Business Analysis of Canada

Canada is the leading country in the world for an American business to expand because of the very similar culture and business environment to the United States. Americans operating in Canada will feel very comfortable integrating into society and will be able to successfully execute their business objectives. The key areas of focus to effectively prove Canada’s compatibility with American firms is based on the following criteria: * Culture * Management * Population Demographics * Compensation * Religion * Ethics * Political Risk * Economy

Culture
Canada’s culture is very similar to the United States and by analyzing the cultural dimension theory by Geert Hofsted, American businesses will be able to understand how the similarities positively impact the success of American expatriates working in Canada.
Hofsted’s cultural dimensions theory is an analysis of 5 specific factors that define the makeup of a society. Using a ranking system he was able to compare over 50 countries to Canada in all of these dimensions: power distance, individualism, uncertainty avoidance, career success and planning for the long-term horizon.
Power distance
This dimension measures the rigidity or flexibility of a country in terms of how organizations structure management and subordinate relationships. If a country has a high power distance, management structures seem to be more rigid or hierarchal and a chain of command system is in place. Rarely will an employee bypass his supervisor for it may be considered an act of insubordination. On the other hand, a country with a low power distance may have a management structure that is more flexible or flat. In this case it would be a cultural norm for an employee to go around his supervisor if it was the best way to accomplish his work (Adler, and Gundersen, 2008). Hofstede’s ranking system has placed Canada with a score of 39 out of 53, very close to the US score of 38. Since Canada has such a low power distance, American companies will be fairly accustomed to the low structured business environment. Therefore, they will be able to seamlessly collaborate with the Canadians having very few manager subordinate conflicts.
Individualism
This dimension measures societies view on how important it is for an individual to rely on himself as opposed to relying on a collective group or organization. Countries whose societies are very individualistic primarily act in a way that will benefit themselves and their immediate families. Countries that are on the opposite extreme are very collective and individuals act in a way that will benefit the group of which they belong (Adler, and Gundersen, 2008). Hofstede’s ranking system places Canada with a score between 4 and 5 out of 50 thereby classifying it an individualistic culture. As a result, American businesses operating in Canada won’t have any trouble motivating its Canadian employees since like Americans, they enjoy achieving goals that focus on individual wealth and prosperity ("Individualism in canada-historical").

Uncertainty Avoidance
This dimension measures the behaviors of a society in terms of the amount of risk citizens will avoid. Countries with high uncertainty avoidance dislike ambiguity and will not make decisions unless outcomes are highly certain and predictable. Those countries with low uncertainty avoidance take a lot of risk and make decisions based on the ones that will bring the greatest reward (Adler, and Gundersen, 2008). Canada is ranked between 41 and 42 and the United States is ranked 43. Since both countries are ranked fairly high, they share similar views on the high level of risk they are willing to take. As a result, American business will find this cultural similarity an advantage as it will create an environment of unity where risky decisions can be made with little opposition.
Career Success/ Quality of Life
This dimension compares two types of societies that focus either on the acquisition of money and material possessions or the emphasis on relationships and the overall quality of life. On the Hofstede scale, 1 is considered very career oriented and 53 is more quality of life oriented. Canada’s rank on the system for this dimension is a 24, which is very balanced on the scale. The United States is ranked 15 and is therefore more career oriented compared to Canada. American businesses operating in Canada would definitely benefit from this more quality of life culture. For example, the fact that the Canadian government covers the cost of healthcare, it thereby alleviates the burdens of an American company paying for corporate medical insurance. As a result, American companies can save thousands of dollars each year in overhead and improve their bottom line.
Long-term/Short-Term
The last dimension in the Hofstede analysis is an outlook on how a society views its time horizon. Countries that have long-term horizons cultivate values of thrift, perseverance and long-term sacrifice. Short-term countries have the opposite orientation. Their values are focused on the past and present, like steadiness, tradition and reciprocation ("Hofstede: long”).
The ranking system for this dimension is out of 34 with 1 being long-term and 34 being short-term. Canada is found closer to the short-term spectrum with a score of 30; a slight more short-term than the United States with a score of 27. Americans selling products in Canada would find this cultural environment very attractive. Like Americans, Canadians are not very thrifty and enjoy spending most of their hard earned money. By correctly identifying the tastes and preferences of the Canadian consumer, American businesses will be able to tap into a healthy market where their products are sold.
Management
If an American company decides to operate in Canada, it must understand the type of management style appropriate for the Canadian environment. Much like the United States, Canadians prefer a democratic management approach. Canadians are fairly open individuals that require the freedom to express their ideas and opinions with their managers. They are also team oriented and enjoy collaborating together to solve problems and complete tasks. Canadians are also time oriented and adhere to schedules. Missing deadlines is a sign of poor management that shakes people’s confidence ("Intercultural management canada,”).
When looking at work rules or policies in Canada, they can be very similar to the United States. The business environment is very egalitarian and employees are expected to be treated with respect and difference. Within Canada there is domestic multi-Culturalism where about 22% of its citizens share French values and traditions. If American managers can develop an interest in French culture, they may be able to earn the respected needed to work efficiently with the French speaking Canadians.
As a result of the open and horizontal business environment, employees expect managers to seek out their subordinates in making very critical companywide decisions. They like to feel important and valued since certain decisions will affect them individually as well as collectively.
Overall, the culture is not so very different than the United States and very little cultural training will be necessary. Like Americans, Canadians are low power distance and low uncertainty avoidance individuals who have the drive for success. They do not fear failure and understand how it is part of the learning process. At the same time, they are hard working people who focus on the details to reach their goals. Like Americans, they enjoy individual rewards and will do whatever is necessary to achieve them.
Population Demographics
When looking to hire and train employees in Canada, it is essential to understand the demographic makeup of the Canadian population. In all provinces except the province of Quebec, English is the most prevalent language. In Quebec, French is the official language where it is spoken by 95% of the population. Other than these two official languages, Cantonese and Mandarin are also widely spoken in large cities nationwide.
As for the ethnic makeup of Canadians, 66% of the population is from a European origin, 6% are from Asia and 28% are from a variety of other origins. As there is a vast diversity of cultures in Canada, it does not take way from the fact that it is the 2nd most educated country in the world. Canada has a literacy rate of 99%, a high school graduate rate of 86.6% and a college graduate rate of 48.3%, the second highest in the world.
Compared to the US, Canadians are fairly close or even better in certain areas of education. In the US, the literacy rate is also 99%, high school graduates are slightly higher at 87.9% and college graduates are lower at 40.3%, sixth in the world ("Countries with the," 2010).
As a result of the similar education, American business operating in the Canada will have very little trouble finding employees with adequate skills and education. The Canadian government invests 5.2% of their GDP on education so that its students are well prepared for the workforce ("The worldfact book," 2011).
Compensation
Canada is a fairly prosperous country in the world. In terms of GDP, Canada is the 14th largest economy in the world with revenue of 1.33 trillion and a growth rate of 3.1% in 2010. Looking at the GDP per capita, the average income of a Canadian is $39,400 per year. Compared to the United States, Canada is behind by $7800. However, looking at countries like Somalia whose GDP per capita is $600 per year, Canada is dramatically wealthier than the poorest nation in the world. As like all wealthy nations, certain labor laws are enforced to maintain wealth and economic growth. One of the most common labor laws is the minimum wage requirement. In Canada, the minimum wage is between $8.83 and $10.79 in US dollars. In the US, the minimum wage is between $7.25 and $8.67. Although the minimum wage in Canada is higher, it is not considered entirely an investment drawback. For example, the higher wages reflects the quality of skills and talents Canadians have to offer. As companies take advantage of the Canadian workforce, Americans business will be able to learn new ways of doing business to improve processes and efficiencies. In other words, the increased benefit in skilled workers may offset the increased cost in payroll ("The worldfact book," 2011).
Religion
American businesses who carefully analyze the most crucial factors in investing in Canada would find the aspect of religion the least important. As like the United States, Canada is primarily Christian with a small minority of Jewish and Islam affiliates. The most interesting difference is that there are almost double the agnostics or non-religious believers compared to America. In many countries, religion can become a hindrance to US corporations who require flexible work schedules. However, in Canada where 17% of its workforces don’t belong to a religion, American businesses will be able to better manage their employee’s work schedules. The need to adapt to schedules around religious days such as the Sabbath can be minimized as more Canadians will be willing to work 7 days a week (Robinson, 2005).
Ethics
While operating an American business on foreign soil, many companies worry about the type of business practices necessary to get ahead and progress financially. In many countries bribery is a common practice where behaving in such a way is normal and legal. By operating in Canada, Americans will be rarely put in a position where bribery is common practice. Looking at transparency.org, Canada is the 6th least corrupt country in the world compared to the US who is the 22nd. The main reason for Canada's ethical position has to do with the fact that the government implements ideas of universalism into the rule of law. The legal and institutional framework in Canada focuses primarily on making sure citizens understand the law and that all those who break the law will be punished. In addition, no one is above the law and those in power will receive the same punishment like any other citizen who breaks the law. Having a legal system that is well defined and properly enforced discourages unethical behaviors, thereby allowing companies to conduct business in an honest and fair environment ("Corruption perceptions index," 2010). As a result of the stable legal environment, American businesses will feel comfortable conducting business in Canada and will not need to operate unethically to compete and stay ahead of the Canadian competition.
Political Risk
The government in Canada is a constitutional monarchy that is also a parliamentary democracy and a federation ("Canada questions and," 2011). As a whole, Canada’s political system is fairly stable with a variety of different political parties. It is somewhat unusual for the country to have a majority government thereby decreasing the chances of political dictatorship. Canadians are given many different opportunities to vote on important issues that affect the wellbeing of the nation. This participation in government policies allows Canadians to freely voice their concerns, thereby reducing the chances of political revolutions and upheavals.
Foreign businesses working in Canada will not only have the political stability but also the civil stability to function and operate in a safe and friendly environment. The amount of crime in Canada is noticeably less than the United States. Out of a list of 82 countries, America has the highest number of reported crimes in 2010. Canada’s crime data is much better with only 2,516,918 total crimes in 2010. According to nationmaster.com there were 4 times fewer crimes in Canada than in the United States ("Crime statistics,”). As a result, American expatriates in Canada will have the added peace of mind that their working environment will be much safer than the United States.
Similarly to the fact that low crime is a factor in investing in a foreign country the same applies to business incentives that a government instills to promote foreign capital investments. At the end of 2011 the Canadian corporate tax rate will be 29%. However, in 2012 the government is planning to lower the tax rate to 26%. Compared to the United States, Canada’s corporate tax rate will be 13.29% lower than the United States in 2012. Consequently, this significantly lower tax rate will create a huge tax shelter for American firms operating in Canada. ("Canada’s low corporate," 2011).
Overall, it is apparent that the political and civil environment in Canada is conducive to American business interests. Canada is a stable country with a low risk of political unrest. Crime is substantially lower than the US and the corporate tax rate provides an opportunity for American firms to earn a healthy profit.

Economy
The economy of Canada is one of the strongest in the world. During the recession of 2007, Canada was able to limit the effects of the economic downturn as a result of its strong banking sector. Since 2009, Canada has rebounded fairly quickly from a negative GDP growth of 2.5% to a positive GDP growth 3.1% at the end of 2010. This is a remarkable rebound considering the fact that most first world countries rarely achieve this type of growth unless unemployment is around 5.5%. Canada’s unemployment rate is currently at 7.3%. The US unemployment rate is currently at 9.0% and its GDP growth rate has been at a stagnant 1.3%. Clearly, Canada has an economic growth potential far better than the United States. Canada’s inflation rates have been fairly stable over the past 10 years. Around the time of the recession, inflation rates had decreased noticeably but avoided any deflationary periods unlike the United States where inflation lowered to a rate of -.36%. ("Inflation rates, list,”). Overall the Canadian economy is fairly stable and is growing sufficiently that American businesses in Canada will be able to sell their products at reasonable prices to a large number of consumers.
Business Possibilities
Canada is a prime location for an American firm looking to expand business outside the United States. In almost all aspects of business, Canada provides an environment that is conducive to foreign business investments. As a result of a similar culture to the United States, Americans will find the transition of operating in Canada fairly easy. Like Americans, Canadians prefer a lower power distance, individual success, risky decision making and a short-term perspective on life. In the aspect of career success and quality of life, Canadians are considered more quality of life oriented. As a result, they enjoy government sponsored programs such as socialized healthcare. Although these programs are rare in the United States, they can be used as a cost advantage to American businesses who wish to do away with corporate health insurance. Since the Canadian government pays for the cost of healthcare, American businesses can better budget their expenses as they will not have to worry about the increasing costs in corporate health insurance that rises every year in America.
As American companies become comfortable working in Canada they will be able to learn effective forms of management among Canadians. As like Americans, Canadians are time oriented individuals who strive to complete tasks within deadlines. Employees prefer a horizontal management structure with flexibility to express their views and concerns. This structure is very similar to American businesses and therefore very little adjustment is needed to manage Canadian employees.
Once an American company projects the need to expand operations in Canada, it will have very little trouble finding adequate employees. Since Canada has some of the most educated citizens in the world, Americans will be able to find a variety of skill sets. Although employers may pay higher wages, there will be a trade off that the higher wages will bring greater corporate successes because of skills and talents Canadians have to offer.
As more and more employees are hired by an American firm in Canada, there may be the need to increase the number of production shifts to improve efficiency. Since twice as many Canadians are non-religious compared to Americans, the likelihood of employees objecting to working on Sundays will be greatly reduced. As a result, American employers will find it easier to schedule staff since they will be more willing to work inflexible shifts.
As American firms become more involved in a foreign country, the fear of legal, political and economic uncertainly may increase significantly. However, by working in Canada, American firms will be assured that the rule of law and will be enforced so that businesses can run in an honest and fair environment. In addition, American firms can be confident that the political risk in Canada will be very minimal as the freedoms and liberties Canadians share promote political stability. In terms of the economy, Canada is very close in line with the American monetary and fiscal policies. Inflation is very mild, economic growth is at a steady rate and unemployment is lower the United States. Overall, Canada is a very safe country to invest, as the fear of uncertainty is dramatically lower than most other countries around the world.
Industries
Based on the variety of opportunities Canada offers to American businesses, the most practical type of industries to locate in Canada would be the ones in research and development and manufacturing. Canadians are highly educated and have a considerable number of engineers. By utilizing their expertise, Americans companies will be able to design some of the most advanced products in the world.
In conclusion, Canada is considered the most feasible country for American businesses to operate because of the very similar business environment to the United States. In almost every aspect, Canadians share similar views in culture, management and ethics. Canadians are well educated, highly skilled individuals who strive to bring about individual and collective success. American companies who fully take advantage of the Canadian workforce will be able to effectively reach their business goals and stay ahead of their competition.

Bibliography
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