Since it’s creation in 1881 the Canadian Pacific Railway supplied nation with a railway that unified a large expanse of a country. However, the Canadian Pacific Railway had virtually NO co
mpetition, a monopoly. With no contenders forcing CP Rail to be efficient, CP dominated the market and was not running an efficient enterprise.
However, the Canadian government didn’t want a monopoly running such a vital industry in there country. Remember, all the government could really do to control CP Rail’s power was inflicting them with countless
amounts of regulations. But all regulations really did was create a less productive company, which only proved to hurt the consumers, seeing they had no other option then to choose the heavily regulated, crippled railway.
A solution finally arrived in 1918, the end of world war one, with a more stable government and a steadier economy and government money, Canada could finally afford another railway. Thus the Canadian National Railway was born, much to the CPR’s dismay. Now, there was a competition. Now there was an Oligopoly. Now there was options, granted there was only one other option which really doesn’t change all that much, but it’s the thought that counts…right?
CPR struggled to come to terms with this new competitor, and all through the 1920’s CPR was loosing profits. CNR was booming, everything seemed to be going right. But the 1930’s came and CNR could not remain in the initial lead it had created over its competition. Through out the 1930’s CPR gained back much of the lost competition by being more effective, because they could afford to. Remember, CNR was a government owned business,
CPR was private. The government did not have the same amount of money to put into the CNR as they did the previous decade, and the CPR who had almost 40 years head start on the CNR did not have to wait for government subsidise to save them. Therefore, during the 1930’s CPR regained its initial power over the industry.
This in short is what these two industries do. Fight for power over the industry rather then trying to run the trains effectively and efficiently.
For instance in the 1960’s: CNR had regained the power and both companies were both transporting goods and people. CPR decided to cut their losses and reduce their passenger intake to an all time low. Giving them more room
for transporting goods, and people had to go to CNR to get train travel. Not to mention, in the 1960’s air planes were becoming the key mode of transport and trains were not as popular, but for those who trusted trains more, they had to choose CNR. This meant CNR had less room for transporting goods AND could not move the trains as fast as CPR could, seeing they had to stop at every stop that their passengers wanted to. Once again the CPR had taken back the power.
However, the government did not approve of this and created a regulation that stated the both trains had to take at least a certain minimum number of people. Nothing really changed, CPR increased the number of passengers they took to the bare minimum and CNR was still left to pick up the left over passengers. Finally, the government created another railway. VIA RAIL, a passenger only train, in no way was it in competition with the “big boys” but it relieved them of their passenger dispute. And the playing field was equal again
Even as recently as this year has this "power war" between the companies been in full force. CNR had many of its engineers go on strike in hopes to raise wages. The engineers are part of a union and therefore it was a crippling blow to the company. CPR jumped on this. In fact, CPR even went out of its way to add $500-million to the pensions of its employees, as if to further motivate their workers, creating a more efficiently run enterprise. However, this extra cost may reduce profits for this year, however, it may prove to be very helpful in the long run if it allows CPR to sidestep a strike themselves. CNR ran most of their trains during the strike, however they did have some delayed or even cancelled, which is not good for business.
The power continues to shift between the two companies. Some years CPR does better, others CNR does better. However both felt the crunch of this passed recession. Both trying to cut back to do better then the other, and due to their interdependency on each other, the other would only respond with the same. However at the end of this year’s third quarter, CNR did only marginally better over all but for how long this “lead” will last is anyone’s guess.
Being in such a tight knit oligopoly creates some serious contentions between the two countries. Despite the industry has some serious barriers to entry, other much smaller have attempted to enter the Canadian railway, but they are never able to compete with the two big companies at the national level.
This extremely drastic oligopoly, proves time and time again, that even though their services are slightly differentiated and their extreme interdependency, that they are extremely inefficient. With prices strangely similar, perhaps higher then they should be, its makes you wonder if collusion is going on behind closed doors, especially when they are under the Railway Association of Canada
The CP rail map
The government is very actively involved with this industry, subsidizing and regulating, creating governing associations that are in charge and create rules for companies in the industry to follow. With heavy government intervention, small number of other options for consumers and two extremely power hungry large corporations, i
t’s any wonder the Canadian railway system is a flawed, inefficient industry.
The CN railway map
eans a certain amount of government money may potentially go into the CNR to help reduce their costs. Also, with consumers constantly having to choose between two railways that depending on where their product that needs shipping needs to go, with choose one over the other, production costs a bound to vary with changes in demand (and customer convenience).
