Canada Post Corporation Executive Summary
History and Description
Canada Post Corporation is the primary postal operator in Canada. It was found in 1867 as the post office department of the Canadian Government, which was named,
Royal Mail Canada. In the late 1960s, the Royal Mail Canada was renamed as
‘Canada Post’ but had not been separated from the government. On October 16, 1981,
Canada Post Corporation was established formally and became a crown corporation.
Its international services started in the early 1990s. (Canada Post Corporation, 2013)
Canada Post Corporation is in the industry of courier whose head quarter is established in Ottawa, Ontario, Canada. With 71,000 full-time and part-time employees, it provides delivery, logistics and fulfillment services in domestic …show more content…
and international market. Canada Post Corporation operates its business in four core segments: Canada Post, Purolator, logistics and others. Most of the major services are contained in the Canada Post segment, which operates the largest retail network in
Canada. The services of the Canada Post Corporation include: Courier express services, Freight forwarding services, logistics services.(Market Line,2011)
Current Competitive Situation analysis
Industry:
Canada allocates 7% of the Americas’ market value of logistics, which is quiet small comparing with United States whose priority of the market reached 80% in
2007. In Canada, there are enough competitors in the logistics market that the degree of the rivalry is not that fierce although the market growth healthily over the past 5 years. The logistics services of different competitors are similar. However, the
demand of the logistics is high that the new entrants are in need. (Data Monitor,2008)
Competitors:
Competitors for Canada Post include: FedEx Corporation, United Parcel Services,
Inc., Deutsche Post AG (Deutsche Post DHL), La Poste, Royal Mail Holidays Plc,
United States Services, etc.
The strongest competitors for Canada Post are the DHL (Deutsche Post AG), which is the 1st on the Ranking of the world’s top 100 logistics companies, UPS (United Parcel
Services), which is ranked the 3rd place and FedEx, which is ranked the 5th place. By contrast, Canada Post ranked 32nd place in the world ranking.
Business Strategy:
1) Vision and value
Canada Post continuously pursues a vision of creating value for their customers, employees and all Canadians by its developed delivery solutions, successful team work with fairness, respect, integrity, efficient leading and management and a strong sense of responsibility. Canada Post is a consumer oriented corporation that always considers the needs and interest of customer (Canada Post Corporation, 2013).
2) Products and services
Canada Post is a postal service company that delivery, logistics and fulfilling are concluded in its range of services. Specifically, Canada Post offers services and products as listed below:
Mail delivery
Parcel delivery
Post office services
Postal retail
Priority courier service
Communication services
Supply chain management ePost (Canada Post Corporation, 2012).
Corporate level Strategy
1) Corporation Organization
Canada Post adopted division form to organize its operation. Its board members and president are appointed by the national government. The CEO completes the everyday management, the executive vice president is in charged of the postal production and management of the corporation. Every subordinates department
(market, sales, retails and others) has a completed and mature operation. Departments that are closely relative to the customers (market department, sales department) play an important role in the organization (Canada Post Corporation, 2013).
2) Retrenchment Strategy
Canada Post adopted a retrenchment strategy that simplifies the scale and requirement of the price, weight and size difference. Businesses that restructure the prize and organization of the advertising letter and access mail business. The success of the implementation of the retrenchment strategy make the services of Canada post much more customer friendly.
3) Development of the organization
The establishment of the user query system and official website brings conveniences to their customer. The postal business customer advisory committee was also set up for a better communication between customer and the service provider
(Canada Post Corporation, 2013).
Competitive Position
With determined vision and value, efficient organization and strategy the commercial operations of Canada Post becomes a powerful corporation whose total revenue of 2011 reached C$7,484 million. Canada Post Corporation also ranked the
32 placed of the world’s top 100 logistics companies (Canada Post Corporation,2011).
As the result of the introduction of the assessment audit of the postal services, the satisfaction of the consumers has improved. What’s more, Canada Post Corporation is the conductor who plays leading role of the supply chain of Ecommerce. However, there are a lot of competitors in the logistics market that Canada Post needs to develop continually to maintain its position in the competitive market.
5 Year Business Environment Projection
Canada Post has been Canada’s main regional mail distributer for over one hundred and fifty years (Canada Post, 2012), and will continue to serve our country for many years to come. Within the next five years, Canada Post will go through many changes. There are four areas that would affect its growth as a company: legal and regulatory, economic, technological, and competitive, social, and global factors.
These areas will outline Canada Post’s five-year business environment projection.
Recently, Canada post has gotten into a lot of legal and regulatory issues. If they are not resolved, they will cause more legislative problems for years to come.
Since the temporary shutdown of the company in July of 2011, there have been continuous problems within the business. Canada Post’s workers have one of the highest paid pensions in all of Canada.
Since Canada Post’s business has been
declining, there was a deficit between revenue and the costly pension plans.
The
struggle between keeping the workforce content, along with making sure the corporation was still profitable, caused the shutdown (Marketline 2012). If a permanent solution is not made, it could lead to more issues.
If the downward trend
of revenue continues, and the pensions of the employees climb, the yearly deficit will be greater than ever before.
On the positive side, Canada Post holds the legal and exclusive right to deliver regional mail. This means that in that category, they have no competition.
In the
next five years, the amount of letter’s mailed may decline, but it will still be a necessity for individuals and corporations alike.
This automatic monopoly is very
advantageous to CP, and will continue to assist them for years to come. (Fraser, 2011)
Economically, Canada Post is caught in a tough situation. Although they are a crown corporation, they do not receive any funding from the government. So any years they are at a deficit, they alone are responsible to solve the financial issue. From
2010 to 2011 the revenue declined by four percent, and it is projected that it will continue to fall (Marketline, 2011). Because of this, they must turn either raising the prices of their services, or reducing the benefits of their current and future employees.
If they choose to do the latter, they face the legal issues already noted above. If they choose to raise prices, the social view of the company would decline.
However
gaining economic stability is not easy, in order to make money, you must spend money. Having a miniscule cash flow makes expansion a very perilous task, and many would think that it would be too much of an economic gamble to do anything drastic. With technological advances being an ongoing occurrence in our society, the business environment for Canada Post will be affected both positively and negatively.
This is due to society’s change to an Internet oriented society. Since E-mail and other social media became the norm, it is easy to see why mail sending is steadily declining.
Major Canadian companies are resorting to e-billing and in general, letter mailing is too slow for our high speed society. In the upcoming years Canada Post must be dynamic and their business choices to accommodate societies swift change to a digital world. Contrarily, technology also has and will continue to help. With better technology, faster and more efficient processes will be realized.
In December 2012,
Canada Post delivered over a million parcels in one day (Penton, 2012). Faster letter sorters, and organization tools are continually being developed opening the door for more and more possibilities as well as money saving opportunities.
The social views of a company can have a huge impact on the success of an operation. Canada Post is no exception. Recently, Canada Post has received a negative stigma because of the strike in 2011. So in the upcoming years, it is at the
utmost importance that they rebuild the trust with their customers. Although they do not have any competition with regular mail, they do compete in package distribution with other companies, such as UPS, and FedEx.
They must show their customers
that they are a viable and dependable option against their competitors. Canada Post will always be around and even with the decline, will always be depended on. Over the next five years, they must concentrate on making that evident to the community. If the public eye has a positive opinion on them, it will in turn, be economically advantageous. Strategic Adaptations
As a result of global economic decline, changes in consumer and business practices and an aging infrastructure, Canada Post has set out to revitalize and restructure itself in an effort to remain a leading employer and cornerstone of
Canadian business. Until the current fiscal year Canada Post had enjoyed sixteen consecutive years of profit (Canada Post, 2012). Current losses however are not yet a cause for concern due to several factors. Delivery volume has dropped an average of 5% for the past several years (for an estimated total of 15% from delivery volume in 2007) with a corresponding decrease in revenue of 27% for the same time frame (CP, p.
2011, Shufelt, 2012). It has become obvious that the physical delivery industry has reached maturity, and management at Canada Post has begun investing heavily to find a continued place in Canadian and Global industry (Canada Post, p.32, 2009). Chief among these planned changes is a complete overhaul and modernization of the national postal infrastructure. Much of the current infrastructure was acquired in the
late 1970’s and early 1980’s and has reached the end of its expected operating life
(Canada Post, p.32, 2009). Naturally such a modernization program is not expected to come without considerable cost outlays. To that end, Canada Post has successfully lobbied for an increase in external borrowing capacity from the Canadian Government, from $300 million to $2.5 billion (Canada Post, p. 38, 2009). In addition to the need to borrow to finance infrastructure modernization, Canada Post also suffered two major setbacks in the 2011 fiscal year that put considerable strain on cash flows. The first was the June 2011 labor disruption. The combined twenty five days of rotating strikes and employee lockout resulted in an estimated loss of revenue exceeding $200 million. Additionally, due to funding volatility related to the current global economic decline, Canada Post recognized an actuarial loss in excess of $1.5 billion in relation to employee pensions and benefits (CP, p.24, 2011). It becomes obvious then that
Canada Post requires a major overhaul to fulfill its mandate of financial independence from the Canadian Government.
As previously stated, one of the primary aims of the organization is cost cutting measures to bring finances in line with current revenue projections while maintaining or increasing efficiency. To that end, Canada Post has begun rolling out a new delivery program. The program consists of the mobilization of “walking” carriers, and the consolidation of several previously specialized truck tasks into a single activity
(Canada Post, p.25, 2011, CBC News, 2011). The new delivery and pickup system is being phased in with infrastructure upgrades and improvements in sorting technology, and is estimated to cost $2.1 billion by completion (Canada Post, p.25, 2011). To date
these cost cutting measures have reduced fuel consumption by 3.7% from the previous fiscal year (Canada Post, p.2, 2011). To further mitigate the growing cost of fuel Canada Post continues to charge fuel surcharges on certain services in lieu of holding oil futures and related securities (Canada Post, p 53, 2011). The rollout of these changes however has not been without issue. CBC News and the Ottawa Citizen have both published news reports relating to issues with the new program. Primary among the issues is employee dissatisfaction stemming from extended shifts as a result of the new operations (CBC News, 2011). With a continuing emphasis on customer based quality relations and further refinement of the program it is likely however that these issues will simply be temporary setbacks as employees adjust to new routes and infrastructure systems. As stated in the article employees have issues with the new sorting systems which have been prone to errors resulting in a decrease of efficiency at the postal carrier level (CBC News, 2011).
One avenue that Canada Post has not given considerable attention to is the possibility of privatization. As pointed out by Lammam and Karabegović, there is a significant body of evidence to suggest that privatization is key to Canada Post’s survival (Lammam & Karabegović, p. 12, 2009). According to the property rights theory of the firm, “public enterprises should perform less efficiently and less profitably than private enterprises” (Boardman & Vining, p.1, 1989). Lemmam even goes so far as to state “Privatization ‘works’ in the sense that divested firms almost always become more efficient, more profitable, financially healthier, and increase their capital investment spending” (Lemmam & Veldhuis, p.31, 2009). Canada Post’s
apparent rush to replace aging equipment and make adjustments well after the peak of
“snail mail” industry seem to support this. Further supporting this theory is Canada
Post’s treatment of its e-post online bill payment service. According to Canada Post’s
CEO Deepak Chopra as quoted in an article in the Financial Post, the program has been in service for ten years, but was “our best kept secret” (Shufelt, 2012). Failure to promote this more modernized e-commerce program stemmed largely from Canada
Post’s fear of cannibalizing their own paper based services (Shufelt, 2012). The downside to this of course is that many major B2C firms now have their own online bill payment services, which effectively cuts out Canada Post as the middle man for both paper and electronic bill payment. Privatization however may not be the golden goose Lammam claims it to be. Boardman and Vining empirically determined that state operated enterprises (SOE) and mixed enterprises perform substantially worse than private firms (Boardman & Vining, p.26, 1989). They do however, recognize that state operated enterprises typically have some value outside profit maximization; lower profits may not be a factor of inefficiency so much as a form of social benefit
(Boardman & Vining, p.9, 1989). This research can be applied to the more recent privatization of Ontario Hydro and the sale of the Bruce Nuclear Generating Station to British Energy suggesting possible pitfalls the Canadian Government and Canada
Post will need to consider in the event of privatization. Due to price freezes below production costs, energy costs rose 67% between 2000-2010 when Ontario became a competitive energy market in 2002 (Dewees, p. 8m, 2012). Without a balancing change in tax regulation this put more pressure on consumers rather than supporting
them through competitive market price controls. If not properly executed, a privatization of Canada Post could pose similar issues for both Canadian businesses and Canadian consumers.
SWOT Analysis
Canada Post is a business that has had many experienced years delivering mail around Canada, from letters to paper bills people have been using this type of delivery for centuries. “They manage the largest physical distribution network in the country, collecting, sorting and delivering 40 million pieces of mail a day to over 12 million addresses” (Informs, 2001). Although lately it seems that our efficient use of the
Internet via e-mail, social networks or online banking people are able to communicate faster and pay bills easier. There are many strengths, weaknesses, opportunities and threats that Canada Post deals with daily.
Canada Post has a variety of strengths that they do that affects their reputation.
They are a strong retail network; this helps them achieve maximum returns.
According to MarketLine (2012) they have over 7000 retail post offices that serve consumers and businesses.
This strong retail network helps them capture new
revenue opportunities. Another strength Canada Post has is that it offers different services to its costumers across Canada. One service is their transaction mail; this would be bills, letters, invoices etc. “This is the company’s largest revenue generating line” (Marketline, 2012). A second service is the direct marketing, which is addressed and unaddressed ad mail and publications mail, such as magazines and newspaper.
The third and final service is parcels, which covers every address in Canada plus
international destinations. Canada Post offers many kind of parcel delivery depending on what the customer is looking for, such as urgent, non-urgent, air or ground delivery. Canada Post, like all businesses have their weaknesses. Canada Posts largest weakness is declining volume in overall revenue. This would be due to the continuing erosion of letter mail and the labor disruption. Many people are ‘going green’ which means they are no longer receiving transaction mail or sending transaction mail to try and save trees. This saves costs for the other business such as banks (for not having
to send out statements) and saving you money for not having to pay the $2.00 fee to receive the bank statement. Many people are using social networks and e-mail to communicate and online banking to view their transactions and pay their credit bills.
Another weakness is the legal issue impacting their reputation. They are subject to many lawsuits, such as “a pay equity complaint that went to the supreme court of
Canada and they ruled in favor of the Public service Alliance of Canada” (MarketLine,
2012). Lastly, its largest weakness is that their pension requires huge amounts of funding. According to the Canada Post Annual report, due to the long-term nature of the benefit plans the calculation of expenses and obligations depends on discount rates, expected long-term rate of return on plan assets, project salary increases, corporate team incentives, and demographics (2009). They have one of the largest single-employee pension plans in Canada with over $15 billion in market value.
According to Marketline (2012), having that large of a pension plan is an ongoing risk to the company’s cash flows and ability to fund investments in moderation and
growth.
There are many opportunities that Canada Post has in the future of mail delivery.
One of them is the Postal transformation program that is influencing the cost structure and competitiveness. This will deliver a modern more flexible and efficient network that is fulfilling. This will include new technology, improve or replace mail-processing plants and automatic mail sorting process. This will also cover reducing operating cost, and creating an online ePost where people can view their bill-presentation. Canada Post also plans on growing the Canadian e-commerce business. Which will help Canada and the Far East making it a lead provider of the business to consumer home delivery.
Lastly, Canada Post has threats that they are aware of and are trying to resolve.
They would be that in the past years there have been labor unrest and lockouts that impacts their finances and production. “In June 2011 there was a shut down for twelve days, this impacted Canada Post greatly by lost revenues of 200 million in that year” (Marketline, 2012). This effects the reputation of the company, the expenses that they have to endure, the demands that were not met and overall production.
“Several Canadian cities were subject to rotating strikes by Canada Post mail carriers when negotiations between Canada post management and the Canadian union of postal workers first stalled” (Fraser Forum, 2011). Canada post also has high competition in the courier, express and parcel market. Such examples are FedEx,
DHL, Royal mail etc. This means that they have to focus on express delivery and price of delivery everyday to be aggressive in the competition. Canada post has to
have regulation on customer postage rates due to the Government of Canada regulations. “This means that stringent regulation and frequent price hikes on the customer postage rates would adversely impact the company’s margins and profitability” (MarketLine, 2012).
Strategic discussion
It is Canada Post’s desire to continue its strive toward success, as the sole mail service provider for the country. In order to achieve this, they should consider privatization in order revitalize the company image, the economic stability, and internal affairs.
If all three of these areas are improved, the companies future
outlook would be substantially greater. (NOT FINISHED)!!
References:
a. Canada Post Corporation (2013), Vision, Values & leadership behavior,
Retrieved Mar.20, 2013 from http://www.canadapost.ca/cpo/mc/aboutus/corporate/visionvalues.jsf b. Canada Post Corporation (2013), Management Team, Retrieved Mar 20, 2013
From http://www.canadapost.ca/cpo/mc/aboutus/corporate/management/default.jsf
c. Canada Post Corporation (2011), Annual report, Retrieved Mar 20, 2013 from http://www.canadapost.ca/cpo/mc/aboutus/corporate/annualreport.jsf d. Market Line (2012) “Canada Post Corporation SWOT Analysis”, Canada Post
Corporation SWOT Analysis 1-9, Retrieved Mar 20, 2013 from Business Source
Complete
e. Data Monitor (2008) Logistics Industry Profile Canada, Retrieved Mar 20,
2013 from Business Source complete
f. Boardman, A. E., & Vining, A. R. (1989, April). Ownership and Performance in
Competitive Environments: A Comparison of the Performance of Private,
Mixed, and State-Owned Enterprises. Journal of Law and Economics, 32(1),
1-33.
g. Canada Post. (n.d.). Annual Reports. In Canada Post. Retrieved March 6, 2013, from http://www.canadapost.ca/cpo/mc/aboutus/corporate/annualreport.jsf
h. Canada Post. (2009). Management 's Discussion and Analysis. In Canada Post.
Retrieved
March
19,
2013,
from
http://www.canadapost.ca/cpo/mc/assets/pdf/aboutus/annualreport/2011_AR_ complete_en.pdf i. Canada Post. (2011). Transformation 2011 Annual Report. In Canada Post.
Retrieved
March
12,
2013,
from
http://www.canadapost.ca/cpo/mc/assets/pdf/aboutus/annualreport/2011_AR_ complete_en.pdf j. CBC News. (2011, December 15). More stress, injuries with new Canada Post
System. In CBC News - Health. Retrieved March 6, 2013, from http://www.cbc.ca/news/health/story/2011/12/15/ns-cupw-injuries-mail.html k. Dewees, D. N. (2012, March). What is Happening to Ontario Electricity
Prices. Sustainable
Prosperity,
1-24.
Retrieved
from
http://www.sustainableprosperity.ca/article2514
l. Lammam, C., & Karabegović, A. (2011, September). Recent mail disruption strengthens case to privatize Canada Post. Fraser Forum, 12-13. Retrieved from http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/r esearch/articles/recent-mail-disruption-strengthens-case-to-privatize-canada-p ost.pdf
m. Lammam, C., & Veldhuis, N. (2009, May). It 's time to privatize Canada 's Crown corporations. Fraser Forum, 31-34.
n. Shufelt, T. (2012, February 18). Canada Post targets transformation. Financial Post.
Retrieved
March
6,
2013,
from
http://business.financialpost.com/2012/02/18/canada-post-targets-transformati on/ o. Management 's Discussion and Analysis. (2009, December 31). Canada Post.
Retrieved
March
18,
2013,
from
www.canadapost.ca/cpo/mr/assets/pdf/aboutus/annualreport/Management_Dis cussion_and_Analysis.pdf p. Value Analysis and Optimization of Reusable Containers at Canada Post . (2009,
December
31).
Interfaces
.
Retrieved
March
http://interfaces.journal.informs.org/content/31/3/3.abstract
Canada Post Corporation is the primary postal operator in Canada. It was found in 1867 as the post office department of the Canadian Government, which was named,
Royal Mail Canada. In the late 1960s, the Royal Mail Canada was renamed as
‘Canada Post’ but had not been separated from the government. On October 16, 1981,
Canada Post Corporation was established formally and became a crown corporation.
Its international services started in the early 1990s. (Canada Post Corporation, 2013)
Canada Post Corporation is in the industry of courier whose head quarter is established in Ottawa, Ontario, Canada. With 71,000 full-time and part-time employees, it provides delivery, logistics and fulfillment services in domestic …show more content…
and international market. Canada Post Corporation operates its business in four core segments: Canada Post, Purolator, logistics and others. Most of the major services are contained in the Canada Post segment, which operates the largest retail network in
Canada. The services of the Canada Post Corporation include: Courier express services, Freight forwarding services, logistics services.(Market Line,2011)
Current Competitive Situation analysis
Industry:
Canada allocates 7% of the Americas’ market value of logistics, which is quiet small comparing with United States whose priority of the market reached 80% in
2007. In Canada, there are enough competitors in the logistics market that the degree of the rivalry is not that fierce although the market growth healthily over the past 5 years. The logistics services of different competitors are similar. However, the
demand of the logistics is high that the new entrants are in need. (Data Monitor,2008)
Competitors:
Competitors for Canada Post include: FedEx Corporation, United Parcel Services,
Inc., Deutsche Post AG (Deutsche Post DHL), La Poste, Royal Mail Holidays Plc,
United States Services, etc.
The strongest competitors for Canada Post are the DHL (Deutsche Post AG), which is the 1st on the Ranking of the world’s top 100 logistics companies, UPS (United Parcel
Services), which is ranked the 3rd place and FedEx, which is ranked the 5th place. By contrast, Canada Post ranked 32nd place in the world ranking.
Business Strategy:
1) Vision and value
Canada Post continuously pursues a vision of creating value for their customers, employees and all Canadians by its developed delivery solutions, successful team work with fairness, respect, integrity, efficient leading and management and a strong sense of responsibility. Canada Post is a consumer oriented corporation that always considers the needs and interest of customer (Canada Post Corporation, 2013).
2) Products and services
Canada Post is a postal service company that delivery, logistics and fulfilling are concluded in its range of services. Specifically, Canada Post offers services and products as listed below:
Mail delivery
Parcel delivery
Post office services
Postal retail
Priority courier service
Communication services
Supply chain management ePost (Canada Post Corporation, 2012).
Corporate level Strategy
1) Corporation Organization
Canada Post adopted division form to organize its operation. Its board members and president are appointed by the national government. The CEO completes the everyday management, the executive vice president is in charged of the postal production and management of the corporation. Every subordinates department
(market, sales, retails and others) has a completed and mature operation. Departments that are closely relative to the customers (market department, sales department) play an important role in the organization (Canada Post Corporation, 2013).
2) Retrenchment Strategy
Canada Post adopted a retrenchment strategy that simplifies the scale and requirement of the price, weight and size difference. Businesses that restructure the prize and organization of the advertising letter and access mail business. The success of the implementation of the retrenchment strategy make the services of Canada post much more customer friendly.
3) Development of the organization
The establishment of the user query system and official website brings conveniences to their customer. The postal business customer advisory committee was also set up for a better communication between customer and the service provider
(Canada Post Corporation, 2013).
Competitive Position
With determined vision and value, efficient organization and strategy the commercial operations of Canada Post becomes a powerful corporation whose total revenue of 2011 reached C$7,484 million. Canada Post Corporation also ranked the
32 placed of the world’s top 100 logistics companies (Canada Post Corporation,2011).
As the result of the introduction of the assessment audit of the postal services, the satisfaction of the consumers has improved. What’s more, Canada Post Corporation is the conductor who plays leading role of the supply chain of Ecommerce. However, there are a lot of competitors in the logistics market that Canada Post needs to develop continually to maintain its position in the competitive market.
5 Year Business Environment Projection
Canada Post has been Canada’s main regional mail distributer for over one hundred and fifty years (Canada Post, 2012), and will continue to serve our country for many years to come. Within the next five years, Canada Post will go through many changes. There are four areas that would affect its growth as a company: legal and regulatory, economic, technological, and competitive, social, and global factors.
These areas will outline Canada Post’s five-year business environment projection.
Recently, Canada post has gotten into a lot of legal and regulatory issues. If they are not resolved, they will cause more legislative problems for years to come.
Since the temporary shutdown of the company in July of 2011, there have been continuous problems within the business. Canada Post’s workers have one of the highest paid pensions in all of Canada.
Since Canada Post’s business has been
declining, there was a deficit between revenue and the costly pension plans.
The
struggle between keeping the workforce content, along with making sure the corporation was still profitable, caused the shutdown (Marketline 2012). If a permanent solution is not made, it could lead to more issues.
If the downward trend
of revenue continues, and the pensions of the employees climb, the yearly deficit will be greater than ever before.
On the positive side, Canada Post holds the legal and exclusive right to deliver regional mail. This means that in that category, they have no competition.
In the
next five years, the amount of letter’s mailed may decline, but it will still be a necessity for individuals and corporations alike.
This automatic monopoly is very
advantageous to CP, and will continue to assist them for years to come. (Fraser, 2011)
Economically, Canada Post is caught in a tough situation. Although they are a crown corporation, they do not receive any funding from the government. So any years they are at a deficit, they alone are responsible to solve the financial issue. From
2010 to 2011 the revenue declined by four percent, and it is projected that it will continue to fall (Marketline, 2011). Because of this, they must turn either raising the prices of their services, or reducing the benefits of their current and future employees.
If they choose to do the latter, they face the legal issues already noted above. If they choose to raise prices, the social view of the company would decline.
However
gaining economic stability is not easy, in order to make money, you must spend money. Having a miniscule cash flow makes expansion a very perilous task, and many would think that it would be too much of an economic gamble to do anything drastic. With technological advances being an ongoing occurrence in our society, the business environment for Canada Post will be affected both positively and negatively.
This is due to society’s change to an Internet oriented society. Since E-mail and other social media became the norm, it is easy to see why mail sending is steadily declining.
Major Canadian companies are resorting to e-billing and in general, letter mailing is too slow for our high speed society. In the upcoming years Canada Post must be dynamic and their business choices to accommodate societies swift change to a digital world. Contrarily, technology also has and will continue to help. With better technology, faster and more efficient processes will be realized.
In December 2012,
Canada Post delivered over a million parcels in one day (Penton, 2012). Faster letter sorters, and organization tools are continually being developed opening the door for more and more possibilities as well as money saving opportunities.
The social views of a company can have a huge impact on the success of an operation. Canada Post is no exception. Recently, Canada Post has received a negative stigma because of the strike in 2011. So in the upcoming years, it is at the
utmost importance that they rebuild the trust with their customers. Although they do not have any competition with regular mail, they do compete in package distribution with other companies, such as UPS, and FedEx.
They must show their customers
that they are a viable and dependable option against their competitors. Canada Post will always be around and even with the decline, will always be depended on. Over the next five years, they must concentrate on making that evident to the community. If the public eye has a positive opinion on them, it will in turn, be economically advantageous. Strategic Adaptations
As a result of global economic decline, changes in consumer and business practices and an aging infrastructure, Canada Post has set out to revitalize and restructure itself in an effort to remain a leading employer and cornerstone of
Canadian business. Until the current fiscal year Canada Post had enjoyed sixteen consecutive years of profit (Canada Post, 2012). Current losses however are not yet a cause for concern due to several factors. Delivery volume has dropped an average of 5% for the past several years (for an estimated total of 15% from delivery volume in 2007) with a corresponding decrease in revenue of 27% for the same time frame (CP, p.
2011, Shufelt, 2012). It has become obvious that the physical delivery industry has reached maturity, and management at Canada Post has begun investing heavily to find a continued place in Canadian and Global industry (Canada Post, p.32, 2009). Chief among these planned changes is a complete overhaul and modernization of the national postal infrastructure. Much of the current infrastructure was acquired in the
late 1970’s and early 1980’s and has reached the end of its expected operating life
(Canada Post, p.32, 2009). Naturally such a modernization program is not expected to come without considerable cost outlays. To that end, Canada Post has successfully lobbied for an increase in external borrowing capacity from the Canadian Government, from $300 million to $2.5 billion (Canada Post, p. 38, 2009). In addition to the need to borrow to finance infrastructure modernization, Canada Post also suffered two major setbacks in the 2011 fiscal year that put considerable strain on cash flows. The first was the June 2011 labor disruption. The combined twenty five days of rotating strikes and employee lockout resulted in an estimated loss of revenue exceeding $200 million. Additionally, due to funding volatility related to the current global economic decline, Canada Post recognized an actuarial loss in excess of $1.5 billion in relation to employee pensions and benefits (CP, p.24, 2011). It becomes obvious then that
Canada Post requires a major overhaul to fulfill its mandate of financial independence from the Canadian Government.
As previously stated, one of the primary aims of the organization is cost cutting measures to bring finances in line with current revenue projections while maintaining or increasing efficiency. To that end, Canada Post has begun rolling out a new delivery program. The program consists of the mobilization of “walking” carriers, and the consolidation of several previously specialized truck tasks into a single activity
(Canada Post, p.25, 2011, CBC News, 2011). The new delivery and pickup system is being phased in with infrastructure upgrades and improvements in sorting technology, and is estimated to cost $2.1 billion by completion (Canada Post, p.25, 2011). To date
these cost cutting measures have reduced fuel consumption by 3.7% from the previous fiscal year (Canada Post, p.2, 2011). To further mitigate the growing cost of fuel Canada Post continues to charge fuel surcharges on certain services in lieu of holding oil futures and related securities (Canada Post, p 53, 2011). The rollout of these changes however has not been without issue. CBC News and the Ottawa Citizen have both published news reports relating to issues with the new program. Primary among the issues is employee dissatisfaction stemming from extended shifts as a result of the new operations (CBC News, 2011). With a continuing emphasis on customer based quality relations and further refinement of the program it is likely however that these issues will simply be temporary setbacks as employees adjust to new routes and infrastructure systems. As stated in the article employees have issues with the new sorting systems which have been prone to errors resulting in a decrease of efficiency at the postal carrier level (CBC News, 2011).
One avenue that Canada Post has not given considerable attention to is the possibility of privatization. As pointed out by Lammam and Karabegović, there is a significant body of evidence to suggest that privatization is key to Canada Post’s survival (Lammam & Karabegović, p. 12, 2009). According to the property rights theory of the firm, “public enterprises should perform less efficiently and less profitably than private enterprises” (Boardman & Vining, p.1, 1989). Lemmam even goes so far as to state “Privatization ‘works’ in the sense that divested firms almost always become more efficient, more profitable, financially healthier, and increase their capital investment spending” (Lemmam & Veldhuis, p.31, 2009). Canada Post’s
apparent rush to replace aging equipment and make adjustments well after the peak of
“snail mail” industry seem to support this. Further supporting this theory is Canada
Post’s treatment of its e-post online bill payment service. According to Canada Post’s
CEO Deepak Chopra as quoted in an article in the Financial Post, the program has been in service for ten years, but was “our best kept secret” (Shufelt, 2012). Failure to promote this more modernized e-commerce program stemmed largely from Canada
Post’s fear of cannibalizing their own paper based services (Shufelt, 2012). The downside to this of course is that many major B2C firms now have their own online bill payment services, which effectively cuts out Canada Post as the middle man for both paper and electronic bill payment. Privatization however may not be the golden goose Lammam claims it to be. Boardman and Vining empirically determined that state operated enterprises (SOE) and mixed enterprises perform substantially worse than private firms (Boardman & Vining, p.26, 1989). They do however, recognize that state operated enterprises typically have some value outside profit maximization; lower profits may not be a factor of inefficiency so much as a form of social benefit
(Boardman & Vining, p.9, 1989). This research can be applied to the more recent privatization of Ontario Hydro and the sale of the Bruce Nuclear Generating Station to British Energy suggesting possible pitfalls the Canadian Government and Canada
Post will need to consider in the event of privatization. Due to price freezes below production costs, energy costs rose 67% between 2000-2010 when Ontario became a competitive energy market in 2002 (Dewees, p. 8m, 2012). Without a balancing change in tax regulation this put more pressure on consumers rather than supporting
them through competitive market price controls. If not properly executed, a privatization of Canada Post could pose similar issues for both Canadian businesses and Canadian consumers.
SWOT Analysis
Canada Post is a business that has had many experienced years delivering mail around Canada, from letters to paper bills people have been using this type of delivery for centuries. “They manage the largest physical distribution network in the country, collecting, sorting and delivering 40 million pieces of mail a day to over 12 million addresses” (Informs, 2001). Although lately it seems that our efficient use of the
Internet via e-mail, social networks or online banking people are able to communicate faster and pay bills easier. There are many strengths, weaknesses, opportunities and threats that Canada Post deals with daily.
Canada Post has a variety of strengths that they do that affects their reputation.
They are a strong retail network; this helps them achieve maximum returns.
According to MarketLine (2012) they have over 7000 retail post offices that serve consumers and businesses.
This strong retail network helps them capture new
revenue opportunities. Another strength Canada Post has is that it offers different services to its costumers across Canada. One service is their transaction mail; this would be bills, letters, invoices etc. “This is the company’s largest revenue generating line” (Marketline, 2012). A second service is the direct marketing, which is addressed and unaddressed ad mail and publications mail, such as magazines and newspaper.
The third and final service is parcels, which covers every address in Canada plus
international destinations. Canada Post offers many kind of parcel delivery depending on what the customer is looking for, such as urgent, non-urgent, air or ground delivery. Canada Post, like all businesses have their weaknesses. Canada Posts largest weakness is declining volume in overall revenue. This would be due to the continuing erosion of letter mail and the labor disruption. Many people are ‘going green’ which means they are no longer receiving transaction mail or sending transaction mail to try and save trees. This saves costs for the other business such as banks (for not having
to send out statements) and saving you money for not having to pay the $2.00 fee to receive the bank statement. Many people are using social networks and e-mail to communicate and online banking to view their transactions and pay their credit bills.
Another weakness is the legal issue impacting their reputation. They are subject to many lawsuits, such as “a pay equity complaint that went to the supreme court of
Canada and they ruled in favor of the Public service Alliance of Canada” (MarketLine,
2012). Lastly, its largest weakness is that their pension requires huge amounts of funding. According to the Canada Post Annual report, due to the long-term nature of the benefit plans the calculation of expenses and obligations depends on discount rates, expected long-term rate of return on plan assets, project salary increases, corporate team incentives, and demographics (2009). They have one of the largest single-employee pension plans in Canada with over $15 billion in market value.
According to Marketline (2012), having that large of a pension plan is an ongoing risk to the company’s cash flows and ability to fund investments in moderation and
growth.
There are many opportunities that Canada Post has in the future of mail delivery.
One of them is the Postal transformation program that is influencing the cost structure and competitiveness. This will deliver a modern more flexible and efficient network that is fulfilling. This will include new technology, improve or replace mail-processing plants and automatic mail sorting process. This will also cover reducing operating cost, and creating an online ePost where people can view their bill-presentation. Canada Post also plans on growing the Canadian e-commerce business. Which will help Canada and the Far East making it a lead provider of the business to consumer home delivery.
Lastly, Canada Post has threats that they are aware of and are trying to resolve.
They would be that in the past years there have been labor unrest and lockouts that impacts their finances and production. “In June 2011 there was a shut down for twelve days, this impacted Canada Post greatly by lost revenues of 200 million in that year” (Marketline, 2012). This effects the reputation of the company, the expenses that they have to endure, the demands that were not met and overall production.
“Several Canadian cities were subject to rotating strikes by Canada Post mail carriers when negotiations between Canada post management and the Canadian union of postal workers first stalled” (Fraser Forum, 2011). Canada post also has high competition in the courier, express and parcel market. Such examples are FedEx,
DHL, Royal mail etc. This means that they have to focus on express delivery and price of delivery everyday to be aggressive in the competition. Canada post has to
have regulation on customer postage rates due to the Government of Canada regulations. “This means that stringent regulation and frequent price hikes on the customer postage rates would adversely impact the company’s margins and profitability” (MarketLine, 2012).
Strategic discussion
It is Canada Post’s desire to continue its strive toward success, as the sole mail service provider for the country. In order to achieve this, they should consider privatization in order revitalize the company image, the economic stability, and internal affairs.
If all three of these areas are improved, the companies future
outlook would be substantially greater. (NOT FINISHED)!!
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