(Relentless change pp. 1-14) Class 1
Laying the foundations, 1805-1905
- Mid 19 century (1850’s) British northAmerica was made up of ;United province of Canada ( modern
day Quebec and Ontario)Nova scotia New Brunswick PEI Newfoundland Vancouver island
- The interior contained 3 territories; 1)Ruperts land ( much of the north, all the area around the Hudson
bay). 2)North west territories. 3) New Caledonia
- The British north America act;
• The act, also known as the BNAAct, comprises a major part of the Constitution of Canada. TheAct
Government of Canada, including its Federal structure, the House of Commons, the Senate, the justice of the
system, and the taxation system. Ruperts land was then added to the dominion of Canada in 1869 after it
was acquired from the HBC.
- Two major public policy statements were particularly significant in the government playing an important
•oleBNA act ( British NorthAmerica act); 1867. Other than creating the dominion of Canada, the act
also allocated responsibilities between the federal and the provincial authorities. The federal took
responsibility of things like regulation of commerce, currency and banking.
• National policy; 1878. The National Policy was a Canadian economic program introduced by JohnA.
Macdonald's Conservative Party in 1876 and put into action in 1879. It called for high tariffs on imported
the 1878 election, and defeated the Liberal Party, which supported free trade. Three main parts; 1) The
settlement of the west 2) The building of a transcontinental railway 3) The adoption of protective tariff.
This was influenced by the heavy reliance on trade.
- Through the BNAact, the federal government was given powers over currency, banking as well as life
- The passage of the Bank act in 1871 ensured a sound currency and a nationally regulated banking
- One of the requirements of the BankAct was that it is renewed decennially ( every 10 yrs) to ensure that
legislators will periodically update theAct in order to keep pace with developments in the financial
life insurance companies as well as mortgage, loan and trust companies had emerged. In the early 20importhnt
century, there were 37 banks in Canada, with HQ mainly around the Toronto and Montreal area.
Other financial intermediaries
-Although banks started off to be the dominant financial intermediaries, mortgage loan companies, life
insurance companies and other financial institutions soon took over. The government responded by
supporting this growth and even appointing superintendents to oversee some of those industries.
traders fro Montreal started developing trade and competing with HBC. The financial systems that wereme
in place made it simpler to obtain capital which helped increase the number of entrepreneurs.
Large non financial corporations
-Agriculture played a dominant role in the economy in the mid 19 century and was by far the greatest
employer. Railroad building was another great business as well as mining. Some manufacturing
companies then started to emerge.
• Railways th
the stagecoach on land. Things changed dramatically with the introduction of the railway constructionand
industry. At first, it was made upthf hundred of small companies that eventually merged into large
corporations by the end of the 19 century. In time, they became the largest business in Canada.At that
time Canada had one transcontinental railway; the Canada pacific railway (CPR).
• Extractive secthr
many small, family oriented businesses. Then coal was discovered and became the next big thing. Major of
companies emerged working on extracting coal and base metal.
o Forestry, like mining, was dominated by many small companies, but eventually only those that merged
and formed large corporations survived. There was a relative decline in lumber and an increasing demand
Toronto. US, and only big companies were able to manage with capital that came in from Montreal and
• Public utilities
o Local utilities were used to provide utilities to municipalities. Then with technological breakthroughs,
enterprising business men mobilized large amounts of capital that permitted the creation of electrical
public utilities in Canada and abroad.
o Municipalities granted companies operating rights and attempted to regulate them.
o Bell was established in 1880 in Montreal. It was the first company in the telecommunication sector. th
general. One of the changes was the government intervention. The federal government put bell operations
under the supervision of an independent regulator commission.
o Manuthcturing played a less significant role than agriculture in the mid 19 century. However, by the
early 20 century, manufacturing had grown equal to agriculture in terms of % of GDP.
o The development of electricity attributed to this happening. In 1905, the 2 largest were Massey
Harris and Canadian General Electric (CGE).
government complied with and raised by 35% on manufactured imports.to help them grow, which the
o During that time, the evolution from manufactures of consumer goods to producer oriented enterprises
that sold through dealers or middlemen picked up.
o Retail in the mid 19 century was a local affair with barter being the main means of conducting
transactions. Since then, it has grown drastically. In 1905, Timithy eaton established the first national
department store chain in Canada.
Origins of financial stability in Canada; the bank act of 1871
- The enormous growth in global trade and investment also required the expansion of government
oversight and international cooperation on financial governance.
- Extraordinary and unprecedented steps have been required by governments across the world to
rescue their banks from default.
- Canadian banks were seen as more stable than the rest of the world, largely due to the way the very
origins of banking law and regulations were set in the 19 century.
- The political goal was financial stability and the managerial challenge was to create the institutions and
regulatory framework to carry it out.
Origins of financial stability in Canada; the bank act of 1871
- There was deterioration in theAmerican banking system. The four provinces then agreed that they
should have a national currency and a national banking system. They also needed to establish public
confidence in the financial system in order to have economic prosperity.
Foundations of banking and currency in Canada together with proposals for a bank act for the dominion of
Banking in early Canada;
-There was no financial system in Canada before passing the powers from France to Brittan from 1759
to 1763. Family’s kept their savings in ‘specie’(which were gold and silver coins). Even when the
British took over from 1759, they had no interest in working out finance and money issues.Areliable
form of money, either for means of payment or to store value, or to even help governments with their own
finances did not exist. People in different areas used to hold different currencies from different
countries. In upper Canada, people used to have a York currency.
-The shortage of specie led to various improvisations of paper money. Merchants in Quebec issued
small promissory notes, British army used its own paper money.
- Merchants had great difficulty in financing their exports of flour, potash, lumber and fur, while also
facing trouble importing clothes, sugar, salt and farming tools.
First bank of the United States;
-US was facing the same problems as Canada, this also was a huge problem for Canada since the states
was a major trading partner. In 1791, the first bank of the US open in Philadelphia. Before that, the US
constitutions specifically assign the power to issue and regulate coinage to the federal government and
defined gold and silver as the only legal tenders. The bank was modelled on the bank of England which
was founded in 1694. Some, even in congress, did not support the bank. The charter collapsed by
congress and never again did they have a national banking system The earliest bank in Canada
- It was mainly through the example of the national bank of Scotland which started in 1824, that the
transition was gradually made to the present system of a few large banks with numerous branches
- Bank of Montreal received provincial charter and royal assent in 1822, but was in operation since 1818.
- The most critical regulation in the BMO articles was that the liabilities of the bank could not exceed
three times its paid in capital, and the paid in capital has to be in specie, gold or silver. The bank was also
limited to ten years.
The bank of upper Canada
- BMO started opening branches all over, this alarmed the merchant community in upper Canada, partly
because BMO was subject to the French civil code or lower Canada, but more generally because it meant
that it would increase their dependence on Montreal. The Bank of Upper Canada obtained the first upper
Canadian charter in 1822. It formed a virtual monopoly. Later on more banks started to appear in the
The struggle among banks for market share
-At confederation, there were 38 banks while BMO had a 25% market share.
-At that time, the US had a free banking system. The licensing of the banks became state decisions.At
that point, virtually anyone with enough capital could open a local bank with no branches. This was
very problematic. There were numerous bank failures, a lot of fraudulent paper money.
- Some were advocating following the British system, in which the bank of England is the sole issuer of
paper money in small denominations.
The rise of the Canadian dollar
- For the first time, there was a fixed relationship between the three currencies; dominion dollar, US dollar
and British pound.
- The result was the establishment of a uniform federal act, replacing all provincial charters and including
the following specific features;
• Minimum capital of 500,00 of which 10% is to be paid up
• Power to issue notes in dominations of 4 or more
• Double liability on shareholders, to be paid before realizing on the assets of the failed bank
• Total bank liabilities not to exceed three times the capital
• Mandatory revision by parliament
• One vote per share
• Prohibition against extending credit on real property
• Maintain a 6% interest ceiling
Canada’s first great manufacturing enterprise; The story of Massey Harris
- In 2003, the condo market in Toronto took off. Low interest rates, high demand and a strong economy
made it possible for many to purchase condos.
Massey’s entrepreneurial roots ( 1802-67)
- Daniel Massey Sr. immigrated into Canada from the states and went into farming.
- The population at that time was growing quickly, and there was an increasing demand for virgin pine
and other woods.
- What he did was rent a land, cleared it from trees and sold the wood, made it suitable for farming,
and then sold it off to others. This was really in demand since recent immigrants needed a place and a
farm to start off, he provided them with that. He repeated the process often to his good fortune.
- He was clear sighted enough to know that change was coming, that the market for his trees was declining
as was the number of land buyers.
- He decided to start investing in trade and started importing a machine that would help in farms
from the states. He then went into producing farm tools and importing.
- Crop failures, economic hardship, and famine in Europe led to an influx of impoverished immigrants to
the new world in the 1840’s seeking relief and a better life. - He established the Newcastle foundry and machine manufacturing company. He bought licences to
produceAmerican designed machines to sell to Canada and Britain.
- His son took over, started modernizing and improving the factory and its operations. They started
to design and produce their own machines.
-At that time, railways started to connect major and minor cities ( 1850’s)
- Farming was becoming more attractive due to some trade agreements with the US and Brittan,
farmers had more capital and started to buy more machines.
-Although immigration levels stayed high, there was a decrease in available man power, and so farmers
saw a need for labor equipment. The decrease in man power was due to rail construction and to the
fact that Canada is too big, they started spreading out more.
- Competition became both national and international.
Reciprocity treaty of 1854
- Treaty between upper Canada and the states regarding a mutual list of goods that they would trade
between themselves tariffs free.
- This treaty helped reduces Harts timber and input costs.
-At that time, hart was also able to benefit from protectionism from Britain where he bought British steel
and iron for cheaper than US competitors.
- The civil war resulted in higher prices for wheat which resulted in many switching to farming.
Therefore, there was again an increase in demand for Harts machines.
- He did a sales catalogue that featured his products. He did promotional campaigns. He established direct
links with his customers. He also extended credit to his customers.
Canada’s first manufacturing enstrprise (1867-1910)
The first dominion day; july 1 1867, province of Canada no more. It was now split into two provinces,
Ontario and Quebec and joined with two maritime provinces, nova Scotia and new Brunswick.
- Massey started filling European orders, he was the first Canadian manufacturer to export
Canadian made machinery.
- The move abroad was made possible due to the rise of steam powered ships. It became cheaper for him
to ship products to Europe than to send them on rail to prairies.
- By 1888, harts son, Walter had set up a massey agency inAustralia, and sales in Europe were growing
- Hart became sick and passed on the work to his son, Charles
The move to Toronto
- Demand became higher than the capacity of the Newcastle plant. He needed a new factory, he chose
Toronto for its banks, its labor pool and many railway connections.
Domestic rivalry and consolidation
- There was a very large increase in the number of competitors and many companies were driven out of
- They bought a company that was struggling financially in 1881.
-At the time of intense rivalry, macdonalds national policy promised much higher tariffs and an
expanded list of products in which the tariff would be applied to.
Massey lashes out
- The national policy with its high tariffs continued to pose a challenge for the massey firm. He decided
to go against it publically. After time, tariffs were reduced.
The merge of Massey and Harris.
- Both massey and harris had established many separate distribution networks around the country. They
emerged in 1891. They became Massey- Harris company. Other competitors also merged.
- Farms were two to three times larger than in Ontario and Quebec and there was an increasing population.
- Massey and competitors ignored the west at the beginning and so manyAmerican competitors dominated
How does Protectionism work? 1) Degrees of Intervention 2) Persuasion (Minimum) 3) Manipulation of the tax system 4) The awarding
of government contracts 5) Granting subsidies and tax concession policies.
BUT, Economic Losses from Tariffs Often Exceed their Benefits.
Remember, there are Non-tariff barriers too: refers to any action other than a tariff that restricts
International trade:1) Quotas
2) Licensing 3)Regulations
ALSO, Political Realities Ensure Protectionist Policies
When economies are booming and jobs seem secure, most people tend to support free trade.
When recessions occur, many countries become more protectionist because of national interest and
pressure from organized labor and other interest groups.
The creation of the CNR
conscription (forcing to join the army) and French Canadians were totally against it.ians were pro
Summer 1917; the railway mess
railway to save it from its financial problems.ernment take over the Canadian northern
and demands for money as well as manpower to support the war. Atemporary income tax was put in led to riots
place. Pressure was mounting for a federal election with widespread support growing for a union
government, a coalition of conservative and English speaking liberals.
-Of the issues that were facing the Canadian government (ex. controlling the sale of alcohol, election
rights to women, inflation,) there was a complete separate mess called the railway mess. There were three
transcontinental railways built for a population of almost 8 million. There was excessive capacity for the
-According to Robert Borden, who was the PM in 1917, the solution as for the government to take over
the Canadian northern and consolidate several other railway lines, which would eventually result in the
creation of the largest crown corporation in Canadian history; the Canadian National railways. The CN.
Sir Wilfrid Laurier’s railway policy
- 1896, the liberal party was led by Laurier, a French Canadian, and it won the elections and formed the
government of Canada.
-He supported the national policy of McDonald. (Spreading the country from sea to sea, settlement in
- In 1903, Laurier pronounced that the 20 century belonged to Canada and authorized the construction of
a second transcontinental railway.
- East was full of railways and the west was undergoing major changes and railway construction was
-Laurier could accept the idea of governments constructing railways but was against governments
-His policy led to a proliferation of railways and mush waste of the publics money. It invited a flood tide
of railway construction.
Aflood tide of railway construction
- The government officially recognized the Canadian northern railway to be the country’s third national
- The Canadian northern continually asked for money from the government and handouts were given in
great amounts numerous times.
-At first, it was doing well, transporting millions of customers and millions of goods.
-For their capital, it was split among stocks, funded debt and government assistance.
-With the break of the war in 1914, the problems- capital cost overruns, overcapacity, inadequate rolling
stock, all became more evident.
-“The problems were exacerbated by the fact that the British government banned the export of capital,
and the London market had been the main source of Canadian railway funding.”
The penalty stage of the railway development
- Nationalized- making it public owned, by the government.
- Continuing war causing more and more problems.At this point, freight traffic was reducing
greatly, passenger numbers were still high but the decrease in shipments resulted in a decrease of
20% in their net earnings. -The grand trunk railway and the Canadian northern (the new ones) were suffering more than the CPR.
Weren’t even covering costs. Government bought the national transcontinental from the grand trunk
pacific in 1915. The grand trunk, the parent company, could not afford to run it anymore.
-Canadian railway and the grand trunk, if collapsed financially, would cause huge problems (loans,
notes). They needed a lot of money and to be in a good position for credits to be able to fund the ongoing
war. The government formed a royal commission to help decide on the issue composed of three people.
They each delivered a split decision in 1917.
-TheAmerican chairman delivered the minority (not in agreement with the majority of the people) report
and dissenting view.
- Smith ( the chairman of the commission) recommended three main approaches,
1. The Canadian northern take over the grand trunk pacific lines in the west and to provide
completion to the CPR in that part of the country
2. In eastern Canada, the grand trunk do the same with the Canadian northern eastern lines
3. The government take over and operate the uneconomic route that ran across the Canadian shield
from Quebec to Manitoba, for both the Canadian northern and the grand trunk.
-The majority report recommended that all the railways of Canada be nationalized, except for the
American lines and the CPR.
-The nationalization would include the Canadian northern, the grand trunk, the grand trunk pacific, the
intercolonial, and the national transcontinental.
-The new company would own the rail lines and the government would be responsible for the interest on
the existing securities (loans).
-CPR wanted to be included but the government refused since CPR owners still wanted a share of the
-Abill was introduced in 1917 placing all government owned railways under the board of railway
commissioners and another bill to purchase the northern railway.
The best choice in unfortunate circumstances
- In December 1917, PM Borden went to the elections as the leader of the coalition unionist party, made
up of traditional conservatives and anglo liberals. Won 57%.
- One of the new governments priorities was to acquire both the grand trunk railway and its subsidiary, the
grand trunk pacific.
- Government owned other public utilities but many, including Wilfred laurier, opposed owning the
-Negotiations with the grand trunk began in 1918 and lasted for two years. The federal government
wanted to acquire the feedings of the grand trunk into ontraio and quebec. But the grand trunks strategy
government waited it out.ake the grad trunk pacific off its hands. They didn’t reach an agreement and the
railways9, they could no longer run their pacific line and the government appointed the minister of
to manage it. In that same year, a bill was proposed to acquire the grand trunk was presented to the house
- The two main arguments against the bill were;
1. The government should take over the grand trunk pacific subsidiary but allow the grand trunk parent
to continue operating it
2. If the grand trunk parent were too close to bankruptcy, the government should let it go bankrupt rather
than take over a long proposition.
- For the next 70 years, Canada had two major railroads competing with each other. One, a crown
corporation, CN, owned by the government, and the other, owned by shareholders, the CP.
What shouldArthur Meighen have done?
- The roots of the railway mess lay in the previous governments failure to create one transcontinental line
to compete with the CPR back in 1903. The approval of the third railway mounted even more problems.
The CN today, the most efficient carrier in north America
-The year of 1923 was the first year of consolidation of the grand trunk railway and all other units of the
national system. This new railroad would be an even larger enterprise than the CPR.
-Right from its inception, its been considered a white elephant, a terrffic drain on governemtn.
- IN 1995, after nearly 8 decades in government hands, the railway was privatised. Its been doing
amazing. Very efficient. Very profitable.
Neo-Conservatism takes hold of western nations, starting with the election of Margaret Thatcher(1979) in
Britain and followed by the elections of Ronald Reagan in the US and Brian Mulroney in Canada. 1) Privatization, sliming down of the civil service, competitive treaties like NAFTA become the norm. 2)
Mike Harris’“Common Sense Revolution” is a prime example of Neo-Conservative ideals.
The Canadian automobile industry
The early automotive industry in Canada
-After the first world war, Canada was second only to the united states in vehicle production and per
capita ownership of automobiles, and it was also the third largest market in absolute terms, after the united
states and great Brittan.
- MacDonald’s national policy and Sir Wilfred Laurieres imperial preference allowed Canada to develop a
domestic auto manufacturing industry under the protection of a tariff wall and at the same time to take
advantage of preferential treatments for exports to the British Empire. (advantage of Emperial Preference)
- Tariffs were then seen as having outlived their usefulness and they made matters worse for the
automobile industry, especially during the depression, and eventually were reduced.
Manufacturing and government policy
- Ontario, in 2004, became north America’s largest automobile producer. - It all started when Gordon
McGregor went to Ford to ask him for a license to produce ford cars in Canada. - The high tariffs,
especially ones set in the national policy, forced major car producers to produce in Canada.
The rise of the automobile industry in Canada
- Automobile industry was born in Canada in 1904 when McGregor got the license and rights to
manufacture and sell ford vehicles in Canada. By 1920, it became the largest automotive enterprise in the
-Sam McLaughlin was a co-owner of a carriage manufacturing company along with his brother George
and his father Robert. Sam wanted to invest in automobiles and start building them but his dad opposed.
In 1907, Sam decided that he wanted to build the Buick in Canada. He signed an agreement to build the
“McLaughlin” with Buick motors. These cars had Canadian designed bodies andAmerican built Buick
- The 35% tariff that was placed in automobiles was set in hope of protecting manufacturers of carriages,
buggies and bicycles.
- Both companies would benefit as those who wanted to licences already had carriage manufacturing
plants and changing them to automobile production plants would be easier than opening completely new
ones.Also, they needed new sources of lending to come from Canadian banks. They also benefited from manufacturers of parts in Canada. Prior to expansion they used to outsource them. Overtime, parts and
materials were increasingly sources in Canada, including steel, iron, brass and fabric.
- Both manufacturers reduced their costs by outsourcing a few productions to within Canada. They also
limited the number of models offered in order to achieve higher volume of parts for materials. -A
combination of factors, the tariff wall, scare capital and an increasing demand, worked to Canada’s
- The growth in the auto industry can also be attributed partly to reinstatement of the British imperial
preference in 1897 through negotiation by PM laurier.
-Canada’s proximity to the US and its membership in the empire gave Canada a unique position.
- Canada’s membership in a vast international network of colonies and dominions gave it another
- Under the British preference system, these markets gave Canadian manufacturers favourable tariff
treatment over US manufacturers. This meant that US companies used their Canadian units to export
cheaper products to imperial nations around the world.
-The Canadian industry also reaped the benefit of a reversal of seasons; sales in southern markets such as
Australia, new Zealand and south Africa peaked at just the period when the Canadian market was in the
winter slump. This allowed for smoother production and employment schedules.
-Eventually, ford also opened assembly plants in places where cared could be better adapted to local
markets all over the empire. By the mind 1920’s, ford in Canada has wholly owned subsidiaries in
Australia, India, Malaya and south Africa.
- It was the limited free trade agreement Canada had with the US in 1854- 1866, and now again..
- Ford was happy about it, he believed that they will start producing more efficiently in Canada.
The sale of the McLaughlin motor car company to general motors
-After some time, the Mclaughlin business completely gave up on the carriage business and became a
producer of motor vehicles exclusively.
- Sam sold the company to GM for 5 million dollars, it became GM of Canada.
The great war, recession, recovery
-The main impact of the great war was the full employment. With earnings high, people were now able to
afford a car, and so in an indirect way, the war drove vehicle demand higher and production increased.
-The end of the war saw a sever economic downturn, and it was not until the mid 1920’s that this was
reversed and recovery achieved.
-After is shaky beginnings as a field of entrepreneurs, the automobile industry became growing,
prosperous, and maturing industry throughout the 1920’s.
-Despite the disappearance of the Canadian automotive firms, Canada emerged as the second largest
producer of vehicles in the world.
The Robb budget of 1926
- In 1926, a budget presented by the minister of finance, James Robb, saw a tariff adjustment was
proposed as well as a limited abolition of the excise tax. This resulted in a reduction of taxes. -There was
also an encouragement to improve part production in Canada and to receive tax cuts if 50% or more of the
car was manufactured in the empire.
The confrontation on the budget
-Sam opposed the tariff reduction and met with the finance minister to express concern. When they
announced it, he closed GM Canada. The manager of the GM saw that this tax reduction would benefit
the Canadian plant since it will help meet the increased demands and is located closer to the manufacturers
of the parts. Canadian operations could actually prosper under the budget provisions. He reopened the
Why lower the tariff?
-If the liberal government was to survive in power, it needed to satisfy voters, especially those in the west
who resented paying higher prices for automobiles in Canada than south of the border. They blamed the higher prices on the tariff in place. The government removed the tariff and reduced the requirement of
50% content to 40% based on total factory output. - Car industry grew rapidly.
Final years of prosperity
-Production reached an all time peak in 1929.
-People developed loyalty for the ford car, they waited for the new ford models instead of switch to new
Full speed in reverse; the great depression
-Conservatives won majority in government.
-When the depression hit, disposable income dropped precipitously and discretionary purchases
plummeted. Consumers held on to their cars instead of trade them in for newer ones.
-Spare production capacity was a chronic problem throughout the 1930’s, compounded by protectionism.
Reversal of tariff policy
- By 1931, the government increased the tariff again. There was also an introduction of a excise tax and
there was a ban on the import of used vehicles.
-These new tariffs and bans would reduce exports, drive up domestic prices, depress demand, and worsen
over capacity problems.
About face on the tariff, again; 1936 and onward
- They reduced the tariff again according to the board’s recommendations. Further, the Canadian content
provisions were streamlined and simplified.
- The changes recommended by the tariff board encouraged trade and commerce between Canada and the
unites states, benefited consumers with lower prices and still provided a level of protection for the
Canadian automotive industry.
- The government really played an important role in the auto industry in Canada.
- Many supported a reciprocity treaty saying that it will help industries survive and flourish. Many were
against, saying that it is a risky adventure that threatened Canada’s identity and economic base.
Eaton’s; from the great depressions to the challenge from Simpsons- sears
- The formation of Simpsons – Sears happened in 1952. Sears was anAmerican retail giant and Simpsons
was the number two Canadian department store.
- The formation would provide Canadian consumers with a different shopping experience that would
complement an unprecedented change in urban demographics and purchasing power.
-At that time, Eaton’s was the leader in Canadian retail. In 1952, they also had the leader in department
store sales. They had a strong position in the upscale market. Had many retail outlets, offices, factories,
and a life insurance company.
The good years
- In 1869, timothy eaton began business and followed three fundamental policies; cash only, a one price
system that eliminated bargaining, and the guarantee of goods satisfactory or the customers money
- Over the next thirty years, a catalogue was launched, a factory was built in Toronto and buying offices
were established in Paris and London.
-After timothy’s death, his son John opened factories in Montreal, Hamilton and Winnipeg as well as
buying offices in Europe, the states and Japan.
-After Johns death, he passed on the company to his nephew Robert.
-After entering into Montreal, they competed with the well established operations of Morgan and Ogilvy.
- Then the great depression came and GDP fell, sales fell 33%.
- Eatons and other mass buyers began to demand lower prices for their manufacturers. Lower than what
they can actually accommodate.As a result, many manufacturers were forced to leave the business.
Independant retailers who could not compete with the prices that department stores offered as a result of
this buying power, were fearful of being forced out of business as well. - Many complaints from both independents and manufacturers came and the government of PM Bennett
H.H Stevens and the price spread inquiry
- PM Bennett was a conservative. Stevens was the minister of trade and commerce.
- Stevens blamed and criticized the practices of mass buying departments and their power of destroying
the smaller retailers and manufacturers.
- Eatons and its fellow mass buyers quickly responded to the allegations. This resulted in the
establishment of a committee of the house of commons to examine the issue more closely.
- The committee was established in 1934 and a price spread commission was established to investigate the
issue of eatons employees making less than minimum wage. They had very bad publicity at that time.
Changing of the guard; John David Eaton
- In 1942, John David, john Craigs son, became president of Eatons.
- Economic events were on John Davids side unlike his predecessor. Sales grew, there was an emerging
middle class. This resulted in Eatons purchasing BC’s Spencer’s retail giant.
- The post war emergence of the middle class and its accompanying effect on population patterns changed
the nature of retailing to the detriment of department stores generally. More people were moving out of
the city to the suburbs.
- Chains stores, especially food chains, almost immediately followed the move into the suburbs.
Additionally, the increase in per capita disposable income combined with the mobility enabled by the
automobile, increased competition from independent stores that carried more expensive, speciality items.
Whether to follow this demographic shift of to enhance ones appeal for the downtown shopper, became
and important consideration for the large department stores.
Achallenger emerges (1950-4)
- Simpsons was well established and known in Canadian retail. They had retail outlets in five large
Canadian citifies as well as a thriving mail order business. They concentrated on enhancing the shopping
Sears in the 1930’s
- Robert Wood, the chairman of sears then, was a general in the army and was responsible for the
distribution of labour and supplies and according to him it was similar to the mass buying system of
-At that time, many acts and bills were proposed and implemented to control mass purchasers and
department stores. Some of the acts aimed at protecting the independent retailer from the chain store
competition and some were also greatly supported by wholesalers eager to prevent large chain stores from
buying directly from the manufacturers for lower prices. Similar to Eaton, there was a negative public
image of Sears and little support.
-Wood believed that achieving broad public support and cultivating a successful business were not
mutually exclusive activities. He sought to enlist public support towards a capitalist enterprise in a variety
- One way he aimed to do that is gain the support of bankers in the smallerAmerican towns. The greater
expense of doing larger amounts of business with many small banks was determined to be worth the
increased political and public support received.
-Other methods of gaining public support included providing agricultural scholarship funds, financing
community improvement projects, and requiring store managers to take prominent social and charitable
roles in their stores community. He repeatedly insisted on the importance of corporate citizenship.
- His strategy of corporate citizenship, along with his managerial skills enable the company to reach total
sales od more than 1 billion by 1945 and by 1952, sears was the worlds largest retailer.
Working out a deal; The joint venture
- The JV between Sears and Simpsons was formed in 1952. Sears contributed 20 million in cash and
Simpsons contributed its mail order business.
- The existing Simpsons stored would remain independent and new stores formed by this JV could open
within a certain radius of the old stores. - The department stores would be Canadian and not used as import stores but things would be run the
Capturing the new market; the growth of the suburbs
-After WW2, sears pioneered the building of stored far from city centers. They observed changing
customer trends and followed them and adapted to them.
- With growth in people living in the suburbia and growth of automobiles, sears did the right think opening
- Simpsons- sears monitored changes in population and the population density of each area. They had an
efficient central merchandising system.
- Eaton was concentrating on downtown while S-2 suburbs. Eaton’s had to deal with the problem of
Accommodating consumer purchasing power
- The increased demand for suburban housing and greater mobility during this period was also
accompanied by an increased demand for quality goods and large appliances.
- It was turning into a consumer driven economy.
-The increase in demand was stipulated by increasing income.
- There was also an increase in offerings of instalment credit where customers were able to pay the store
back in instalments. This allowed d an even large percentage of the population to be able to make such
purchases. The instalment credit enhanced the purchasing power of the majority of the population.
-The large debts incurred by a large percentage of the population in these instatement credits were seen by
some as problematic and alarming.
- Simpsons-sears and Eaton’s both presented different forms of this credit. Eaton’s main credit system
was a deferred payment plan whereby monthly payments would be made by the customer but the item
would not be directly received until all the payments were made.
Reaching out to the consumer; the catalogue
-They competed on who had bigger catalogues.
- Simpsons-Sears ceased paying the shipping costs and passed on the cost to the customer. Eaton’s
continued to pay for shipping. S-S paid dearly in lost catalogue sales.
- While initially hurt by their addition of delivery charges, S-S introduced innovations that enabled the
company to recover the ground it had lost to Eaton’s in the catalogue business. They established catalogue
sales office, an inventory system that would inform customers whether the product was in stock.
Competition moved from price to efficiency and distribution, and there S-S had the upper hand.
The mid 1950’s; The department store scene ; Eatons continued to have 50% M.S but was facing more
intense competition from S-S (where they operated) and Hudson bay company with its plans of expanding
Eatons should have: 1) Recognized the movement of people to suburbs. Developed a suburban store
strategy – 50% of population by 1951 Toronto 82% growth and developed a suburban store strategy to
service these customers. 2) Eatons needed to consider younger families who did not have the time to come
downtown to focus on bringing the store to the customer. 3) Needed to identify the population growth
areas and develop a store location strategy that anticipated the development of these areas so that Eatons
could capture these customers. 4) Needed to focus on a broader consumer demographic rather than just
their loyal customers who would be aging. This would allow the younger customer to relate to Eatons. 5)
Recognized the need for customers not living near the downtown to have accessible parking, therefore
should have developed a parking strategy. 6)Needed a store sizing and merchandising strategy to deal with
competition of small independents and for smaller communities. 7) Eatons needs to change its Canadian
Department Store banner being used in smaller communities to Eatons to build the Eatons brand. 8)
Eatons to enhance the convenience for customers, increase number of customers and for efficiency needed
to develop community agents or catalogue sales offices for customers who shopped where there was no
store. 9) Needed to develop stronger management and management process through the the use of systems
(merchandising & inventory) to enhance service to customers and increase efficiency. 10) Profit sharing
for employees to motivate them and to engage them more in the success of the company. 11) Need to
develop an Installment credit process to allow the company to tap into the consumerism that drove the
growth of the post war economy. 12) Eatons need to develop a corporate citizen philosophy to help in keep in touch with smaller communities. 13) Eatons should look at creating a central buying function
rather than allowing store managers buying autonomy to provide consistent assortment and in-stock
experience within it stores. 14)Develop automated systems for its catalogue business to increase
availability of goods and increase efficiency in a highly price competitive channel
Eatons needed to continue to strengthen its nationalism campaign that it is truly all Canadian. --
Converting to a public company is not a necessary strategy to help it be competitive. --
Case 8(look at end of lecture 9)
The end of Monopoly; a new world at Inco
- In 2006, Inco was bought by CVRD, a Brazilian miner of iron core
- 2005 and 2006 saw aggressive bids and propositions for mergers and acquisitions in the market. It was a
very intense period.
- These changes were also indicative of a major shift in the worldwide mining industry whereby
companies that used to specialize in one or two metals took on a greater range of minerals. This will also
result in a more diversified revenue stream
The view from New York plaza
- In 1972, Grubb was appointed as president of Inco. He was previously head of Inco’s UK subsidiary. He
was known to be a cost controller and he fired any employees that weren’t performing up to the standards.
Asurprising changing of the guard
-Instead of Gagnebin, the board names Edward Grubb to succeed Henry Wingate as president. This
surprised everyone since no one was expecting it.Although, he was as experienced as Gagnebin.
-It was a weird choice since the board were literally his board. He appointed more than half of them and
always got away with them.
Annus Horribilis,Annus Mirabilis, Annus Horribilis
- Financial results in 1971 were bad news. Sales had dropped 25% and profits were more than halved.
-These developments made it clear that major management changes were overdue.
- in 1969, they also had labour problems. Negotiations broke out and 17000 employees walked out of their
jobs. There was a four month strike.
-The performance was quickl