Canadian Pacific Railway Limited Analysis

Compilation of Key External and internalstrategic factors

Strategicfactors give a company a competitive advantage over the others in thesame business. Strategic factors are divided into two depending onthe company’s influence them. Internal strategic factors aremajorly due to the efforts of the company. They may include factorssuch as human resources, organizational structure, able leaders, andgood organizational culture.The company has little or no influence onexternal strategic factors. They include factors such as betterexchange rates, laws that support the industry, and a favorablepolitical climate. It is upon the business to take advantage ofexternal strategic factors in order to stand a better competitiveadvantage than the rest. The success of Canadian Pacific Railway(CPR) is a culmination of internal and external strategic factors.This segment highlights the key internal and external strategicfactors that have led to the overall success of CPR over the years

Internal Factors

External Factors

15,000 employees and a rail network of 14,000 miles.

Good brand reputation in the USA and Canada

Use of modern technology to manufacture locomotives

Reliance on rail transport for businesses in Northern America

Large yards and repair shops for maintenance

Creative Corporate Social Responsibility program

Commendable financial resources

Subsidiary companies performing well

Good customer relations

Marketing prowess

Generic Strategies

According to Porter (2007), there are threecategories of generic strategies- lower cost, productdifferentiation, and market focus. A company can seek to create acompetitive advantage over others by lowering the cost of productionin order to produce cheaper goods and services. A company can achievethis by producing in large scale or using the latest productiontechnology to minimize wastage. Differentiation involves offering abetter product in order to attract more customers than one’scompetitors can. A company can achieve differentiation by creating aproduct along the dimensions of the customer’s demand. Focusentails creating a product with a specific market in mind. Theproduct will appeal to a small section of the market who will becomethe loyal customers that will be willing to pay well for it. Acompany can employ one or more generic strategies as a means ofgaining a competitive advantage over the rest. CPR seems to haveinvested in differentiation and focus in its generic strategies.

Throughout its history, CPR has sought to bebetter than her competitors are, by providing better goods andservices to her customers. First, the CPR has railroad coverage ofover 14,000 miles (Canadian Pacific, 2015). The line stretches acrosstwo continents and some people refer to it as intercontinentalbecause it connects between the Atlantic and the Pacific coast. CPRdecided to invest in a wide-reaching rail network in order to beatcompetition from other railway companies. Whilst many American railcompanies can only cover a few states within the USA, CPR stretchesfrom Eastern Canada to British Columbia in the USA. Exporters andimporters in the USA who wish to do business in Canada would opt forCPR rather than the American companies because CPR offers awide-reaching network. In a time when railway freight transport is atits peak, many businesspeople simply choose CPR because it could taketheir goods almost anywhere within the USA and Canada.

CPR invests in the production oftechnologically advanced locomotives. After the First World War, roadand air transport began to gain popularity. The large multitude ofpassengers that CPR was accustomed to gradually started to shrink.The company knew that it was about time it created a better productthat will ensure its customers remained loyal while those of otherrail companies fell in love with road and air transport. CPRintroduced diesel engines for their locomotives while competitorswere still using steam-powered locomotives. In 1955 when thepassenger train business was dwindling, CPR introduced The Canadian,a new transcontinental luxury passenger train. The new product sawthe sale of tickets for the passenger train goes back to their formerhigh volumes. When the passenger train could no longer withstand thepressure from air transport, CPR handed over the function ofpassenger transport to a subsidiary company. Currently, the companyis investing in the production of state of the art locomotives forpulling freight trains. They include the newly launched EMD SD 60 andthe SD90MAC.

CPR has managed to stand out in the railtransport business because it has invested in complimentarybusinesses. In early 1950’s the company’s top brass thought thatit would be better if they started a hotel business to carter for itspassengers and train crew. That marked the onset of CPR’s massivepresence in the hotel industry. The company also engages in themanufacture of locomotives rather than indulge other manufacturers.Whilst other companies offer rail transport or manufacturelocomotives, but not both, CPR is able to design trains that areconcurrent with the current market trends. The company has alsoinvested in sleeping cars during the time when passenger trains werestill fashionable. While other companies in the USA depended onindependent companies to provide the service, CPR built its ownsleeping cars to serve the passengers. The complimentary businessesensure that CPR acts like a one-stop shop for its customers, hencemaking it more consumer-friendly.

With the increasing numbers of rail accidentsover the decades, CPR has struggled to assure its customers that hertrains are safer than those of other companies are. The company hasinvested in numerous CSR programs that aim at creating the notionthat at CPR, it is all about safety. On its website, safety is amongthe key issue it addresses. Among the Safety Campaigns that itspearheads include advising children not to play near railway lines,and warning adults against crossing the railway with an oncomingtrain in sight. The company also assures potential client that itadheres to all rules and regulations that pertain to thetransportation of regulated commodities such as fuel, explosives, andradioactive material. The company has succeeded in portraying itselfas more adherent to safety precautions than most of her competitors.If a given choice, most clients would opt for a rail companies thatdirects more of its energy to safety precautions.

With the advent of new and reliable modes oftransport, CPR has invested in water and air transport in a bid toremain afloat in the dynamic transport industry. After the FirstWorld War, many people moved from trains to road and air transport.The transportation of goods also shifted from overly relying onfreight trains to using ships as a complimentary mode of transport.In 1901, CPR introduced the British Columbia Coast Steamships. TheSubsidiary of CPR had a fleet of 72 ships that operated betweenseveral ports in the Americas. Although CPR later sold the company in1998, the ship businesses helped it stay afloat at a time when mostrailway companies were collapsing due to a shift in preference in themode of transportation. CPR also ventured in the air business byforming an airline called Canadian Pacific Airlines in 19422. Theairline was a major competitor of the government-owned, CanadianAirways. The airline helped CPR to reap big in the passengertransport business.

CPR has also used focus as another genericstrategy. The launch of some special trains aimed at attracting aspecific section of the market. Among the earliest special trains ofCPR was the silk train that would transport the precious commodityfrom Vancouver to New York under heavy security. Other special trainsincluded the royal trains for transporting the royal family while inCanada, funeral trains for prominent people, schools cars and silverstreak. The most recent attempt at focus as a generic strategy wasthe invention of the holiday train in 1999. The train operatesbetween the months of November and December along its major lines,collecting donations for community issues and food banks. People thatwish to enjoy the train can pay to be part of the crew that collectsfood for the needy. The royal Canadian specific is a luxury train forholiday lovers that operate on a distance of 1000 miles betweenCanada and the USA. The spirit train of 2008 stopped at variouspoints in Canada to celebrate the 2008 Olympic winter games.

Discussion and Recommendations

The company should stick to its currentstrategy because so far it has proven to be more profitable than thatof many railway companies. As the cliché goes, do not fix it unlessit is broken. In the financial year ended 2015, freight revenuesincreased by 7.8% (Canadian Pacific, 2015). The rise was majorlyattributed to the use of technology in the company’s operation. CPRhas invested in technology in areas such as management, communicationand new locomotives. The rise is also a result of higher volumesregistered by the Canadian grain, metals, Crude oil, consumerproducts Domestic intermodal, and minerals. The company was able toattract more clients who contracted CPR’s freight services toexport or import the aforementioned commodities. In general, CPR’sstrategy is working just fine save for a few setbacks in thenon-freight revenue sector.

CPR should change its approach in order toimprove sales from non-freight activities. In 2015, revenue fromnon-freight activities increased by a paltry 2% while that of thefreight sector went up by 7.8%. The company attributes the dismalperformance on a poor business environment. However, othercompetitors especially in the hotel industry recorded significantincreases in their revenue, a clear indication that indeed CPR isunderperforming in the non-freight sector. The company can maneuverthis hurdle by adopting a different strategy for its non-freightbusinesses. Rebranding would be a starting point. Most peoplerecognize CPR to be a bigwig in rail transport but not in otherbusinesses. Changing this image would be a big step forward. Thecompany is already working hard to change the stereotypical image ofCanada as a country that is cold, tough and inhospitable (Choko,2015). The same rebranding efforts should be extended to thenon-freight activities.

References

Canadian Pacific (2015). CPWorks Annual Report 2015. Retrievedfrom&lthttp://www.cpr.ca/en/investors-site/Lists/FinancialReports/cp-ar-2015.pdf&gtAccessed June 15, 2016.

Choko, M. (2015). CanadianPacific: Creating a Brand, Building a Nation.National Book Network.

Porter, M. (2007). Porter`s generic strategies.Retrieved June,14,2009.