicated entirely to the toilet." The association is devoted
to "toilet culture," has established a National Toilet Day and
convened seven symposiums.
In 1991, Hong Kong's city fathers consulted the
association on public lavatories. In France a sister body has sprung up,
France's Association of Toilets and in June an International Toilet Symposium
will be held in Kobe. Despite these encouraging strides, the association is
worried. The world still suffers from "the simple lack of awareness of the
present conditions of the toilet and the critical need for change."
It is tempting to wonder if this is destined to become a
worldwide movement.
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