JANUARY 1995 Edition
BRAND LOYALTY
Young & Rubicam Inc., a large U.S. advertising
agency, has conducted a major study costing $8 million. Taking 18 months and
involving 30,000 consumers in 21 countries, the study tracked attitudes to
about 6,000 brands including more than 650 in Canada. Coca-Cola, Lipton,
Rubbermaid, Lego and Xerox were the top brands in Canada. In the U.S., Disney,
Doritos, Jell-O, Ocean Spray, Sesame Street and Sony headed the list. Among
Canadian brands having trouble with recognition are Hyundai, ABC laundry
detergent, Purina pet food, Nutrasweet artificial sweetener and Uniroyal. In
the U.S., the losers included Bayer, Oldsmobile, Ramada and Wesson. Many of the
world's big-name goods have suffered in past years with recession-weary
consumers switching to alternatives such as private label brands.
CONGESTION
The world's airports are not expanding fast enough to
cope with the sky-rocketing growth in traffic. Last year, 1.8 billion
passengers went through the world's airports, and 35 million tonnes of cargo on
40 million aircraft movements. It is predicted that the number of passengers
will increase by 100 million annually. To keep up with this growth, governments
will have to add annual capacity of two new Heathrows, three Frankfurts and
five Sydneys. Even in Canada, congestion is a problem; 94 per cent of air
passengers and cargo are funnelled through only 4 per cent of its certified
airports.
When the world's most expensive airport opened in
September--the $15 billion airport in Osaka--airlines noticed almost no difference,
except for exorbitant landing fees. And when Hong Kong's new airport opens in
1997, experts say it will reach saturation almost immediately. As of late last
year, there were 119 airports operating in China, compared with only 78 at the
end of 1978, but only 12 can accommodate Boeing 747s. In Europe, flight delays
are expected to be widespread until a unified air traffic control system for
the continent can be developed. One of the reasons congestion is so severe is
said to be because planners completely misjudged the impact of airline
deregulation.
CANADIAN TIRE
Last month we reported that Eagle Hardware was pulling
out of Canada, this month a Canadian company is in retreat from the U.S. The
Canadian Tire Corp. is closing its 10 Auto Source stores in the north-central
U.S. and taking a charge of $95 million. The venture lost $60 million over the
past three years. This is the second time Canadian Tire has been burned. Its
disastrous acquisition of White Stores Inc. in 1986 produced about $250 million
in losses. One reason claimed for the latest failure is that the U.S. retail
market is far more cutthroat than Canada's. Also, Auto Source was at a
disadvantage because the stores were not properly "clustered" to
allow for economies of scale. They tried to draw customers from a wide trading
area but many consumers were not prepared to travel a long distance to buy auto
parts. At home, Canadian Tire has to concentrate on competition from Wal-Mart
and Home Depot and has plans to expand or relocate more than half of its 425
stores by 1998, at a cost of up to $1 billion.
MACHINERY
You can tell a great deal about the health of Canada's
factories and the optimism of the people who run them by looking at what they
spend on industrial equipment. By that measure, the country's manufacturers are
very optimistic indeed. Not only are they spending more on machinery, but
they're hiring as well. Manufacturers have added 94,000 to their payrolls in
the last year, a 5.3 per cent increase. During the past spring, Canadian
businesses were buying new machinery at an annual rate of $46 billion, up by
6.9 billion over the final three months of 1992. About 39 cents of every dollar
went for industrial machinery, 22 cents was spent on cars and trucks and 20
cents on office machinery and telecommunications. The final 19 cents went on
farm machinery and office furniture.
SUGAR
Since 1987, the U.S. has limited Canadian exports of
sugar to about 35,000 tonnes worth about $125 million annually. Four times that
amount flows from the U.S. to Canada. As part of the new world trade deal
beginning on January 1st, the U.S. government can impose new restrictions on
Canadian exports of sugar-containing
products such as iced tea mixes and as of October 1st will be free to add
additional barriers against shipments of Canadian refined sugar. Canada imposes
few restrictions on imports of refined sugar and sugar-containing products but
the U.S. has been unwilling to follow suit choosing instead to maintain
protection for U.S. producers who benefit from price support programs that the
U.S. General Accounting Office has estimated costs U.S. consumers $2 billion
annually. The restrictions could result in lost exports for Canada of tens of
millions of dollars and the loss of 2,400 jobs.
BOEING-A WAKE-UP CALL?
This giant Seattle company represents 20 per cent of
Canada's aerospace industry. It directly employs 1,800 in Canada and has
represented an average of $800 million annually in export sales for nearly 150
Canadian suppliers over the past three years. However, Canadian procurement
over the same period has averaged just $30 million, which is for product
support only, with no new product sales of either commercial aircraft or
defence products. Boeing was not even given the opportunity to bid on the
replacement of B-707 equipment in the Canadian Forces fleet.
Up to now, Boeing has used three criteria to govern
procurement, quality, cost and delivery. Now, citing the new
competitive realities in the global marketplace, it has added a fourth, market
and market access, which may well have important implications for Canada.
While recognizing that Canadian suppliers have no direct influence on market
potential, Boeing wants it clearly understood that, in return for its role in
Canada as a customer, an employer and an exporter, it expects tangible sales
results and an equal opportunity in future procurement initiatives by the
government.
HARRODS
This renowned British retailer is fleeing Canada after
its four-year foray into the market turned into a disaster. The ritzy shop
which sells a high-end mix of clothing, gourmet food and gift items in Terminal
3 of Toronto's Pearson International Airport suffered a combination of woes
almost since the day it opened, beginning with the Gulf War and the economic
recession that produced a steep short-term drop in air travel.
TRADE POLICY
Canada's trade policies and practices received generally
high marks from members of the GATT council recently. The 215-page report
issued by the secretariat was the third review of Canada since 1989. Canada's
policies are seen as open, positive and dynamic and the principle objectives of
the last two years, NAFTA and the GATT, have been achieved. But the council
criticized the complexity of Canada's tariff system and questioned the
exceedingly high tariff rate quotas in the agricultural sector which will average
205 per cent in 1995 and 174 per cent in 2000. The report also had tough words
for Canada's provincial policy, saying interprovincial trade barriers are a
major problem which hampers economic growth and job creation as well as
reducing competitiveness of Canadian-based firms.
LABOUR
Apart from the railway and forest-product sector,
Canada's labour scene is relatively quiet as unions focus on protecting jobs
during the post-recession recovery. There have been no major strikes in the
manufacturing or public sectors over the past two years. According to the
Canadian Manufacturers Association, unions are recognizing the changes in the
global marketplace and are adopting a more positive, less confrontational
relationship with employers.
WOMEN
A study by the Canadian Federation of Independent
Business has found that women now own and operate 39 per cent of small
businesses in Canada. In the under-35 age group, the figure rises to 44 per
cent. But while women own 39 per cent of small businesses, they collect only 28
per cent of the income generated by small businesses. The federation suggested
this may be because female entrepreneurs tend to be concentrated in the
lower-return parts of the service sector, because their businesses are newer,
or because some devote less time to work because of family responsibilities.
More than 84 per cent of self-employed women work in the service sector,
including finance, real estate, communications, trade and other services. The
other 16 per cent were in the goods-producing sector, including manufacturing
and agriculture. In a separate CFIB study, 42 per cent of woman entrepreneurs
complained they had trouble getting finance, but so did 37 per cent of men. In
the U.S. female entrepreneurs are becoming the shapers of California's
new-business culture. The state has by far the largest concentration of
women-owned businesses in the country, with almost 100,000 female entrepreneurs
in Los Angeles County alone. In 1992, women across the U.S. were starting
enterprises at twice the rate of men.
SNOWBIRDS
The drop in Canadian tourism to Florida has so alarmed
tourism and business officials that a delegation representing 60 tourist
associations, attractions and governments recently visited Toronto and Montreal
to make a pitch to get Canadians to return. Due mainly to a slumping Canadian
dollar, state officials fear an 11 per cent decline in Canadian visitors which
means a revenue drop of about $250 million. About two million Canadians will
have visited Florida in 1994, down 250,000 from 1993 and 500,000 or 20 per cent
from 1992. Travellers spend an average of $1000 each in Florida. Every 25
visiting Canadians represent the creation of one full-time job according to the
Department of Commerce. Universal Studios is cutting $4 off the price of
admission when visitors prove Canadian residency and Busch Gardens and Sea
World are considering a January-to-March discount for Canadians. Health
insurance is another worry for Canadian visitors now that provincial
governments have cut out-of-country health care payments.
DEALS
The last few months have seen the landmarks towards
global free trade pass at breathtaking speed. The 18 nations in the
Asia-Pacific Economic Co-operation group decided to eliminate trade barriers by
2020 --10 years earlier for its more advanced members. Then the European Union
expanded to include Sweden and Finland and others will come on board when
countries of Eastern Europe emerge from their postcommunist troubles. The U.S.
Congress has now ratified the GATT agreement, all 22,000 pages of it, which
took seven years to negotiate and is expected to add as much as $510 billion
each year to the world economy. And at the recent Summit of the Americas in
Miami, the 34 leaders of the Americas committed themselves to creating a hemispheric
Free Trade of the Americas by 2005. Also, Chile is poised to become the next
member of the NAFTA. Far from developing into hostile trading blocs as some
expected, the blocs are growing together. Members of the NAFTA also belong to
the GATT and APEC. The EU is negotiating to join MERCOSUR, a South American
mini-bloc and Prime Minister Chretien has talked about a relationship between
the NAFTA and Europe.
REGULATIONS
Ottawa intends to revise 170 regulations and scrap
another 150 early in the year. Readers may be concerned to learn that train
stations will no longer be required to have spittoons! Bureaucrats will also be
encouraged to get rid of legalese. "Consumer explosives" may now be
called "fireworks".
TRIVIA
* Iceland has only 6,000
fishermen but catches and markets as many fish as Canada does with 65,000
fishermen. Canada has a fishing bureaucracy of 6,000 while Iceland has 200.
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