Canadian Pacific Railway’s and Union Pacific’ Partnership

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Table of Contents

Introduction
Nonmarket Environment
Integrated Strategy
Conclusion and recommendations
References

Introduction

Canadian Pacific Railway Limited (CPR) operates a transcontinental railway between Canada and the US. It has a railway network dispersion covering 14,000 miles. Headquartered in Alberta, the company has a workforce of 16,000 employees. It largely transports crude fuel and coal along the network. The company entered into a distinctive partnership with Union Pacific (UP). UP has been facing operational challenges. Consequently, the partnership has affected CPR’s capacity to address customer commitments leading to negative publicity affecting its business environment.

Business environment is composed of two components. These include the market and the nonmarket component. Typically, organizations often underestimate the implications of the nonmarket environment in achieving organizational goals and objectives. In situations where organizations are conscious of the nonmarket environment, it proves challenging to manage. Organizations hence require having a strategy in place to deal with the nonmarket environment. These nonmarket strategies must be executed in combination with market strategies. The nonmarket environment impacts market environment such as competition, market share and profitability (Baron, 2012).

Nonmarket Environment

The market component entails relations among organizations, suppliers and consumers. The three aspects are governed by markets and agreements. The relations comprise deliberate financial dealings and the trade of services and commodities. Efficient management of market environment is a fundamental condition for greater financial performance. However, it is not sufficient in view of other forces that influence the performance of a business entity. In this view, organizations require addressing the nonmarket environment.

The nonmarket environment component entails social, political and legal engagements that define relations outside the markets and agreements. The management of the nonmarket environment is typically aimed at collaborating with the market environment to achieve the goals and objectives of an organization. Efficient supervision of the nonmarket environment has gradually and increasingly become an essential requirement for superior organizational outcome.

The nonmarket issues that influence the performance of an organization include environmental protection, fuel economy legislation, federal fuel taxes, human rights, ethics, capacity constrain, corporate social responsibility and health and safety. Other issues that impact organizational performance under nonmarket environment include intellectual property protection, antitrust, regulation and deregulation, international trade policy, social activist’s pressure and media coverage of the organization.

The Issue: Public Perception

The partnership between CPR and the financially-struggling UP created a negative perception among the CPR’s customers and the general public. CPR during its initial days had been performing financially and consequently serving its customers better. Starting from the time of partnership, the company lost its commitment to customer satisfaction as it concentrated on redeeming itself from the financial woes. The company struggled to deliver services to its customers.

The company’s customers in the western corridor have a negative perception regarding the company. The company face capacity constrains consigning the customers to use other means of transport despite the company having railroad network in the corridor. The customers in the region are frustrated by the company’s services. Customers in other regions also face almost similar problem regarding the company’s capacity to offer services to the thousands of passengers who need the company’s services. The reduced profitability made the company to abandon its corporate social responsibility.

The coal market in the US has been rapidly increasing. The rapid growth is the outcome of swelling Chinese demand for metallurgical coal. Consequently, the price of coal has increased fourfold from 20 percent to 80 percent. Unfortunately, the trucking industry has not been able to sufficiently meet transportation demands. Many tracking companies have been facing capacity constrain. The population living in these areas has been equally frustrated by CPR’s incapacity to sort the transportation mess in regard to coal. Prior to the partnership with UP, CPR would sufficiently assist the customers in transporting the coal to different ports for shipment. However, the increasingly incompetent (as perceived by the public) management has been unable to address the customers’ plight.

CPR has negative publicity regarding its social corporate responsibility, environmental protection and health and safety issues. On 27 March 2013, the company spilled over 75,700 litres of crude oil onto ice-covered land in northwest Minnesota. This was irrespective of the criticism the company was enduring regarding the transportation of crude oil by rail. On July 6, 2013, a train derailed at Lac-Megantic dumping millions of litres of crude oil into the environment (Blatchford, 2013). The public in conjunction with the provincial administration had demanded that the company pick up the spill. The response of the company generated heated public debate. The company issued a press release stating that it had no responsibility in cleaning the area. The spill was adversely affecting the environment as well as the community living in the town.

The cleanup was left to the authorities that used resources from public coffers. The move further angered the public as the company was not giving the transportation services as expected from a large company effectively in the first place. The disaster resulted in fatality of 47 residents. Additionally, it led to mass removal of more than 6,000 people. Majority of the locals abandoned their residences in the town and relocated to other places without compensation by the company. This significantly increased the public contempt for CPR.

Interests

The issue of corporate social responsibility (CSR) attracts heated debates in all industries. CSR has significant impact on the public perception about a specific company. It is always expected that any organization must be willing to give back to the community in which it operates. Consequently, organizations incorporate CSR in the organizational policy as one of the pillars that help the company achieve its organizational goals and objectives. In situations where the organization fails to execute its CSR, it attracts undivided attention of many players. Proper implementation of CSR gives a company competitive edge over competitors.

Typically, rail accidents do occur. CPR has had a number of such accidents leading to spillage and potential pollution of the environment. However, when the company dumped millions of litres in Lac-Megantic, the management acted naïve to the incident. The initial public outrage against the company emerged when the company refused to clean up the spillage at Lac-Megantic town. The incident destroyed public contentment regarding the rapidly-increasing capacities of crude oil ferried by the company. The incident attracted the reaction of environmental activists, human rights advocates and watchdog groups. Mayors and councils of societies in the country added to the voice by indicating that the company should not only clean the spillage but also the removal of hazardous rail cars. The Federation of Canadian Municipalities (FCM) has been reiterating that the company should not disgrace the community from which it obtains its profitability.

There has been mounting pressure from other railway companies and US and Canadian officials regarding the environmental safety practices of the company. Fingers have been pointed at the federal government for ignoring the public outcry. The company is owned by large, influential and financially endowed companies. Immediately after the Lac-Megantic incident, FCM established a functional group to lobby for better rail safety.

This forced the government to implement changes albeit short-lived. One-person teams for engines hauling train cars with hazardous items were barred. New limitations were introduced for unattended locomotives. Minimum decelerating system requirements were also introduced. However, this did not help in resolving the Lac-Megantic standoff. In fact, it increased the public contempt for the company as the move was viewed as having been influenced by the company to avoid cleaning the spillage and compensation of the displaced communities.

Institutions

There is a variety of institutions involved in view of corporate social responsibility of CPR. The number increased significantly after the Lac-Megantic incident that elicited institutional intervention to solve the issue. The company and the Canadian government are among the major institutions. Other institutions such as the FCM, the Canadian Transportation Safety Board (TSB) and the US National Transportation Safety Board (NTSB) also became significant players in the matter. The FCM played a major role in pressuring the government to act against CPR. In a move that received public accolade, the TSB and NTSB pressured the government to take immediate action against the company (Stephenson, 2014). Consequently, the government initiated the gradual removal of older car models. Additionally, Class One railway companies were ordered to furnish municipalities with comprehensive facts regarding the hazardous loads ferried every three months.

In respect to the hazardous substances transported by the company, the Canadian chemical industry has established the Responsible Care program. The program meticulously connects transport supervisors, railway and substance organizations in effort to diminish any hazards.

Information

This bit regards what the parties and institutions are aware of and trust concerning the subject at hand. The officeholders and interests know about the consequences of substitute course of action as well as the partiality of the parties concerned with the issue. In this perspective, the public holds information regarding the impact of the Lac-Megantic incident and the consequent refusal by CPR to demonstrate corporate social responsibility. The public outcry was a sign of the public awareness of the effects of the spillage. Additionally, the affected communities believed that the company should have compensated not only the families of the deceased but also the families that were displaced.

Cleaning the negative perceptions arising from the incident and the events that followed will not be easy for the company despite initiating environmental strategies. The public continue to feel aggrieved. Pollution agencies hold the position that it is the responsibility of railway companies to collaborate with contractors in cleaning up any spillage (Dixon, 2013).

Integrated Strategy

Managers function in both market and nonmarket environments. They are subsequently best positioned to evaluate the effect of the organization’s marketing activities in its nonmarket surroundings. They are also aware of the influence of developments in the nonmarket surrounding regarding market opportunities and performance. The corporate management is therefore responsible for formulating and instigating market strategies as well as nonmarket strategies (Baron, 2012).

The crude oil spillage at Lac-Megantic and the subsequent public and private outrage coerced CPR to reconsider its corporate social responsibility. The report of the Intergovernmental Panel on Climate Change (IPCC) issued press release citing calamitous ecological imbalance consequences if the company did not review its policies (Annis, 2013). The company designed the Integrated Vegetation Management Plan (IVMP) to manage the vegetation within the properties owned and managed by the company.

These include the track, ballast, rights-of-way and the ground adjacent to the railroad. The plan entails the planning procedures and the principles of incorporated pest management. It also defines how the approaches safeguard efficient environmental management while putting into consideration and incorporating environmental and human health aspects in its areas of operation. The impact the crude oil has on the health of residents has been put into consideration by committing to worker and public safety. The integrated strategy incorporates ecological safety considerations in tandem with safe and effective operation of its railroad.

Conclusion and recommendations

Nonmarket issues often impact organizational performance. In most circumstances, organizations act only when the subject matter is robust enough to coerce them to respond. It is imperative for organizations to be proactive to limit the extent of the harm arising from an issue once the organization has been confronted by one. CPR should have taken the initiative to clean up the spillage as a corporate social responsibility.

The move would have significantly improved the public perception of the company. The failure to compensate the victims further defaced the company’s image. The refusal by the company to assist in paying for the cleanup and compensation as requested by the Quebec government further attracted public contempt for the company. The company should honor the request as it is impacting its operation and losing business to competitors. CPR requires reviewing its CSR policy to include corporate actions that will assist the communities in which it operates. It should further review its environment policy to ensure compatibility with the regulations set by legislation.

References

Annis, R. (2013). Petro-political flows in Canada. Web.

Baron, D. (1996). Business and its environment. Upper Saddle River, NJ: Prentice Hall. Web.

Baron, D. (2012). Business and its environments. Alberta, Canada: Prentice Hall. Web.

Bloom, N. et al. (n.d). The business environment: Does management matter. Economic & Social Research Journal, 1(1), 1-39. Web.

Dixon, G. (2013). Canadian pacific rail spill highlights oil transportation debate. Web.

Stephenson, A. (2014). Pressure mounts to sidetrack older, hazardous rail cars used for hauling oil. Web.

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