Competitive advantage
The Canadian Pacific Railway came in to existence in the year 1881 for linking the populated centers of Canada with the unpopulated centers of the west. The headquarters of Canadian National Railway is in Montreal, Quebec that helps in serving United States and Canada. The main reason for the formation of the Canadian Pacific Railway was to unite Canadians and Canada from various coasts. A transcontinental railway is operated by the Canadian Pacific railway in United States and Canada and helps in providing supply chain expertise and logistics. The company provides intermodal transportation services and rail services over a network of about 13,600 miles that helps in serving the business centers of Quebec, British Columbia, Midwest regions and Canada. The railway feeds directly in to the heartland from east coast to west coast.
The company transports merchandise freight, intermodal traffic and bulk commodities. The bulk commodities that are transported by the company include coal, sulphur, fertilizers, coal (Canadian National Railway Charged in Spill. , 2008). The merchandise freight that is transported by the company includes automotive parts and finished vehicles along with the consumer products and industrial goods. The intermodal traffic includes time sensitive retail goods, high values that are transported in the overseas containers that could be easily handled by the ship, train and truck. The company is a public company that has 24,000 employees. The Canadian Railway is the largest railway in Canada in terms of physical size and revenue of its railway (Watson, 2004).
The Canadian National Railway is in the mid of huge transformation where the main goal of the company is to plan and help in build the solid foundation that would help in railway evolution. The company has redefined its BI strategy (Bond, 2013).
The industry in which the Canadian National railway operates includes massive barriers to entry. In fact it is the widest moats in North America. There are very less or say zero chances that a new competitor would build a new rail line for giving tough competition to the existing rail companies in U.S. and Canada. All the railways enjoy this advantage whereas the Canadian National railway has an extra edge as it is the only rail carrier in the North America that offers its customers an access to three coasts (Walker, 2015).
The Canadian National Railway is a very successful corporation as it has a healthy financial position that is being maintained by the company through the maintenance of the profit (Yousif, 2015). The company commits to its daily operations in a much disciplined manner. The main objective of the company is to deliver excellence in its services and operations so that it can provide greater values to its customers and deliver responsibility (Canadian Pacific Railway Ltd., 2004).
Capabilities
The main objective of the company is to create long term value for its customers, employees and shareholders by growing in a profitable manner within the footprint of the core rail franchise. The company tries to achieve the objective through its three part strategy:
- It generates quality revenue growth by realizing the benefit of the demand growth in its merchandise business lines with its targeted infrastructure capacity investments to global trade opportunities.
- It concentrates on the improvement of its productivity by operating partnerships and leveraging strategic marketing.
- It continues to develop a knowledgeable and professional workforce that has the main commitment to the sustainable financial performance and safety through the improvement in the profitability(Canadian Pacific Railway Ingenuity , 2006).
SWOT Analysis
Strengths:
- Diversified Product Portfolio
- Strong growth that is inorganic in nature
- It is the largest railway in Canada in terms of physical size and revenue of the rail network
- It has strong brand reputation in the industry
- It has balanced and diversified portfolio of goods
Weaknesses
- The gross profit margins of the company are decreasing
- It has a great overdependence on the Canadian Market
- The financial performance of the company is very weak
Opportunities
- There are chances of strategic acquisitions for increasing the market share
- The demand of coal is increasing in the U.s.
- There is a positive outlook for the U.S. agricultural trade
Threats
- There is intense competition
- There are many regulatory conditions that are being imposed
- Slowdown in the U.S. economy
Political factors
There are many political factors that affect a company and its operations. The various political factors that affect a particular company include the policies, rules and regulations made by the government from time to time. There are many policies and rules that are imposed by the Canadian government on the Canadian National Railways that affects its operations in a huge manner. The Canadian National railways was formed in a government owned corporation by amalgamating various privately owned railways and financially troubled railways between 1917- 1923. Since then there has been a great reduction in the scope of rate regulation of the two railways with only one exception that is the grain transportation.
Economic factors
Likewise the political factors there are different economic factors that have the bearing on the operation of the company. The economic infrastructure and framework of the Canadian National railway are: In the year 2007 the Canadian Railway carried more than 353 million tons of freight which was slight a decrease from the year 2006. By the 2009 the total freight that was being carried by the Canadian Railway decreased to 278.9 million tones of freight (Schmidin, 2014).
Social Factors
Some of the social factors that affect the working of an organist ion includes the changes in the tastes and habits of the society. These days people are becoming more aware of the importance of the environment and are becoming green consumers. The people these days are more mobile and prefer travelling more (Business Case studies, 2012). According to the statistics that was produced by the Department for transport in the year 2007, there has been a positive picture shown:
Technological Factors
With the advancement of technology on routine basis the companies carrying on their operations are highly affected. There is a continuous development of the technology by the businesses so that they could provide best solutions for the market place. The firms that are intelligent often find out the most appropriate technologies for their businesses and use them and this is very much true in the case of transport. One of the very good example in this regard could be the provision of buses that helps in, lowering the floor for easy entry (Fenn, 2000).
Corporate Strategy
Environmental Factors
The companies operate in the environment so they cannot ignore the environment and its impact on the companies. There has been increase in the freight rail GHG emissions.
The Canadian National Railway has proven out to be the excellent in the managing of the costs. The company also managed to lower its operating ratio even when there was a fall in the carloads and revenue. There are three main reasons for the success of the Canadian National Railways that has helped the company for leveraging its business mix and unique rail network for generating returns for its shareholders:
- The growth to the company is provided by the company by best in class international intermodal franchise: According to a survey it has been observed that approximately twenty three percent of the revenue of the company comes from the intermodal segment and sixty two percent comes from the international intermodal segment . There has been a tremendous growth in the volume of the company by about 21% CAGR in the year 2009(Mancini, 2015). The company has a unique rail network having access to west coast, east coast and Gulf of Mexico. There are major growth expansions that are occurring at the Port of Prince Rupert and Port of Vancouver that are good for the future of the Canadian Railways (Walker, The Motley Fool, 2016).
- The U.S. exposure of CN is continuous that should help it in providing growth opportunities: The by product of strong incomes, employment and low debt levels are strong housing in the economy of U.S. The Canadian Railway is positioned in such a manner that it receives benefits from all these trends. It has been seen that about 13% revenue of the company comes from the forest products
- Excellent record of returning the capital to its shareholders: The Company has been returning a good amount of capital since its inception to its shareholders in the form of dividends and share buybacks. It has also been seen that there is a rise in the dividend of the company by a CAGR of 17% since the year 1995.
While reviewing the network map of the two railroads there were many interesting facts that were revealed about their natures. The Canadian National Railway touches three coasts in North America on the other hand the Canadian Pacific only touches two. This helps the Canadian National railway to move its products more quickly along the network and hence it could use its assets more effecinetly. The portfolio of the Canadian National railway is also very much diversified (Canadian National (CNI), 2017).
There was a rise in the profitability of the company when the company decided to remove itself from the noncore freight rail transportation. The Canadian National Railways is considered to be highly competitive with the CPR in the various areas that includes central Canada and the dense network at the highway that grew in Quebec and Ontario. The company was once considered as a industry leader in its time as a crown corporation in the terms of research and development in to the logistics management and railway safety systems.
Conclusion
With a proper analysis and evaluation of the past and expected future of the Canadian National Railway along with the environmental analysis of the company it can be concluded that the company is performing pretty well since it came in to existence. The company has been giving quite a tough completion to its competitors with almost zero entry chances to them. Since it .is carrying on its operations in two countries it has maintained a corporate distinction by having its lines incorporated under the Grand Truck Corporation. It can be concluded that making any kind of investment in the Canadian Railways could be a good decision (The Motley Fool Canada. , 2015). The Company bears avoidable and minimal risks. The Canadian National Railways has been performing good due to various reasons which includes there has been continuous increase in the profits of the company, there is favorable rate of return, gross margin and high dividends of the company. Along with this the company is earning more profits as compared to its competitor the Canadian Pacific Railway that has helped the company to gain competitive advantage. Also, the company is making efforts in expanding its operations and taking advantage of the oil industry.
References
Bond, A. (2013). WhereScape. Retrieved March 27, 2017, from WhereScape.com: https://www.wherescape.com/resources/case-study-canadian-national-railway-company/
Business Case studies. (2012). Managing external influences. Social and technological factors .
Canadian National (CNI). (2017, January 4). Seeking Alpha. Retrieved March 28, 2017, from Seeking Alpha.: https://seekingalpha.com/article/4034098-canadian-national-rail-beats-canadian-pacific-rail
Canadian National Railway Charged in Spill. . (2008). Oil Spill Intelligence Report. Retrieved March 28, 2017, from https://web.b.ebscohost.com.ezproxy.macewan.ca/ehost/detail/detail?vid=10&sid=5e78494a-82a1-431b-a541-29f3c70d3bbd%40sessionmgr101&hid=123&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#AN=31949976&db=a9h
Canadian Pacific Railway Ingenuity . (2006). https://s21.q4cdn.com/. Retrieved March 27, 2017, from https://s21.q4cdn.com/: https://s21.q4cdn.com/736796105/files/doc_downloads/resources/cp-2006-fact-book.pdf
Canadian Pacific Railway Ltd. (2004). Canadian Pacific Railway Ltd. Wall Street Journal – Eastern Edition. , A6.
Fenn, M. (2000). Transportation Statistics Annual Report (1997) – Page 256.
Mancini, A. (2015, October 26). The Top 3 Reasons to Own Canadian National Railway Company. Retrieved March 28, 2017, from https://www.fool.ca/2015/10/26/the-top-3-reasons-to-own-canadian-national-railway-company/
Schmidin, N. (2014). The Art of Company Valuation and Financial Statement Analysis.
The Motley Fool Canada. . (2015, April 19). Canadian National Railway Company (USA) vs. Canadian Pacific Railway Limited (USA): Which Is the Best Investment? . The Motley Fool Canada.” Canadian National Railway Company (USA) vs. Canadian Pacific Railway Limited (USA): Which Is the Best Investment?
Walker, A. (2015, April 13). The Montley Fool. Retrieved March 27, 2017, from https://www.fool.ca: https://www.fool.ca/2015/04/13/canadian-national-railway-company-4-reasons-investors-should-be-all-aboard/
Walker, A. (2016, July 13). The Motley Fool. Retrieved March 28, 2017, from https://www.fool.ca/2016/07/13/tfsa-investors-does-canadian-national-railway-company-deserve-to-be-a-top-pick/
Watson, T. (2004). CANADIAN PACIFIC RAILWAY. . Retrieved March 28, 2017, from CANADIAN PACIFIC RAILWAY. Canadian Business, : https://web.b.ebscohost.com.ezproxy.macewan.ca/ehost/detail/detail?vid=11&sid=5e78494a-82a1-431b-a541-29f3c70d3bbd%40sessionmgr101&hid=123&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#AN=13285890&db=a9h
Yousif, M. (2015, April 23). Canadian National Railway? A High Return on Your Investment? Academic Nexus .
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