project

1.B. Country Evaluation

1.B.1) Geographic [jill]

1.B.2) Demographic [ivy]

1.B.3) Cultural [sebastian]

1.B.4) Economic [mingyu]

1.B.5) Political [adam]

1.A. Country Selection

Van Horn, Metz, and Company, Incorporated (VHM) selected the country of Canada as the potential market to enter for the sale of the rigid Polyurethane (PUR) and Polyisocyanurate (PIR) foam product. Canada was selected due to their large manufacturing industry, their growing population, and VHM’s ability to conduct business across the US-Canada border. The team chose two other countries to research in order to locate other potential markets to enter. The countries that were chosen were Russia and China, due to their similar size, infrastructure, and their potential need for the product in construction manufacturing. The table below outlines the key criteria used evaluate the economic, political, and international risks associated with each country in regard to potential entry and VHM’s potential success.

1.B. Country Evaluation

1.B.1) Geographic Situation

With a total land mass of 9.97 square kilometers, Canada is the second largest country on the planet. It is located in the Northern of half of North America and takes up approximately two-fifths of the continent. From East to West, Canada occupies six time zones. The country’s southern border with the United States is the longest border not patrolled by military forces while its northern border connects to Canada’s Arctic Islands. The land mass is doted with mountains and lakes throughout, but only approximately 12% of the land is suitable for agriculture. It is because of this that the majority of the population lives within a few hundred kilometers of the southern border of the country. Major cities include Toronto, Montreal, Vancouver, Ottawa, Calgary, Edmonton, Alberta, Quebec City, and Winnipeg.

Canada has the longest coastline of any country in the world with connections to the Atlantic, Pacific, and Arctic Oceans. Inland, water has a major effect on the geography of the nation as there are nearly 2 million lakes located within the country. The lakes cover roughly 7% of all land mass and is the estimated home of one-seventh of the world’s fresh water supply. Major lakes in the area include Lake Superior, Lake Huron, and Great Bear Lake.

The climate of Canada is extremely varied due to the huge area covered the country. As a typical rule, the climate is conditioned by latitude and the regions distance from warm oceans. Just as it was previously the majority of the Canadian population lives within a few hundred kilometers of the southern border due to the milder climate that is better suited for agriculture. The northern two-thirds of the country, known as the Canadian Tundra or “Barren Lands”, experience very cold winters and short cool summers like those of Scandanavia. The overall climate for the north is extremely harsh while, it becomes more mild as one moves south.

1.B.2) Demographic

http://worldpopulationreview.com/countries/canada-population/

Canada ranks as the 38th most populated country in the world with an estimated current population of 37.15 million people. Between the 2011 and 2016 census, Canada’s population increased by 4.9% and has an estimated 2019 growth rate of 0.88% (worldpopulationreview [cite properly later]). Canada’s working population

Source: https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html (properly cite later)

RUSSIA: Russia current has about 144 million people and a declining growth rate of approximately 0.05%, with a steady decline rate for the past two decades (http://www.worldometers.info/world-population/russia-population/ [properly cite later])

The current population only populates two specific areas in Russia, as much of the country is inhabitable: the Central and Volga federal districts.

CHINA: According to the most recent data released in January 2013, China has 1.345 billion people living on mainland China, not including Hong Kong and Macau. (http://worldpopulationreview.com/countries/china-population/ [cite properly later]). The United Nations predicts China’s population will reach 1.42 billion in 2019, with a current yearly growth rate of 0.35%. Due to economic growth in the past decade, this has enabled hundreds of millions of people to be pulled out of poverty. However, 10% of the population still live on USD$1 a day, but is a significant improvement from 64% from 35 years ago.

The country has had problems arise in the past for population control, resulting in the “one-child policy,” which was lifted and put into effect in January 2016. Due to this policy, the birth rate became 1.4 children per woman in comparison to the 2.1 children per woman replacement rate, which raises high concerns for the future population of China. The decrease of Chinese youth and increase of Chinese elders sees concerns in the working class, as that population will further decrease as more working-aged Chinese prefer work over settling down and having a family.

1.B.3) Cultural

Canadian culture is heavily influenced by American, British, and French traditions that can be attributed the country’s history and ties to the United States, the UK, and France.

1.B.4) Economic

Canada the 10th largest economy in the world (The Heritage Foundation, 2019). The economic system that is in place in Canada resembles that of the United States in that it is primarily market-oriented in nature. The country’s leading economic sectors include petroleum, minerals, forest, products, the automotive sector, and other manufacturers. Three-quarters of the country’s exports normally go to the United States implying that the 2018 NAFTA renegotiation was crucial for the country (The Heritage Foundation, 2019).

Economic freedom score of Canada is currently 77.7. This ranks the country’s economic as 8th freest based on the rankings in 2019. This score makes it the leading country in the Americas; and is also above the world and regional average (The Heritage Foundation, 2019). The main economic areas that are emphasized by the Canadian government include export promotion, trade diversification, and support for those domestic industries and small businesses that have been affected by protectionism. The government also maintains a fiscal policy that is expansionary in nature and the country’s business investment has generally grown. Inflation, however, has been kept in control due to the gradual tightening the country’s central bank (The Heritage Foundation, 2019). The county’s economic competitiveness has primarily been promoted and sustained by the open-market system support by solid institutional foundations together with a highly efficient regulatory system. According to the quick facts on Canada’s economic outlook provided by The Heritage Foundation (2019), the country’s GDP is $1.8 trillion following a growth of 3.0 from 2017. Per capital is $48,265 and the rate of unemployment is 6.3%. In addition to that, the country’s level of inflation I 1.6% (The Heritage Foundation, 2019).

The combined value of the country’s efforts and exports is 64.1 percent of its GDP and average tariff rate applied to imports coming into the country is 1.6 percent. According to the data provided by the WTO, Canada had a total of 435 non tariff measures that were in place. Additionally, foreign investment in sectors, such as telecommunications and aviation, is normally capped by the Canadian government (The Heritage Foundation, 2019). The banking sector, however, remains sound.

According to Nordea.com (2019), the Canadian economy is heavily reliant on exports; and has suffered significantly in the recent years due to the fall in oil prices as well as other materials. In 2017, however, the economy grew by 3 percent following a growth of 1.5 percent in 2016. The 2017 economic growth has made the country the G7’S fastest-growing economy. The biggest contributor to this growth was household spending, with inventory being the second contribution and business investment being the third contributor to the country’s economic growth. In terms of the industries involved in the production of goods, the biggest contributor of economic growth was natural resources extraction that saw an expansion of 7.8 percent. The country’s services industry expanded by 2.8 percent (Nordea.com, 2019). The GDP to debt ratio of Canada, which stood at 30.5 percent in 2017, ranks among developed countries’ lowest; and it has been projected to stabilize at about 28.5 percent in the next five years. Canadian households, however, are very indebted but unemployment control and low real estate prices support their consumption. The inflation rate in 2017 was 1.7 percent, which was slightly lower than the 2 percent target by the Bank of Canada (Nordea.com, 2019).

In terms of the main sectors of the Canadian Industry, the country’s economy is dominated by the service sector, which represents about 70.2% of Canada’s GDP according to the 2017 Canadian economic report. The service sector also employed well over 78% of the country’s labor force. The sectors that are most dynamic in the economy include aerospace engineering, telecommunications, internet, and tourism. The agriculture sector contributes 1.7 percent of the country’s GDP and provides jobs for 2.1 percent of the Canadian population. Food processing industry and the agricultural system employ over two million individuals and contribute about 8% of Canada’s wealth. The country is one of the largest agricultural product exporters, with its main product being wheat. It also exports fish, minerals, and oil (Nordea.com, 2019.). The country also has strong primary sectors that are very strong. These include the forestry sector; renewable energies; oil and gas; fishing; minerals and metals; and hydrogen and fuel cells. The manufacturing sector represents about 28.1 percent of the country’s GDP and provides employment for 19.8 percent of the country’s labor force.

1.B.5) Political

Elected in 2015 Prime Minister Justin Trudeau’s popularity has begun to slip somewhat. This can be attributed to the standard level of disenfranchisement that most democratically elected officials experience after a few years in office. Trudeau is still very popular and likely has many more years as Prime Minister. Since then the Government has put in place several measures aimed at supporting the middle class, including a cut of the federal government’s reduction to the second lowest personal income tax rate from 22 to 20.5% (though some opponents claim that Trudeau government’s major changes to the personal income tax system resulted in an increase of the fiscal burden for the majority of middle income Canadians). Payroll taxes will be increased to fund an expansion of the Canada Pension Plan (CPP), with the first increase tak­ing place in January 2019. In 2017 Trudeau announced the creation of the Canada Infrastructure Bank - a new Crown corporation that operates at arm's length from the government - which should invest CAD 35 billion from the federal government into infrastructure projects. The canadian government has been working diligently over the past several years to help the country’s middle class flourish. It has lowered the personal income tax of middle class canadians by 1.5%. However this tax cut is being funded by an increased payroll tax.

The country is also heavily investing in infrastructure, with a new quasi-government initiative set to take 35 Billion dollars in funding for infrastructure projects. Such projects will, of course, require large amounts of construction. This could definitely be an area that could be used to help encourage insulation manufacturers to invest in VHM’s new Aerogel insulation. While the Comprehensive Economic and Trade Agreement (CETA), signed with the EU in October 2016 and subject to ratification by national parliaments in Europe, should boost bilateral trade by 20%; the election of Donald Trump in the U.S. represents a risk as he intends to renegotiate the North American Free Trade Agreement (NAFTA). That is why in its fiscal budget for 2018 the Liberal government also built a USD 3 billion risk adjustment fund to account for economic uncertainties. Canada has agreed to sign the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to the Trans-Pacific Partnership (TPP), which could not take effect when the United States withdrew in January 2017. As a participant in the CPTPP Canada will benefit from reduced tariffs and freer access to ten markets in Asia and Latin America.

According to Canada’s national statistics office, the country's unemployment rate reached its lowest point in over 40 years in December 2017, dropping to 5.7%, as employment rose 2.3% for its fastest growth rate in 15 years.

https://en.portal.santandertrade.com/analyse-markets/canada/economic-political-outline

A federation of former British colonies , Canada follows the British pattern of parliamentary democracy. Ties with the US are now vital, especially in terms of trade, but Canada often goes its own way.

Both English and French enjoy official status, and mainly French-speaking Quebec - where pressure for full sovereignty has abated in recent years - has wide-ranging cultural autonomy. Indigenous peoples make up around 4% of the population.

Canada is one of world's top trading nations - and one of its richest. Alongside a dominant service sector, Canada also has vast oil reserves and is a major exporter of energy, food and minerals.

https://www.bbc.com/news/world-us-canada-16841111

PART 2: MARKET ANALYSIS, EXPORT PLAN, & MARKETING PLAN

Our End User: Manufacturers who are purchasing Aerogel

2.A: Market Analysis:

2.A.1: Market Size, Trends, & Growth (Sebastian)

https://www.ic.gc.ca/app/scr/app/cis/summary-sommaire/23

http://www.naimacanada.ca/

https://www.ic.gc.ca/app/scr/app/cis/summary-sommaire/23831 (Drywall & Insulation Contractors)

2.A.2: Market Forecast (Sebastian)

2.A.3: Consumer Spending (Max)

2.A.4: Consumer Habits/Purchasing Behaviors (Max)

2.A.5: Gross National Income per Company (Ivy) - look into revenues for industry companies… make connection?

Income per capita

2.A.6: Competitors (Jill)

SVENSKA SUPPLIER… potential to become competition or importer

One source of competition… has monopoly on the price (priced very high) - Cabot

(CANADA) http://www.cabotcorp.com/solutions/applications/construction/building-insulation

Patent on aerogel current process

Competition on traditional methods of insulation… more than just aerogel… substitutes & switching costs?

http://www.naimacanada.ca/ (association works in canada)

2.A.7: Products (Adam)

2.A.8: Distribution Channels & Promotional Methods (Mingyu)

References

China. (2019). CIA World Factbook. Retrieved February 14, 2019, from https://www.cia.gov/library/publications/resources/the-world-factbook/geos/ch.html

Geography. (2019). Your Canada. Retrieved February 9, 2019, from http://yourcanada.ca/geography/

Grant, W. L., & Belanger, C. (2004). Quebec History. Retrieved February 9, 2019, from http://faculty.marianopolis.edu/c.belanger/quebechistory/encyclopedia/GeogofCan.htm

Morton, W. L., Hall, R. D., Bercuson, D. J., Nicholson, N. L., & Krueger, R. R. (2019, February 05). Canada. Retrieved February 9, 2019, from https://www.britannica.com/place/Canada

Nordea.com. (2019). The economic context of Canada. Retrieved from: https://www.nordeatrade.com/en/explore-new-market/canada/economical-context

Russia. (2019). CIA World Factbook. Retrieved February 14, 2019, from https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html

The Heritage Foundation. (2019). 2019 Index of Economic Freedom. Retrieved from: https://www.heritage.org/index/country/canada

The World Bank in Russia. (2019). Retrieved February 14, 2019, from https://www.worldbank.org/en/country/russia/overview