Wednesday, March 25, 2009

Petro Can and Suncor - Why Can't Canadian's Compete?

The latest "exception" might be this financial crisis, in which case our banks simply weren't "beat up as badly". I'd call that winning the race for last.

However, Canadian consumer products businesses always seem to be small shadow's of their American cousins. Examples?
  • Jumbo Video versus BlockBuster
  • Mr. Sub versus Subway
  • Petro Canada (Sunoco) versus ESSO (Exxon Mobile) - Check out my post on the Petro Canada / Sunoco merger posted yesterday
Aside: I might also note that American readers probably look at the above list and have no idea what I'm talking about. The American businesses have crossed the border, but many of the Canadian ones have limited success (or have closed down) on our side of the border only.

Even Tim Horton's (founded out of Hamilton by the famous hockey player of the same name) was purchased by Wendy's a while back.

Now granted, there are some obvious general assumptions which apply which make it harder for us to "compete" on a comparable level playing field:
  • The US has a 10x larger population than Canada, generally more demand
  • Canada is geographically much bigger which results in a compound effect and lower population density
  • We typically have higher tax, but enjoy more social programs
  • American's have higher marginal propensity to consume (MPC) improving their GDP multiplier and demand curves
I sincerely think that this is a "handicap" of our own making. While Canadian business would rather keep prices stable and sell a constant volume (as was described to me by the owner of an export company), American's are willing to drop their margins to get the higher volume. Simply put? American businesses are more willing to push competition.

Note as well that it's not that the American's are targeting us per-say when they make an expansion onto our soil, but rather they are embracing globalization. Generally, the companies listed above have a presence in other countries as well as Canada.

Particularly in the Petro Canada / Suncor example, it's clear who's the bigger player as they will be retaining the Suncor name and CEO.

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