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PESTLE ANALYSIS

CANADA

RIFFAT FAIZAN

ACADEMY OF BUSINESS MANAGEMENT

OPEN UNIVERSITY OF SWITZERLAND

DOCTORATE BUSINESS ADMINISTRATION (DBA)

CANADA (PESTLE ANALYSIS)

Political Analysis:
Powerful and solid democratic setup.
Strengths Prospering trade and stable foreign relations.
Current

Confict of interest with UAE (Diplomatic row).


s Discrepancies in development.
Challenge
Current

taxes.
Investment prospects inclining and deduction in
Prospects New political division's emergence.
Future

Provincial governments' fexibility plans.


Risks: Disposing plan regarding per-vote subsidy.
Future

Source: Datamonitor, (2011). Political Landscape Analysis of Canada.

Current Strengths:

Powerful and Solid Democratic Setup:

The self-governing provinces in Canada was prevailing since the end of 19th century and
from those early days democratic principles are evident in Canada's political setup
(Datamonitor, 2011). Liberal party in coalition with conservative party was ruling the nation
in early 20th century (Datamointor, 2011). Liberals or Conservatives were ruling after World
War II. On the ground of accountability and voice in 2009, 95.3% is Canada's score as per
Worldwide Governance Indicators (Datamonitor, 2011). This strongly indicates democratic
system's stability in Canada.

Prospering trade and stable foreign relations:


There has been significant trade development and investment agreements made by Canada
due to proactive approach and positive attitude developed towards strengthening foreign
relations. The significant contribution towards country's GDP is through value of imports and
exports and highly dependent on trade. Nicaragua, El Salvador, India, Guatemala, South
Korea, Andean, Honduras, the Dominican Republic, Turkey, the EU, Morocco, Ukraine, and
Caribbean countries are in negotiation with the government of Canada under "free-trade"
agreement (FTA) (Foreign Affairs, Trade and Development Canada, 2014). Canada's top
priority in foreign policy is America. Regional free trade, protect foreign investment,
strengthen financial, bilateral free trade, banking institutions, avoid double taxation, and
assist development are agreements that is being pursued by Canada (Foreign Affairs, Trade
and Development Canada, 2014). With Panama, Canada signed FTA while joint action plan
was signed with Mexico during 2010 in order to improve trade. In addition to that, bilateral
agreements were signed with Croatia, Greece, Mexico, and Ukraine to improve workforce
resources. Through this agreement, work and travel for young people was relaxed.
Furthermore, in order to ensure red-tapism in several sectors are deduced US-Canada
Regulatory Cooperation Council was created by US and Canada in 2011 (Datamonitor, 2011).
This council was to ensure businesses are supported adequately.

Current Challenges:

Discrepancies in development:

The most prominent is regional disparity (Datamonitor, 2011). Provinces with rich natural
resources hold strong political image due to strong economic growth. It is evident that
Alberta, Ontario, Quebec, and British Columbia have stronger image as these provinces are
politically and economically stable due to their natural resources in comparison to other
provinces. Furthermore, 85% of the Canada's total GDP is contributed by aforementioned
four provinces (Leitao, et al, 2013). Interestingly, there are allegations on government that
less-developed areas are not getting as much support as these high-growth and high-revenue
generator provinces received. This inequitable growth and disparities growing due to it, has
been the reason of conflict and discontentment among regional authorities (Leitao, et al,
2013). In developed and less-developed provinces there is animosity evident as growth is not
on uniform basis.

Conflict of interest with UAE (Diplomatic row)


The relationship with UAE has not been good since Emirates and Etihad Airlines have been
denied of landing slots by transport agency of Canada in October, 2010 (Croucher, 2011). As
a result, Mirage military base camp of Canada outside Dubai was close down by UAE
(Croucher, 2011). This camp was mainly used in Afghanistan War. Moreover, free visas for
Canadian citizens were cancelled by UAE embassy in December 2010. The Canadian citizens
were asked for C$1,000 charges for visas (Croucher, 2011). Thus, it is essential for Canada
government to maintain good relationship with other countries, especially countries that are
in cluster so that blog is not made against them.

Future Prospects:

Investment prospects inclining and deduction in taxes

For investments, it is one of the lowest in the list with tax structure in G8 countries which
makes it most ideal choice for investments. Moreover, among G8 countries, Canada has
lowest payroll taxes and tax credit programme is based on most advanced R&D (2014 Global
Survey of R&D Tax Incentives, 2014). Interestingly, the corporate tax rate has been cut down
by Canada in 2012 which makes it a favourable country among G8, for foreign investments
as statutory corporate income tax is lowest (2014 Global Survey of R&D Tax Incentives,
2014). The budget of 2011, considered the notion that economic action plan is developed to
increase economic growth and create job opportunities by reducing taxes and invest in
training, education, and innovation.

New political division's emergence

There is fusion of various diverse cultures, linguistic classes, and social norms that has
developed Canada to have multicultural society. Since, 1990s, there has been 3/4th millions
of immigrants coming into the country due to pro-immigrant policy. The survey has shown
that "ethnic enclaves" are approximately 260 presently in Canada (Datamonitor, 2011). This
means that other than French and English, almost 30% of ethnic communities are different.
The survey also found that, a vital role is played by immigrants in the country's election. In
2011 elections at federal level revealed that non-native candidates formed nearly 11% while
immigrant voters constituted significant portion which is evident as it resulted into present
government (Datamonitor, 2011). In addition to that, the national and federal level high
offices are hold by immigrants therefore there is probability that related native political
groups will emerge that will have an impact on the policy making, especially in favour of the
minorities.

Future Risks:

Disposing plan regarding per-vote subsidy

In order to raise funds for party in a country, per-vote subsidy is a phase out placed by the
Conservative government as it is one of the most significant way to do so. This concept of
introduced by Liberal party in 2003 which was based on the notion that C$2 guarantee per
vote for parties that will be receiving in federal election, more than 2% of total valid votes
(Datamonitor, 2011). Moreover, C$2 will be guaranteed for fielding their candidates if
accounting to 5% of valid votes in electoral districts (Datamonitor, 2011). The purpose of this
subsidy was to ensure that political decisions are influential and balance funding is
considered from individuals, trade unions, and corporations. Interestingly, in 2009, political
parties under the per-vote subsidy approach, received approximately C$27 million. Now, the
government is planning to scrap this approach. This has led to political unrest in country as
one aspect of it is conveying the perspective that under democratic process, federal politics
has benefited from playing field and now planning to dispose it. There is a possibility that
this alteration in plan may backfire on government.

Provincial governments' flexibility plans

In local matters, provincial government exercise independent legislative power as federal


structure is very loose. Thus, there have been several incidents that conflict of interest has
occurred between provinces and the central government. A good example to explain conflict
of interest between federal-provincial governments is that, INSITE is injection site that was
medically supervised by Vancouver in May, 2011 to facilitate drug addicts in rehabilitation
but tuned into political conflict between federal and provincial government as Mayor Gregor
Robertson (British Columbias politician) along with five others wrote to federal government
to abandon this programme (Datamonitor, 2011). Due to political tension, Supreme Court of
Canada intervene. Central government later on in legal brief stated that this case has affected
the relationship between federal-provincial governments. Moreover, it was also stated that,
the federal policy was based on the facts and findings from British Columbia therefore policy
should not be questioned by Supreme Court of Canada as it will be an attempt of crossing
jurisdiction. Although, in this regard, province is proposing the argument that through
provincially authorized clinic they are entitled to say in healthcare services delivery. Hence,
the conflict of interest between central and provincial governments is due to too flexible
federal structure.

Economic Analysis

Concrete and sound banking system


Strengths Business freedom of large extent.
Current

Low productivity.
s Discrepancies in economic growth.
Challenge
Current

Job creation and economic growth action plans.


Prospects Scheme for duty-free manufacturing tarif.
Future

Fiscal defcits.
Risks: Canadian dollar impact on export.
Future

Source: Datamonitor, (2011). Political Landscape Analysis of Canada.

Current Strengths:
Business freedom of large extent
Canada is a major exporter of forest products, minerals, oil, manufacturing goods, and
automobiles. Moreover, it is one of the leading free-market economies in the world. 80.8% is
score on Index of Economic Freedom (Appendix). Business freedom registration for Canada
is 96.4% which is highest. Within five days on average business starts in comparison to rest
of the world where it takes approximately 35 days (Datamonitor, 2011). Since 2006, the
opening of business is online which indicates that it is favourable destination for foreign
investments.

Concrete and sound banking system


The significant aspect of Canadas economy is strong banking system. The significance can
be measured as banking sector is great contributor to the economy through taxes (C$7.5bn),
financing 1.2 million SMEs, and providing employment to over 260,000 people.
Furthermore, its contribution towards GDP is more than 3% (Datamonitor, 2011). In addition
to that, outside Canada, banking sector provides job of approximately 90,000. More than
6000 branches of foreign and domestic banks along with the financial service providers (70
life insurance companies, 35 trust companies, 1000 credit unions, and 200 finance
companies) construct strong business environment and banking system. Due to strong Direct
Payment Terminals (630,000 DPTs) and 58,000 ATMs Canadian banks have strong system
therefore in times of economic constraints, Canadian banks has ability to ensure economic
revival (Datamonitor, 2011).

Current Challenges:
Discrepancies in economic growth
The economic structure of few provinces are stronger in comparison to other provinces. As
mentioned earlier, Alberta, British Columbia, Ontario, and Quebec has strong economies and
85% of total GDP is the contribution of these four provinces (Appendix). Due to high
discrepancies in in economic growth, there are high unemployment in some of the other
provinces.
Low Productivity
Economy of country is being severely affected by low productivity. The appreciating
Canadian dollar, low productivity gains, and high labour cost has been continuously
challenging the economy of country (Bank of Canada Quarterly Economic report, 2011). Net
exports recovery plans are negatively affected by poor productivity. Since 2005, 31%
increase is evident in labour cost per production unit in comparison to US, accredited to poor
productivity and appreciating Canadian dollar. Since 2005, Canada has experienced decline
in productivity by 0.5% whereas 2.1% increase in US productivity is noticed in same
timeframe. For balanced economic growth, high productivity is essential (Datamonitor,
2011).
Future Prospects:
Scheme for duty-free manufacturing tariff
The new initiative taken by country has helped the industries as through these tariffs,
manufacturing units have declined to certain extent. By the end of 2015, it will go to zero.
Tax burden on the businesses are to be reduced through governments campaign. Due to it,
Canada has been viewed as large free-trade zone. The tariffs on various tools, fibres,
chemicals, equipment, and machineries have been reduced which will increase the chances
for more investments in businesses.
Job creation and economic growth action plans
The jobs and opportunities for economic growth has been significantly improved through
2011 budget by introducing low-tax plan and investment in training, education, and
innovation. The small business are given a temporary hiring credit up to C$1,000 in order to
create job opportunities. Furthermore, the permanent annual investments up to C$2bn
through legislation in developing infrastructure for various sectors are taking place
(Datamonitor, 2011).

Future risks:
Fiscal deficits
Since 2005, the fiscal deficit for Canada has been 0.5% on average (Whittington, 2015).
There has been decline of 13% in 2009 while in 2014 the decline reached to 15%
(Whittington, 2015). In 2011, the deficit declined by 0.2% to C$34.4bn accredited to high
revenue from taxation and low expenditure by government. Moreover, to reduce deficit the
infrastructure funding was redesigned (Whittington, 2015). However, the trade deficit is
inclining and it is expected to further increase in upcoming years therefore in 2014-15
budget, the government set objective to achieve C$4bn through annual savings.
Canadian dollar impact on export
The Canadian dollar in comparison to US dollar is appreciating. The interest rate has increase
and fluctuation in exchange rate is posing a serious threat to economy of Canada. Canada is
heavily dependent on US for export therefore the shift in policy can affect the Canadian
products by lowering demand for it.
Social Analysis:

High Developed Human Index.


Strengths
Highly Efective and efcient security system.
Current

Aging Population.
Challenges
Provincial growth imbalanced.
Current

Retirement and pension reforms.


Prospects
Future

Inclined immigration population.


Risks: High Unemployment.
Future

Current Strengths:

Highly Developed Human Index

On numerous social parameters, the performance of Canada is substantial. 0.902 is HDI value
while it is ranked 8 out of 210 (UNDP HDR, 2014, Appendix III). The score of Canada has
been 32.6 on Income Gini Coefficient (0=Perfect Equality and 100=Perfect Inequality).
Female life expectancy is 84.1 while male life expectancy is 78.8.

Highly Effective and efficient security system

Labour force participation is promoted through employment programmes and policies. The
support system is provided by government to unemployed, underemployed, and labour
market in transition. Universal Child Care Benefit System is another initiative taken by
government to support parents on monthly terms to have C$1000 for each child under the age
of six (Datamonitor, 2011). A programme for OLES introduced by government of Canada to
enhance the knowledge of employees regarding work, promoting training, tools, and skills
required to perform tasks. CPP is a Canadian Pension Plan that has been introduced by
government to ensure that aging populations needs are catered. The retiring people at the age
of 65 benefit from CPP.

Current Challenges:

Provincial growth imbalanced

In terms of economic growth, some provinces are lagging behind others. Hence, there is
fluctuation in overall economic growth in country. Out of 13, 4 provinces are stable in
economic growth therefore receive more structural benefits (Datamonitor, 2011). The job
frequency is high in those four provinces while unemployment is more evident in remaining 9
provinces. There is a serious challenge for Canada as social discrepancies are high which can
affect the overall social system of Country.

Aging Population

Aging population is a serious challenge faced by developed economy (Canada). Especially,


age group belonging to baby-boomer is old or near to retirement. There has been almost 13%
increase in aging population since 2006 till 2014 in Canada (Appendix). Furthermore, in
2010 census, it was found that 4.34 million population was aging between 55 and 64
(Datamonitor, 2011).

Future prospects:

Retirement and pension reforms

Government introduced CPP as a response to changes in labour market economy and catering
the needs of aging population. The reforms for pension and retirement is to offer benefits to
people through CPP calculation. It is a much-required reforms to assist aging population and
this is required to be done in all provinces.

Future risks:

Inclined immigration population

The lenient policy of immigration has enhanced the entrants to Canada, especially from
developing countries. There is an accusation that authorities are being lenient to immigrant
population in order to capture vote bank. Moreover, the contentious social issues have been
resulted from 2011 immigration policy. The high unemployment rate and reduction in
employment conditions are linked with immigration issues, which are yet not resolved.

High Unemployment.

The unemployment especially after 2008 recession is still high in Canada. Though part-time
jobs have inclined but full-time jobs have declined significantly in Canada. At present, the
unemployment rate has exceeded to 7.0% which has been high in comparison to last year as it
was 6% (Appendix IV).

Technological Analysis:

established.
Strengths
Manufacturing & aerospace industry is well
Current

corporate spending.
Investment in R&D is low in terms of
Challenges
system.
Current Technical skills are not taught by educational

ICT sector expanding.


Prospects
Future

Patent number is low.


Risks:
IPR regime is weak.
Future

Current Strengths:

Manufacturing & aerospace industry is well established

The high-end developed products are produced through well-established manufacturing


industry. The integration of North American market, R&D incentives, low tax rates, and
qualified workforce are facilitating manufacturing sector (2014 Global Survey Report, 2014).
Furthermore, aerospace industry benefits from machinery and tools produced through
manufacturing sector. Interestingly, the US import 70% of goods that are manufactured in
Canada (Datamonitor, 2011). Since these goods hold true value-added element thus revenue
returns for Canada is higher. The production cost is significantly low in comparison to
advanced economies. The Information and Communication Technology (ICT) manufacturing
is likely to benefit through manufacturing industry of Canada.

Current Challenges:

Technical skills are not taught by educational system

Post-secondary is the higher portion of Canadian population. There is low advanced


qualification and fractional high degree oriented people especially in the field of research. In
addition to that, qualified workforce is not aligned with knowledge-based society and modern
economy. Furthermore, Canada stands 14th out of 17 peers on patents and PhDs which reflects
the poor performance in this aspect (Appendix).

Investment in R&D is low in terms of corporate spending

Canada is behind other advanced economies as the spending in R&D is substantially low. It is
reflected that in GDP, only 2% is spend on R&D (Appendix). Furthermore, private sector has
not been very active in investing in innovation which is reason for decline in R&D. In last
one decade, Gross Expenditure on R&D (GERD) has fractionally declined reflecting that
business enterprises are not willing to spend in innovation. Moreover, the innovation in
commercial sector will be negatively affected by low investment in corporate spending.
Though the ranking of Canada has improved as now it is 10th among 17 peer countries list of
business expenditure on R&D (Appendix V).

Future Prospect:

ICT sector expanding

The country is investing in ICT as there has been an increase of 0.2% in ICT manufacturing
GDP (Datamonitor, 2011). In addition to that, ICT services have grown by 0.6%
(Datamonitor, 2011). Electronic equipment and technologically advanced household
appliance are manufactured. Though, there is decline evident in the ICT exports especially in
EU and US market but in Asia Pacific region there is significant increase. This shows that
there is chances of expansion in ICT sector. Moreover, the dependence of Canada on US for
ICT has reduced.

Future Risks:

IPR regime is weak

Intellectual Property Rights (IPR) is introduced through the Industrial Design Act, the Patent
Act, the Plant Breeders Act, the Integrated Circuit Topography Act, the Copyright Act, and
the Trade-marks Act (Datamonitor, 2011). Despite these all still the IPR system is not as
innovative due to low creativity and innovation in private sectors. In recent times, the IPR
regime has gone stronger that has strengthened the industry. However, the standards are still
not as good as other developed economies thus there is improvement required in this aspect.

Patent number is low

Patents received by Canadian organisations has been significantly low which shows that the
technological advancement is declining leading to reduce the advantage for the country.
There is lack of innovation evident in the private sector which is a sign that Canadas
performance low in comparison to developed economies. The patents received by Canada
have only been 5,513 while US has 121,179 patents (Datamonitor, 2011). This is a risk that
can further damage its position.
Legal Analysis:
framework.
Business entities beneft from legal
Strengths
investors.
Current Incentives and relaxation in taxes for

sectors.
Ownership restriction in certain
Challenges Taxation system's loopholes.
Current

Few Service sector's liberalization.


Prospects
Tax rate reduction.
Future

Single regulator non-existent.


Risks:
Future

Current Strengths:

Business entities benefit from legal framework

The business environment enjoys transparency doe to regulatory and legal comprehensive
framework in Canada. Foreign investors find regulatory process to be favourable as starting,
operating and closing down business is easy due to freedom offered by national laws. Within
average five days a business can be started in Canada due to legal laws (Datamonitor, 2011).
In one day all legal procedures can be completed. In addition to that, legal procedures are
transparent.

Incentives and relaxation in taxes for investors

For businesses, tax rate is low in Canada. Among G8 countries, Canada has lowest payroll
taxes and statutory corporate income tax rate. In addition to that, the corporate tax rate was
reduced to 15% in 2012 (2014 Global survey report, 2014). Moreover, SR&ED (scientific
research and experimental development) expenses, taxes are most reasonable in the entire
world. Moreover, additional incentives are offered by provincial and federal government.

Current Challenges:

Taxation system's loopholes

Orthodox and old tax regulations still operate in Canada. Certain provisions allow evasion of
taxes by wealthy citizens. The provision states that, "an individual can pay a one-time
departure tax of 25% of their personal assets then place the assets into an offshore trust,
which is run by arms-length offshore trustees" (Datamonitor, 2011). Furthermore, in order to
evade taxes, in any other country, capital gains can be transferred. In addition to that, in tax-
free trust's name, the money can be deposited to avoid taxation. These are certain loopholes
and government must take initiatives to close these loopholes.

Ownership restriction in certain sectors

Although the country is one of world's advanced economies but to large extent in aviation,
financial services, and telecom sectors the foreign ownership is not allowed. In telecom
sector, 20% is limit on foreign ownership. Pharmacies, liquor sales, oil and gas, collection
agencies, farming, optometry, book publishing and selling, securities dealers, fisheries,
engineering, and mining are sectors with foreign ownership restrictions (Datamonitor, 2011).
Furthermore, Canada is among few developed economies that have investment review
process. The liberalization in various sectors can enhance investment activities.

Future Prospects:

Tax rate reduction

Additional tax relief is given to small businesses. The corporate tax reduction by 15% is
another bright prospect (Datamonitor, 2011). This step has stimulated the nation's economy to
grow further. Investment competitiveness in some provinces is encouraging as large-scale tax
cuts were used.

Few Service sector's liberalization


The energy's sale and expansion in international market can be attained by liberalizing power
sector. The foreign direct investment in broadcasting, airlines, and telecom sector will
enhance competition among existing players. Canadian government has brought regulatory
reforms in electricity to enhance competition. This is common phenomenon that competition
will increase innovation and improve standards of services.

Future risks:

Single regulator non-existent

The security market regulations are limited to provinces as there is no uniform regulator in
country. There is no adequate model that is agreed by federal and provincial government.
However, gain to certain level can be attained through introduction of uniform regulatory
system. Through uniform regulatory system, accountability will enhance and information
sharing will improve. This is a risk that Canada may suffer if legal framework is not
developed to ensure transparent uniform regulatory system.
Environmental Analysis
for environmental Policies.
Strengths
Initiative and strong framework
Current
inefciency.
Energy consumption -
Challenges
weak.
Current Track record on environment is
regulations.
transport sector through
Prospects GHG emission reduction from
Future

Nuclear waste enhanced.


implementation.
Risks: Kyoto Protocol's non-
Future

Current Strengths:

Initiative and strong framework for environmental Policies

At State and Federal level, it is evident that well-established, legislative framework and
environmental policy are strong in Canada. The Environmental Act of Canada covers all
aspects including; preservation of biodiversity, and effective management of waste, air, and
water (Datamonitor, 2011S). Under provincial and federal government separate agencies are
working to ensure policies are implemented and measured. The national environmental
policies' implementation and significant improvement in legislation has been evident in
recent years. On the international platform, Canada has done well to keep its commitment
regarding environmental issues.
Current Challenges:

Track record on environment is weak

Among OECD countries, after US Canada has worst record in environmental records (Fraser,
2010). Pesticide use, sewage treatment, GHG emissions, nuclear waste, and species at risk are
indicators that have made it stand 24th out of 25 countries listed in OECD (Appendix). The
environmental performance of Canada is not very good as it is ranked 15th out 17 peer
countries on environmental performance (Appendix).

Energy consumption - inefficiency

The usage of energy in efficient manner is questionable as pollution is generated in high


volume against the services and goods manufactured by industries. The energy consumption
is higher in comparison to US. The statistics revealed that it consume 33% extra than US
(Datamonitor, 2011S). This can cause serious problem to economic growth and rising
population. On non-renewable energy resources, it is over-dependent therefore it indicates the
inability of using alternative energy sources. This can reduce natural resources and may
negatively affect the process of growth in Canada.

Future Prospects:

GHG emission reduction from transport sector through regulations

From automotive sector, GHG emission is trying to be limited through new regulations. Light
Truck Greenhouse Gas Emission Regulations and Passenger Automobile Regulations were
introduced in September 2010 in order to deplete GHG emission (Datamonitor, 2011). The
regulation was introduced by government that from 2011 onwards on-road emission
reduction policy so that vehicles manufactured must be productive in reducing pollution. It is
part of plan that by 2020 the GHG emissions are reduced by 20% in comparison to the level
of GHG emissions in 2006 (Datamonitor, 2011).

Future Risks:
Kyoto Protocol's non-implementation

Clean Development Mechanism's implementation and promotion could benefit due to signing
Kyoto Protocol. Though, in order to reduce GHG emissions by 6% negative effect on the
internal policies related to infrastructure incurred (Datamonitor, 2011). Thus, government
decided not to extend Kyoto Protocol after 2012. So far the country has not been able to
accomplish its objective of reducing emission.

Nuclear waste enhanced

The cause of concern for Canada is level of waste increased. Nuclear wastage has increased
to 75% since 1980 (Datamonitor, 2011). Despite policies, there has been no action plan to
control nuclear waste. Therefore, it indicates that environmental friendly system is further
delayed. The Canadian government is still finding sites where geological repositories are
developed in order to spent nuclear fuel but finding it difficult as opposition is raising
questions.
PESTLE ANAYLSIS Overview:

Political analysis
New Democratic, Liberal, and Conservative parties dominate the Canadian political setup.
For 12 long years, Liberal rule dominated political arena but in 2006, Conservative
government came as minority government but by 2011 election it came into power with
majority eliminating all political instability threats (Brethour, 2011). It is regarded as Third
Harper Government. However, the challenges are posed by "Federal-provincial relations"
(Waddell, 2015). Still, the demands by provincial governments regarding additional funds
from the state are pending. In provinces, disparities are growing due to lacking uniformity in
policies (Datamonitor, 2011).

Economic Analysis

Presently, Canada stands as the 10th leading economy in the world (IMF, 2015). However
there has been significant decline in its GDP over last three years but $1615.5 growth reflects
that it is still progressing significantly (IMF, 2015). The growth in 2010 increased by 3% after
decline of 2% in 2009. Similarly, in 2013, 2% increased has followed 1% decline in 2014 and
presently in 2015 still 1% decline is noted so far (IMF, 2015). Business environment as well
banking system is very strong in Canada. It is credited to governments policy of economic
growth in 2010 when duty-free manufacturing tariff scheme and stimulus package of C$60bn
was introduced. The immediate effect was noted that industries (33%) and services (65%)
respectively contributed to GDP in 2010. Foreign Direct Investment (FDI) has been
significantly attracted through R&D incentives and lower corporate taxes. 2% employment
increase was noted between 2010 and 2011. However, there are concerns for country
especially deficits in trade and fiscal policy along with low productivity. Government of
Canada is facing a challenge of discrepancy in economic growth. To overcome this challenge,
measures are taken by government to accomplish C$4bn in balanced budget of 2014-2015
through annual savings and returns.
Social analysis
On human development aspects Canada has high score and social security system is very
strong. The total score on index is 0.902 whereas country is ranked 8 among 210 counties
(UNDP, Human Development Report, 2014). The changes in the economy and labour market
has determined that aging populations needs are addressed through revising retirement
reforms and pension structure. The higher social costs can affect the economic productivity
and competitiveness of country as there is visible aging population and imbalanced economic
growth in provinces. Moreover, the government may face serious tension and challenge due
to liberal and open immigration policy and high rate of unemployment in certain provinces.
Technological Analysis
The full potential of technological advancement is not reflected in real sense by Canada as
only 2% in GDP is R&D total expenditure. There is still innovation gap because the
percentage of spending on technology has not improved in GDP. The qualified labour force is
high in comparison to the researchers quantity and external patents application frequency.
Patents received constituted only 5513 in comparison to US patents received were 121,179.
There is lack of innovation evident in educational system as well business enterprises. In
addition to that, private organisations are not very interested in investing in new technology.
However, among advanced economies, Canada has been able to maintain its strong position
for being cost-effective country.
The geographical juxtaposition and healthy investment and trade relations with USA has
made it ideal choice for investments. In manufacturing sector, traditional mode of equipment
and machineries are used. However, in aerospace industry, Canada has significant advantage
due to high technological advancement.
Legal Analysis
Independent judiciary operated in the legal system of Canada. The judicial system is extended
by the Canadas federal structure. Into various divisions of government, legislative
responsibility and authority are sub divided. Ten provinces legislature and Canadian
Parliament has the authority of make laws. Countrys supreme law is the Constitution of the
country. In terms of easily establishing business, World Bank has ranked Canada 7 th in the
world. Moreover, the flexibility is high in labour market which has increased the
opportunities for employment and growth productivities. In comparison to other advanced
economies, corporate tax rate of Canada is low but on investment organisation faces highest
marginal taxes of the world. The external players gain several competitive advantages from
this country. There is low liquid transfer in the country for foreign investments. Moreover,
there are different several regulations that at provincial and federal level that business
enterprises face which discourage investors. However, the variation among these regulations
as well tax rate varies from province to province.
Environmental Analysis
With economic development, environmental challenges occur and government of Canada has
taken steps to ensure the mechanism is there to overcome these challenges. The
environmental policies of Canada have broad perspectives as local, regional, and global
nature issues and challenges are catered. Canada's environmental agenda has on top priority
list issues including hazardous waste, global biodiversity, chemical transport, climate change,
and ozone layer depletion. Canada has made steady progress to meet international
commitments and domestic environmental objectives. In order to reduce greenhouses gasses
(GHGs) policies are created. Moreover, advance strategies are made to cut air pollution.
Although, the performance is not very satisfactory in terms of enhancing energy efficiency,
biodiversity's preservation, and managing hazardous waste and pollution. The prime agenda
is climate change for Canada. Waste disposal, water and air quality, waste water collection,
human health, and preservation and protection of nature are other priorities of Canada.
Despite in aforementioned priority areas, sustainable development is made but still the results
in practical sense is yet not attained. It is due to lack of legal authority in implementation and
enforcement by concern authorities. The first round of Kyoto Protocol 2012 had defined
objectives to reduce emission but yet country has not been able to accomplish that objective.
PESTLE KEY POINTS

Political Analysis:

Prospering trade and stable foreign relations.


Powerful and solid democratic setup.
Discrepancies in development.
Conflict of interest with UAE (Diplomatic row).
New political division's emergence.
Investment prospects inclining and deduction in taxes.
Disposing plan regarding per-vote subsidy.
Provincial governments' flexibility plans.

Economic Analysis:

Active member of G8 and Organisation of Economic Cooperation and Development


(OECD).

Service sector is dominant contributor as 70% towards economy.

Listed in World's top 10 trading countries.

Highly regarded for energy net export.

The inflation rate in 2015 is 1.2% which has declined from 2.4% in 2014.

The economic system is similar to US.

FTA and NAFTA agreements are signed with various countries to improve trade
relations.

Economic policy of Canada is interlinked with US so minor changes in interest rate of


US have impact on Canada's economy.

Canada's banking system is conservative in approach.


Social Analysis:

In Canada, median family income is C$76,000.

The individual average income is $27,600 in Canada.

The bottom 20% families earn only 5.2% of income while 43.6% is income of top
20% families.

Women have attended more school than men in recent past.

Men earn more income than women.

14.9% Canadians have low income bracket (Appendix).

13.3% children in Canada live in poverty which is very high rate (Appendix).

Technological Analysis:

Manufacturing & aerospace industry is well established.

Technical skills are not taught by educational system.

Investment in R&D is low in terms of corporate spending.

ICT sector expanding.

IPR regime is weak.

Patent number is low.

Legal Analysis:

Incentives and relaxation in taxes for investors.

Business entities benefit from legal framework.


Taxation system's loopholes.

Ownership restriction in certain sectors.

Tax rate reduction.

Few Service sector's liberalization.

Single regulator non-existent.

Environmental Analysis:

Initiative and strong framework for environmental Policies.

Track record on environment is weak.

Energy consumption - inefficiency.

GHG emission reduction from transport sector through regulations.

Kyoto Protocol's non-implementation.

Nuclear waste enhanced.

APPENDIX I:
APPENDIX II:
APPENDIX III:
APPENDIX IV:
APPENDIX V: