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Canada and Its Economic System

Canada possesses one of the most fully developed economic systems

in the world. Our abundance of natural resources, the skills of our
labour force, and the sophistication of our technology-based
businesses have enabled our economy to grow and prosper.
moved from being primarily agricultural to a diversified system with
products and ser- vices sought by consumers and businesses around
the world. Productivity gains, strong business investment,
technological innovation, moderate wage increases, and a favourable
currency exchange rate are all key factors that are deemed critical to
ensuring our economy remains resilient and competitive now and in
the future.
Trading products- crude oil and other petroleum gases; wheat, canola,
and other agricultural-based products; metals, such as gold and nickel;
and minerals, such as sulphur and potash. On the manufacturing side,
areas such as telecommunications, aerospace, energy support
products (e.g., gas turbines), forestry-related products, and the
automotive sector continue to demonstrate Canadas ability to develop
world-class competitive products
Contributing factors to economic development:
stability and growth of any economic system lies in its ability to
support and promote both the current and future economic activity
taking place
Our political system is stable. Our economy contains the necessary
factors of production, such as roads, ports, utility systems, educated
workforce, and technology-based business management systems that
are essential to the efficient and effec- tive development and delivery
of goods and services throughout our economy. Our national and
provincial debt levels are within acceptable limits, with both our federal
and provincial governments working to reduce such debt loads. Our
banking system is considered to be one of the most efficient and
techno-savvy in the world, and our inflation levels have been well
managed in recent years by the monetary policies and actions put in
place by our central bank, the Bank of Canada. Our country is
considered to possess a strong, fair, and equitable legal system, and
the existence of corruption is viewed as being minimal in both our
public and private sectors.

Political stability, Established factors of production, Manageable levels of national debt,

National monetary policy and banking system, Low inflation, effective legal system,
Sufficient levels of investment, Absence of corruption, Comparative advantage
G7/8 is a quasi-organization comprising the worlds major fully
developed economies. The G7 consists of the United States, Japan,
Germany, Great Britain, France, Italy, and Canada. In 2006, the G7
transitioned to the G7/8 with the inclusion of Russia into its
membership. Heads of the G7/8 countries meet at least once annually
to discuss major economic, political, and societal issues challenging
the global marketplace. Recent meeting trends have also resulted in
representatives of major developing economies (such as China)
attending at least part or all of such summit meetings.
Comparative Advantage refers to the ability of a country to produce
or supply goods or services at a lower cost than other countries or to
possess resources or unique services that are unavailable elsewhere.
Foreign Direct Investment (FDI) occurs when a company or individual
from one country makes an investment into a business within another
country. This investment can reflect the physical ownership of
productive assets or the purchase of a significant interest in the
operations of a business.
hree fundamental market composition principles:
Law of Supply and Demand: refers to the ability of the market,
independent of external influences, to determine the price for which a
product or service will be bought and sold.
CREATION: principle refers to the openness of the market to support,

encourage, and promote the concepts of private enterprise, personal

ownership, entrepreneurship, and wealth creation.
Government involvement in the economy relates to the varying roles
government can play within ongoing day-to-day economic activities.
Government can act as a customer; as a manager ,as a taxation agent;
as an economic stimulation agent; and as a competitor

Open System refers to an economic system that adheres to the

principles of economic freedom: the law of supply and demand, full and
open access to the principles of private ownership, entrepreneurship,
and wealth creation, and an absence of regulation on the part of
Controlled System refers to an economic system where the
fundamentals of the law of supply and demand, private ownership,
entrepreneurship, and wealth creation are largely restricted or absent,
and the government fully controls the economic direction and activity.

Economic Activity 5 Expenditures 1 Savings 1 Investment 1 Credit

his productivity and its resulting economic activity will be predicated

on the basis of four fundamental factors:
1. Expenditures: the purchases you make in support of your day-to-day
economic activity that are deemed to be of value in meeting
sustenance needs and in improving your overall quality of life.
Clothing, food, housing, and transportation would be examples of such
2. Savings: dollars you set aside today that will support economic
activity and wealth creation in/for the future. Placing money in an RRSP
(Registered Retirement Savings Plan) or purchasing GICs (guaranteed
investment certificates) are examples. Your savings are then lent to
others with the intent of stimulating their economic activity in the
hopes of enhancing their wealth and private ownership levels.
3. Capital asset investments: investments you are making today to
further expand your capacity to conduct and expand your productivity
and overall economic capacity. If your
business requires an additional truck in order to expand, the purchase
of this truck would be considered an investment focused on expanding
your productivity and economic activity. Investments in real estate with

the purpose of building future equity via wealth appreciation are an

additional example.
4. Credit: the borrowing of dollars to support expenditures or
investments being made. You may have needed to borrow money to
purchase the above-mentioned truck, which you deem necessary to
expand your businesss capacity and capabilities, or to finance the real
estate purchase you made
Economic Growth Cycle:
GDP: refers to the total market value of the goods and services
(economic output) a nation produces domestically over a period of
time (generally one calendar year).
The total value of GDP is: goods and services produced and purchased
domestically for consumption, business investments within the
economy, goods produced for export purposes, government spending
Recession is a period of time that marks a contraction in the overall
economic activity within an economy. A recession is typically believed
to occur when an economy experiences two
- Economists track the movement of GDP (upward or downward) over a
period of time to determine whether an economy is growing or

US is one of the leading purchasers of goods and services, consumer purchase

based economy, much imported from Canada
Natural resource, technology and energy producing industries sector influences
canadas GDP movement

Economic Growth cycle of north America EXPANSION

Growth in the economy via its GDP driver(s) (mainly consumer
spending in the United States and Canada) results in an increase in
corporate revenue and profits and government tax revenue. As a result
of this increase in profits and tax revenue, both business and
government will possess increased capacity to invest in new
infrastructure and new product/service offerings for consumers. These
investments expand the economic infrastructure to meet the growing
needs of the economy and the people within it, and add further
stimulation to economic activity. Increased business activity requires
more employees, resulting in an expansion of employment
opportunities. With an increase in the need for workers, employers are
forced to pay higher wages to attract and retain employees. These
higher wages result in additional dollars for workers (consumers) to
spend and, therefore, contribute to economic growth.

Economic Growth cycle of north America Contaction

In periods of economic contraction, the reverse holds true. For
example, a softening of consumer spending will place downward
pressure on corporate profits and government tax revenues .With this
reduction to profits and tax revenue, businesses and government will
reduce spending. This in turn will reduce investment in economic
expansion based activities. With this reduced spending and lower
levels of consumer spending, fewer workers will be needed because
the amount of goods and services being produced will be reduced. This
will have a negative impact on employment requirements, resulting in
an increasing supply of available workers that, ultimately, will be
reflected in higher unemployment rates. With more workers available,
the supply of workers will exceed the demand, which will result in a
downward pressure on wages and wage increases. This results in fewer
dollars for consumers to spend and therefore contributes to a further
slowing of economic activity
Trends impacting the Canadian market
Inflation: inflationary pressures will have a negative impact on the
growth of economic activity in Canada. Inflation robs an economy of
true growth and psy- chologically negatively impacts the confidence
levels of consumers and business operators
Demand of products is rising such as energy. Heavy reliance on energy
for production and transportation theres an upward price pressure for
suppliers resulting in high prices for consumers aswell, Can we find
other fossil feuls to depend on? Same with the food market, signals are
sent before hand to the market by restaurants when there abt to
increase their prices
Geographic clustering occurs when regional economies develop into
what are considered distinct from one another and separated by
significant geographic space where interdependency is minimized.
Distinct government policies that are interdependent from one area to
Currency exchange rate impact: On the positive side, the strength
of the Canadian dollar has assisted in reducing the price of goods and
services being imported into the country from other countries. It has
also made trips to the United States less expensive for Canadians. On

the negative side, a stronger Canadian dollar has impacted our tourism
and manufacturing export sectors, as the price of Canadian goods and
services being exported to other countries has risen, making these
goods and services more expensive when compared to their
domestically produced counterparts, and the cost of visiting Canada by
residents of the U.S is now more expensive than before.
With our strong energy and natural resource base, and our more
diversified economy, analysts anticipate that our dollar will remain
near or slightly above parity (US$1 range) going forward. Thus, our
export manufacturers will need to create other ways to create
competitive advantages against their U.S. and global competitors,
versus simply hoping for a currency exchange rate advantage. Parity
means being equal or equivalent to; specifically, the value of one
currency being equal to that of another.
Branch market impact: PPP (Purchasing Power Parity): a measure that
takes into account the relative cost of living and the inflation rates of
each country, and adjusts the total value of economic activity
- overall size of Canada is smaller than other developed and
developing countries however In addition, with such strong demand for
our natural resources, energy, and commodity-based goods and
services, many global organizations have looked to actively purchase
Canadian owned companies. Canada has a risk of losing their
economic base and becoming a Branch Market
Hostile Takeover refers to an attempt by a company to take over
another company whose management and board of directors are
unwilling to agree to the merger or takeover.
Sustainability and Green Initiatives: increased emphasis on green
products, more environmentally friendly packaging, reduced carbon
emissions, and greater sensitivity to the use of finite resources in the
development, production, and distribution of goods and services to the
global community at large
- Walmarts Canadas long-term focus is the pursuit of three
sustainability goals globally: (1) to produce zero waste, (2) to operate
with 100 percent renewable energy, and (3) to make available
environmentally preferable products
Aging workforce, Immigration and multi Culturalism: over 30 percent of this
workforce is expected to retire within the next decade, resulting in a
need to hire and train at least 39 000 workers.As baby boomers slide
into retirement, analysts are becoming increasingly concerned about

intellectual capital shortages in fields such as information technology,

health care, educa- tion, and skilled trades in a number of market
sectors, including the petroleum sector. One of the lowest birth rates of
any fully developed coun- try, Canadas strategy for replacing retiring
workers and for continuing to grow our economic base is closely tied to
immigration. The need for skilled and well-educated workers will continue to rise, resulting in our need to import such skills due to a
shortage domestically. Find ppl that embrace our culture and
contribute to social and economic growth of the country
With the Canadian dollar expected to remain strong against the U.S.
dollar for the foresee- able future, and the rise of the developing
economies of Asia, Eastern Europe, and South America, Canada will be
challenged to maintain its competitive advantages in the marketplace.
CA in natural resources, Education, banking and financial services, and
sophisticated operational process development are areas where we
must continue to excel in order to ensure our economic platform and
our quality of life are protected and enhanced.
SMALL BUSINESS EMPHASIS: make the most fabric in the market,
more sole propiership. Domestic ethnic market development, global
niche market opportunities, and specialty goods and services offerings
are just a few examples of where continuous small business growth will
be driven.
Globalization refers to the growing interconnectivity of the world and
the heightened interde- pendence we are seeing among its various
economic regions. Internet helps transmit info across the globe.
Canadian businesses will need to adapt to remain competitive.
Adapting means becoming more efficient and effective in our
operational processes, improving the productivity of our workforces,
reinventing our businesses as global market needs change, and
becoming increasingly innovative and entrepreneurial as product and
market life cycles become shorter.
As managers, it is fundamentally important that we understand what is
happening in both our domestic economy and within those global
economies that influence our overall economic activity and prosperity.
1. What are the general indicators saying about the current economy
and about the current relationships among the key variables governing
our mixed economic system
2. broad level changes are impacting the economy? Ex tech, env ,

3. What specific current competitive actions may disrupt the way in

which business is done within my organizations particular market
Primary economic indicators
unemployment rate, inflation rate , Consumer Price Index (CPI), new
housing starts, manufacturing inventory, Consumer Confidence Index,
price of crude oil, market indexes, currency exchange rate, monthly
retail sales
Manufacturing firms will also look at productivity indexes, inventory
and manufacturing level indexes, and export and producer price
indexes. Information relating to each of these indicators can be picked
up via government releases, media reports, industry trade and analyst
reports, and Web-based searches. Ongoing monitoring of these
indicators enables us to assess whether the economy is expanding
rapidly, beginning to slow, or moving into a potential market
contraction or recession
PESTEL Analysis refers to a macro-level assessment of the political,
economic, social, technology, environmental, and legal trends that can
or will impact the markets within which an organization competes.
Protectionism is the outcome of the intent of economic policies that are
put in place to protect or improve the competitiveness of domestic
industries via impeding or restricting the openness of a market or
markets to foreign competitors through the use of tariffs, trade
restrictions, quotas, artificial control of currency values, or other
related activities.
Purely competitive markets are markets that are characterized by a
number of similar prod- ucts or services and where no single
competitor has a dominant market leader position. A key fundamental
characteristic of this market is the absence of differentiation among
the products or services being offered. Price is the key factor of all
monopolistic markets are markets that possess a number of
different suppliers of products and services but where the nature of the
product or service, along with the marketing effort initiated by
businesses within the sector, has enabled true differentiation to set in.
Cellphone market, all compete for customers on the basis of product
differences, value, and overall price/quality perceptions.

Oligopoly-based markets are markets that contain a small number

of suppliers that control a large percentage of market share within the
market and that compete on the basis of products or services that
have achieved success in distinguishing themselves from their
competitors, have greater control over the price being charged for a
product or service due to the limited competition within this
Monopoly-based markets are markets that are served by a single
product/service supplier. In monopoly-based markets, many of which
are government regulated, the belief is that a single entity can provide
the product or service more efficiently and at a better price point than
an open-market concept could, electicity supply.

purely competitive markets, where there is an absence of product

differentiation, tend to experience a market where the product is
viewed largely as a commodity and where price is a key determinant in
the buying process. Conversely, mo- nopolistic markets (many
competitors), where differentiation is a significant weapon of competitive rivalry, can minimize price as a major customer decision
criterion and, in fact, attract higher prices by delivering great products
or services combined with great marketing.
Sensing Market change
In simple terms, by using Porters Five Forces as a basis for analysis we
are trying to ascer- tain the following:
Rivalry among existing competitors: How many competitors are
currently challenging us for customers in our industry and markets?
How strong are they? In general, the more competitors there are, the
more intense the rivalry is to acquire customers and grow market
Threat of new entrants: What is the probability that new entrants will
enter our industry and markets? Where will they come from? How will
their products and services impact our growth and our ability to retain
our market share?
Threat of substitute products or services:What is the probability that
our product or service offering could be rendered obsolete, or its
overall sales potential significantly impacted by a substitute offering?
Do we see such substitute products emerging on the distant horizon?
Bargaining power of suppliers: What is our relationship with our
suppliers? How much control do they have in influencing our

operations and our overall cost structure? Are we able to extract

concessions from them, if required? Is it easy for them to shift their
efforts to supporting one of our competitors? Are we significantly
dependent upon them for critical aspects of our product/service
5. Bargaining power of buyers: How much choice do buyers have in
the purchase of products and services within our industry? Is it easy for
them to switch from one product to another? What substitute
products/services are currently available to buyers, and what potential
substitutes are threatening to attack our industry and market?
Ex music industry, no longer we have to purchase the CD but download
specific songs we want via internet, itunes.
The lesson learned is that we must constantly assess our industry and
its markets for potential disruptive changes that will render our
products obsolete or negatively impact our customer base.