My decision as the President and CEO of CN, Hunter E. Harrison, is to continue with our strategic focus on continuing to improve productivity and customer service along with a new directive moving forward to continue to grow our sales, profits, cash flow and market value. CN will implement a new strategic focus to expand the share of rail traffic in North America by directing overseas traffic flows on to our network. In order to grow with expansion possibilities in North America being limited and the growth in NAFTA trade declining, CN requires a solid strategy to capture the growing importance of Asian markets. CN will invest and/or partner in international logistics as a freight forwarder intermediary to assist in capturing the growing Asian trade market with North America to ensure the traffic is on our network. CN has become very successful since the privatization and deregulation in order to take advantage of the growing demand due to the North American Free Trade Agreement. As a private company, we have successfully become the only North American transcontinental railroad and the largest railroad in Canada. We serve major ports on the Atlantic and Pacific coasts, the Great Lakes in Canada and also the ports of New Orleans and Mobile on the Gulf of Mexico. The new CN network today also serves every major metropolitan area in Canada as well as 10+ major rail hubs in the United States. CN is a true North American railroad with a clear competitive advantage over competitors as CN provides a single-line service between facilities in Canada, United States and Mexico. This network is built to handle the additional traffic that can be generated from the increasing Asian market that CN’s intermediaries in international logistics will secure to flow through North America. Immediate Issue and Secondary Issues with Impact Analysis:
CN has overcome great challenges and improvements within the rail industry in North America due to the privatization of the company, deregulation of the rail industry in Canada and the North American Free Trade Agreement between Canada Mexico and the United States over the past ten years. CN now needs to determine how to continue to grow their revenue with expansion possibilities in North America being limited and the growth in NAFTA trade is declining.
If CN focuses to grow its revenues with their current NAFTA strategy, they will have to build costly rail lines further south as expansions in North America are limited as they have to get approval from regulatory agencies in both Canada and the U.S. for cross-border mergers and acquisitions. CN already had a strategic plan that was halted by the Surface Transportation Board such as the merger they tried with the BNSF. CN needs to implement a new strategy to continue with their success and to improve market share. The growth in NAFTA trade is declining and there is now a growing importance with the Asian markets. CN can consider expanding internationally and acquire or build railroads abroad and apply their North American strategy to make them highly effective and efficient or CN can maintain their North American focus and aim to increase its share of the market by directing more of the overseas traffic flows onto its network. Environmental and Root Cause Analysis:
CN is limited to future growth in North America expansion due to the Surface Transportation Board new merger rules that make it more difficult to realize large-scale mergers. CN NAFTA trade flows are established as CN has already made sound acquisitions and marketing alliances to meet trans-border links throughout Canada, United States and Mexico that the regulatory bodies would allow. CN has already a marketing alliance with KCS railway which controls TFM, the Mexican railway so as long as that relationship stays solid, there is no need for CN to expand its physical network to Mexico. In North America our government institutions are not as well...