BUS 478 D100

Canadian Tire Case Synopsis

Prepared by: Hannah Hwang Emily Lui Kathy Pham Sophia Wang Heidi Sung Prepared for: Jerry Sheppard Submitted on: March 13, 2015

FIRM HISTORY Canadian Tire Corporation (CTC) is one of the leading retailers in Canada. Its primary retail business categories include: automotive, living, fixing, playing and apparel. In 1922, John William Billes and Alfred Jackson Billes invested in Hamilton Tire and Garage Ltd. in Toronto (Canadian Tire Corp., 2014). In 1923, Hamilton Tire and Garage Ltd. was sold and the Billes brothers moved to the corner of Yonge and Gould and named their business Canadian Tire Corporation. In 1934, the first official associate store opened in Hamilton (Canadian Tire Corp., 2014). CTC expanded their portfolio with the launch of Canadian Tire Petroleum in 1958 and their own financial services in 1995. Since then, the company increased their number of stores to 487. After 1994, the company gained significant growth and success (Canadian Tire Corp., 2014). The Company Today Canadian Tire Corporation is a family of companies which includes Canadian Tire, Partsource, Gas+, FGL Sports (Sport Chek, Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere) and Mark's and Canadian Tire Financial Services. CTC nurtures an innovative environment introducing new products and services, rolling out new store formats and maintaining an efficient supply chain (Canadian Tire Corp., 2014). The Canadian Tire Retail (CTR) uses its extensive reach by scaling their retail stores up to 30 million square feet to make themselves accessible to 90% of Canadians who are within a 15 minute radius. Thus, a key element of the internal environment is a culture that encourages innovation, customer service and sustainable growth. CTR is aiming to be a Canadian market leader in each of its three main product divisions: automotive, home and leisure (Canadian Tire Corp., 2014). In 2011, CTC expanded its sporting sector by acquiring Forzani Group Ltd (FGL) - Canada’s largest sporting-goods retailer based on market share. This acquisition positively influenced Canadian Tire as it contributed up to 11.5% increase in sales in 2013 (Canadian Tire Corp., 2014). CTC owns 1,700 retail and gasoline outlets. In 2014, consolidated revenue increased by 5.7%, or about $12.5 billion. Consolidated retail sales in 2014 increased by 4.8%, or a $13.9 billion profit. Lastly, the EPS in 2014 increased by 9.8%, which translates to $7.59 per share (Canadian Tire Corp., 2014). 1    

Mission

To be the first choice for Canadians in automotive, sports and leisure, and home products, providing total customer value through customer-driven service, focused assortments, and competitive operations. Currently, Canadian Tire offers a wide range of different products and services. By using the customer-centric approach strategy, CTC is able to expand its target customer group and increase its market share. In addition, CTC is implementing a sustainable business model by fostering innovation, improving productivity and enhancing environmental standards and social outcomes. With these factors in mind, CTC hope to serve its current stakeholders and draw interests from potential investors (Canadian Tire Corp., 2014). Goals To achieve this mission, CTC has committed to: •

•

Creating Business Sustainability by: o

Increasing productivity and operational efficiency;

o

Fostering innovation, improving operational processes, products and services;

o

Reinforcing the brand image by strengthening its Canadian identity and protecting its reputation.

Being socially and economically responsible by: o

Building stronger communities across Canada through sponsorships and charities;

o

Practicing operational responsibility by following laws and regulations;

o

Providing strong returns for its shareholders. GENERAL ENVIRONMENT

Demographic The demographics in Canada are always changing due to new immigrants in Canada from all around the world; based on this trend, the Canadian population is more diverse. Demographic changes in the Canadian population can affect the demand for Canadian Tire’s products and services (Canadian Tire Corp, 2012). CTC needs to be aware of these demographic changes to tailor their products to customers’ needs.

2    

Political/Legal Many laws in Canada, for example, Labour and Employment Law, Competition Act, and the Canadian Tax Law, are important for companies to refer to. Companies need to be aware of changes and updates for Laws and regulations to ensure their business is operating legally to maintain their reputation and avoid lawsuits (Canadian Tire Corp., 2012). It is also important for CTC to be familiar with laws in other countries where they have potential to enter into the market or do business with. Economic Since the economic recession in 2008, consumer behaviours have been changing drastically, e.g., customers’ willingness to pay has declined. Many consumers are looking for deals and promotions. Economic changes affect consumer demands; therefore, also affecting the company’s profits (Canadian Tire Corp., 2012). Socio-cultural Many companies and the general public are concerned with corporate social responsibility and sustainability. When a business is aware and cares for the environment, this creates a positive image to the public (Ballingall, 2012). Good publicity not only attracts customers, but it is also important to shareholders and to gain the interest of investors. Technological Advances in technology play a big part in a company’s success. With the help of technology, CTC may easily enhance their systems to track inventory (Canadian Tire Corp., 2012) and potentially save in labour costs as labour is replaced by technology. Online flyers and online stores are increasing social trends within Canada (Colao, 2014). Not only does providing options for online shopping offer convenience to customers, but it also helps the company to obtain more information on customers’ preferences and purchasing patterns. Global As globalization trends are increasing, more companies are expanding internationally (Farrell, 2007). New companies entering the market can improve the economy, but it also increases competition for local 3    

businesses. CTC needs to be knowledgeable of potential competitors to maintain their competitive advantage. INDUSTRY ENVIRONMENT Porter’s Five Forces Low There are a large amount of substitutes that distribute their products through Canadian Tire. With a large number of options available, it gives suppliers less bargaining power over producers (Canadian Tire Corp., 2014). • There is also high competition amongst suppliers. With high levels of competition, suppliers compete by reducing prices for producers - this increases Canadian Tire’s bargaining power. • There is a low cost for switching suppliers and this will increase Canadian Tire’s bargaining power. Suppliers will ultimately have the lower bargaining power once they make the switching cost for Canadian Tire to be effortless (Canadian Tire Corp., 2014).

Rivalry

Threat of New Entry

Substitute Threats

Buyer Power

Supplier Power

•

Medium-Low • As Canadian Tire does not specifically specialize in any service, their business model makes it extremely easy for buyers to be price sensitive. It is a potential threat for CTC because there is a low switching cost for buyers (Canadian Tire Corp., 2014). • CTC offers a wide range of products and services, making it hard to define its customer base. With a large number of customers, it is hard to develop strategies to enhance their business based on their customer needs (Canadian Tire Corp., 2014). Medium • As mentioned, Canadian Tire does not specialize in a specific service and/or product, meaning there are many available substitutes. Substitutes give customers more options – e.g. customers can easily choose from other service locations as it is more convenient and/or customers can choose from other firms that specialize in selling a product (Canadian Tire Corp., 2014). • Including other firms (e.g. RONA and Walmart) of similar business models as Canadian Tire, smaller entities are also a substitute for customers (Canadian Tire Corp., 2014). Customers may choose to visit a smaller firm due to the quality and price of their products and services. Low Capital requirements to match Canadian Tire’s scale of operations are significant (Canadian Tire Corp., 2014). • Canadian Tire is a well-established company within Canada. This creates barriers to entry for new entrants, making it difficult for new firms to establish a reputation equal to CTC (Canadian Tire Corp., 2014). • Canadian Tire’s business model is sophisticated and well established. For a new competitor to develop a business in this industry, they would have an extremely high learning curve, which means time and money needs to be invested in the business (Canadian Tire Corp., 2014). •

Medium • For this industry, barriers to exit are relatively low, which makes weaker firms leave the market. However, the stronger firms are left to compete for the market share. This makes it harder for Canadian Tire to compete with other rivalries as their business model is relatively similar and that they are potentially a threat to Canadian Tire (Canadian Tire Corp., 2014). 4  

 

MAIN STRATEGIC CHALLENGES Customer-centric retailing approach For Canadian Tire to steadily develop their customer base, they must develop digital retailing and marketing in order to create loyal customers and bring in new customers from its competitors. CTC’s Customer Loyalty Program collects customer data and analyzes customer insights to better modify their own business model (Canadian Tire Corp., 2014). In October 2014, the company introduced "My Canadian Tire 'Money' TM", a more developed version of the traditional paper Canadian Tire 'Money'. CTC also distributes various types of weekly promotional flyers, which is a good approach to maintain customer interest. Long-term Customer Retention Plan Target's retreat in Canada this year positively impacted Canadian Tire as it removed one of the company’s primary competitors from the Canadian market. These short term benefits, however, can further turn into a burden for Canadian tire in the long term. For example, Wal-mart or other competitors of Canadian Tire in Canada could possibly take over Target's stores and market share, resulting in a negative impact on CTC (Heinzl, 2015). It is strongly recommended that Canadian Tire does more research on the impact of competitors’ expansion at the site of Target stores and have a solid customer retention program to develop loyal customers. Sustainability Commitment As a national retailer, Canadian Tire Corporation places sustainability at the core of its business strategy. The company faces two main challenges: minimizing energy consumption and avoid greenhouse gas emissions (“Sustainability Commitment Update: Canadian Tire Corporation”, n.d.). To deal with these challenges, Canadian Tire Corporation needs to focus on three key areas in business operations: products and packaging, product transportation and buildings and operations (“Sustainability Commitment Update: Canadian Tire Corporation”, n.d.). The company should work on changes and enhancements to decrease the environmental impact.   5    

References Ballingall, A. (2012, June 14). How Corporate Social Responsibility Improved These Companies' Bottom Lines. Retrieved March 9, 2015, from Macleans: http://www.macleans.ca/general/how-corporate-socialresponsibility-improved-these- companies-bottom-lines/ Canadian Tire Corp. (n.d.). Canadian Tire. Retrieved from Canadian Tire Corporate Info: http://corp.canadiantire.ca/EN/Investors/Documents/Q4%202014%20MDA%20and%20Financials.pdf Canadian Tire Corp. (n.d.). Canadian Tire. Retrieved from Canadian Tire: http://corp.canadiantire.ca/EN/AboutUs/Pages/default.aspx Canadian Tire Corp. (2014). Canadian Tire Corporation, Limited - 2014 Third Quarter Report to Shareholders. Canadian Tire Corp. Retrieved from http://corp.canadiantire.ca/EN/Investors/Documents/Q3%202014%20Interim%20Report.pdf

Canadian Tire Corp. (2012). Annual Report 2012. Canadian Tire Corp. (2014). Canadian Tire Delivers Another Record Year. Retrieved March 10, 2014, from Canadian Tire: http://corp.canadiantire.ca/EN/Investors/Documents/Q4%202014%20Earnings%20Release.pdf

Canadian Tire Corporation. (2012). Management's Discussion and Analysis (MD&A). Canadian Tire Corporation, Limited 2014 Annual Information Form. (2015, February 26). Retrieved March 12, 2015, from http://corp.canadiantire.ca/EN/Investors/Documents/2014 Annual Information Form.PDF

Colao, J. (2014, August 4). The Future of Shopping In Three Trends. Retrieved March 9, 2015, from Forbes: http://www.forbes.com/sites/jjcolao/2014/08/04/the-future-of-shopping-in-three- trends/ Farrell, R. R. (2007, February 23). The Future of Globalization. Retrieved March 9, 2015, from Real Truth: http://realtruth.org/articles/070223-001-globalization.html Heinzl, J. (2015, February 23). Canadian Tire, Target learn home is where the profit is - BNN News. Retrieved March 12, 2015, from http://www.bnn.ca/News/2015/2/23/Canadian-Tire-Target-

learn

home-is-where-the-profit-is.aspx

Sustainability Commitment Update: Canadian Tire Corporation. (n.d.). Retrieved from: http://sharegreen.ca/node/162

6