In the past year, Bombardier Aerospace introduced their much anticipated line of CSeries jets.  Magellan Aerospace and Pratt & Whitney Canada invested big time in their Montreal and Winnipeg operations.

According to the AIAC (Aerospace Industries Association of Canada), based in Ottawa, the aerospace sector directly employed 82,000 Canadians in 2007.  This is a significant increase from the 79,000 employees working in the industry just a year prior.  Aerospace revenue increased by half a billion to $22.7B.

Aircraft parts, components, and planes, jets, etc. account for 55% of  the overall revenues for the aerospace sector, the majority of which is generated by exports, especially to the US and European countries. Military sales increased by $5 billion last year, a rise of 18% from 2006.

Helping to fuel the exponential growth of the aerospace sector (no pun intended) is the increase in commercial air travel. The Current Market Outlook for 2007-2008, released by Boeing, predicted that air passenger travel will increase 5% per year, and cargo travel by 5.8%. The forecast extends these numbers for the next two decades.

Quote for April 22nd, 2009:

“The modern airplane creates a new geographical dimension. A navigable ocean of air blankets the whole surface of the globe. There are no distant places any longer: the world is small, and the world is one.”
- Wendell Willkie

During the Leaders’ english debate on October the 3rd, one issue that was broached was the federal SRED (Scientific Research and Experimental Development) business incentive program. Under the existing federal SR&ED program, non-profitable corporations with large revenues may receive research and development tax credits that cannot be applied.  Liberal leader Stephane Dion and Bloc Québécois leader Gilles Duceppe both proposed that these tax credits be partially refundable.

“A Liberal Government will encourage all companies to innovate, even if their innovation does not lead to immediate profitability, by making the SR&ED Tax Credit partially refundable. This change is vital at a time when many companies are struggling to become or stay profitable.  Every company that puts money into R&D should be rewarded for innovating.” [ Source ]

Large corporations can sometimes receive millions of dollars in tax credits through the SR&ED program.  I think that this measure, if implemented, will increase the cashflows of these large corporations drastically!

Financing from banks will no longer be easy to come by.  In turn, consumers will no longer be willing to accumulate loads of debt.  Therefore, conservation will soon become a common theme.  Concepts such as “green living” will soon become synonymous with “sustainable lifestyles,” “affordability,” and “living within your means.”  If this is what it means to “be green,” then so be it- consumers will want to live greener lives, and companies should adapt accordingly.

Economists claim that invest in energy efficiency and renewable-energy strategies could create 2 million US jobs in the next 2 years. And as many as 1 out of 4 workers in the US will be working in the renewable energy and energy efficiency industries by 2030, according to a separate recent report from the American Solar Energy Society.

The big question is: will Canadian businesses follow suit?

Nintendo’s response was the handheld DS, followed by the Wii. The DS two-screen touch handheld was a test study that focused on gameplay and “fun” instead of trying to compete with Sony and Microsoft on graphics and hardware.  The DS was a success, so the Wii followed suit.

Nintendo built the Wii: a cuddly, low-priced, motion-controlled machine that focused on interaction and unique gameplay.  Their strategy was to expand the target market, because to compete with Sony and Microsoft to develop the best hardware would have been suicide.  Nintendo used a cheaper and lower-powered processor for their Wii console because they firmly believed that they could appeal to children as young as 4 and adults as old as 70 if they could:

1. Make video games easy-to-play, interactive, and “fun.”
2. Sell a complete gaming system at an affordable price point. 

This strategy was an astounding success!  Families, women, children, and all grandparents all embraced the gameplay of the Wii, and the low $300 price point increased sales volumes drastically.  And because of the decision to adopt older technology, they were able to sell the console with a $50 profit margin! (Sony and Microsoft both sell their consoles in the $400 to $500 price range at a loss)

Nintendo now projects that the Wii will take a 40-45% market share in this generation.

This case study illustrates the fact that innovation and R&D is a necessary part of any business’ survival.  Businesses are constantly competing to build the better mousetrap.  However, the business that figures out how to deter the mouse from entering the house (at an attractive price point) will steal market share from their competitors.

Further information:

• Stringer: Wii business model superior to PS3′s
• The untold story of how the Wii beat the Xbox, PlayStation

“For too long, we allowed high commodity prices to make us feel wealthy,” says Glen Hodgson, chief economist at the Conference Board of Canada. “In a perfect world, we’d have an election campaign that debated how to improve our lagging productivity, which any economist will tell you is the key to sustainable prosperity.”

According to Anne Golden, President of the Conference Board of Canada, steps that are needed to ensure sustainable prosperity include:  enhanced labour mobility, a credentialing system that more rapidly integrates skilled newcomers, along with measures to improve health care.

I think that the key to turn around the economy is to enhance labour mobility by investing in R&D and scientific innovation.  Investment dollars need to be spent to encourage students to pursue advanced studies in engineering, physics, and math, because these are the fields of studies that are pre-requisites to scientific innovation.