Sample Report On Environmental Scanning And Due Diligence

Type of paper: Report

Topic: Vehicles, Canada, Automobile, Cars, Investment, Government, Politics, Toyota

Pages: 4

Words: 1100

Published: 2020/11/01

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Introduction

Canada‘s automobile industry, which is the largest job provider in provinces like Ontario, has a huge impact on its workforce. Being the neighbor of the USA, Canada has benefitted substantially in terms of gaining knowledge, expertise and ancillary operations for the automobile industry. Detroit, the automobile hub of the world, is situated on the Canadian border, which has helped Canada in the attainment of multiple automobile plants and automotive parts suppliers in the country. Over the years, the Canadian government has facilitated the automobile companies in setting up their plants in Canada by giving a host of incentives, such as lower corporate tax rate and land at a minimal price (Freishner, 2014). However, in recent years, especially after the recession of 2007-2008, Canada has seen a huge decline in the automobile growth. Toyota is no exception. Before the economic crisis, the automobile industry generated revenue close to $40 billion. However, in 2013, the estimated revenue generated has shrunk to $35 billion. Direct employment in automobile sector has reduced from an all-time high of 150,000 to close to 95,000 in 2012 (CAW, 2012). Based on the SWOT analysis of the Canadian automobile industry, this essay will recommend a few implementable environmental strategies for Toyota to improve its revenue.

Strength of the Canadian Auto Sector

Canada has an excellent infrastructure in terms of road and transportation facilities. It also has well-developed real estate supply that can be used for starting a new industry, dealership, and plant.
The Canadian government has announced a $600 million package to boost the Research and Development capabilities of the automobile companies so that the productivity in Canadian plants increases, and it becomes more lucrative to produce in Canada than in the USA (CAW, 2012).
Canada has one of the highest percentages (51%) of high skilled labor availability in the world. In fact, among G7 countries, Canada ranks number one (Elwood, 2014). This availability of human capital helps flourish any industry.
Canada shares a good camaraderie with the USA. The US investors feel comfortable investing in Canada for any industrial venture, and the current exchange rate also favors investment in Canada.

Canada has no legal constraints on transfer of profits, fees or royalties on the repatriation of investors.

Canada, especially Ontario, already has a well-established automobile hub with one of the best quality R&D facilities in the world (Elwood, 2014).

Canada is politically stable.

Weakness of the Canadian Auto Sector
The main problem with the Canadian auto sector, in recent years, is that there is almost no new investment made by any automobile giant. GM, Chrysler, Ford and Toyota have refrained from investing in new plants (Freishner, 2014). In fact, it seems that most of the automobile majors are trying to revamp the automobile base in Detroit and Tennessee or moving further south to Mexico.
Since the Canadian government has helped GM and Chrysler with bailout packages, these companies are not retrenching production in their Canadian plants, but it is feared that as soon as the contract period ends in 2016, these jobs may be shifted to the US locations.
The Canadian automobile industry is heavily dependent on investors from the USA (90% of the auto investors are from the USA), and also almost all of the export of automobile happens to the USA. As the US itself is struggling in the economic crisis, Canada, which is fully dependent on the USA in terms of automobile exports, parts produced, and investments, is also struggling.
The Canadian government is still not focusing on providing a special tax holiday or other benefits to the potential investors in the automobile sector as the government is more interested in other political matters (Elwood, 2014).

Opportunities

There are prospective investors in the automobile sector not from the USA. The Canadian government should explore the non-traditional markets like India, China, and Middle East for potential investors.
The new trend is on environmentally friendly vehicles. Canada already is a pioneer in that area. Electric vehicle, hybrid vehicles and other energy efficient vehicles should be given special importance in Canada as it has the potential to become the green vehicle supplier of the world (Freishner, 2014).
the availability to high skilled resources can be utilized to make the Canadian automobile sector a highly productive base.

Threats

After the financial crisis of 2007-2008, the overall job market and consumption have experienced a huge downturn, which is causing sluggishness across all industries.
The overall investment in upgrading the existing operations and the R&D facilities in the automobile sector is on the decline. None of the Canadian plants is getting upgraded with new equipment and machinery in the coming future, which means less productivity in the coming years.
Mexico and Tennessee seem to be the new automobile destinations for investors. The overall percentage of Mexico’s production output among G7 countries has increased to 20% in 2012 from 13% in 2003. Canada’s share has decreased from 17% in 2003 to 11% in 2012 (CAW, 2012).
The Canadian government is bringing in strict environmental norms to be followed by factories. If no new investments are made in the existing factories, then many old automobile plants may become shut down.
Nationalism in the US auto market means that GM, Chrysler, and Ford are making more investment in the USA and less in other countries (Elwood, 2014). This will not take the growth of the automobile sector up in Canada.

Conclusion and Recommendation

In Canada, the automobile industry may not be as big as the oil sector. It only employs close to 100,000 directly, but the automobile sector has a huge downstream effect. It is estimated that if 100,000 people are directly employed by the auto industry, then almost 5 times that number are indirectly employed by the sector (CAW, 2012). The automobile is also the second largest exporter after oil and gas. It is, therefore, important that Canada gives special emphasis on reviving its automobile sector. Here are some recommendations for Toyota that can help improve the situation for Toyota over other players. These strategies cannot be implemented overnight, but slowly the sector may see an upturn if positive actions are taken by the government, industry leaders and investors.
Canada is a country that attaches extreme importance to environmental protection. Toyota is already known for its environmental friendly image and practices. It can negotiate with the Canadian government for special tax credits and special terms (CAW, 2012). In return, Toyota can set up more plants to produce its green vehicles, which can be sold to the US market.
As the Canadian government provides incentive for the R&D related facility to productivity improvement, fuel efficiency, and green vehicle technologies, Toyota can take full advantage of those government funds (Elwood, 2014). It can collaboratively work with the government and universities to come up with better operations and technological innovations, which will differentiate it from others.
Recently, GM and Ford are not investing in upgrading their Canadian plants (CAW, 2012). Toyota can grab this opportunity, and negotiate special terms with the Canadian government and then commit to the future investments for improving productivity and upgrade (Elwood, 2014).
Toyota should not reduce its capacity in Canada as the Canadian government is planning to charge some tariff or put some quota on the maximum number of vehicles imported. If other big players are producing vehicles in the US and Canada, then Toyota will be better off producing in Canada and catering to the domestic demand.
Finally, Toyota has the strongest green vehicle portfolio. The only thing it is missing is proper marketing and positioning of its products against the main rivals like Honda and GM. If products like the Prius and Camry Hybrid are properly marketed, then they are sure to take the number one position in the green vehicle segment category in Canada, beating Honda Insight.

References

Canadian Auto Workers Union (CAW). (2012). Re-thinking Canada’s Auto Industry: A Policy Vision to Escape the Race to the Bottom. Retrieved on 6th Feb, 2015 from <https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB4QFjAA&url=http%3A%2F%2Fwww.sme-tbm.org%2Fapp%2Fdownload%2F6668821404%2FCAW%2BAUTO%2BPOLICY%2BPLAN.pdf&ei=XZLVVJ_qOYOaNtWugPgI&usg=AFQjCNGWDKaCV1CEb63RgTzN3uWmkY8pWw&sig2=1yMOe2iKOGxVw5FVw-MUpg&bvm=bv.85464276,d.eXY>
Freishner, T. (2014). SWOT Analysis General Motors. Marketing Teacher. Retrieved on 6th Feb, 2015 from <http://www.marketingteacher.com/general-motors-swot/>
Elwood, M. (2014). Electric Vehicle Technology Roadmap for Canada. Government of Canada. Retrieved on 6th Feb, 2015 from <https://www.google.com/url?url=https://emc-mec.ca/eng/pdf/EV_Technology_Roadmap_for_Canada_February_2010.pdf&rct=j&frm=1&q=&esrc=s&sa=U&ei=Yz3VVKTnGebjsASjzYHQDg&ved=0CBoQFjAB&sig2=p9-sn4CltUxcTKSm4nBCGQ&usg=AFQjCNGHcHyzfsNdOcx6L7RpwJgZ1C9y1Q>

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