Month: October 2012

The entrance of China’s National Offshore Oil Corp into Canada is known as foreign direct investment (FDI). This will increase employment and earnings may have a multiplier effect on Canada’s economy, stimulating growth. In addition, Canadian government will earn high tax revenue from NOOC’s profit. NOOC may bring along technology  that may not be available in Enbridge. The cooperation between the two large firms will create synergy. They can have access to each others’ resources, including control of distribution channels, management know-how and human resources.

However, there will be loss of control as NOOC gains market share in Northern Gateway. Both firms will suffer from increased bureaucracy and slower channels of communication, especially when there are corporate cultural clash. In this case, “the Chinese environmental and manufacture safety and emergency awareness is not up to par with Canada’s strict standards.” This conflict will create inefficiency and slower decision making.

Canadian government should negotiate with NOOC before accepting their purchase of shares. NOOC should run its projects following Canada’s main rules and regulations, especially on environmental laws. Managers from both firms should exert their negotiation skills and be able to handle the added pressures and responsibilities that they will face.

http://www.huffingtonpost.ca/2012/09/08/enbridge-northern-gateway-pipeline-chinese-interest_n_1867701.html

Kelly Gu’s blog https://blogs.ubc.ca/kellysongmeigu/

http://www.reuters.com/article/2012/04/20/us-mcdonalds-idUSBRE83J0P020120420

Porter’s Generic Strategies allows firms to access their level of competitiveness in the market using the three general strategies: cost leadership, differentiation, and focus.

McDonald’s competitive advantage in the fast food market is mainly its provision of food at a low cost. It adopts cost leadership strategy, which does not aim to compete with firms, such as Burger King and Wendy’s, that offer higher-quality products, since this would lead to price hikes. McDonald directly competes with its competitors using predatory pricing strategy, in which it sets a price so low that competitors, especially smaller firms, cannot compete at a profitable level. The firm is able to sell low using economies of scale.

Although McDonald’s products are easy to copy, its quality, strong brand image and customer loyalty stabilizes its position in the fast food market. Non-price competition is also used by McDonald to increase its sales revenue using differentiation strategy through new menu, and focus strategy on “restaurant makeovers and longer operating hours.”

That article states that ” Same-restaurant sales rose 5 percent in Europe and 8.9 percent in the United States, where mild weather has helped lift restaurant sales.” This indicates that firms are affected by the external influences. When the economy is in recession, unemployment will rise, and reduces purchasing power of consumers. This leads to a fall in demand and thus a fall in expenditure.