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BUSINSS MEMORANDUM
DATE

: 20 November, 2017

TO

: Mr. Robert, Chief Executive Officer, Blue Bird Corporation

FROM

: Mr. Crac, Business Manager, Blue Bird Corporation

RE

: Board of Directors, Blue Bird Corporation

Introduction
Blue Bird Corporation, established in 1982, is a United States-based multinational bus
manufacturing and marketing company. The products offered by the company include school
buses, transit buses, motorhomes, and specialty vehicles. Currently, Blue Bird has the operation
in more than 12 countries of the world. It is now considering to expand its operation and
establish a new branch in the foreign market for expanding its products life cycles and increase
total revenue.
This paper aims at exploring the business expansion scope, challenges, and opportunities
to the Canadian market. Based on the review of the business expansion scope, challenges and
opportunities in light of business relationship of United States with Canada, inflation rate in
Canada, exchange rate of US dollar and Canadian dollar, trade policies of Canada, and degree of
exchange rate risk in obtaining finance (from home country or from abroad) for expansion, some
recommendations will be made to Blue Bird with respect to business expansion in Canada.
Commercial Relationship in Between United States and Canada
Canada shares land borders with the contiguous United States to the south and Alaska
state to the northeast (Figure 1). It is second largest trading partner of United States. United
States and China are friendly neighbors for the last 200 years. Both countries extends their
mutual support and cooperation for boost up economic development. These countries are sharing

the longest un-militarized border in the world. These share commercial trade, immigration, and
tourism (All Lake, 2016).

Figure 1: Canada and United States

According to Barack Obama, the former president of United States, no other countries in
the world match up more closely together deeply, economically, and culturally than the United
States and Canada (The Embassy of the United States of America, 2016). United States and
Canada share $1.4 trillion bilateral trade and investment relationship on average (The Council of
State Governments, 2016).
According to Paul Mackler, the president of Eagle Eye Expositions, the bilateral
economic relationship of these two countries is the largest bilateral commercial relationship in
the world (The Council of State Governments, 2016). In 2016, the merchandise goods trade with
the Canada consisted of USD 266797.4 million of exports and USD 277755.7 million of export
(U.S. Census Bureau, 2017). According to the Office of the United States Trade Representative,
more than 8 million jobs in United Sates depends upon the trading relationship with the Canada.

Potential opportunity for the Company
The high aggregate export balance of United States to Canada represents a trade
opportunity for Blue Bird. Total balance of export of trucks, buses and special purpose vehicles
of United States in 2016 was USD 13,928,172 thousands as compared to that of earlier period
(2015) of USD 13,583,035 thousands (U.S. Census Bureau, 2017).The high export balance
indicates that there is high demand of US cars and automobiles in the Canada. Trucks, buses and
special purpose vehicles is the third largest export item of United States to Canada. Blue Bird
can consider to expand business in the Canada as part of extending its product life cycle and
increase overall revenue.
Trade Policy of Canada
Canada is a trading nation as its total trade is worth more than two- thirds of its total
GDP. Nearly about 75% of the total trade of the Canada are occurred with the countries with
which it has Free trade agreements. Canada is an original member country of WTO1 since 1995.
The government of the Canada has high focus on current and future growth of the country with
open markets, and stable and transparent trading environment. It focuses to ensure less
restrictions in free movement of goods and investment through negotiations at the bilateral,
regional and multilateral levels (Global Affairs Canada, 2016). Canada has already established
and negotiated free trade agreements with more than 40 countries of the world. In 2016, it has
concluded two big free trade agreements including CETA2 and TPP3 (HERMAN, 2017). The
trade barriers (tariff and non-tariff), and regulations are lower level at Canada as compared to
other many countries of the world.

1

WTO: World Trade Organization

2

CETA: Comprehensive Economic and Trade Agreement

3

TPP: Trans-Pacific Partnership

Canadian government imposes no foreign exchange restrictions. Trade licenses can be
easily obtained with less bureaucratic problems and complexities (HKDTC Research, 2017).
Import licenses are only required for a limited number of goods. Imports are subject to import
duties. But imports of some selected products including drugs, medical devices, hazardous
products, motor vehicles etc. are heavily regulated. The foreign companies are favorably taxed
like as the local companies as a part of fostering efficient market environment (HKDTC
Research, 2017).
The NAFTA4, established in 1994 to promote the free and fair trade, has opened the door
of free trade and investment in between United States and Canada. NAFTA is the second largest
free trade regions in the world. Since implementation of NAFTA, the trade in between Canada
and United States have become more than double (The Embassy of the United States of America,
2016).
The trade barriers (tariff and non-tariff) that can be faced by the Blue Bird in doing
business in Canada include•

Strict licensing requirements (in consideration of the protection of local industry).

•

Anti-dumping and countervailing duty measures.

•

Product standards and requirements.

•

Differential tax treatment (than t...