This is a generic PESTEL analysis of Canada. You may know that Canada is the 2nd largest country in the world by total area. It is also a rich and beautiful country. With a service-oriented economy and growth in manufacturing, Canada has become one of the top economies in the world.
PESTEL analysis of Canada
This article aims to examine some of the political, economic, social, technological, environmental, and legal factors affecting Canada today.
Political environment in Canada
Canada is a founding member of the United Nations and is a powerful country. It maintains good relations with the most powerful country in the world, the USA. It also maintains good relations with the United Kingdom, France and many other countries in the world. Ottawa is the capital of Canada.
Canada is a democratic country with a parliamentary system in place. It also has a constitutional monarchy. Queen Elizabeth II is the head of state, while the Governor General is her representative who usually carries out most of the royal duties in Canada. The Prime Minister is the head of the government and holds the executive power.
Canada enjoys a very good political stability. It is in fact one of the safest countries in the world. With a low crime rate and trustworthy policing services, Canada positions itself a very good place for business and tourism. It is worth mentioning that Canada’s focus on international peacekeeping has earned it a very good global image.
Economic environment in Canada
The next element to address in the PESTEL analysis of Canada is the economic environment. Canada is the 10th largest economy in the world as of April 2018. It has membership in the Organisation for Economic Co-operation and Development (OECD), the World Trade Organization (WTO), the G20 and the Commonwealth of Nations. It also has free trade agreements with a number of countries. For example, Canada signed a free trade agreement called Comprehensive Economic and Trade Agreement (CETA) with the EU in September 2017. This agreement aims to make it easier to export goods and services to benefit people and business both in Canada and the EU. Canada along with Mexico and the United States signed the North American Free Trade Agreement (NAFTA) in 1994 to create a trilateral trade bloc.
Canada has a highly developed mixed economy. Both the government and the people of Canada make economic choices for the country. Some industries are publicly owned, while some others are privately owned. For example, Canada has more than 40 state-owned enterprises (SOEs) at the federal level. Likewise, it has more than 100 SOEs at the provincial level that immensely contribute to a variety of sectors including, finance; power, electricity, utilities, and transportation (ITA, 2017).
The Canadian GDP is expected to be around USD1.8 trillion in 2018 (Focus Economics, 2018). Economic Growth for 2019 is forecast at 2.0 per cent, up from an earlier projection for 1.7 per cent. With a strong and dynamic economy, diverse and entrepreneurial people, world-class infrastructure, and one of the best banking systems in the world, Canada draws the attention of investors and businesses around the world. It is worth mentioning that the recession in 2007/8 hit Canada badly; however, it managed to recover from the crisis well because of its sound fiscal policy and financial systems.
Some of the top exports of Canada are motor vehicles and parts, gold, telecommunications equipment, industrial machinery and crude petroleum. Canada’s top imports are cars, vehicle parts, computers, and delivery trucks. The top trading partners of Canada are the US, Mexico, China, Japan, Germany, and the UK.
Social environment in Canada
Canada is the 2nd largest country in the world by area; however, its population is not that big. As of May 2018, the total population of the country is 36.90 million and the population density is 4 per Km2 (Worldmeters, 2018). Population growth has been fairly consistent over the last four decades and currently there is no sign of slowing down.
Canada is a very diverse country. In fact, diversity has played a big role in the history of Canada, and many people call the country a country of newcomers. There is a big shortage of skilled workers in a number of sectors in Canada and many business owners say that this shortage is obstructing the growth of their companies. The government of Canada is dealing with this situation with the development of people in the country and a flexible immigration system. Canada encourages immigration and people with appropriate skills and experience can apply to immigrate to the country.
According to some sources, around 46% of Canadians aged 15 and older could be foreign-born, or could have at least one foreign-born parent by 2031. While English and French are the two official languages, there are over more than 200 languages which are spoken in Canada as a home language or mother tongue. Freedom of religion in the country is a constitutionally protected right. Therefore, Canadians are free to have their own beliefs and opinions, and they can assemble and worship without limitation or state interference. This makes Canada an ideal place for expatriates of many different faiths and none to work in the country.
The living standard in Canada is one of the highest in the world. The Canadian consumers are confident about the sustainability of their jobs, and the economy in general. They almost always demand high quality products/services and after-sale customer support. The rate of online shopping is growing very fast as the young customers are increasingly using their tech devices to shop online (Banco Santander, 2018). However, there are some concerns regarding growing economic inequalities in Canada. For example, Canada’s 100 richest citizens have assets of around $230 billion, while the richest 10 per cent of the population controls 40 per cent of the country’s wealth (Attfield, 2017).
Technological environment Canada
Another important aspect in the PESTEL analysis of Canada is the technological environment. Like all other major economies, technology plays a big role in the Canadian economy. In fact, technology is one of the fastest growing sectors in the country. Canadians make use of technology for many purposes, most notably education, careers, and leisure. The technology sector provides people with high-paying jobs, with an average salary of $67,000 compared to the national average of approximately $48,000 (Rodgers, 2016).
Both public and private investments in Canada’s technology industry are growing swiftly. In addition, political, economic and social stability have made the country a fertile ground for entrepreneurship advancement. In fact, many international IT professionals and firms see Canada as one of the best countries in the world to advance their careers and grow their businesses. Across Canada, technology is changing the landscape of many traditional industries and is offering both people and companies a lot of opportunities.
Environmental issues in Canada
Millions of tourists visit Canada every year to experience its scenic beauty. The Arctic mountains, glaciers, lakes, forests, deserts, and many more offer tourists a diverse landscape which is full of surprises. However, there are a number of environmental challenges that Canada is facing today. For instance, a number of air pollutants, acid rain, smog, and climate change are affecting Canadians. Many Canadians in fact see air pollution a major environmental concern. However, it is worth mentioning that the government of Canada has taken a number of initiatives to decrease air pollution and the emissions of greenhouse gases like carbon dioxide that cause climate change.
Legal environment in Canada
Legal environment is the last element to discuss in the PESTEL analysis of Canada. A number of relevant issues should be discussed here. For example, certain rights of employees are protected by law in Canada. There are some minimum standards employers must abide by concerning employees’ hours of work, minimum wages, sick days, vacation, dismissal, and many more. The Canadian Human Rights Act (CHRA) prohibits discrimination on the basis of gender, race, ethnicity, age and a number of other grounds.
There are many methods to do business in Canada. For instance, corporations, joint ventures, general or limited partnerships, trusts, sole proprietorships, co-operatives, and Branch plant operations are the most common ones. For international businesses, corporation is the most popular method of entry into Canada (Mercier & Woodman, 2016).
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Last update: 07 May 2018
Attfield, R. (2017) Economic inequality and social unrest, available at: https://www.muskokaregion.com/opinion-story/7219513-economic-inequality-and-social-unrest/ (Accessed 04 May 2018)
Banco Santander, S.A (2018) Canada: Economic and political outline, available at https://en.portal.santandertrade.com/analyse-markets/canada/economic-political-outline (Accessed 20 April 2018)
Financial Post (2018) IMF hikes Canada’s economic outlook, but it still lags the global growth forecast, available at: http://business.financialpost.com/news/economy/imf-raises-outlook-f The International Trade Administration or-canadian-economy-upgrades-global-economic-projections (Accessed 24 April 2018)
Focus Economics (2018) The World’s Top 10 Largest Economies, available at: https://www.focus-economics.com/blog/the-largest-economies-in-the-world (Accessed 01 May 2018)
ITA (2017) Canada – 7-State-Owned Enterprises, available at: https://www.export.gov/article?id=Canada-State-Owned-Enterprises (Accessed 01 May 2018)
Mercier, M. & Woodman, B. (2016) Establishing a business in Canada (Federal), available at https://uk.practicallaw.thomsonreuters.com/9-564-0499?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 (30 April 2018)
Worldmeters (2018) Canada Population, available at http://www.worldometers.info/world-population/canada-population/ (Accessed 06 May 2018)
Rodgers, M. (2016) Technology Industry is Canada’s Fastest Growing Economic Sector, available at: https://www.mentorworks.ca/blog/market-trends/canadian-technology-industry/ (Accessed 04 May 2018)
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Author: Jo David
Jo David has years of experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality and tourism management.