Canadian National Railway

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CANADIAN NATIONAL RAILWAY 1

The Company (CN) is a Canadian first classrailway company whose headquarters are in Montreal, Quebec. It servesCanada, Southern and Midwestern U.S. It is considered to be the realpillar of the economy as it transports goods worth over $250 billionevery year for a broad range of commercial segments through a railsystem of nearly 20,000 miles traversing Canada, Southern andMidwestern America. These goods include resource products, consumergoods, and manufactured goods. Together with its railwaysubsidiaries, it serves various ports and cities of the United Statesand Canada (Waldron, 2017). This paper describes its currentorganizational strategy, problems it faces, and its performance.

Currentorganizational strategy

CN’s present-day corporate strategy is anchored on the constantquest for service and operational excellence, the creation of astrong team of skilled and motivated railroaders, and resolutecommitment to sustainability and safety. Its primary objective is togrow at low incremental cost and to deliver efficient and valuedtransport service to its customers. Therefore, it endeavors to ensurethat its shareholders get value for their investment by striving toachieve sustainable financial performance through return oninvestment, sufficient flow of cash, and profitable top-line growth.It aims at returning value to its owners through share repurchaseprograms and payment of dividend. With a precise itinerary,accelerated by a commitment to productivity, innovation, upholdingsafety, minimizing environmental impact, and supply-chaincollaboration, it endeavors to make sure that its customers getvalue.

Its success depends on the presence of supportive policy andregulatory environment that propels innovation and investment. Itssuccess is also influenced by long-term economic viability andcapital investments. It invests in track infrastructure to increasethe integrity and productivity of the plant and increase the fluidityand capacity of the network. It also invests in track upgrades tosupport long sidings and higher volumes, which allow for long trains.It invests in new cars and locomotives since new motive power resultsin increased fuel efficiency and productivity, and more reliableservices. It also invests in units that have distributed power toincrease the trains’ productivity, mainly, during cold weatherconditions, while improving safety and train handling. Targeted carpurchases aim at complementing the fleet of private railcars spanningits network and tapping growth opportunities. CN also makes strategicinvestments in the field of information and communications technologyto facilitate access to accurate and timely information that supportsits current efforts to enhance efficiency and innovation in employeeengagement, safety, cost control, service delivery, assetutilization, and innovation (, 2014, p. 13).

For many years, CN has made sure that innovation is at the core ofits organizational agenda. From an earlier concentration on assetutilization by a business model of precision railroading, it hasshifted its focus to balancing service and operational excellence(Transport Canada, 2012). It is embracing innovation to handle vitalclient pinch points and shipment cycle’s first and last milethrough an assortment of initiatives known as ‘Customer First.’Its latest initiative in the first mile-last mile strategy is knownas iAdvice. It was rolled out in 2014 to enable CN to communicatebetter with its customers. It started with informing them aboutservice prospects in an appropriate manner to help them makeadjustments to their work plans. It has now improved and become anadvanced set of processes and tools to improve the way CN operatesand communicates with its customers (, 2014,p. 6).

Strategyimplementation

CN’s organizational strategy is focused on ensuring that itscustomers get cost-effective, efficient, and reliable transportservices (Beatty, 2016, p. 4). Therefore, it pursues service andoperational excellence and strives to operate efficiently. Itoperates with a mindset, which drives asset utilization and costeffectiveness. This mindset flows from its corporate model ofprecision railroading that aims at improving all processes thataffect transportation of goods. This process is highly disciplinedand enables CN to handle every rail shipment following a particulartrip plan and manage every aspect of railroad operations to achieveprofitability and efficiency. CN measures outcomes relentlessly anduses them to improve service delivery and operate flawlessly. Itworks hard to minimize dwell times at rail terminals and increase theoverall network speed by running more efficient trains. Its businessmodel requires fewer locomotives and railcars to transport the samequantity of cargo in a tight, efficient, and reliable operation. Itruns its railroad by a disciplined methodology and executes with asense of accountability and urgency. Indeed, this philosophycontributes to its profitability, high growth rate, and return oninvestment (, 2014, p. 14).

It appreciates the significance of balancing its desire to increaseproductivity with the efforts required to improve customer service.Its efforts to provide service and operational service excellence arebased on supply chain approach, working closely with supply chainpartners and clients, and involving all its relevant sections in theprocess. It fosters better end-to-end service performance, encouragesall players of supply-chain to shift from a silo mindset to regularengagement, problem-solving, information sharing and execution. Italways strengthens its commitment to service and operational serviceexcellence through innovations based on its continual improvementmentality. It builds on its industry leadership by providing reliableand fast hub-to-hub services and always appreciating undertakingsdesigned to improve customer touch points and first mile-last mileactivities. It monitors traffic forecasts proactively, ensures thatcar order fulfillment is very responsive, and makes sure thatcustomer communication at a local level is proactive. It uses aninformation tool called iAdvise to improve the consistency andreliability of shipment information (, 2014,p. 14).

Problemsfaced

In spite of its success, CN faces some problems that disrupt itsoperations. Some of the challenges include stiff competition fromcompetitors, interest rate and currency fluctuations, inflation,liabilities from derailments, changes in fuel prices, regulatory andlegislative developments, regulators’ actions, and strictenvironmental laws. Labor disruptions and negotiations, uncertaintiesof investigations, environmental claims, and litigation also disturbit operations. Other problems, which adversely affect its operationsinclude natural events like harsh weather conditions, earthquakes,droughts, and floods (, 2014, p. 16).

Performanceanalysis

CN has seen a continued increase in its profits, cash flow, andmarket value for many years. Its operating ratio dropped from 89percent in 1995 to 61 percent in 2006, while its revenue nearlydoubled. It is currently considered to be the most innovative,efficient and profitable railway company in North America. It hasconsistently endeavored to deliver responsibly and efficiently, witha firm commitment to solid sustainability practices and safety andadhered to high corporate standards. Through a transformationaljourney, it has become the backbone of the economy of North America.Its excellent financial performance since privatization in 1995, inspite of several challenges, shows its robust execution capacity,great management, and strong strategic agenda (Beatty, 2016, p. 8).Building on its commitment to service and operational excellence andconstant innovation has made it remain focused on creating a companyof the future. It has been able to strengthen its role as a pillar ofthe economy of North America with continual investments in its peopleand capacity. It has built a strong team of railroaders who haveplayed a key role in achieving outstanding operational and financialresults since its privatization. According to its annual report in2014, its earnings per share rose by 23 percent, and net incomeincreased from $2,612 million in 2013 to $3,167 million in 2014(, 2014, p. 2).

It has grown faster than the overall economy at a low incrementalcost due to its industry-leading performance. Once a Canada-onlycompany and an industry laggard, it currently leads the railwayindustry of North America regarding operating margins and efficiency.Its 20,000 miles network traverses sixteen states of the U.S. andeight provinces of Canada, transporting goods worth over $250 billionyearly. That reflects over $8 billion of acquirements since 1998. Ithas blazed a trail in building new first mile-last mile services forcargo and organized services for bulk freights. It has positioneditself as a real supply-chain facilitator through entering intoinnovative supply-chain partnership arrangements with its customersand key ports that it serves, most of which operate terminals(, 2014, p. 2).

Its growth rate has continued to outstrip the growth rate of theCanadian economy. It repurchased about 22.4 million shares in 2014,returning more than $1.5 billion to the shareholders (CanadianNational Railway, 2014, p. 15). It paid quarterly dividends of $0.25for each share in 2014, $0.31 in 2015, and $0.375 in 2016. Itrecorded a profit of $818 million in 2014, $844 million in 2015, and$941 million in 2016. This pattern shows that its profits anddividends have been rising annually (Marowits, 2016).

Its sustainability practices have made it be considered the leader inthe Transportation Infrastructure Industry part of the Dow JonesSustainability Global Index. Given that it has been activelyundertaking activities to mitigate carbon emissions and the effectsof business activities on the environment, it has received manyawards. It has opened two state-of-the-art facilities for training,one in Winnipeg, Manitoba, and the other in suburban Chicago,Illinois, as part of a rejuvenated training program (CanadianNational Railway, 2014, p. 15).

Conclusion

For more than twenty years, CN’s organizational strategy has helpedit overcome several challenges and provide world class and efficientservices to its customers. Consequently, it has managed to fightcompetition, become very productive and profitable, and achieve highgrowth rates. It has become the best and most successful rail companyin North America. That is why it is considered to be the main pillarof the economy. Furthermore, its growth rate has surpassed theeconomic growth rate. Indeed, building on its commitment to serviceand operational excellence as well as continuous innovation has madeit remain focused on developing a corporate of the future.

References

Beatty, C. A. (2016). Hunter Harrison and the Transformation of the . Kingston: Queen’s University.

. (2014). 2014 Annual Report. Montreal, Quebec: .

Marowits, R. (2016, January 26). CN Rail hikes dividend by 20% despite challenging year. Retrieved from The Star: https://www.thestar.com/business/2016/01/26/cn-rail-hikes-dividend-20.html

Transport Canada. (2012, July 18). Rail Transportation. Retrieved from Transport Canada: https://www.tc.gc.ca/eng/policy/anre-menu-3020.htm

Waldron, P. (2017, February 1). CN`s 2016 Annual Financial Statements and Annual Information Form available on Company website. Retrieved from : https://www.cn.ca/en/media/2017/02/pressrelease_20170201050022_0737