Introduction
Canadian Tire Corporation is one of the most successful retail companies in North America. What makes this company interesting is the fact that it runs multiple retail businesses under the general organizational framework. Some of the products and services offered by different divisions of the company include vehicle spare parts, apparel and sports gear, petroleum and other petroleum products, and financial services. Operation in all these different sectors makes the company have very unique internal and external environments that would offer a lot of insights on retail business operations.
In that regard, this paper presents an analysis of the internal environment of the Canadian Tire Corporation. The analysis looks at the various business aspects under the broad topics of available resources, activities across the value chain, and core competencies. Under these wide topics, a number of different factors are evaluated so as to determine the exact position of the company as a result of its internal capabilities.
Resource-Based View Analysis
Tangible Resources
Financial Resources
Canadian Tire Corporation is currently in a very good financial position. I have integrated the key data from Morningstar (Morningstar.com, 2018) into the financial performance analysis ratio table. From the average of current ratio from 2015 to 2017, the average is over 2.0 which means CTC has high ability to pay current liabilities using assets that can be converted to cash in the near term, we can see Judged from the item of Profitability, CTC profitability is rising on yearly basis, making the company capable of paying for the costs. From the data of ROA and ROE, it can be concluded that the company is in a healthy and robust operating condition, which suggests the managers are getting favorable returns from shareholders’ investment. At the same time, the rising fixed assets turnover shows that the company is making better use of fixed assets turnover, such as the plants and equipment, to improve incomes.
Ratio Table
Performance Measure 2015 2016 2017 Industry Average
Liquidity
Current Ratio 2.24 1.85 1.95 2.01
Cash Ratio 3.00 1.62 2.53 2.38
Asset Management
A/R Turnover in Days 20.66 18.28 17.04 18.66
Cash Conversion Cycle 10.84 13.10 11.40 11.78
Fixed Assets Turnover 3.18 3.14 3.24 3.19
Total Asset Turnover 4.01 3.98 4.11 4.03
Long-term Debt Paying Ability
LT Debt to Total Capitalization 0.37 0.35 0.39 0.37
Profitability
Gross Margin 33.7 34.6 34.5 34.27
Operating Profit Margin 8.5 8.7 9.1 8.77
Net Profit Margin 5.37 5.28 5.47 5.37
ROA 4.46 4.42 4.75 4.54
ROE 13.39 13.47 15.17 14.01
Physical Resources
Among the physical resources owned by Canadian Tire Corporation are retail stores distributed all across Canada. In total, the corporation runs over 500 stores in Canada only. However, most of these stores are operated by independent individuals or businesses which are referred to as Associate Dealers (Tyghe & Katai, 2015). The stores run by dealers are distributed in such a way that over 80% of the Canadian population lives within a 20 minutes’ drive distance from a CTC store. Of the over 500 stores the company directly owns 66 retail stores while the rest are leased. Looking more specifically at the items in these stores, it is evident that Canadian Corporation has a huge stock of items such as clothing and fashion items in its Mark’s stores and sports gear and equipment in its FGL stores,
In addition to the store that stock merchandise such as sportswear and automotive parts, the company also runs a petroleum division that has 296 gasoline retail outlets in Canada. Of these outlets, 20 are state-of-the-art gas bars that operate within convenience stores that are found along busy highways. In that context, the company’s petroleum division has stocks of gasoline and other petroleum products. In addition to these, the company runs a real estate division that is under the Canadian Tire Real Estate Limited. In this division, the company manages both owned and leased property all across Canada (CTC, 2017).
Technological Resources
As pointed out in CTC (2017), Canadian Tire Corporation runs a sophisticated system of technological resources. The specific technologies employed by the company include systems that are responsible for monitoring of inventories with the aim of enabling efficient distribution of goods to all the stores. In addition, the company has systems that are responsible for processing orders thus further helping in inventory management and sales tracking. Apart from focusing solely on ease of internal working, the company is also focused on efficient service delivery to the customer. In that regard, CTC runs an e-commerce platform that enables customers to purchase products online. Still, in the context of technological resources, the company has invested in a digital garage and innovation lab in Kitchener-Waterloo that enhances the company’s capabilities in digital development.
Canadian Tire Corporation also runs a data center in Winnipeg, Manitoba. This center serves as the central data center for FGL sports and Mark’s. CTB and Canadian Tire are served by a data center at the A. J. Billes Distribution Center (CTC, 2017). All these technologies are geared towards ensuring internal efficiency in the management of inventory and order processing and also assist in efficient service delivery to the customer. For those reasons, the company’s technological resources play a central role in the success of all divisions of Canadian Tire Corporation.
Intangible Resources
Human Resources
CTC (2017) presents a list of the employees under Canadian Tire Corporation that worked on the full-time and part-time basis by the end of 2016. At the corporate center, the company had a total of 1,648 full-time employees and 29 working on a part-time basis. Canadian Tire, on the other hand, had a total of 3865 full-time employees and 989 part-time employees while FGL Sports was the highest staffed division with 4,119 full-time employees and 12,443 employees working on a part-time basis. In total, the company had 12,356 full-time employees and 16,846 part-time employees.
CTC aims to become the world’s most innovative retailer. To achieve this goal, it has established such a corporate culture of setting employees as the priority investment and keeping attracting the talents that can help promote business. It has sent for distinguished speechmakers, including high-end personnel in this business, to give speeches to make the employees more efficient and active in their posts. Besides, HOTIDEAS forum has also been created to encourage the employees to communicate with the management, such as sharing ideas on company business and giving opinions on commodities and production lines. (CNW, 2018) The employees in the different divisions mentioned above specialize in areas such as store operations and design, customer service, supply chain, marketing, category management, finance, and technology (CTC, 2017). Canadian Tire Corporation strives to maintain a highly skilled workforce that enables the alignment and coordination of all the company’s important functions such as supply chain management and service delivery. Because of the diverse skills in the workforce, the company has been able to maintain its position as one of the leading retailers in Canada.
Innovation and Creativity
According to Lornic (2016), despite the fact that Canadian Tire cannot be said to be the leading firm in the development of cutting-edge technologies, the company has done a lot in terms of innovation which will be a great contributor to success going forward. This drive towards innovation can be seen in the company’s setting up of R&D operations in Waterloo where the highly skilled R&D staff have developed a new social media application known as Catch that will enable the company post pictures and update customers on the items that are on sale. In addition to this app, the R&D team has created a mobile interface that has features such as e-commerce capabilities, store-level inventory checks, and enabling customers to go through products online. In addition to these capabilities on mobile applications, the company’s R&D team has been able to integrate features that keep track of customer’s searches on the website. The most popular searches enable the company to get a hint of what products are actually needed in the market, thus serving as a great tool for determining inventory needs (Lornic, 2016). This shows that the company has a very keen interest in innovation, especially in digital technology which is where almost all kind of retail is heading. The innovation and creativity focus will thus be very instrumental in ensuring the company maintains or even improves its market share in future.
Reputation
Canadian Tire Corporation is a company that is focused on maintaining a good reputation in all its activities. This is because it is understood that perception people have of a company affects the way people view the company’s brands and ultimately how the company performs in terms of profitability. With that in mind, the company has invested a lot in creating a good reputation in Canada. For example, the company has entered into an agreement with the Canadian Olympic Committee in supporting Canadian Olympic teams which paints a very good picture for the company. In addition, the company takes part in CSR activities such as social philanthropy in which it supports a number of social causes and also sponsors a number of initiatives in communities such as those that promote healthy living. The company also makes sure that its employees follow a code of ethics at all times (CTC, 2017). As a result of all these efforts, the company has been able to create a very good reputation for itself in Canada. This good reputation is evidenced by the revenues which have been constantly growing over the past years.
Value Chain Analysis
Primary
Inbound Logistics
The company’s supply chain is responsible for the flow of goods from the suppliers to all the company’s stores all across Canada. The supply chain is composed of a number of distribution channels that ensure timely replenishment of vehicle parts at PartSource stores all over Canada. The merchandise from the suppliers comes to the company’s distribution centers in Brampton, Ontario that is operated by Canadian Tire Company, and Calgary, Quebec, and Montreal, Alberta that are under a third-party logistics company. Goods from suppliers to FGL Sports are kept in warehouses located in Mississauga, Ontario while Mark’s uses third-party logistics companies in the replenishment of merchandise in its distribution centers in Brampton and Calgary (CTC, 2017). In addition to these specific locations where goods are received, the company has developed digital inventory management systems that assist in making decisions such as when more products should be brought in from suppliers. This effective logistics system helps all the company’s divisions to be well stocked at all times.
Operations
CTC has a 1,200,000-square-inch distribution center in Brampton, Canada’s Ontario. Instead of upgrading the old trucks to pass through the narrow channels for distribution, CTC has put into wide use in the same region the specially designed automated guiding vehicles (AGV), to take the place of the trucks and achieve automated storage. (automation & Trebilcock, 2018) As an ever-developing business network, CTC has accumulated a number of suppliers from fashionable accessory retailing to sales of oil products. However, thanks to the automated AGV, manpower and operation costs are sharply reduced in the process of transportation.
The financial division operates the Canadian Tire Bank that offers financial services and also offers branded credit cards through which customers can access credit services. Other than the physical stores run by the company, Canadian Tire Corporation runs an online platform where purchases can be made from all its outlets (CTC, 2017).
CTC’s success is the result of increased investment on quality control. Intertek, a world top supplier of quality and security solutions, will join hands with CTC, and provide professional consultancy and solutions in product development and quality control. (CNW, 2018)
Outbound Logistics
The company operates a highly efficient distribution network that is served mostly by third-party logistics companies. For example, third-party companies are used for distribution functions from warehouses to outlets in Vancouver, Halifax, Nova Scotia, Ontario, and Toronto. In that regard, Harris (2016) points out that very recently; the company introduced a 60ft container that will be used in the transportation of goods between warehouses and the various outlet stores. This is an important move by the company because the new containers will increase the number of goods carried in a single round by 13%. For that reason, the outbound logistics function by the company can be seen to be working towards its sustainability objective since the increased cargo-carrying capacity will help in the reduction of vehicles from the road. In addition to the new containers, the company operates a fleet of vehicles with over 6000 containers that are very useful in the company’s distribution function.
Marketing and Sales
Canadian Tire Corporation engages in a number of marketing activities across all its divisions. The specific marketing strategies employed by the company include promotion and advertising programs, market research, and customer loyalty programs. The company creates customer awareness of the products in different divisions of the company through the distribution of electronic flyers via internet platforms, and weekly promotional flyers in print media. In addition to these focused methods, the company employs general marketing methods such as advertising through television, social media, radio, magazines, and newspapers (CTC, 2018). These marketing efforts are strongly linked with the high sales volumes achieved by the company each year. For example, during the fourth quarter of 2017, the company’s sales increased by 4.9% and this can be attributed to a good reputation plus marketing efforts (CTC, 2018).
Service
The company maintains very efficient communication channels with all customers so as to ensure all complaints and queries are responded to in time. The company has a commitment to eliminate all kinds of barriers to access to any kind of information. In that regard, apart from all employees being trained on how to best serve customers, they are also trained on how to communicate and interact with all kinds of people including the disabled ones. With the aim of keeping in touch with customers, the company has a number of communication channels including telephone, email, and direct one-on-one communication (CTC, n.d.). In addition, all employees in the company serve all customers in accordance with the company’s code of conduct which insists on honesty, integrity, and ethics when dealing with customers or any other individual that forms the larger Canadian Tire community (CTC, 2017).
Secondary
Procurement
Canadian Tire Corporation sources all its different products from different suppliers all over the world. For example, vehicle parts are procured from auto manufacturers in their respective countries, petroleum is obtained from petroleum suppliers, and sportswear and fashion accessories are purchased by worldwide suppliers dealing in different brands. The company has set a code that governs the suppliers to conform to. CTCs supplier code addresses issues such as health and safety, working hours, discrimination, forced labor, child labor, and bribery. For the company to reach an agreement with any supplier, the said supplier must prove adherence to the supplier code (CTC, 2017). This shows the company’s commitment to having its products procured from suppliers that observe a high degree of ethics, respect for human rights, and respect for the environment. The company’s procurement function is directly supported by the inbound logistics functions of transportation to the different warehouses as discussed in the previous section.
Technology Development
Harris (2016) points out the development and integration of the JDA transport management software (TMS) in its supply chain network. The software will allow the company to be able to optimize the logistics functions thus eliminating wastage associated with the transportation of goods from distribution centers to the various stores all across Canada. In addition to the transport management software, the company has a number of other technological systems that assist in the management of inventory meaning that the company has been successful in automating the entire supply chain right from the store, to the warehouse and eventually to product replenishment in the warehouses.
Human Resource Management
According to Galt (2018), the method used by Canadian Tire Corporation in the recruitment process in the past was found to be very inefficient as a lot of time was wasted in the process. In that regard, the HR team developed a recruitment approach that followed the lean methodology which has led to halving the amount of time required for recruiting employees. In addition to the efficiency achieved in the hiring process, the company has invested in training programs and internal leadership programs that prepare junior employees for future leadership roles. The HR department also makes efforts in ensuring employees benefit from ongoing professional development by the use of internal and external course (CTC, 2017).
General Administration
Starting from the top, the company is led by a board of directors that is composed of both executive and non-executive members. The board is divided into four committees which are the audit committee, the MRC committee, the governance committee, and the brand and community committee. Each of the mentioned committee deals with a specific aspect of the administration of the company hence the efficiency of the lower levels is monitored from the top. After the board, the company has a number of executive officers that have experience in diverse fields including real estate, regulatory affairs, retail operations and many more (CTC, 2017). Having an administration with such diversified skills has ensured that all aspects of the company’s value chain are well covered thus explaining the high level of efficiency in all the business divisions run by the company.
Core Competency Analysis
Specific Knowledge, Skills, and Abilities
Associate Dealer Model Enabling CTC to focus on Value Chain
The associate dealer model is one of the smartest operational moves made by Canadian Tire Corporation. This is because, as pointed out in CTC (2017), the company’s administration is able to focus on value chain functions instead of managing employees and inventory at each of the over 500 retail outlets in Canada. Because of this, most of the company’s skills and abilities are focused on the creation of efficiency in the value chain instead of focusing on retail functions.
Innovation and Technology
Despite being a company that is mainly concerned with retail of products and serviced from different industries, CTC has been able to invest in research and development that has enabled the company to come up with innovative ways to manage the supply chain and distribution functions. The digital development capabilities of the company have enabled CTC move with the times. This can be seen from the fact that the company has been able to use its R&D prowess in developing an e-commerce application that has been able to compete with purely online businesses such as Amazon. The company’s innovativeness promises success even in future as this ability will help the organization be better prepared to take advantage of any future opportunities that may arise.
Canadian Tire Corporation VRIO Analysis
Organizational Capability
Using what value chain activities or resources How is Value Created? Why Rare? Why Inimitable? Why non-substitutable? VRIO* Implications for Competitiveness Core Competency?
Innovation and Technology
1. Sales and Marketing
2. Service -It saving money and time
– CTC has a forward-looking on the marketing, as I mentioned before, CTC has a team to creates new products to meet customer needs -unique product service (bakery-convenience store)
-experience
-High brand identification in local
-Constantly innovate and continuously develop new strategies
-It is unlikely that a small new entrant can copy the format and the scale due to the Massive amount of finances required.For the big firms would require a total overhaul of their mode of operation. From the analysis presented in the previous sections, it is clear that the organization has a very highly skilled top management that is closely involved with different aspects of the value chain. In addition, the company is adequately staffed with a workforce that is skilled enough to carry out different functions satisfactorily. ✓ V
✓ R
✓ I
✓ O Sustainable Competitive Advantage Yes
Associate Dealer Model Enabling CTC to focus on Value Chain
1. Inbound Logistics
2. Sales and marketing
All the products provided by CTC are all somehow necessary in the present world. Every decision making depend on the customer’s demand and marketing changing.
Canadian Tire Corporation sources all of the products it retails from independent manufacturers. That means that all the products that the company deals in are not rare. However, The quality of service delivery and the level of reach attained by the company are not common. The store formats run by the company can be imitated by any other company because CTC does not have any form of patent protecting its mode of doing business. The analysis has also shown that the organization has invested in research and development and will thus be better prepared to take advantage of future opportunities. All these show that the company is organized well enough to use its capabilities to maintain a significant market share. ✓V
✓ R
x I
✓ O ✓Temporary Competitive Advantage
Yes
Key Success Factors
Innovation and Technology
The innovation culture established in the company as pointed out in CTC (2017) enables the company to coordinate its supply chain functions with actual demand in the retail stores run by the company’s independent retail associates. In addition, the innovativeness in the company’s R&D team has enabled the company to evolve with technological advancement in the context of e-commerce. This is despite the fact that Canadian Tire Corporation initially run traditional brick and mortar stores that are being replaced by online retail. As a result of the forward-looking mindset of the R&D team, the company is able to compete with online retail companies such as Amazon and eBay. Looking forward, innovation and technology will be a great source of competitive advantage for Canadian Tire Corporation because while the traditional competitors are phased out of the market with each new development, CTC wi be able to leverage the skills of its workforce to adapt to the changing technological environment.
Associate Dealer Retail Model
According to CTC (2017), Canadian Tire Corporation does not run its entire retail business directly but rather uses third-party agents known as Associate Dealers. Under this model, the company enters into contracts with individual dealers who have to accept to work under the Canadian Tire Corporation umbrella. Looking keenly at this model, it becomes clear that this kind of deal reduces expenses and complexities associated with running so many retail outlets distributed all over Canada. This is because each individual dealer is supposed to manage their own human resource and general expenses. It is thus clear that the company only shares the profit while expenses and management technicalities are left to the associates. Such a business model links to the future success of the company since the top-level executives are able to focus more on matters such as supply chain optimization and general business strategy. In addition, this kind of model makes expansion of the business to other regions relatively easy due to the fact that most of the initial costs are borne by the associates (CTC, 2017).
Corporate Social Responsibility
Canadian Tire Corporation takes part in a number of CSR activities including corporate philanthropy and community support (CTC, 2017). Despite marketing playing a very significant role in creating a good brand image, CSR gives the brand a good reputation and that is very important for the future of the company. Taking part in local CSR activities will enable the company to be able to fight competition from international retailers that might not be able to engage in a lot of CSR activities in Canada. The insistence on employee ethics when dealing with any of the company’s stakeholders as pointed out in CTC (2018) is a very good move of creating a good reputation for the company in general and this will ensure brand loyalty which will shield CTC against competitive pressures in future.
Conclusion
The analysis, first of all, shows that the company is performing very well in terms of revenues. In addition to this, all the available tangible and intangible resources are well aligned with the objectives of the company. The company’s value chain is also found to be very well coordinated with functions such as inbound and outbound logistics being made more efficient by the use of the latest digital technologies. Finally, in terms of competencies, the company has all the necessary resources to take advantage of future opportunities. Despite the fact that the VRIO analysis shows that the company’s business model is imitable, this is not going to happen any time soon due to the huge amount of finances required. However, the company must still stay focused on developing its core competencies to adapt to changes in the retail environment whenever need be.
References
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