Cn Railway

Cn Railway

Table of Contents

Executive Summary 3

Issue Identification 4

Slowing Growth in NAFTA Trade 4

Continuation of NAFTA Strategy versus Expansion into Latin America 4

Taking Advantage of Economic Growth in Asia and Emerging Markets 4

Expanding Overseas 4

Environmental & Root Cause Analysis 5

Slowing Growth in NAFTA Trade 5

Continuation of NAFTA Strategy versus Expansion into Latin America 5

Taking Advantage of Economic Growth in Asia and Emerging Markets 5

Expanding Overseas 6

Alternatives and/or Options 6

Slowing Growth in NAFTA Trade 6

Continuation of NAFTA Strategy versus Expansion into Latin America 6

Taking Advantage of Economic Growth in Asia and Emerging Markets 7

Expanding Overseas 7

Recommendations and Implementation 7

Slowing Growth in NAFTA Trade 7

Continuation of NAFTA Strategy versus Expansion into Latin America 7

Taking Advantage of Economic Growth in Asia and Emerging Markets 8

Expanding Overseas 8

Monitor and Control 8

Executive Summary

Since Canadian National Railway Company (CN)’s privatization by the Canadian government in November 1995, CN has not stopped growing its sales, profits, cash flow and, as a result, market value. Privatization and deregulation of the rail industry led to some of CN’s success, but CN had to cut costs and increase revenues. Cutting costs meant reducing workforce and closing or selling unprofitable tracks. It also meant investing in more efficient rail equipment and technology. Increasing revenues required focusing on customers’ needs and expectations. It also required attracting customers whose business was growing more rapidly. CN’s strategic plan was based on the following three thrusts: productivity, customer focus and the North American Free Trade Agreement (NAFTA).

As a result of CN’s success, CN needs to move forward and investigate how to continue growing its revenues while maintaining if not improving its productivity, especially if the growth in NAFTA trade is slowing down. Also, CN needs to consider whether to continue its current NAFTA strategy or expand further south to Latin America. CN could explore and take advantage of the economic growth in Asia, especially China and India, as well as in other emerging markets (e.g., Brazil). In addition, CN could expand overseas where it can apply its operational effectiveness and efficiency.

Issue Identification

Slowing Growth in NAFTA Trade

With sourcing from low-cost countries, such as Vietnam and China, increasing because of reduced purchase prices, there is a slowing growth in NAFTA trade. Thus, with CN’s current infrastructure in place and its reliance on NAFTA trade as CN has acquired many companies to facilitate shipments from East to West and from North to South, CN needs to figure out ways or methods to continue growing its revenues while maintaining if not improving its productivity.

Continuation of NAFTA Strategy versus Expansion into Latin America

Currently, CN’s rail network travels from West to East within Canada and North to South within the Eastern half of the U.S. and also down into Mexico. CN could continue its NAFTA strategy and expand into the Western half of the U.S. or it could expand into Latin America, which includes Chile, Peru, Colombia and Mexico and these four Latin American nations have a Free Trade Agreement with the United States.

Taking Advantage of Economic Growth in Asia and Emerging Markets

With the increase in trading with low-cost countries, such as China and India, and emerging markets, such as Brazil, CN may want to take this opportunity to create more links to facilitate shipments from those countries.

Expanding Overseas

With the increase in trading overseas, CN may consider expanding overseas and applying its operational effectiveness and efficiency.

Environmental & Root Cause Analysis

Slowing Growth in NAFTA Trade

Much of CN’s success was contributed to CN growing its revenue and productivity by increasing capital investments in equipment and infrastructure, automating a series of operational functions by using the latest technology, reducing the size of their workforce, etc. Thus, to sustain and maintain their competitive advantage, CN needs to implement ideas to continue growing its revenues while maintaining if not improving its productivity.

Continuation of NAFTA Strategy versus Expansion into Latin America

With the changing of the Canadian-to-US dollar exchange rate, it is now less costly to purchase and source from the U.S. relative to a few years ago. Thus, there may be more shipments from the U.S. into Canada, and CN can leverage this and obtain and/or retain more business by continuing the NAFTA strategy.

CN may also choose to expand into Latin America, which includes Chile, Peru, Colombia and Mexico and these four Latin American nations have a Free Trade Agreement with the United States. Thus, CN can also leverage these relationships.

Taking Advantage of Economic Growth in Asia and Emerging Markets

With the increase in trading with low-cost countries, such as China and India, and emerging markets, such as Brazil, CN may want to take this opportunity to create more links to facilitate shipments from those countries. A lot of revenue could be generated from transporting shipments from China, India, Vietnam and Brazil.

Expanding Overseas

With the increase in trading overseas, CN may consider expanding overseas and applying its operational effectiveness and efficiency to rail companies and other modes of transportation within those countries. This would lead to decreased delivery and lead times and ultimately satisfied customers.

Alternatives and/or Options

Slowing Growth in NAFTA Trade

In addition to CN's current strategies to increase revenue and productivity, including increasing capital investments in equipment and infrastructure, automating a series of operational functions by using the latest technology, and reducing the size of their workforce, CN can sustain and maintain their competitive advantage by reconfiguring routes and optimizing shipments.

Pros: Reconfiguring routes and optimizing shipments may expedite deliveries and shipments to customers leading to high customer satisfaction.