International Business: Canada's Trade and Investment Friendliness

This International Business study material explores recent news about Canada's trade and investment friendliness, international relations with Australia, PESTEL factors, and more. It provides insights into the political, economic, social, technological, environmental, and legal aspects of doing business in Canada.

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Name
Course
Tutor
University
City/State
Date

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Recent news about the country you selected with regard to its trade and investment
friendliness
Canada is described as one of the most beautiful countries with vast land for agricultural
purposes; however, the most of the people occupy the Southern Provinces. It is in 1867 that
Canada was granted the status of being a nation by the British North America Act. Almost a
century later, Canada designed their formal white flag symbolized by a maple leaf in between the
two red stripes. Canada is ranked as the second biggest nation after Russia in the global rankings.
Canada has been ranked as a rich nation in the world and is a member of Organization Economic
Cooperation and Development (OECD) and the robust G-8. The service industry primarily
dominates the economy of Canada. Canada is also ranked as one of the top nations in the world
to export energy.
International relations between the home country of your firm and the destination country
The international relations between Canada and Australia are friendly and highly
productive. The relationship between the two nations has evolved over a long history and is
founded on both the shared past and a set of values in sectors such as trade, defense, culture and
parliamentary relations among others. Canada and Australia enjoy robust and bilateral relations
that are multifaceted. Canada constantly consults with Australia to develop common interests on
global matters based on their policy convergence in many sectors such as trade, economic
growth, and counterterrorism.
Local (host country) PESTEL factors
Political
Canada is a democratic nation made of a parliamentary government composed of the
house of commons (Frue, 2018). The primary state parties are the Liberals, conservatives and

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New Democratic among others. Stephen Harper rule for close to ten years and is the leader of the
Conservative Party and governed the country as the prime minister, and this shows that Canada
is a politically stable country.
Economic
In 2011, the rate of inflation rose than what was anticipated in December, and at the
beginning of 2011, it stood at 2.4%. In March 2019, the inflation rate rose to 1.9% from the 1.5%
recorded in February (Trading Economics, 2019). It was reported that this was the highest
inflation since the one recorded in December.
Approximately 70% of Gross Domestic Product in Canada comes from the service sector
which is responsible for employing more than 75% of Canada’s population. The agricultural
industry, on the other hand, contributes about 2% of the GDP employing a good number in that
sector also. Canada’s industry contributes approximately more than 25% of its GDP and employs
approximately 27% of Canada’s population. Canada’s service sector involves retail,
communication, and financial services among others. A substantial proportion of agricultural

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commodities such as wheat and grains have become important components of trade as they get
exported to other countries such as the United States of America, Europe, and Asia.
The Canadian economy is similar to that of the US as the market is characterized by a
focused economic framework, a trendy production framework and effluent lifestyles (Frue,
2018). The significant expansion of the manufacturing, mining and service following post World
War two have changed Canada from being an agrarian economy to one that is highly
industrialized and has an urban economic framework. The low costs associated with labor and
comprehensive health care and social security have lured many companies form the US and
Japan particularly the automobile industry to establish the manufacturing enterprises in Canada.
The social aspect of Canada
As of 2000, the family income was approximately $66,000 with the upper quartile of the
Canadian communities receiving 43% of the income. Contrary, the lower quartile received only
5% of the income. Such huge disparities have prevailed for more than 45 years. However,
Canada has a small disparity with regards to income compared to the US.
Education
Education is a vital element in determining workforce involvement, type of job and
income to be received and is highly prioritized in Canada and other advanced economies.
However, education is perceived to be a right and has not been equally pursued by women
compared to men. However, of late there are trends where more women are completing
schooling compared to the males.
Gender
Women also have been reported to earn less incomes, amass limited wealth and
experience less pride in their jobs compared to men.

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Technological aspect
The use of internet has become a vital source of information characterized by sites such
as Wikipedia and Google. There are many information articles written in both the English and
French language styles and posted in sites such as Wikipedia to be used by the Canadians and
many of such articles form crucial components of Canadian life. Internet is essential in
facilitating the setup of a website to be used by a Coles as it has one of the best websites
providing all the information that customers require regarding the goods and services provided
by the retailer.
Environmental aspect
The Economic environment of Canada runs under the alias Department of the
Environment under the Environment Act. The department is tasked with managing the
environmental policies and programs and also preserves the natural environment. Thus, for a
supermarket such as Coles which complies with the environment through its corporate social
responsibility through ethical sourcing will have not problems in a country such as Canada.
Legal environment
Canada has some regulations that are stringent when it comes to the retail industry. For
instance, some products cannot be sold in Canada, and some products have specifics such as
restrictions regarding banned or hazardous ingredients and required licenses or commodity
approvals. Also, there are laws regarding the label that retailers put on their products as this is
regarded as the central channel of communicating the value of the product to consumers.
The strength of the banking system in the destination country and whether its banks have
international relations with banks in the home country

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Regarding the Banking Banana Skins responsible for publishing an exclusive report that
yields insight into emerging risk factors in the global banking sector as perceived by bankers,
banking regulators and observers of the banking environment across the globe, the Canadian
executives felt better equipped to handle and address risks compared to global counterparts
(Ashton College, 2015). This is a testament that reveals the strength of Canadian banks.
Other global banking players highly regard the banking industry in Canada due to its
stability particularly in times of financial crisis (Allen, et al., 2011). It has also been observed
that Canadian banks exhibited robust growth with all accumulated profits for the big six banks
exceeding CA$30 billion in the history of Canada (Ashton College, 2015). However,
contemporary economic, regulatory and competitive hurdles shave impacted the industry leading
to Canadian banks developing strategies to improve their position and profitability.
The Canadian banking industry is characterized by stringent regulations, and this may be
the sole reason for the overall economic strength witnessed in Canada. In adherence to this strict
banking regulation, the federal government of Canada has full control for banks in accordance to
the Canadian Constitution particularly regarding section 91(15) of the Constitution Act which
was earlier identified as the British North America Act of 1867. However, the credit unions and
mutual funds are controlled entirely by the territorial governments. With money laundering
issues being rampant, it is problematic to transfer funds while one is in Australia from a
Canadian bank account.
Trade barriers that the destination country or your firm’s home country impose on one
another
Despite Canada eliminating tariffs on industrial and agricultural commodities from
countries such as the US and other foreign countries using terms of NAFTA, tariffs and tariff-

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rate quotas (TRQs) are still in force on dairy and poultry related products (Canadian Business,
2018). In Canada’s federal budget of 2013, Canada announced that it would eliminate MFN
tariffs in products such as baby clothing and athletic equipment estimated to be worth C$76
million.
Investment barriers
Referring to the Investment Canada Act (ICA) has been regulating foreign investment
since its inception in 1985 (Canadian Business, 2018). For instance, foreign investors are
required to notify the state before the direct or indirect acquisition of a Canadian business
beyond the threshold value (Export, 2018). In 2009, Canada amended the ICA intending to raise
the threshold with the overall aim being to benefit Canada. The limit stands at C$600 million
scheduled to increase to C$1 billion as of 2019.
Local (host country) PESTEL factors
Risk ranking Name of risk Impact of risk on the
firm
Strategies you will
recommend to
mitigate
the risk
1 Political risk Nationalization and
seizure of assets
Doing research on
closing business deal,
successes and
failures of businesses
that operated earlier
2 Financial risk Risk and expense of
converting the dollar
Use a banking system
that has got branches

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to a home currency in Canada and
Australia
3 Logistical risk Supplier failing to
deliver on time and
in the budget
provided (Saint-
Leger, 2019).
Diversifying the
supply chain by
having a variety of
suppliers (Morello,
2019).
4 Regulatory risk May affect the cost
of operation and
expansion
Respecting foreign
attitudes with
reference to the
environment
5 Country risk Poor infrastructure
such as roads and
telecommunication
networks
Conducting PESTLE
analysis of the host
country
Finally, you are required to recommend one of the following strategies as a possible entry
point for the firm
Direct entry would be the best for a supermarket such as Coles (Dlabay & Scott, 2011).
The Canadian political environment promotes foreign investments, and just like Target ventured
the Canadian market, Coles will not encounter challenges with venturing such a market. The
direct entry mode will enable Coles to carry on with its corporate culture as well as display the
Australian lifestyle. However, huge initial investments will be required in setting up premises
and other facilities for the supermarket.

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In conclusion, it is imperative to conduct a proper analysis of the market that a company
wants to venture to have a view of the risks that a firm will face in such a market. However, the
Canadian market is characterized by many opportunities worth investing in as the GDP of the
country is great providing incentives for people to indulge in a shopping culture. The rate of
inflation is also low compared to many countries, and this is crucial in ensuring that prices will
be reasonable and cheap.

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References
Allen, D., Boffey, R. & Powell, R., 2011. Peas in a pod: Canadian and Australian banks before
and during a Global Financial Crisis. [Online]
Available at: https://ro.ecu.edu.au/cgi/viewcontent.cgi?referer=https://www.google.com/
&httpsredir=1&article=1647&context=ecuworks2011
[Accessed 2 May 2019].
Ashton College, 2015. How strong are the Canadian banks? Perspectives on the Canadian
banking industry. [Online]
Available at: https://www.ashtoncollege.ca/how-strong-are-the-canadian-banks/
[Accessed 2 May 2019].
Canadian Business, 2018. Marketing, advertising and sales regulations. [Online]
Available at: https://canadabusiness.ca/government/regulations/regulated-business-activities/
marketing-advertising-and-sales-regulations/
[Accessed 2 May 2019].
Dlabay, L. & Scott, J., 2011. International business. Mason,OH: South-Western Cengage.
Export, 2018. Canada - Import Tariffs. [Online]
Available at: https://www.export.gov/article?id=Canada-Import-Tariffs
[Accessed 2 May 2019].
Frue, K., 2018. PEST Analysis of Canada. [Online]
Available at: https://pestleanalysis.com/pest-analysis-of-canada/
[Accessed 2 April 2019].

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Frue, K., 2018. PESTLE Analysis of The Retail Industry. [Online]
Available at: https://pestleanalysis.com/pestel-analysis-of-retail-industry/
[Accessed 2 May 2019].
Morello, R., 2019. Strategies That Mitigate International Business Risks. [Online]
Available at: https://smallbusiness.chron.com/strategies-mitigate-international-business-risks-
43016.html
[Accessed 2 May 2019].
Saint-Leger, R., 2019. Risk Involved in an International Business. [Online]
Available at: https://bizfluent.com/info-7766597-risk-involved-international-business.html
[Accessed 2 May 2019].
Trading Economics, 2019. Canada Inflation Rate. [Online]
Available at: https://tradingeconomics.com/canada/inflation-cpi
[Accessed 2 May 2019].