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UBC Theses and Dissertations

The development of marketing in CN and CP Rail Jurczynski, Christopher 1976

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THE DEVELOPMENT OF MARKETING IN CN AND CP RAIL by CHRISTOPHER JURCZYNSKI B.A., M c G i l l U n i v e r s i t y , 1968 A T h e s i s S u b m i t t e d i n P a r t i a l F u l f i l m e n t o f the R e q u i r e m e n t s f o r t h e D e g r e e o f MASTER OF SCIENCE IN BUSINESS ADMINISTRATION i n t h e F a c u l t y o f COMMERCE AND BUSINESS ADMINISTRATION We a c c e p t t h i s t h e s i s a s c o n f o r m i n g t o t h e r e q u i r e d s t a n d a r d THE UNIVERSITY OF BRITISH COLUMBIA December, 19 76 © C h r i s t o p h e r J u r c z y n s k i In presenting th i s thes is in pa r t i a l fu l f i lment of the requirements for an advanced degree at the Univers i ty of B r i t i s h Columbia, I agree that the L ibrary shal l make it f ree ly ava i l ab le for reference and study. I further agree that permission for extensive copying of th is thesis for scho lar ly purposes may be granted by the Head of my Department or by his representat ives. It is understood that copying or pub l i ca t ion of th is thes is fo r f inanc ia l gain sha l l not be allowed without my writ ten permission. The Univers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 - i i -ABSTRACT In the absence to date of s u b s t a n t i a l published m a t e r i a l on Canadian railway marketing, t h i s t h e s i s represents an i n i t i a l overview study of the subject. I t examines the o r i g i n s , development overtime and current status of the f r e i g h t marketing organizations and p r a c t i c e s of CN and CP R a i l . The f i r s t part of the thesis i s an examination of the post-second World War economic and regulatory environment and developments i n the CN and CP R a i l organization and p r a c t i c e s of the time. Evidence ind i c a t e s that the appearance of railway marketing was a response to post-war commercial competitive f o r c e s . The second part consists of a discussion of today's integrated CN and CP R a i l marketing organizations and traces the development from the e a r l i e s t forms of railway marketing. The a n a l y t i c framework f o r t h i s discussion i s basic marketing theory. Evidence from the an a l y s i s suggests that Canadian railway marketing has developed i n a s i m i l a r manner to that experienced i n other i n d u s t r i e s and r e f l e c t e d i n marketing theory. - i i i -CONTENTS ABSTRACT LIST OF TABLES LIST OF FIGURES LIST OF EXHIBITS ACKNOWLEDGEMENTS I Introduction 1 Objective 1 Importance 2 Outline 2 Sources 3 Li m i t a t i o n 3 I I The Marketing Concept ; 5 D e f i n i t i o n 5 Structure 5 The Marketing Mix - Core Functions 6 Support Function 10 Integration 11 Usual Phases of Concept Implementation 19 I I I Reasons for the Railways' Adoption of the Marketing Concept 21 The 1945-1960 Railway Environment The Contemporary Railway View 22 Environmental Va r i a b l e s - A Survey 23 Environmental Impact on Railway Earnings 39 Railway Earnings 39 Impact of Environmental Developments 41 Railway Responses 42 Railway Technological and New Service Developments 42 Adopting the Marketing Concept 43 Conclusion 45 i i v v i v i i i i x - i v -IV Railway Marketing 47 The Evolution of Railway Marketing - An Overview 47 The Beginnings 47 Development through the 1960's 51 The Marketing Concept i n P r a c t i c e Today 55 The Development Phases of Railway Marketing 58 The Present Structure of Railway Marketing 58 The Marketing Mix - The Core Marketing Functions 59 The Support Function - Marketing Research/ Marketing Information System 69 Integration and Co-ordination 73 D e c e n t r a l i z a t i o n 84 Conclusion 88, V Summary and Conclusion 93 FOOTNOTES 98 BIBLIOGRAPHY 10.2 - v -L I S T O F T A B L E S ( C h a p t e r I I I ) I S o m e C a n a d i a n E c o n o m i c I n d i c a t o r s : 1 9 4 7 , 1 9 5 2 , 1 9 5 7 , 1 9 6 2 2 4 I I 1 9 4 7 - 6 2 G r o w t h i n O u t p u t o f t h e C a n a d i a n E c o n o m y ( i n G N E T e r m s ) , T r a n s p o r t a t i o n S e c t o r ( i n T o n - M i l e T e r m s ) , a n d R a i l w a y I n d u s t r y ( i n T o n - M i l e T e r m s ) 2 6 I I I M o d e S h a r e s i n C a n a d a ( B a s e d o n T o n - M i l e O u t p u t 1 M e a s u r e s ) : 1 9 4 7 , 1 9 5 2 , 1 9 5 7 , 1 9 6 2 2 7 I V C a n a d i a n R a i l w a y a n d H i g h w a y T o n - M i l e D a t a : 1 9 4 7 , 1 9 5 2 , 1 9 5 7 , 1 9 6 2 2 9 V D i s t r i b u t i o n o f T o n - M i l e s o f T r a n s p o r t a t i o n S e r v i c e i n C a n a d a , b y R a t e C l a s s ( E x c l u d i n g S t a t u t o r y R a t e s ) : 1 9 5 1 , 1 9 5 8 , 1 9 6 8 3 1 - v i -L IST OF FIGURES ( C h a p t e r I I ) 1 P r o d u c t - M a r k e t S t r a t e g y A l t e r n a t i v e s -12 2 F u n c t i o n a l O r g a n i z a t i o n 14 3 O r g a n i z a t i o n by Customer Group o r Market Segments 16 4 O r g a n i z a t i o n by P roduc t 17 5 R e g i o n a l O r g a n i z a t i o n 18 (Chapter I I I ) CN Net Income before Fixed Charges and CP R a i l Net R a i l Operating Income (Current D o l l a r s ) : 1947-1962 40 ( C h a p t e r IV) 7 CP R a i l 1962/3 : H e a d q u a r t e r s O r g a n i z a t i o n - T r a f f i c 49 8 CN 1960: H e a d q u a r t e r s O r g a n i z a t i o n - T r a f f i c 50 9 CN 1964: H e a d q u a r t e r s O r g a n i z a t i o n - S a l e s 53 10 CN 1975: H e a d q u a r t e r s O r g a n i z a t i o n - F r e i g h t M a r k e t i n g 75 11 CP R a i l 1975: H e a d q u a r t e r s O r g a n i z a t i o n - F r e i g h t M a r k e t i n g and S a l e s 76 12 CN 1975: System ( H e a d q u a r t e r s and R e g i o n s ) F r e i g h t M a r k e t i n g O r g a n i z a t i o n 81 13 CP R a i l 1975: System ( H e a d q u a r t e r s and R e g i o n s ) F r e i g h t M a r k e t i n g and S a l e s O r g a n i z a t i o n 82 14 CN and CP R a i l : A d m i n i s t r a t i v e R e o r g a n i z a t i o n s - 1950 ' s to the P r e s e n t 85 CN 1960: Sys tem ( H e a d q u a r t e r s and F i e l d ) T r a f f i c O r g a n i z a t i o n CP R a i l 1 9 6 2 / 3 : System ( H e a d q u a r t e r s and F i e l d ) T r a f f i c O r g a n i z a t i o n CN 1964: System ( H e a d q u a r t e r s and R e g i o n s ) S a l e s O r g a n i z a t i o n - v i i i -LIST OF EXHIBITS (Chapter IV) 1 A Sample of T i t l e s of CP R a i l Research Studies (1948 to 1970) - i x -ACKNOWLEDGEMENTS T h i s t h e s i s would no t have been p o s s i b l e w i t h o u t t he c o o p e r a t i o n o f CN and CP R a i l p e r s o n n e l who g e n e r o u s l y g r a n t e d me i n t e r v i e w s . A l o n g w i t h many o t h e r s t o o numerous to m e n t i o n , I s h o u l d l i k e t o thank , o f t h e CN, M e s s r s . J . C . G a r d i n e r and R.A. S i l k f o r ' t h e i r d i s c u s s i o n o f t h e g e n e s i s and deve lopment o f CN r a i l w a y m a r k e t i n g , G.A. D u c r o s s and N.A. K o r n a f e l f o r a s s i s t a n c e w i t h o r g a n i z a t i o n c h a r t s , W.D. Spencer f o r h i s h e l p i n r e c a l l i n g and e x p l a i n i n g i n s t i t u -t i o n a l d e v e l o p m e n t s i n r a i l w a y p r i c i n g , and M r s . W.D. Webb o f P u b l i c A f f a i r s f o r t h e t e x t s o f 1 9 5 0 ' s and 6 0 ' s p u b l i c a d d r e s s e s by CN s e n i o r management. A t CP R a i l , I am i n d e b t e d to M e s s r s . H.M. Romof f , W.G. S c o t t , G . J . A s k w i t h and J . R . C r o s s l e y f o r t h e i r a c c o u n t s o f d e v e l o p m e n t s i n CP R a i l m a r k e t i n g o r g a n i z a t i o n and p r a c t i c e s ; M r s . P. T s e n g , C o r p o r a t e L i b r a r i a n , f o r a c c e s s t o h i s t o r i c a l company memoranda and o l d r e s e a r c h r e p o r t s ; M e s s r s . B. C a p l a n , J . A . S h i e l d s and D.O. Brown f o r e a r l y 1 9 6 0 ' s and c u r r e n t r a i l w a y o r g a n i z a t i o n c h a r t s ; and M. G i n g e r y s t y and R. F e r g u s s o n o f t h e M o n t r e a l and V a n c o u v e r P u b l i c R e l a t i o n s o f f i c e s f o r t e x t s o f p o s t - w a r s e n i o r management s p e e c h e s . - x -I am g r a t e f u l to Mr. J . Hanley of the Canadian Transport Commission for h i s h e l p f u l views on the development of competition i n Canadian tran s p o r t a t i o n and to Dr. W.W. Long of the U n i v e r s i t y of Calgary for guidance on the sections on marketing theory. I should also l i k e to thank Dr. M. Christopher of the C r a n f i e l d I n s t i t u t e , England, f o r h e l p f u l suggestions i n the e a r l y stages of planning and researching my t h e s i s ; members of my committee for advice and guidance throughout the manuscript preparation; and my parents f o r t h e i r kindness i n reading and commenting on e a r l y d r a f t s . - 1 -CHAPTER I INTRODUCTION / Object ive L i t t l e i s written on substantial developments and changes which have recently taken place i n Canadian railways in the organization and practices of fre i g h t marketing. Indeed there is a lack of systematic material on railway marketing generally. Focussing on CN and CP R a i l ^ \ t h i s thesis attempts to contribute to an understanding of th i s subject. F i r s t , i t examines the railways' l a t e 1950's/ early 1960's adoption of a marketing perspective as a response to changes i n the external environment such as the post-war growth of intermodal competition. Then, t r a c i n g the evolution of railway marketing through the 1960's - including the development of an array of marketing mix elements and s i g n i f i c a n t d e c e n t r a l i z a t i o n to the regions - i t analyzes the present structure of railway marketing organization and practices i n terms of textbook marketing theory. - 2 -Impor tance An u n d e r s t a n d i n g o f t he c u r r e n t m a r k e t i n g s y s t e m o f C a n a d i a n r a i l w a y s and the r e a s o n s f o r i t s p a r t i c u l a r deve lopment i s i m p o r t a n t . F o r example , governments i n c o n s i d e r i n g c o n t r o -v e r s i a l f r e i g h t r a t e i s s u e s c o u l d d e r i v e some i n s i g h t s f r o m a knowledge o f r a i l w a y m a r k e t i n g as t he w i d e r terms o f r e f e r e n c e w h i c h s e t t he p a r a m e t e r s f o r p r i c i n g d e c i s i o n s . S h i p p e r s c o u l d g a i n an a p p r e c i a t i o n o f t h e g e o g r a p h i c s cope and b r e a d t h of t h e r a i l w a y s ' m a r k e t i n g e n d e a v o u r s and o f t h e i n t e r r e l a t i o n s h i p s between r e g i o n s and between h e a d q u a r t e r s and r e g i o n s . The r a i l w a y s t h e m s e l v e s c o u l d f i n d u s e f u l a d e s c r i p t i o n o f t h e i r o r g a n i z a t i o n and p r a c t i c e s , v i e w e d f r o m a t h e o r e t i c a l s t a n d p o i n t . T h e r e c o u l d a l s o be l e s s o n s f o r o t h e r t r a n s p o r t a t i o n compan ies o r t h e b a s i s f o r a c o n t r i b u -t i o n to the m a r k e t i n g l i t e r a t u r e . O u t l i n e C h a p t e r I I i s a b r i e f t h e o r e t i c a l d i s c u s s i o n o f t h e m a r k e t -i n g c o n c e p t . C h a p t e r I I I s eeks to d e t e r m i n e the r e a s o n s f o r t h e r a i l w a y s ' i n i t i a l - i n the mid 5 0 ' s a t CN and a b o u t 1960 a t CP R a i l - 3 -- a d o p t i o n of the m a r k e t i n g p e r s p e c t i v e . C o n s i d e r a t i o n i s g i v e n to e n v i r o n m e n t a l d e v e l o p m e n t s , l i k e the sharp r i s e i n i n t e r m o d a l c o m p e t i t i o n , wh ich o v e r the p e r i o d 1945-1960 l e d up t o the c r e a t i o n o f the f i r s t r a i l w a y m a r k e t i n g e n t i t i e s -t he t r a f f i c r e s e a r c h g r o u p s . C h a p t e r IV examines c u r r e n t CN and CP R a i l m a r k e t i n g o r g a n i -z a t i o n and p r a c t i c e s and how t h e y have d e v e l o p e d and d e c e n t r a l i z e d over the p e r i o d 1960-1975. S p e c i a l a t t e n t i o n i s g i v e n to each o f the e l ement s o f the m a r k e t i n g mix and to t h e o r g a n i z a t i o n a l s t r u c t u r e tha t e n s u r e s c o - o r d i n a t i o n between t h e s e e l ement s and between h e a d q u a r t e r s and the r e g i o n s . C h a p t e r V p r e s e n t s a summary and c o n c l u s i o n o f the t h e s i s . Sources Sou rce s f o r the b a s i c m a r k e t i n g t h e o r y i n c l u d e t e x t b o o k s (2) such as S t a n t o n and Sommers . F o r the e n v i r o n m e n t a l (3) d a t a , s o u r c e s i n c l u d e P r i c e s and Incomes Commiss ion and S t a t i s t i c s Canada p u b l i c a t i o n s , bank r e v i e w s o f the C a n a d i a n economy, the " F i n a n c i a l P o s t " , P u r d y ' s w o r k ^ ^ and M a c D o u g a l l ' s h i s t o r y o f C a n a d i a n P a c i f i c ^ \ F o r m a t e r i a l - A -on railway marketing, r e l i a n c e was placed on documents and memoranda provided by railway o f f i c i a l s and on information provided v i a interviews with senior o f f i c e r s . L i m i t a t i o n A l i m i t i n g f a c t o r i n any treatment of railway marketing i s the nature of the subject i t s e l f . I t c l e a r l y lends i t s e l f to q u a l i t a t i v e rather than q u a n t i t i v e a n a l y s i s and, i n e v i t a b l y , there must be r e l i a n c e on s u b s t a n t i a l t r a c t s of n a r r a t i v e and l a r g e l y subjective assessments. Chapter I I I , where the railway operating environment of the 1950's i s deal t with, i s an example of t h i s . - 5 -CHAPTER II THE MARKETING CONCEPT Def i n i t ion The marketing concept contemplates a firm a n t i c i p a t i n g , meeting and adapting to dynamic market conditions. Thus, a l l company planning, p o l i c i e s , and operations must begin . (6) with the customer. The concept also implies that a l l the products and services for which a demand e x i s t s and which i t is within the firm's c a p a b i l i t i e s to supply should be i d e n t i f i e d quite p r e c i s e l y . This i s c a l l e d product d i f f e r e n t i a t ion. Structure Marketing is concerned with " l i n k i n g - p i n " a c t i v i t i e s between a firm and i t s customers. Some of these a c t i v i t i e s existed h i s t o r i c a l l y , but were not c a l l e d marketing a c t i v i t i e s . An example of this in many industries was the p r i c i n g department. Other a c t i v i t i e s - for example market research - have evolved as a r e s u l t of the development of the marketing concept. Today, a l l marketing a c t i v i t i e s are normally grouped together as a single coherent departmental - 6 -u n i t , notwithstanding the h i s t o r i c a l status of a c t i v i t i e s l i k e p r i c i n g . The marketing concept-in-operation is based on the idea of an integrated package of marketing instruments comprising nonprice programs such as product development, d i s t r i b u t i o n , and promotion, as well as p r i c i n g programs. The four instruments are commonly referred to as the "marketing mix" (8) and comprise the core of a company's marketing system. Support systems for these core functions include a market research c a p a b i l i t y and a marketing information system. Marketing a c t i v i t i e s directed toward i n d u s t r i a l markets have a somewhat d i f f e r e n t emphasis from consumer marketing a c t i v -i t i e s . Since railway marketing f a l l s into the " i n d u s t r i a l " category, the following discussion concerns i n d u s t r i a l market ing. The Marketing Mix - Core Functions Product Development. "Product" i n the context of marketing theory includes " s e r v i c e s " and a l l a t t r i b u t e s which d i s t i n -guish one product from other products. This may include p r i c e and "time and place u t i l i t y " , i . e . a v a i l a b i l i t y , which - 7 -themselves are treated as separate marketing mix e l e m e n t s . ^ A product type i s considered to have a c e r t a i n l i f e c ycle, passing through development, introduction, growth, maturity and d e c l i n e phases. The product " p o r t f o l i o mix", necessary to preserve a stable market p o s i t i o n f o r the fir m , normally includes some products at each of the various stages of the l i f e c y c l e . Marketing strategy as regards the product element may be either to introduce a new product, or modify or eliminate an e x i s t i n g one. D i s t r i b u t i o n . "A channel of d i s t r i b u t i o n i s the structure of intracompany organization u n i t s and extracompany agents and dealers, wholesale and r e t a i l , through which a commodi-ty, product, or service i s marketed".^ ^ It has been mentioned that i f a company's product - whether c i g a r e t t e s or nuclear generators - i s defined to include a l l a t t r i b u t e s which make i t appealing to a buyer, then the a t t r i b u t e c a l l e d " a v a i l a b i l i t y " (or time and place u t i l i t y ) must be included. Producing t h i s a v a i l a b i l i t y or ensuring an optimum d i s t r i b u t i o n network i s an important marketing function. - 8 -In considering the railway "product", namely a set of transportation s e r v i c e s , i t i s obvious that i t too must be made a v a i l a b l e i n order to be of use. However, u n l i k e other i n d u s t r i e s where channels must be set up to allow a product to flow from manufacturer to ultimate buyer, i n the railway industry - or i n the transportation industry generally -production of the product/service occurs d i r e c t l y at the l o c a t i o n of the buyer of the s e r v i c e , the shipper or the consignee, as well as at an " i n f i n i t e " number of points anywhere along the railway i n f r a s t r u c t u r e s t i l l i n use. In t h i s sense, i t can be s a i d that there i s no i d e n t i f i a b l e " d i s t r i b u t i o n system" of the railway industry which i s separate from the "product", the way there i s i n most other i n d u s t r i e s . Promotion. The promotional element of the marketing-mix comprises the a c t i v i t i e s of a d v e r t i s i n g , personal s e l l i n g , and sales promotion. The mix of these promotional elements i s determined by the funds a v a i l a b l e , nature of the market, nature of the product and stage of the product's l i f e c y c l e . A d v e r t i s i n g c o n s i s t s of a l l the a c t i v i t i e s involved i n presenting a group with.a non-personal message, o r a l and/or - 9 -v i s u a l , regarding a product, s e r v i c e or i d e a . A d v e r t i s i n g may be product or producer oriented and may be d i r e c t e d to (13) general or s e l e c t i v e audiences (markets). i Personal s e l l i n g normally r e f e r s to a c t i v i t i e s performed by a sales f o r c e . These may include engaging i n "missionary" s e l l i n g , s e r v i c i n g customers, and s e n s i t i z i n g market (14) managers to the market. Sales promotion includes a c t i v i t i e s such as d i s p l a y s , shows, demonstrations and various non-recurring s e l l i n g e f f o r t s . P r i c i n g . P r i c i n g a c t i o n can d i r e c t l y i n f l u e n c e - among other things - revenue, p r o f i t , demand, market share and costs. P r i c i n g objectives are described u s u a l l y i n terms of achieving c e r t a i n d o l l a r or percentage targets i n one or several of these areas. Because of the widespread and complex impact of p r i c i n g a c t i o n , however, " p r i c i n g i s one of the l e a s t formally structured aspects of marketing (15) management" . "Cream-skimming",. "penetration", and discount p r i c i n g are examples of various p r i c i n g t a c t i c s . - 10 -Support Functions Marketing Research, Marketing Information System. Support to the four marketing-mix elements is supplied by marketing research and a marketing information system (MIS). Both functions may be concerned with the monitoring and analysis of markets, sales r e s u l t s , or advertising e f f o r t s . B a s i c a l -l y , however, the research function i s project oriented , while the MIS i s systems oriented. The research function is concerned with performing i n v e s t i -gations, designing p a r t i c u l a r marketing programs and systems, and developing, maintaining and updating an ongoing marketing information system. The function of a marketing information system is to organ-ize in a suitable form for marketing decision-making i n f o r -mation regarding "changes in the competitive environment, l e g a l issues, economic trends, value s h i f t s , ... , technical advances, int e r n a l a b i l i t i e s (the company's marketing per-f * v. ( 1 7 ) formance, etc. ; . In sum, the basic di f f e r e n c e between the more t r a d i t i o n a l "marketing research" and an MIS i s the "scope and unity of design of the l a t t e r . - 11 -Integrat ion Strategic and Program Parameters. The cornerstone notion of the marketing concept i s the necessity for i n t e g r a t i o n among the d i s t i n c t marketing instruments - hence the term marketing "mix". The framework for the a c t i v i t i e s of the mix i s set at the corporate s t r a t e g i c l e v e l . Given that a company does have an o v e r a l l marketing o r i e n t a t i o n , marketing strategy-making - l i k e finance, operations or personnel strategy-making - involves a cross-section of senior management, perhaps at the v i c e - p r e s i d e n t i a l l e v e l . This ensures a degree of i n t e r - f u n c t i o n a l co-ordination and consistency with o v e r a l l corporate goals or missions. Examples of marketing strategy which i s set at the senior l e v e l would be the defining of target rates of return for various commodity l i n e s or the establishment of desired product-market postures. The four basic strategy a l t e r n a t i v e s d e r i v i n g from product-market posture are commonly referred to as market penetra-t i o n , market development, product development and d i v e r s i -f i c a t i o n . They may be defined in terms of developing e x i s t i n g or new markets with e x i s t i n g or new products, as shown in Figure 1. - 12 -FIGURE 1 'PRODUCT-MARKET STRATEGY ALTERNATIVES MARKETS EXISTING NEW PRODUCT EXISTING NEW Market Market Penetration Development Product D i v e r s i f i c a t i o n Development - 13 -The program parameters are those at a t a c t i c a l l e v e l . Like s t r a t e g i c parameters, they contribute toward the co-ordina-t i o n of marketing e f f o r t s only more r e s t r i c t e d l y , within the l i m i t s of a p a r t i c u l a r program. K o l l a t t describes marketing programs and t h e i r role as follows: "After a master marketing strategy has been formulated, marketing programs are developed by functional departments representing the elements of the marketing mix" ... (These programs) include a detailed o u t l i n e of the action steps to be taken to achieve s p e c i f i e d objectives ... (including) what w i l l be done, by whom, when, and the r e s u l t s anticipated from such action".(19) Organizat ion. There are several philosophies for organizing marketing a c t i v i t i e s so as to ensure int e g r a t i o n and co-ordination. One of these i s the o r i e n t a t i o n around "function". A f u n t i o n a l l y oriented marketing organization, might have "program managers" to manage each of the four marketing-mix elements, and have a "marketing manager" to co-ordinate the various programs. It would be the a d d i t i o n a l r e s p o n s i b i l i t y of the l a t t e r to mediate between the program ( t a c t i c a l ) and the v i c e - p r e s i d e n t i a l ( s t r a t e g i c ) l e v e l s . The functional organization i s shown in Figure 2. - 14 -FIGURE 2 FUNCTIONAL ORGANIZATION Corporate Vice-Pres ident Market ing Market ing Manager Program Manager Sales, Advert i s i n g and Sales Promot ion Program Manager D i s t r i b u t ion Program Manager Product Development Program Manager P r i c i n g Adapted from K o l l a t , D.T., Blackwell, R.D., and Robeson, J.F., (Holt, Rinehart and Winston, Inc: New York, 1972) Chap. 17, F i g . 17.3 - 15 -A s e c o n d a p p r o a c h , shown i n F i g u r e 3, f o c u s s e s on o r g a n i z a -t i o n based on cus tomer g roup o r marke t segment . L i k e t h e f u n c t i o n a l o r g a n i z a t i o n , t h e r e a r e d i r e c t o r s o r managers o f t h e f o u r m a r k e t i n g mix e l e m e n t s . B u t t h e r e a r e a l s o " m a r k e t i n g d i r e c t o r s " f o r e a c h cus tomer g roup a n d , w i t h i n e a c h g r o u p , a n o t h e r s e t o f m ix e l e m e n t s w h i c h r e l a t e s p e c i -f i c a l l y t o t he g r o u p . O r g a n i z a t i o n by p r o d u c t , shown i n F i g u r e 4, i s a t h i r d a p p r o a c h to c o - o r d i n a t i o n o f m a r k e t i n g a c t i v i t i e s . The f o c u s on p r o d u c t t ype r a t h e r than marke t segment i s d i r e c t l y o p p o s i t e to t he cu s tomer a p p r o a c h . The n o t i o n o f s e p a r a t e m a r k e t i n g mix f u n c t i o n s f o r each p r o d u c t , h o w e v e r , doe s have s i m i l a r i t i e s w i t h the i d e a o f c u s t o m e r - s p e c i f i c m ix f u n c t i o n s . A g e o g r a p h i c a l l y d e c e n t r a l i z e d o r r e g i o n a l o r g a n i z a t i o n accommodates a s e t o f m a r k e t i n g a c t i v i t i e s a t e a c h r e g i o n a l o f f i c e . These a c t i v i t i e s may o r may no t c o m p l e t e l y d u p l i c a t e a l l h e a d q u a r t e r s a c t i v i t i e s b u t t h e g e n e r a l n o t i o n o f d e c e n t r a l i z a t i o n i s seen a s e n h a n c i n g o v e r a l l c o r p o r a t e m a r k e t i n g e f f o r t s . F i g u r e 5 i s a s c h e m a t i c d i a g r a m o f a d e c e n t r a l i z e d or r e g i o n a l m a r k e t i n g o r g a n i z a t i o n . - 16 -FIGURE 3 ORGANIZATION BY CUSTOMER GROUP OR MARKET SEGMENT Corporate Vice-President Marketing General Marketing Di r e c t o r Director Marketing Customer Group A Director Marketing! Customer |Group B [Director Sales Director D i s t r i b u t i o n i i i . _i _ J. Sales Manager Customer Group B D i s t r i b u t i o n Manager Customer Group B Director Product Development Director P r i c i n g Product Development Manager Customer Group B i . P r i c i n g Manager Customer^ Group B Adapted f r om K o l l a t , D.T., Blackwell, R,D,, and Robeson, J,F,, (Holt, Rinehart and Winston, Inc: New York, 1972).. Chap, 17, F i g , 17-7, - 17 -FIGURE 4 ORGANIZATION BY PRODUCT Corporate Vice-President Marketing General Marketing D i r e c t o r Product Manager Product A Product Manager D i r e c t o r D i s t r i b u t i o n Products A,B,C Di r e c t o r Sales Products A,B,C D i r e c t o r Product Development D i r e c t o r P r i c i n g Products A,B,C Products A,B,C Product B Product Manager Product C Adapted from K o l l a t , D.T., Blackwell, R.D., and Robeson, J.F., (Holt, Rinehart and Winston, Inc.: New York, 1972) Chap. 17, F i g . 17-6. - 18 -FIGURE 5 REGIONAL ORGANIZATION C o r p o r a t e V i c e - P r e s i d e n t M a r k e t i n g G e n e r a l Manager Market ing ) Reg ion A G e n e r a l Manager Ma rke t i n g ! R e g i o n B D i r e c t o r S a l e s D i r e c t o r D i s t r i b u t i o n ; D i r e c t o r P r o d u c t Development] D i r e c t o r ! P r i c i n g S a l e s Manager R e g i o n B D i s t r i b u t i o n Manager R e g i o n B P r o d u c t Deve lopment Manager R e g i o n B P r i c i n g Manager R e g i o n B Adapted f r om K o l l a t , D .T . , B l a c k w e l l , R.D. , and Robeson J . F . , ( H o l t , R i n e h a r d and W i n s t o n , I n c . : New Y o r k , 1972) Chap. 17 , F i g . 1 7 . 4 . - 19 -Usual Phases of Concept Implementation Stanton and Sommers i d e n t i f y four n a t u r a l phases of the evolution of marketing philosophy i n companies. The f i r s t i s the "sales f o r c e " stage. This i s characterized by aggressive sales e f f o r t s , i n contrast to the premarketing production-oriented business approach. Some a c t i v i t i e s -fo r example p r i c i n g , sales or inventory c o n t r o l - which i n time w i l l become elements of the marketing mix continue to e x i s t as separate departments, as they have done t r a d i t i o n a l l y . The second state i s that of "sales management". At t h i s stage, some cognizance i s taken of the be n e f i t s of a n a l y s i s of sales performance; i t i s recognized that a l l e f f o r t s are not equally productive. There may further be some grouping of marketing a c t i v i t i e s , with l i n k s between them, however, being rather informal. The o v e r r i d i n g concern of the f i r s t two phases i s the maximization of sales volumes and revenues. The t h i r d stage c l a s s i f i e d by Stanton and Sommers i s a " f u l l y integrated marketing management". Here, there i s \ - 20 -i n t e g r a t i o n of a l l the marketing instruments - product development, d i s t r i b u t i o n , promotion and p r i c i n g . Objectives are described in terms of p r o f i t , rather than sales volume, and products are judged in terms of t h e i r " c o n t r i b u t i o n " . The emphasis is on the f i n a n c i a l rather than the salesmanship competences of marketers. The fourth and f i n a l stage in the process of putting the marketing concept into action i s the stage where the marketing manager i s at l a s t aligned with the top men i n production and finance, and sometimes personnel, to work with the president, as the company's top planning and p o l i c y group. The marketing philosophy has at t h i s stage been throughly d i f f u s e d throughout a l l departments, and at a l l l e v e l s . When t h i s stage has been reached a company may be c a l l e d a f u l l "marketing organization". This chapter has described the hallmarks and basic elements of modern marketing theory and i t has outlined the path firms have t r a d i t i o n a l l y followed to become f u l l marketing organizations. Thus, i t provides a conceptual backdrop to the discussion in the next chapters of how marketing originated, developed and i s currently practised - at CN and CP R a i l . - 2 1 -CHAPTER III REASONS FOR THE RAILWAYS' ADOPTION OF THE MARKETING CONCEPT This chapter examines how external forces - and notably intermodal competition - led the CN and CP R a i l in the late 1950's and early 60's to adopt a marketing perspective i n the conduct of t h e i r business. The an a l y t i c framework i s the systems theory of the firm. This theory presumes that a firm operates in an "environment" of i n t e r a c t i n g " v a r i a b l e s " . The variables - including demand, economic conditions, competition, technology, and legal or regulatory (21) factors - produce c e r t a i n impacts on firms and induce c e r t a i n responses. The chapter begins with an examination of developments i n the railway environment i n the pre-marketing 1945-1906 period. It looks at perceptions of contemporary railway management and then, independent of the railway view, makes a survey of p a r t i c u l a r environmental v a r i a b l e s . Next, i t considers the impact of the environmental changes on CN and CP R a i l earnings. F i n a l l y , i t analyzes railway responses - among them the adoption for the f i r s t time of a marketing perspective. - 22 -The 1945-1960 R a i l w a y E n v i r o n m e n t The Contempora ry R a i l w a y V i e w . R a i l w a y management i n t h e 1 9 5 0 ' s were aware o f the r i s e o f i n t e r m o d a l c o m p e t i t i o n . Indeed t h e r e i s c o n s i d e r a b l e c o n t e m p o r a r y d o c u m e n t a t i o n t o t h i s e f f e c t . A 1955-56 " Economic S t u d y " , p r e p a r e d f o r CP R a i l by a H a r v a r d - M c G i l l c o n s u l t i n g g r o u p , a n a l y z e d t h e t r a n s p o r t a t i o n e n v i r o n m e n t o f the p e r i o d and recommended p o l i c y d i r e c t i o n s f o r t he company. The a n a l y s i s was p a r t i c u l a r l y i n c i s i v e : " C o m p e t i t i o n , b rough t on by r a p i d t e c h n o l o g i c a l change , i s r e s u l t i n g i n sweep ing change s i n t r a n s p o r t a t i o n . C o m p e t i t i o n has r e d u c e d t h e demand f o r many r a i l w a y s e r v i c e s . T h i s , i n c o n j u n c t i o n w i t h r e g u l a t o r y p o l i c i e s and r i s i n g c o s t s , has o c c a s i o n e d a s u b s t a n t i a l i n c r e a s e i n t h e number, e x t e n t , and b u r d e n o f u n r e m u n e r a t i v e s e r v i c e s p r o v i d e d by the r a i l w a y s . . . " ( 2 2 ) CP R a i l V i c e - P r e s i d e n t R.A. Emerson i n 1958 s t a t e d t h a t " t h e c h a l l e n g e o f c o m p e t i t i o n has r e p l a c e d the c h a l l e n g e o f geography as t he g r e a t s t i m u l u s o f p r o g r e s s i n r a i l t r a n s -(23) p o r t a t i o n " . The company ' s T r a f f i c R e s e a r c h Manager , W.G. S c o t t , s t a t e d i n 1962 t h a t " t h e sha rp d e t e r i o r a t i o n i n t h e r a i l w a y s ' marke t s h a r e and t h e t i g h t ( r e g u l a t o r y ) c o n t r o l w h i c h f o r y e a r s have b e e n e x e r c i s e d by Government - 23 -. . . d e s p i t e h i g h l y c o m p e t i t i v e marke t c o n d i t i o n s . . . were b a s i c r e a s o n s f o r a p p r e h e n s i o n d u r i n g t h e 1 9 5 0 ' s w i t h i n t h e ( r a i l w a y ) i n d u s t r y " . E n v i r o n m e n t a l V a r i a b l e s - A Su rvey Demand, G e n e r a l Economic C o n d i t i o n s , and C o m p e t i t i o n . Demand f o r r a i l w a y f r e i g h t s e r v i c e s underwent an i m p o r t a n t change i h t h e p o s t - S e c o n d W o r l d War p e r i o d . I t became s p e c i a l i z e d . The a p p e a r a n c e o f new modes and t h e growth and deve l opment o f o t h e r a l t e r n a t i v e modes f r a g m e n t e d a t r a n s p o r t a t i o n marke t w h i c h was p r e v i o u s l y s e r v e d by a s i n g l e t y p e o f l a n d c a r r i e r . The booming p o s t - w a r economy w h i c h s p a r k e d moda l d i v e r s i -f i c a t i o n i n t he t r a n s p o r t i n d u s t r y a l s o a l l o w e d t h e r a i l w a y t o m a i n t a i n p a s t l e v e l s o f p r o d u c t i o n . W h i l e t h e r a i l w a y s ' s h a r e o f t h e t r a n s p o r t a t i o n marke t f e l l , t h e r a p i d g r o w t h i n o v e r a l l t r a n s p o r t a t i o n demand a l l o w e d some g r o w t h - a l b e i t m a r g i n a l - even i n r a i l w a y b u s i n e s s . T a b l e I shows how the C a n a d i a n economy expanded i n terms o f G r o s s N a t i o n a l E x p e n d i t u r e ( e s p e c i a l l y u n t i l 1 9 5 7 ) . - 24 -TABLE I SOME CANADIAN ECONOMIC INDICATORS: 1947, 1952, 1957, 1962 Year G r o s s N a t i o n a l P e r c e n t a g e E x p e n d i t u r e (GNE) I n c r e a s e i n 1 9 6 1 - C o n s t a n t Over E a c h - D o l l a r s ( 1 ) 5 - y e a r p e r i o d ($ b i l l i o n s ) I m p l i c i t GNE A v e r a g e A n n u a l P r i c e D e f l a t o r P e r c e n t a g e 1961 - 100(2) I n c r e a s e , i . e . A v e r a g e A n n u a l I n f l a t i o n r a t e 1947 21 .4 63.1 30.8% 7.9% 1952 28 .0 87 .9 26 .1% 1.6% 1957 3 5 . 3 9 5 . 0 19.8% 1.3% 1962 42.3 101.4 — ._ ,.. (1) SOURCE: C a n a d i a n Depar tment o f F i n a n c e , A n n u a l Economic Rev iew, A p r i l 1975, R e f e r e n c e T a b l e 4, p . 1 0 5 , (based on d a t a f r o m S t a t i s t i c s Canada C a t a l o g u e #13-531) . (2) SOURCE: Same, R e f e r e n c e T a b l e 43 , p .150 - 25 -Supp lementa ry e v i d e n c e o f t h i s growth i s p r e s e n t e d i n the (25) " R o y a l Bank ' T r e n d i c a t o r ' R e p o r t " o f J u l y 1975 . A g raph i n t h a t r e p o r t p l o t s "Changes i n R e a l Economic A c t i v i t y " f o r the p e r i o d 1953-75. It combines bo th t r e n d and c y c l i c a l e f f e c t s . The p e r i o d f i r s t - q u a r t e r 1953 th rough t h i r d - q u a r t e r 1957 i s c h a r a c t e r i z e d by n e a r - c o n t i n u o u s p o s i t i v e changes i n r e a l economic a c t i v i t y , v a r y i n g o n l y i n (26) deg ree ; and the downswing o f t h i s c y c l i c a l b e h a v i o u r o c c u r s o n l y i n the f o u r t h - q u a r t e r , 1957. Changes i n r e a l economic a c t i v i t y from t h i s p o i n t are c o n t i n u o u s l y n e g a t i v e o v e r the next seven y e a r s . T a b l e I I i l l u s t r a t e s the r e l a t i o n s h i p between the growth o f the economy and tha t o f the t r a n s p o r t a t i o n s e c t o r . The growth o f C a n a d i a n f r e i g h t t r a n s p o r t a t i o n o u t p u t , measured i n t on m i l e s , grew at about the same r a t e as the o v e r a l l economy, measured G r o s s N a t i o n a l E x p e n d i t u r e . The r a t e o f growth i n the r a i l i n d u s t r y however l a gged m a r k e d l y . W h i l e t o t a l t r a n s p o r t a t i o n output n e a r l y d o u b l e d , r a i l w a y ou tpu t remained a lmost c o n s t a n t . T a b l e I I I shows tha t the p e r i o d 1947-62 was a p e r i o d o f ad ju s tment i n the marke t s o f the v a r i o u s modes. (Between 1962 and 1967 however , t h e r e were .no f u r t h e r major changes i n market s h a r e . ) - 26 -TABLE I I 1947-62 GROWTH IN OUTPUT OF THE CANADIAN ECONOMY (IN GNE TERMS), TRANSPORTATION SECTOR (IN TON-MILE TERMS), AND THE RAILWAY INDUSTRY (IN TON-MILE TERMS) Yea r G r o s s N a t i o n a l P e r c e n t a g e E x p e n d i t u r e (GNE) I n c r e a s e i n 1 9 6 1 - C o n s t a n t ove r each D o l l a r s ( 1 ) 5 - y e a r p e r i o d ( $ b i l l i o n s ) T o t a l F r e i g h t P e r c e n t a g e T o n - M i l e s I n c r e a s e (2) o v e r e a c h 5 - y e a r p e r i o d (T-M b i l l i o n s ) R a i l w a y P e r c e n t a g e F r e i g h t I n c r e a s e T o n - M i l e s ( d e c r e a s e ) (2) ove r each 5 - y e a r p e r i o d (T -M b i l l i o n s ) 1947 21.4 85 .7 60.1 30.8% 31.7% 13.8% 1952 28 .0 112.9 68.4 26 .1% 19.7% 3.9% 1957 35.3 135 .1 71 .1 19.8% 21.0% (4.5%) 1962 42.3 163.5 67 .9 1947-62 P e r c e n t a g e GNE: 97.7% T o t a l F r e i g h t ) R a i l w a y I n c r e a s e T o n - M i l e s ) 90.8% F r e i g h t ) T o n - M i l e s ) 13.0% (1) SOURCE: C a n a d i a n Depar tment o f F i n a n c e , A n n u a l Economic R e v i e w , A p r i l 1975, R e f e r e n c e T a b l e 4, p . 1 0 5 , (based on d a t a f r o m S t a t i s t i c s Canada C a t a l o g u e #13-351) (2) SOURCE: S t a t i s t i c s Canada C a t a l o g u e #50-001, " T r a n s p o r t a t i o n S e r v i c e B u l l e t i n " , I s sue 2, Ma rch 1970, A p p e n d i x 1, p . 7 , ( e x t r a c t f r om S p e c i a l R e l e a s e f rom T r a n s p o r t a t i o n and P u b l i c U t i l t i e s D i v i s i o n , Domin ion Bureau o f S t a t i s t i c s , A p r i l 1 9 6 9 ) . - 27 -TABLE I I I MODE SHARES IN CANADA (BASED ON TON-MILE OUTPUT MEASURES) 1947, 1952, 1957, 1962  TOTAL RAIL ROAD WATER P IPEL INE , YEAR % F r e i g h t T o n - M i l e s ( b i l l i o n s ) % % % O i l p l u s Gas % 1947 100% 85 .7 70% 5% 25% 1 1952 100% 112.9 61% 8% 27% 4% 1957 100% 135 .1 53% 8% 27% 12% 1962 100% 163.5 41% 11% 16% 22% SOURCE: S t a t i s t i c s Canada C a t a l o g u e #50-001, " T r a n s p o r t a t i o n S e r v i c e B u l l e t i n " I s s u e 2, March 1970, A p p e n d i x 1, p . 7 , ( E x t r a c t f r o m S p e c i a l R e l e a s e f rom T r a n s p o r t a t i o n and P u b l i c U t i l i t i e s D i v i s i o n , D o m i n i o n Bu reau o f S t a t i s t i c s , A p r i l 1 9 6 9 ) . - 28 -The most s e v e r e impac t on t h e r a i l w a y s ' marke t p o s i t i o n was p r o d u c e d by the a d v e n t and g rowth o f p i p e l i n e s . P i p e l i n e s l i n k e d s o u r c e f i e l d s w i t h d i s t a n t m a r k e t s by means o f a d i s t r i b u t i o n s y s tem w h i c h was a l m o s t s e l f - c o n t a i n e d . Between 1947 and 1962, t he r a i l w a y s ' s h a r e o f t he t r a n s p o r t a t i o n market d ropped by 29% ( f r om 70% to 41%) . The p i p e l i n e s ' s h a r e grew by 22%. Much o f t he p i p e l i n e v o l u m e , however , was new t r a f f i c . Highway t r a n s p o r t c a p t u r e d t h e r e m a i n i n g 7% change i n marke t s h a r e . The deve lopment o f h ighway i n f r a s t r u c t u r e and t e c h n o l o g i c a l a d v a n c e s i n h ighway equ ipment f a c i l i t a t e d t h e deve lopment o f t r u c k i n g . I t s s e r v i c e o r c o s t c h a r a c t e r i s -t i c s , o r b o t h , were p a r t i c u l a r l y a t t r a c t i v e to a c l a s s o f s h i p p e r s t h a t was s t e a d i l y g r ow ing i n s i z e . Bound t r a d i -t i o n a l l y to the r a i l mode, s h i p p e r s d e a l i n g i n s m a l l - s i z e d / s m a l l - l o a d o r h i g h - v a l u e / s e r v i c e - s e n s i t i v e c o m m o d i t i e s i n c r e a s i n g l y s w i t c h e d t h e i r b u s i n e s s o v e r t o t r u c k s , u s i n g f o r - h i r e c a r r i e r s or e n g a g i n g i n p r i v a t e t r u c k i n g on t h e i r own a c c o u n t . Much o f t h i s t r a f f i c had b e e n h i g h r e v e n u e b u s i n e s s f o r the r a i l w a y s . T a b l e IV shows t h a t , f o r t he p e r i o d 1947 -62 , t h e g rowth r a t e o f h ighway t o n - m i l e o u t p u t was f a r l a r g e r t han t h a t o f r a i l : 286% and 133% r e s p e c t i v e l y . - 29 -TABLE IV CANADIAN RAILWAY AND HIGHWAY TON-MILE DATA: 1947, 1952, 1957, 1962  Year R a i l w a y F r e i g h t T o n - M i l e s ( b i l l i o n s ) Highway F r e i g h t T o n - M i l e s ( b i l l i o n s ) 1947 60.1 4 .3 1952 68.4 8 .9 1957 71 .1 1 0 . 7 1962 67.9 16 .6 1947-62 Net I n c r e a s e : 7.8 (13.0%) 1 2 . 3 (286.0%) . SOURCE: S t a t i s t i c s Canada C a t a l o g u e #50-001, " T r a n s p o r t a t i o n S e r v i c e B u l l e t i n " , I s s u e 2, M a r c h 1970, A p p e n d i x , p . 7 , ( e x t r a c t f r om S p e c i a l R e l e a s e f rom T r a n s p o r t a t i o n and P u b l i c U t i l i t i e s D i v i s i o n , Domin ion B u r e a u S t a t i s t i c s , A p r i l 1 9 6 9 ) . - 30 -O t h e r s t a t i s t i c s may be c i t e d as f u r t h e r e v i d e n c e o f t h e s u b s t a n t i a l g rowth o f t he t r u c k mode. F o r examp le , between 1948 and 1958 t h e number o f t r u c k r e g i s t r a t i o n s r o s e 107% ( f rom 488,000 to 1 , 0 1 2 , 0 0 0 ) , w h i l e the number o f r a i l c a r s went up by 14% ( f r om 172,406 to 1 9 6 , 8 9 3 ) . S i m i l a r l y , S t a t i s t i c s Canada has e s t i m a t e d t h a t , i n t h i s p e r i o d , i n t e r -c i t y f r e i g h t tonnage h a n d l e d by t r u c k r o s e 83% ( f r o m 161 to 29 m i l l i o n ) w h i l e by r a i l o n l y 12% ( f rom 176 to 197 m i l l i o n ) . T a b l e V i l l u s t r a t e s t h e g rowth o f c o m p e t i t i o n be tween t h e r a i l w a y s and o t h e r modes and t h e d e g r e e o f s u c c e s s t h e r a i l w a y s had i n c o m p e t i n g i n c e r t a i n m a r k e t s . Between 1951 and 1968, r a i l w a y t r a f f i c w h i c h was p r i c e d i n c o m p e t i t i o n w i t h n o n - r a i l w a y modes grew f rom 14.0% o f r a i l vo lume ( i n t o n - m i l e terms) to 53 .4%. The s h i f t i n i m p o r t a n c e o f c o m p e t i t i v e r a t e s was g r e a t e s t - f r o m 14.0% t o 40.7% - i n t he y e a r s 1951 t o 1958. The f a c t t h a t abou t 53% o f r a i l w a y b u s i n e s s was mov ing i n 1968 under c o m p e t i t i v e r a t e s i n d i c a t e s some s u c c e s s by the r a i l w a y s i n m e e t i n g t h e c o m p e t i t i o n f r om o t h e r modes . In t he 1945-1960 p e r i o d , c o m p e t i t i o n e x p e r i e n c e d by the r a i l w a y s was i n t e r m o d a l r a t h e r than i n t r a m o d a l . The - 31 -TABLE V DISTRIBUTION OF TON-MILES OF TRANSPORTATION SERVICE IN CANADA, BY RATE CLASS (EXCLUDING STATUTORY RATES ) : 1951, 1958, 1963  1951 1958 1968 T o t a l , A l l R a t e s 100% 100% 100% ' i M a r k e t C o m p e t i t i v e R a t e s (Ra tes R e f l e c t i n g S h i p p e r Marke t F a c t o r s ) - C l a s s R a t e s - Commodity N o n c o m p e t i t i v e 12.4% 73.5% 85.9% 6.0% 53.2% 59.2% 2.3% 44.2% 46.5% Mode C o m p e t i t i v e (Ra tes R e f l e c t i n g In termode C o m p e t i t i o n ) - Commodity C o m p e t i t i v e - A g reed C h a r g e s * 12.6% 1.4% 14.0% 27.2% 13.5% 40.7% 23.6% 29.8% 53.4% SOURCE: C a n a d i a n T r a n s p o r t Commi s s i on , " W a y b i l l A n a l y s i s 1968 " (O t tawa: The Q u e e n ' s P r i n t e r , 1 9 6 9 ) . * A c c o r d i n g to a s e n i o r CN r a t e s o f f i c e r , A g r e e d Cha r ge s have a l w a y s i n v o l v e d b o t h marke t and mode c o m p e t i t i v e f a c t o r s . I n t h e e a r l y 1 9 5 0 ' s , marke t c o n s i d e r a t i o n s o c c u r r e d more f r e q u e n t l y , b u t s i n c e t h a t t ime moda l c o n s i d e r a t i o n s have been more i m p o r t a n t . T h i s b e i n g t h e c a s e , the growth i n A g r e e d Charges as a mode c o m p e t i t i v e r a t e f o r m would be more p ronounced than i s i n d i c a t e d i n the g l o b a l A g r e e d Charges t r a f f i c s h a r e f i g u r e s o f 1951, 1958, and 1968. - 32 -f o r t u n e s o f e i t h e r CN or CP R a i l may have i m p r o v e d a t t h e expense o f t he o t h e r r a i l w a y a l i t t l e . But each r a i l w a y ' s p o s t - S e c o n d W o r l d War o p e r a t i n g e n v i r o n m e n t was c h a r a c t e r i -zed c h i e f l y by t h e g rowth o f i n t e r m o d a l c o m p e t i t i o n . T e c h n o l o g y . I m p o r t a n t t e c h n o l o g i c a l d e v e l o p m e n t s o c c u r r e d i n t h e p o s t - w a r t r a n s p o r t a t i o n e n v i r o n m e n t . These have been w e l l documented , n o t a b l y by t h e MacPher son R o y a l Commis s ion on T r a n s p o r t a t i o n . W i t h r e s p e c t to l o n g - h a u l h ighway movements, t h e Commiss ion r e p o r t e d t h a t u n t i l abou t 1950 "h i ghways were s t r u c t u r a l l y weak . . . (and) p r o v i n c e s had to m a i n t a i n low g r o s s w e i g h t l i m i t a t i o n s . . . . Highway t r a c t o r s ( d i d n o t ) . . . have t h e power, s t r e n g t h , e f f i c i e n c y o r r e l i a b i l i t y f o r c o n t i n u o u s (28) h a u l s up to 2 ,000 o r 3 ,000 m i l e s " \ . By 1950, however , changes were t a k i n g p l a c e . D i e s e l s were i n t r o d u c e d to Canada, and " t h e U n i t e d S t a t e s No. 2 h i ghway p r o v i d e d a paved e a s t - w e s t r o u t e t h r o u g h t h e n o r t h e r n b o r d e r (29) s t a t e s ' . The s t a g e was s e t f o r t h e d e v e l o p m e n t o f l o n g - h a u l h ighway f r e i g h t movement between f a r - f l u n g C a n a d i a n c i t i e s . - 33 -W i t h the pa s s a ge o f the T r a n s - C a n a d a Highways A c t i n 1948, c o n s t r u c t i o n began on a n a t i o n a l h ighway i n f r a s t r u c t u r e . D u r i n g the 1 9 5 0 ' s , l i g h t e r w e i g h t , l ower c o s t d i e s e l s were i n t r o d u c e d ; l a r g e r tandem equ ipment was p e r m i t t e d b y p r o v i n c i a l r e g u l a t o r y a u t h o r i t i e s ; and s p e c i a l i z e d e q u i p m e n t , s u c h a s r e f r i g e r a t e d t r a i l e r s , a p p e a r e d o n t h e r o a d f o r the f i r s t t i m e . The i n c r e a s e d e f f i c i e n c i e s i n h ighway t r a n s p o r t l e d a g row ing number o f s h i p p e r s f o r t h e f i r s t t ime to make s p e c i a l i z e d demands o f c a r r i e r s . Demands f o r new s e r v i c e s were a l s o a r e s p o n s e t o t e c h n o l o -g i c a l changes o c c u r r i n g i n o t h e r modes b e s i d e s t r u c k i n g . F o r example, t he c o n s t r u c t i o n o f l o n g i n t e r - p r o v i n c e gas and o i l p i p e l i n e s and the b u i l d i n g o f t h e S t . Lawrence Seaway were i m p o r t a n t d e v e l o p m e n t s i n t h e 1 9 5 0 ' s t r a n s p o r t a t i o n e n v i r o n m e n t . These y e a r s were i m p o r t a n t f o r t he e x p a n s i o n o f a who le r ange o f t r a n s p o r t a t i o n a l t e r n a t i v e s . A r e v i e w o f t h e t e c h n o l o g i c a l deve l opment o f t h e 1 9 5 0 ' s s h o u l d i n c l u d e the s c i e n c e o f p h y s i c a l d i s t r i b u t i o n manage-ment (PDM). As w i t h many of t he p o s t - w a r m e c h a n i c a l advance s a c h i e v e d i n c o m m e r c i a l t r a n s p o r t , PDM owed i t s o r i g i n s to the Second Wor ld War when a d v a n c e s were made i n the s c i e n c e o f l o g i s t i c s . S h i p p e r s and c a r r i e r s ^ ^ - 34 -widely became aware of PDM only in the 1960's. Its i n i t i a l appearance as a management science, however, occurred in the 1950's, at the same time as an important range of new trans-portation a l t e r n a t i v e s came into being. Regulatory Factors. For many years, railways in Canada came under heavy regulation, i n both the operating area (notably with respect to safety) and in the f i n a n c i a l area (usually regarding f r e i g h t r a t e s ) . In the f i n a n c i a l area, controls were exercised as a counterweight to the railways' near monopoly p o s i t i o n i n transportation matters. Before the Second World War, regulatory control of the general f r e i g h t rate l e v e l was aimed p r i m a r i l y at "the prevention of excessive railway earnings". A f t e r the war, " i t was concerned with determining what minimum 'earnings requirement' must be allowed the r a i l c a r r i e r s to keep them (31) i n reasonable f i n a n c i a l health". There was some question in the period following the war whether the railways s t i l l had a near monopoly i n transportation. Nevertheless, a considerable degree of control - e s p e c i a l l y with regard to non-mode-competitive rates - continued to be exercised u n t i l 1967 when the National Transportation Act was passed. Since then, railway r e g u l a t i o n has dealt less conspicuously with rates. - 35 -The p o s t - S e c o n d Wor ld War p e r i o d saw p r e s s u r e s b e i n g e x e r t e d f o r t he r e v i s i o n o f r e g u l a t i o n s , on t h e one s i d e f rom t h e r a i l w a y s and on the o t h e r f rom p o l i t i c a l i n t e r e s t s i n t h e W e s t e r n and M a r i t i m e P r o v i n c e s . The r a i l w a y s sough t d e r e g u l a t i o n ; the p r o v i n c i a l i n t e r e s t s , f u r t h e r c o n t r o l s , w i t h r e s p e c t to c e r t a i n a s p e c t s o f r a t e - m a k i n g . The e x i s t i n g p r o c e d u r e f o r r a i l w a y s to i n c r e a s e t h e i r n o n -c o m p e t i t i v e r a t e s was to a p p l y - w i t h j u s t i f y i n g a r gument s - t o the B o a r d o f T r a n s p o r t C o m m i s s i o n e r s ( BTC ) , t h e r e g u l a t o r y b o d y ; to w a i t t h r o u g h an o f f i c i a l , o f t e n l e n g t h y , h e a r i n g o f any r e s p o n d e n t s ' ( i . e . s h i p p e r s ' ) p o s i t i o n s ; a n d , f i n a l l y , to l o o k to the Board f o r a f a v o u r a b l e f i n a l judgement and o r d e r . The f i r s t i m p o r t a n t p o s t - w a r r a t e s c a s e was t h e 1946-48 g e n e r a l i n c r e a s e a p p l i c a t i o n . I n 1946, t h e r a i l w a y s a p p l i e d f o r a 30% h o r i z o n t a l i n c r e a s e i n C l a s s and Commodity r a t e s i n o r d e r to c o v e r l a r g e p o s t - w a r wage s e t t l e m e n t s f r e e o f t h e w a r t i m e wage c o n t r o l s . I t was t h e f i r s t a p p l i c a t i o n f o r r a t e i n c r e a s e s o f t h i s t y p e s i n c e 1927. N i n e t e e n months a f t e r t h e i n i t i a l a p p l i c a t i o n by t h e r a i l w a y s , t h e BTC a p p r o v e d a 21 p e r c e n t i n c r e a s e . T h i s was i n 1948. - 36 -I n the same y e a r , the two ma jo r f e d e r a l p o l i t i c a l p a r t i e s h e l d n a t i o n a l l e a d e r s h i p c o n v e n t i o n s . P rom inence was g i v e n t o m a t t e r s o f c o n c e r n t o i n t e r e s t s f r o m W e s t e r n and M a r t i m e p r o v i n c e s . F a i r f r e i g h t r a t e s , b r o u g h t t o t h e f o r e f r o n t by the 21 p e r c e n t r a t e s e t t l e m e n t , was one o f t he c o n c e r n s . In December 1948, t h e f e d e r a l government , i n r e s p o n s e to r e g i o n a l p r e s s u r e , a p p o i n t e d a R o y a l Commiss ion on T r a n s -p o r t a t i o n to s t u d y f r e i g h t r a t e s . The Commis s i on , c h a i r e d by Mr . J u s t i c e T u r g e o n , gave r e c o g n i t i o n to p r o v i n c i a l r a t h e r t h a n r a i l w a y c o n c e r n s . F o r example , i t s 1951 r e p o r t recommended f u r t h e r r a t e c o n t r o l s s u c h as e q u a l i z a t i o n o f e a s t e r n / w e s t e r n C l a s s r a t e s and i n t r o d u c t i o n o f the " o n e and o n e - t h i r d r u l e " . W h i l e t h e Commiss ion gave no c o n s i d e r a t i o n t o r e s t r u c t u r i n g r e g u l a t o r y p r o c e d u r e s - s i n c e t h i s was v i e w e d as b e i n g beyond i t s terms o f r e f e r e n c e - i n 1951 i m p o r t a n t changes i n t a r i f f f i l i n g p r o v i s i o n s were i n s t i t u t e d w h i c h d i d e n a b l e the r a i l w a y s t o compete somewhat more e f f e c t i v e l y w i t h h ighway t r a n s p o r t . Changes i n 1955 to P a r t IV o f t h e T r a n s p o r t A c t , r e g a r d i n g A g r e e d C h a r g e s , f u r t h e r enhanced t h e r a i l w a y s ' a b i l i t y t o compete . - 37 -N o t w i t h s t a n d i n g t h e s e i m p o r t a n t d e v e l o p m e n t s , t h e t r a d i t i o n -a l q u a s i - l e g a l r e g u l a t o r y p r o c e s s r e m a i n e d b a s i c a l l y u n -c h a n g e d . I t was p o t e n t i a l l y a l e n g t h y one . I t c o u l d t a k e as much as two y e a r s between a p p l i c a t i o n f o r r a t e i n c r e a s e s and a p p r o v a l by the B o a r d - when i n d e e d a p p r o v a l was g i v e n . I f s h i p p e r s c o u l d n o t a lways have r a t e i n c r e a s e a p p l i c a t i o n s r e j e c t e d , they c o u l d u se t h e h e a r i n g s p r o c e s s i t s e l f t o f o r e s t a l l i n c r e a s e s . Two major e v e n t s i n the h i s t o r y o f r a i l w a y r a t e r e g u l a t i o n o c c u r r e d i n 1959: one w i t h immed ia te i m p a c t and s u p p o r t i n g the Wes te rn and M a r i t i m e p r o v i n c e s p o s i t i o n on r a t e s ; t h e o t h e r w i t h a d e l a y e d i m p a c t , b u t s u p p o r t i n g t h e r a i l w a y s ' p o s i t i o n . The f i r s t even t was t h e pa s sage o f t h e F r e i g h t R a t e s R e d u c t i o n A c t (FRRA) . T h i s A c t b r o u g h t a b o u t a 17 p e r c e n t r o l l b a c k on c e r t a i n r e c e n t l y i n c r e a s e d r a t e s and f r o z e them i n d e f i n i t e l y . A t the same t i m e , i t c o v e r e d by s u b s i d y any r a i l w a y d e f i c i t p o s i t i o n s due t o t h e r o l l b a c k . The FRRA was i n f o r c e u n t i l 1 9 6 7 . ( 3 2 ) - 38 -The second even t was t h e a p p o i n t m e n t o f t he (MacPherson) R o y a l Commis s ion on T r a n s p o r t a t i o n . The C o m m i s s i o n ' s R e p o r t was p u b l i s h e d i n 1961-62 and i t s b a s i c recommendat ions were i n c o r p o r a t e d i n l e g i s l a t i o n ( t h e NTA) i n 1967. The MacPher son Commis s ion i n t e r p r e t e d i t s terms o f r e f e r e n c e w i d e l y t o a l l o w a w i d e - r a n g i n g a n a l y s i s o f t h e t r a n s p o r t a -t i o n m a r k e t - p l a c e and t h e r o l e o f t h e r e g u l a t o r y b o d y . The Commis s ion R e p o r t documented t h e u n p r e c e d e n t e d g rowth i n i n t e r m o d a l c o m p e t i t i o n i n t h e p o s t - w a r y e a r s . I t , m o r e o v e r , s u g g e s t e d t h a t t h i s deve lopment had made o b s o l e t e much o f t h e B T C ' s r e g u l a t o r y i n v o l v e m e n t i n r a i l w a y p r i c i n g m a t t e r s w h i c h was b a s e d on t h e a s s u m p t i o n o f a r a i l w a y m o n o p o l y , o r n e a r - m o n o p o l y , i n t r a n s p o r t a t i o n . " I t w i l l be n e c e s s a r y so f a r as we c a n s e e , t h a t r a i l w a y s s h a l l c o n t i n u e t o f i l e t a r i f f s c h e d u l e s w i t h the Boa rd o f T r a n s p o r t C o m m i s s i o n e r s . The f reedom to change t a r i f f s , i n t r o d u c e new o n e s , and to make s p e c i f i c r a t e s t o meet c o m p e t i t i o n w i t h o u t d e l a y must (however) be e n h a n c e d . I t i s a p p a r e n t to us t h a t so l o n g as one mode ( i . e . h ighway t r a n s p o r t ) can f r e e l y q u o t e r a t e s a t t h e i n s t a n t o f b a r g a i n i n g , t he o t h e r i s a t a d i s -advan tage n o t to be a b l e to do s o . T h e r e f o r e , we recommend t h a t r a i l r a t e s s h a l l be e f f e c t i v e upon f i l l i n g w i t h the b o a r d . " ( 3 3 ) - 39 -In summary, the regulatory environment of the post-war period was characterized by attempts by regional p o l i t i c a l i n t e r e s t s to increase and by the railways to decrease the Board of Transport Commissioners' substantial control over the railways' freedom to set freight rates. Some conces-sions were achieved by the railways in 1951 and 1955 i n the areas of mode-competive rates, but i t was not u n t i l MacPherson Commission Report of 1961-62 that the stage for a restructured, less regulated rate-making environment was f i n a l l y set. Environmental Impact on Railway Earnings Railway Earnings. The railways' economic well-being deteriorated during the 1950's. Figure 6 plots CN net r a i l income before fixed charges and CP R a i l net r a i l operating income for the years 1947 through 1962. Except for the years 1955 and 1956 which were exceptional boom years for the North American economy, aft e r 1950 there is a general downward trend in railway earnings. It cannot be suggested that environmental factors were the only cause for t h i s decline. However, they probably made a s i g n i f i c a n t contribution. - 40 -- 41 -Impact of Environmental Developments. Post-war environ-mental developments adversely a f f e c t e d the railways i n several ways. The growth of intermodal competition was s i g n i f i c a n t . In i t s e l f , the increased competition may have had a negative impact on railway fortunes - indeed, evidence e x i s t s that there i s a p o s i t i v e c o r r e l a t i o n between market (34) share and p r o f i t a b i l i t y . But the growth of truck competition i n p a r t i c u l a r probably had the greatest impact. I t encroached on high-revenue railway markets. Indeed developments i n highway transport technology pointed out to shippers generally motor c a r r i e r s ' f l e x i b i l i t y and t h e i r unique a b i l i t y to s a t i s f y c e r t a i n key d i s t r i b u t i o n needs. The t r a d i t i o n a l regulatory apparatus f o r general railway rate increases remained i n place through the 1950's. The q u a s i - j u d i c i a l regulatory r a t e a p p l i c a t i o n s procedure had no counterpart i n the trucking industry. Slow-moving, i t hampered e f f e c t i v e competitive p r i c i n g which depended on r a p i d responses and f l e x i b l e p r i c i n g arrangements. Rapid economic growth and an a c c e l e r a t i n g cost of l i v i n g , furthermore, brought a succession of s u b s t a n t i a l railway wage settlements. These forced costs up r a p i d l y at a time - 42 -when r e g u l a t o r y a u t h o r i t i e s were d i s a l l o w i n g commensurate r a t e i n c r e a s e s or when i n c r e a s e s were b e i n g awarded o n l y a f t e r a c o n s i d e r a b l e p e r i o d had been t a k e n f o r h e a r i n g s and Board d e l i b e r a t i o n s . The r e s u l t , f o r t h e r a i l w a y s , was a (35) c h r o n i c c a s h - f l o w p r o b l e m . R a i l w a y Responses The u n p r e c e d e n t e d d e g r e e o f change i n t he r a i l w a y e n v i r o n -ment o f the p o s t - w a r p e r i o d - p a r t i c u l a r l y i n t h e a r e a o f i n t e r m o d a l c o m p e t i t i o n - c a l l e d f o r an u n p r e c e d e n t e d d e g r e e o f change i n t he r a i l w a y s . The f i r s t r e s p o n s e s were i n t h e deve lopment o f new t e c h n o l o g y and s e r v i c e s ; t h e l a t e r o n e s , i n t h e b a s i c a p p r o a c h to t h e i r b u s i n e s s . R a i l w a y T e c h n o l o g i c a l and New S e r v i c e Deve lopment s W h i l e s i g n i f i c a n t t e c h n o l o g i c a l d e v e l o p m e n t s t o o k p l a c e i n o t h e r modes, r a i l w a y t e c h n o l o g y a l s o made i m p o r t a n t a d v a n c e s i n t h e 1 9 5 0 ' s . These i n c l u d e d m e c h a n i z e d y a r d d e v i c e s , improved s i g n a l l i n g , m e c h a n i z e d t r a c k m a i n t e n a n c e , d i e s e l - 4 3 -l o c o m o t i v e s , improved and d i v e r s i f i e d r o l l i n g s t o c k , improved commun i ca t i on s equ ipment and m o r e - s o p h i s t i c a t e d c o s t i n g t e c h n i q u e s . I m p o r t a n t new r a i l w a y s e r v i c e s o f t h i s p e r i o d were " p i g g y b a c k " and " m e r c h a n d i s e s e r v i c e s " . P i g g y b a c k a l l o w e d t h e r a i l w a y s to p a r t i c i p a t e i n some o f t h e s h o r t - h a u l , as w e l l as t he l o n g - h a u l , m a r k e t s w h i c h had been g o i n g o v e r e n t i r e l y to h ighway t r a n s p o r t . M e r c h a n d i s e s e r v i c e s , i n t r o d u c e d a t CP R a i l o n l y , o f f e r e d l o w e r c o s t s by i n t e g r a t i n g l e s s - t h a n - c a r l o a d and e x p r e s s t r a f f i c w i t h r a i l owned t r u c k i n g o p e r a t i o n s . The r a i l w a y s a l s o began to engage more i n m o d e - c o m p e t i t i v e p r i c i n g . The u s e o f A g r e e d C h a r g e s became more w i d e s p r e a d and c a r l o a d - i n c e n t i v e p r i c i n g was i n i t i a t e d . The growth, o f c o m p e t i t i v e p r i c i n g i s i l l u s t r a t e d i n T a b l e V (page 3 1 ) , A d o p t i n g the M a r k e t i n g Concep t In C h a p t e r I I , m a r k e t i n g was d i s c u s s e d . E a c h o f t h e above p o s t - w a r r a i l w a y r e s p o n s e s t o e n v i r o n m e n t a l changes r e p r e s e n t s what t o d a y m i gh t be c a l l e d a m a r k e t i n g a c t i v i t y . The t e c h n o l o g i c a l and s e r v i c e deve lopment s were examples o f - 44 -product development. Rate-making innovations might represent p r i c i n g programs. At the time, however, railway mangement did not perceive them as such. Management required an understanding of the marketing philosophy before such a c t i v i t i e s could be seen as "marketing" undertakings, (36) This understanding evolved gradually , i n the l a t e 1950's. About 1955 at CN and 1960 at CP R a i l , railway T r a f f i c Research departments became the f i r s t manifestations of the marketing philosophy i n a c t i o n . They comprised integrated, systematized groups of a c t i v i t i e s , oriented toward the market. For the railways, they r e f l e c t e d a t o t a l l y new approach to doing business. "The customer was to be king".. While e a r l y manifestations of the marketing philosophy occurred i n the 1950's, the need was seen f o r continued adaptation to the new approach i n the 1960's. CN management, i n i t s 1960 Annual Report, pointed out "the necessity f o r pressing forward with programs designed to mould the System into an instrument better able to adjust and respond to both, the p r e v a i l i n g business climate and the s h i f t s and new challenges of a h i g h l y competitive (37) tran s p o r t a t i o n market". The next chapter considers developments i n railway marketing from the e a r l y 1960's to the present day. - 45 -C o n c l u s i o n C h a p t e r I I I has r e v i e w e d the key e x t e r n a l i n f l u e n c e s on C a n a d i a n r a i l w a y o p e r a t i o n s o f t he 1 9 5 0 ' s , examined t h e i r f i n a n c i a l i m p a c t , and i d e n t i f i e d c e r t a i n r e s p o n s e s t h e CN and CP R a i l made to c o u n t e r t h e s e f o r c e s and i m p r o v e t h e i r economic f o r t u n e s . The a d o p t i o n - i n t h e l a t e 1 9 5 0 ' s and e a r l y 1 9 6 0 ' s - o f a m a r k e t i n g a p p r o a c h i s i d e n t i f i e d as a r a i l w a y r e s p o n s e u n l i k e the o t h e r s . I t i s s e e n as h a v i n g a l o n g - t e r m impac t and p r o v i d i n g a f l e x i b l e mechanism f o r s e n s i n g and r e a c t i n g to f u t u r e changes i n t h e t r a n s p o r t a t i o n e n v i r o n m e n t . I t i s c o n c l u d e d t h a t t he c h i e f f a c t o r p r o m p t i n g r a i l w a y r e a c t i o n and change i n t he 1 9 5 0 ' s was t h e s u b s t a n t i a l p o s t -war i n c r e a s e i n t r u c k c o m p e t i t i o n . I n s p i t e o f g rowth i n the economy and i n o v e r a l l demand f o r t r a n s p o r t a t i o n , d e v e l o p m e n t s i n h ighway t r a n s p o r t t e c h n o l o g y b r o u g h t about s e r i o u s c o m p e t i t i o n f rom t r u c k s i n t he most p r o f i t a b l e market segments and c a u s e d the r a i l w a y s s e r i o u s f i n a n c i a l d i f f i c u l t i e s . I t prompted r e a s s e s s m e n t o f t h e i r s e r v i c e o r i e n t a t i o n and i n d e e d t h e i r p h i l o s o p h y o f b u s i n e s s . R a t e -mak ing r e g u l a t i o n s , f o r many y e a r s an i m p o r t a n t e n v i r o n -m e n t a l f a c t o r i n r a i l w a y o p e r a t i o n s , were n o t s e e n as b e i n g - 46 -a m a j o r c o n s i d e r a t i o n i n b r i n g i n g about r a i l w a y r e a c t i o n s i n t h e 1 9 5 0 ' s . T r u c k c o m p e t i t i o n l e d t o a c o n s i d e r a b l e new i m p o r t a n c e f o r m o d e - c o m p e t i t i v e r a i l r a t e s and owing t o changes i n r e g u l a t i o n s i n t h e 1 9 5 0 ' s t h e s e were n o t s u b j e c t t o t h e same t i m e - c o n s u m i n g a p p l i c a t i o n s p r o c e d u r e s a s n o n - m o d e - c o m p e t i t i v e r a t e s . - 47 -CHAPTER IV RAILWAY MARKETING The E v o l u t i o n o f R a i l w a y M a r k e t i n g — An O v e r v i e w The B e g i n n i n g s I t a p p e a r s t h a t the m a r k e t i n g p h i l o s o p h y g a i n e d c u r r e n c y a t about t he same t ime a t b o t h t h e CN and CP R a i l . T r a f f i c R e s e a r c h Depa r tment s were s e t u p , i n 1955 a t CN and 1960 a t CP R a i l , t o p r o v i d e o n g o i n g r e s e a r c h i n r e s p e c t o f m a r k e t i n g c o n c e r n s . The emphas i s o f t h e CP t r a f f i c r e s e a r c h p rog ram i s summar ized i n t h e f o l l o w i n g p a s s a g e f r om a 1960 a d d r e s s , d e l i v e r e d by the p r o g r a m ' s manager : "We r e c o g n i z e the i n c r e a s i n g i m p o r t a n c e o f t h e m a r k e t i n g c o n c e p t , w h i c h s t a r t s w i t h t h e customer** and h i s n e e d s , and ends o n l y when t h o s e needs a r e f i l l e d i n a way w h i c h i s b e n e f i c i a l b o t h t o h im and to our Company. I t i s t h e o b j e c t i v e o f o u r r e s e a r c h programme to t r y t o p r e d i c t f u t u r e changes i n t r a n s p o r t a t i o n demand w e l l i n a d v a n c e and e f f e c t i v e l y adap t ou r r a t e s , s e r v i c e and s a l e s p o l i c i e s to meet t h e m . " ( 3 8 ) The newness o f t he p rog ram was i n d i c a t e d i n t h e same s p e e c h : " I n d e e d we p l a n to d e v e l o p as q u i c k l y as p o s s i b l e a p r o g -ramme w h i c h w i l l c o - o r d i n a t e a l l a s p e c t s o f modern m a r k e t i n g A - 48 -m e t h o d s " , x ' J y j S i x a s p e c t s o f t h e "modern m a r k e t i n g programme" were i d e n t i f i e d : " c u s t o m e r r e s e a r c h , d e s i g n and deve lopment o f a p r o d u c t o r s e r v i c e p r i c i n g , p r o m o t i o n , s a l e s , and market s t u d i e s " . T h u s was d e s c r i b e d t h e f o r m a l m i s s i o n o f t r a f f i c r e s e a r c h , t he f i r s t r e c o g n i z e d m a r k e t i n g u n i t . CP R a i l ' s T r a f f i c R e s e a r c h Depar tment was p a t t e r n e d a f t e r t he one a t CN w h i c h had been e s t a b l i s h e d e a r l i e r . In terms o f p r a c t i c a l t a s k s , t he o r i g i n a l d e p a r t m e n t was r e q u i r e d t o make r e v e n u e f o r e c a s t s , u n d e r t a k e t r a f f i c s t u d i e s , and d e t e r m i n e i n f o r m a t i o n needs f o r market and r a t e s r e s e a r c h w i t h a v i e w to mak ing u se o f l a r g e , n e w l y - i n s t a l l e d computer h a r d w a r e . T h i s r e s e a r c h f u n c t i o n , however , was s t i l l s e e n o n l y a s a new s u p p o r t i n g a c t i v i t y w i t h i n a r a t h e r t r a d i t i o n a l l y o r g a n i z e d T r a f f i c Depar tment made up o f a ne twork o f cus tomer s e r v i c e r e p r e s e n t a t i v e s and r a t e s o f f i c e r s . F i g u r e 7 i s an o r g a n i z a t i o n c h a r t o f t h e CP R a i l T r a f f i c Depar tment a t the s t a r t o f t he 1 9 6 0 ' s . F i g u r e 8 i s a comparab le c h a r t f o r CN. The T r a f f i c R e s e a r c h f u n c t i o n s a r e i d e n t i f i e d by d o t t e d - l i n e boxes i n each f i g u r e . - 4 9 -I-i .n t\ rt c 1' • ? I 0 a < 6 — r-5 » s * r I «? « f • U s i i L*>J il 0 i •* 2" • er s it £ •3 J . -I t i3 V-p o o "tf tit cn c •> <3 % cr i i i a v * o t .7 •0 0 4 V k < <f tr s -j? * o o e _ 0 < y c * s> £ •A ~* 1 t 4 i • 3--5 c •r o i t 6 il l/i V 4-L Y o I - 50 to ID O o c $ I C <• 0 JJ u et -C ty i of pi 'it V Sir .f 2 £ r . _ J cr v | [ I -5 ' I i « i a--i 3' o s i 1 I 1 <» .at i .3 > -I • e »* 2 ^ cr « » «r 0 o c V - v i£ r • • «• e tf r v *-2 a — -foe? a- y 01->-"3 c • 0 5 r 6 ^ 5 tr 6 31 - 51 -Before the creation of T r a f f i c Research groups, corporate Research Departments had performed a few t r a f f i c studies for the T r a f f i c Departments. Their impact on decision making, however, had not been great. They engaged in r e f i n i n g costing techniques and focussed on the then-new notion for the railways - competitive p r i c i n g . Before the war such studies had been unknown altogether as railway research had been conducted c h i e f l y in the area of operations. Development through the 1960's It was not long before the complexity and number of tasks assigned to T r a f f i c Research grew. New subdepartments were hived o f f to accommodate t h i s growth. At CP R a i l , for example, by 1 9 6 3 T r a f f i c Research had evolved into three research groups: Market Development, which concerned i t s e l f with external (outside the company) data, and to some degree with product development; Sales Ana l y s i s , which handled in t e r n a l data and produced revenue forecasts, sales quotas and t r a f f i c analyses; and Rates ( P r i c i n g ) Research, which produced s e n s i t i v i t y studies for pro forma rate adjustments (e.g. revenue estimating, costing and t r a f f i c f o r e c a s t ) , undertook assignments associated with the imminent trans-portation l e g i s l a t i o n to be the NTA 1 9 6 7 , and produced some studies on p r o f i t a b i l i t y by equipment or by market segment. -. 52 -By the mid 1 9 6 0 ' s , i n a d d i t i o n to the deve lopment o f a l o o s e a s s o c i a t i o n o f m a r k e t i n g a c t i v i t i e s , a t b o t h CN and CP R a i l an a g g r e s s i v e s a l e s emphas i s has r e p l a c e d t h e t r a d i t i o n a l o r d e r - t a k i n g and c u s t o m e r - s e r v i c i n g a p p r o a c h o f t h e T r a f f i c D e p a r t ment . S a l e s Depar tment had r e p l a c e d the name T r a f f i c D e p a r t m e n t . F i g u r e 9 i s an o r g a n i z a t i o n c h a r t o f t h e 1964 CN H e a d q u a r t e r s S a l e s D e p a r t m e n t . In t he l a t e 1 9 6 0 ' s , f o r m a l r a i l w a y " M a r k e t i n g " Depa r tment s e v o l v e d i n p l a c e o f t he f o rmer " S a l e s " D e p a r t m e n t s . (At CP R a i l , " S a l e s " became " M a r k e t i n g and S a l e s " . ) The l o o s e l y r e l a t e d m a r k e t i n g a c t i v i t i e s became i n t e g r a t e d e l e m e n t s o f a " m a r k e t i n g m i x " and the o n g o i n g r e s e a r c h f u n c t i o n became a s s o c i a t e d w i t h each o f t he e l e m e n t s . In a d d i t i o n , f i n a n -c i a l s k i l l s were emphas ized more and p a r t i c u l a r a t t e n t i o n was g i v e n to " h i g h c o n t r i b u t i o n " t r a f f i c r a t h e r t h a n t o j u s t m a x i m i z i n g s a l e s . The m a r k e t i n g d e v e l o p m e n t s o f t h e l a t e 1 9 6 0 ' s a r e . r e f l e c t e d i n t he 1975 o r g a n i z a t i o n s o f CN and CP R a i l , shown i n F i g u r e s 10 and 11 (pages 75 and 7 6 ) . The e d u c a t i o n a l p r o f i l e o f t h e depa r tment head had a l r e a d y , i n the e a r l y 1 9 6 0 ' s , been upgraded f rom a p o s i t i o n f o r a - 54 -career f r e i g h t t r a f f i c person without u n i v e r s i t y t r a i n i n g to one for a u n i v e r s i t y trained g e n e r a l i s t with some railway experience outside the Marketing Department. In the l a t e 1960's, the recruitment of a team of marketing management personnel focussed on i n d i v i d u a l s having received s i m i l a r higher education and with more-diversified work experience. A considerable number of those with work experience came from other transportation i n d u s t r i e s . As regards new graduates without work experience, bachelor and master l e v e l i n d i v i d u a l s were sought. The bachelor-l e v e l candidates were sought for c e r t a i n day-to-day market-ing functions. Railway recruitment brochures generally appealed for i n d i v i d u a l s with commerce, a r t s , and science degrees, but were not s p e c i f i c as to the d e s i r a b i l i t y of one d i s c i p l i n e over another. Consideration was given to p u t t i n g u n i v e r s i t y graduates i n p r i c i n g p o s i t i o n s and experimenta-t i o n began i n the placement of graduates as sales representatives. Master-level graduates were r e c r u i t e d f or posting i n p r o j e c t work and research-type p o s i t i o n s , as marketing analysts f o r a p a r t i c u l a r industry or as product development o f f i c e r s r e s p o n s i b l e f o r equ ipment - and s e r v i c e - u t i l i z a t i o n s t u d i e s . These r e c r u i t s u s u a l l y were m a s t e r s i n b u s i n e s s a d m i n i s t r a t i o n , b u t a l s o i n c l u d e d m a s t e r s g r a d u a t i n g i n d i s c i p l i n e s a s s o c i a t e d w i t h c e r t a i n s h i p p e r i n d u s t r i e s , l i k e m i n i n g and a g r i c u l t u r e . The M a r k e t i n g Concept i n P r a c t i c e Today In t h e 1 9 7 0 ' s , t h e r e has been o n l y m i n i m a l change t o t h e m a r k e t i n g o r g a n i z a t i o n s w h i c h t h e CN and CP R a i l s e t up and d e v e l o p e d d u r i n g t h e 1 9 6 0 ' s . S i m i l a r l y m a r k e t i n g p r a c t i c e s have b a s i c a l l y gone u n c h a n g e d . T h e r e h a v e , h o w e v e r , been i m p o r t a n t d e v e l o p m e n t s i n terms o f r e c o g n i t i o n o f the m a r k e t i n g c o n c e p t by d e p a r t m e n t s o t h e r t h a n M a r k e t i n g and by a l l l e v e l s o f t he h i e r a r c h y . I n t h e p e r i o d 1966 -72 , CN and CP R a i l c o m p l e t e d e x t e n s i v e s a l e s t r a i n i n g o f new and o l d s a l e s and m a r k e t i n g p e r s o n n e l . I n r e c e n t y e a r s b o t h r a i l w a y s have begun s y s t e m - w i d e programs to educa te O p e r a t i n g D e p a r t m e n t s ' p e r s o n n e l w i t h r e s p e c t t o t h e m a r k e t i n g p h i l o s o p h y . I t has b e e n v i e w e d t h a t , as l a r g e numbers o f o p e r a t i n g emp loyees a r e i n d a i l y c o n t a c t w i t h l a r g e numbers o f r a i l w a y c u s t o m e r s , e a c h employee i s i n e f f e c t a m a r k e t e r o f r a i l w a y s e r v i c e s and - 56 -must have at l e a s t a broad overview of the basic tenets of marketing. The influence of the marketing philosophy i n the 1970's also pervades the highest corporate p o s i t i o n s . At both CN and CP R a i l , the present senior executive o f f i c e r s of the r a i l operations have had recent marketing department experience. This i s a new phenomenon. Recent experience furthermore shows non-marketing-trained department heads occupying marketing p o s i t i o n s on a term basis returning to f i l l senior non-marketing p o s i t i o n s ^ o n l y a f t e r concen-trated exposure to the marketing philosophy. While t r a d i t i o n a l marketing deals with a company's approach to users of i t s s e r v i c e or product, large corpora-tions i n modern society have had to become accountable not only to government, but also to non-user groups i n s o c i e t y . CN and CP R a i l have both f e l t pressures i n t h i s regard, but e s p e c i a l l y the l a t t e r with i t s greater independence from government involvement. CP R a i l , i n r e a c t i o n to t h i s influence, has engaged i n what one senior o f f i c e r c a l l e d " s o c i a l marketing". This centres on continuous public r e l a t i o n s e f f o r t s , not with shippers, but with the general p u b l i c . The r a i l industry t r a d i t i o n a l l y has had an intimate r e l a t i o n s h i p with - 57 -government through the web of l e g i s l a t i o n and regulations a f f e c t i n g i t s conduct. In the 1970's, however, the railways have come to recognize also the role of the fourth party i n major decisions - non-user groups in society. An example where fourth parties play a role i s in the a p p l i c a t i o n for branchline abandonment process. At CP R a i l , the s o c i a l marketing function has been performed to a large extent by senior railway o f f i c e r s making speeches in a l l parts of Canada to service groups or non-industry associations. Recently, CP R a i l has also appointed an o f f i c e r , c a l l e d P r i c i n g Director - Government L i a i s o n , to be responsible s o l e l y for public r e l a t i o n s statements about the company's role i n Canadian h i s t o r y and about i t s role i n the economy and society of today. An example of a recent issue is the "land grants" question. The company's strategy i s to respond d i r e c t l y to p a r t i c u l a r public grievances involving the CP R a i l rather than to "keep a low p r o f i l e " . Other examples of s o c i a l marketing have been Canadian P a c i f i c Limited's postwar r e p a t r i a t i o n of ownership from abroad and the pu b l i c a t i o n in 1968 of an " a u t h o r i t a t i v e " Canadian P a c i f i c corporate biography by J. Lome (41) MacDougall. More recently, in 1973, CN and CP R a i l - 58 -collaborated in producing the brochure "Railway Freight Rates - A Source Book". The Development Phases of Railway Marketing In Chapter II i t was pointed out that firms normally go through several phases in the development of a marketing system: from a production o r i e n t a t i o n - through a sales force o r i e n t a t i o n , a sales management phase, and an integra-ted marketing management phase - to the stage of being a f u l l marketing organization. The preceding overview of how railway marketing has evolved at CN and CP R a i l would suggest that the railways too have followed t h i s pattern. The Present Structure of Railway Marketing The discussion of marketing theory in Chapter II can serve as a framework for a study of current CN and CP R a i l marketing organization and p r a c t i c e s . The following sections examine the present railway marketing core functions, support functions and organization for marketing-element in t e g r a t i o n , h i g h l i g h t i n g as well key events in t h e i r evolution over the past f i f t e e n years. - 5 9 -The Marketing Mix - The Core Marketing Functions The Product Development Element. U n t i l the 1960's, product development was performed by consensus d e c i s i o n making by upper management committees representing the major company departments. As such, i t was r e a c t i v e to, rather than a n t i c i p a t o r y of, changes i n the railway operating environ-ment. Examples of the product-development function as performed i n these years by other departments or i n t e r -departmental groups would include: the s e t t i n g up of a railway pick-up-and-d e l i v e r y s e r v i c e , the organizing of express s e r v i c e s , the establishment - at CP R a i l only - of Merchandise Services ( l a t e r disbanded), the f i l i n g of a p p l i c a t i o n s to the Board of Transport Commissioners to discontinue s e r v i c e of c e r t a i n non-compensatory branch-l i n e s (as part of the d r i v e toward the " r a t i o n a l i z a t i o n " of the r a i l plant i n the 1950's), and the s e t t i n g up of Piggyback S e r v i c e s ^ ^ , introduced i n the e a r l y 1950's as a s i n g l e plan and expanded l a t e r to include three or four plans. a) b) c) d) e) With the advent of the marketing philosophy, the f i r s t requirement of the railways was to define the nature of - 6 0 -t h e i r business. I t meant seeing t h e i r f u nction as more than j u s t "producing and s e l l i n g ton-miles". Broadly defined t h e i r business was transportation, producing time and place u t i l i t y f o r shippers. From a product development viewpoint t h i s d e f i n i t i o n implied the channelling of corporate resources from the railway operations i n t o other modes ( i . e . d i v e r s i f i c a t i o n ) as well as the development of the railway-based "product". Both courses were followed at CN and CP R a i l . This thesis confines i t s e l f , however, to d i s c u s s i o n of the program f o r the development of the r a i l - b a s e d product. Railway marketing departments develop marketing s t r a t e g i e s . This function includes i d e n t i f y i n g markets which can be served p r o f i t a b l y with the r i g h t service/product. Product development programs, given s p e c i f i c railway competences, develop products to f i t these designated markets. Recent examples of new products (services) developed s p e c i f i c a l l y by CP R a i l ' s Product Development group include: a) "Run Thru Service" between Montreal and and Chicago i n c o l l a b o r a t i o n with the Chessie System, whereby a day i s saved i n each d i r e c t i o n thanks to "run-thru power and pre-blocked•trains"; - 61 -b) " H i g h - R e l i a b i l i t y Freight Service" on i t s tra i n s #901 Toronto-Vancouver, #902 Vancouver-Toronto, and #921 Toronto-Winnipeg, whereby "on Times" on #901 improved 41% over a year (from 46% on time i n 1971-72 to 65% in 1972-73, for the 10-month period July 31-May31), and on #902 improved 160% over the same year (from 25% to 65%), while in 1972-73 #921 was inaugurated and achieved 70% on-time performance - thanks to increased motive power and newly-initiated car monitoring; c) increased-frequency and hence fas t e r service, thanks to smaller t r a i n lengths; and d) various programs of equipment modification. (43) Product Development at both CN and CP R a i l comprises the sections Equipment Planning and Transportation Planning. Each section i s staffed with research analysts who monitor the p r o f i t a b i l i t y of various r a i l assets (car types) and services ( o r i g i n / d e s t i n a t i o n combinations). The a n a l y t i c s k i l l s of personnel required in product development are c h i e f l y i n the f i n a n c i a l budgeting area. Problem areas are i d e n t i f i e d by the monitoring exercise and opportunity areas pointed out by market segment managers ( c a l l e d National Commodity Sales Managers at CN and Commodity Marketing Directors at CP R a i l ) . Product Develop-ment s t a f f in addressing problems or opportunities co-ordin-ate projects that are designed towards the modification or a c q u i s i t i o n of equipment or the modification of routings. - 62 -Co-ordination may be required among several railway depart-ments, in c l u d i n g Finance, Engineering, Motive Power and R o l l i n g Stock, Research and Marketing. The Manager of Product Development, as pointed out i n a 1972 CP R a i l p o s i t i o n guide, "(works) with the Sales Department to communicate to customers new equipment or t r a i n s e r v i c e " . Accordingly, h i s department produces pamphlets and brochures f o r use as sales t o o l s . The Manager i s also expected "to work with i n d i v i d u a l cus-tomers i n the design and development of equipment and with connecting c a r r i e r s i n the design and development of new t r a i n s e r v i c e s " . The Promotional Element. With respect to the three compon-ents of promotion, the present railway p r a c t i c e at both CN and CP R a i l i s for a d v e r t i s i n g normally to be performed at the Corporate l e v e l , personal s e l l i n g at the Marketing Department l e v e l , and sales promotion at e i t h e r l e v e l . A l l these functions are c l e a r l y marketing a c t i v i t i e s . However, i n f u l l y developed "marketing organizations" such as CN and CP R a i l , marketing a c t i v i t i e s are performed by any and a l l departments and at a l l l e v e l s of the organization. - 63 -R a i l w a y f r e i g h t t r a f f i c a d v e r t i s i n g i s a p o s t - 1 9 6 0 phenomenon. The p r o m o t i o n a l s i d e o f the market d e f i n i t i o n and market s e g m e n t a t i o n s t r a t e g i e s - new i n the 1960 ' s -r e q u i r e d r a i l w a y s to i d e n t i f y the a c t u a l i n d i v i d u a l s who made the t r a n s p o r t a t i o n d e c i s i o n i n each o f i t s cus tomer f i r m s . F r e i g h t a d v e r t i s i n g was i n i t i a l l y p r e s e n t e d i n t r a n s p o r t a t i o n and t r a f f i c - m a n a g e m e n t t r a d e j o u r n a l s . It was gea red to c o r p o r a t e t r a f f i c d i r e c t o r s o r managers . By 1971, however , CN and CP R a i l began p l a c i n g f u l l - p a g e a d v e r t i s e m e n t s i n media w i t h a g e n e r a l a u d i e n c e : d a i l y newspapers and t e l e v i s i o n . The c h i e f t a r g e t s o f the a d v e r t i s e m e n t s were the s e n i o r g e n e r a l management o f the cus tomer f i r m s . The r a i l w a y s were engag ing i n a t ype o f market d e v e l o p m e n t . They were f o r c i n g an awareness o f the p h y s i c a l d i s t r i b u t i o n a spec t o f m e r c h a n d i s i n g upward i n t o the s e n i o r c o r p o r a t e l e v e l s o f customer f i r m s . Key d e c i s i o n - m a k e r s , i t was r e a l i z e d , c o u l d be l o c a t e d at many l e v e l s of management. CN i n 1972 i n s t i t u t e d an o r i e n t a t i o n seminar on p h y s i c a l d i s -t r i b u t i o n f o r top management p e r s o n n e l from a f u l l c r o s s -s e c t i o n o f s h i p p i n g C a n a d i a n i n d u s t r i e s . A c c o r d i n g to CN, i t was w e l l a t t e n d e d (by about 80 p e r c e n t o f those i n v i t e d ) and well received. This seminar i s an example of sales promotion, rather than a d v e r t i s i n g . Another example of sales promotion by the railways are t h e i r recent attempts, through t h e i r consulting arms CANALOG D i s t r i b u t i o n and Canadian P a c i f i c Consulting Services, to o f f e r customers " t o t a l package" p h y s i c a l d i s t r i b u t i o n studies. The p e r s o n a l - s e l l i n g aspect of promotion, known at the r a i l -ways as Sales, could be considered the l e a s t important of the three marketing mix elements i n railway marketing. At CP R a i l , Sales was espoused as one of three marketing instruments only a f t e r much i n t e r n a l debate. T r a d i t i o n a l l y , i t was assumed that railways r e l i e d f o r t h e i r business volume almost e n t i r e l y on general swings i n the economy and the f i n a n c i a l fortunes of shippers. The "derived demand" notion was supreme. This b e l i e f was c a r r i e d on, with con-siderable momentum, into the marketing era. In mid-1960's, the CP R a i l Vice-President of T r a f f i c considered a b o l i s h i n g the p o s i t i o n of the Freight T r a f f i c Representative, main-t a i n i n g only the Service Representative across the system. - 65 -This a c t i o n , however, was not taken. Instead, i t was accepted that the marketing-mix concept contemplated a f o u r - f o l d process: marketing and sales representatives spotting the marketing opportunities (or problems), the product development group producing s u i t a b l e service and equipment configurations, the p r i c i n g group determining a p r i c e , and marketing and sales representatives a c t i v e l y s e l l i n g the "package". In other words, i t was decided that there was a need for a c t i v e personal s e l l i n g . To develop the s k i l l s of the sales force, extensive t r a i n i n g programs were c a r r i e d out. These included seminars i n time and t e r r i t o r y management, the psychology of s e l l i n g ("people knowledge"), railway equipment and services ("product knowledge"), and the nature of transportation and shipper markets. These programs were aimed equally at e x i s t i n g sales s t a f f and new representatives. The q u a l i t y of the sales s t a f f and manage-ment has been further upgraded i n recent years through the recruitment for the f i r s t time of c o l l e g e educated i n d i v i d u a l s . The salesman today has a new-found i d e n t i f i c a t i o n with the railway operation as a whole, as w e l l as with the marketing department i n i t s newly acquired d i v e r s i t y . He i s " f r o n t -man", may sign l e t t e r s i n many cases on h i s own a u t h o r i t y , - 66 -and e n j o y s t he s u p p o r t o f a b a c k - u p team o f " p r o f e s s i o n a l s " e x p e r t i n the f i e l d o f p r i c i n g o r t h e d e s i g n o f p h y s i c a l d i s t r i b u t i o n s y s tems . U n t i l r e c e n t l y , the s a le sman has sought t o m a x i m i z e s a l e s r e v e n u e s o r market s h a r e . In the l a s t two o r t h r e e y e a r s ( 1 9 7 4 - 7 6 ) , however, m a r k e t i n g depa r tment m o n i t o r i n g sys tems have i n d i c a t e d to h im w h i c h t r a f f i c i s r e t u r n i n g t h e " g r e a t e s t c o n t r i b u t i o n " ( t o o v e r h e a d ) , and he now u s u a l l y c o n c e n t r a t e s o n l y on h i g h - c o n t r i b u t i o n m a r k e t s . The sa le sman i s no t o f t e n t h e u l t i m a t e n e g o t i a t o r f o r l a r g e r t r a f f i c c o n t r a c t s between r a i l w a y c a r r i e r and s h i p p e r . He i s , however , an i m p o r t a n t a n t e n n a f o r s e n s i n g t h e marke t e n v i r o n m e n t . The P r i c i n g E l e m e n t . The pa s s a ge o f t he N a t i o n a l T r a n s p o r t -a t i o n A c t (NTA) i n 1967 meant t h e e l i m i n a t i o n o f i m p o r t a n t r e g u l a t o r y c o n s t r a i n t s and r a i l w a y p r i c i n g ( r a t e - m a k i n g ) a c q u i r e d a new market s e n s i t i v i t y . P r i c i n g f l e x i b i l i t y , however , had been g row ing s t e a d i l y o v e r t h e y e a r s . Some k e y e v e n t s a r e r e c o u n t e d . T r a d i t i o n a l l y the r a i l w a y s were r e g a r d e d as common c a r r i e r s and, because o f t h i s , r e g u l a t i o n s f o r many y e a r s p r o h i b i t e d the r a i l w a y s from e x e r c i s i n g " u n f a i r d i s c r i m i n a t i o n " between d i f f e r e n t p l a c e s or s h i p p e r s . T h i s s i t u a t i o n e x i s t e d i n the e r a when r a i l w a y s e n j o y e d a near monopoly o f l a n d t r a n s p o r t -a t i o n i n Canada . Highway t r u c k e r s e n t e r e d the t r a n s p o r t a t i o n f i e l d i n the p o s t - W o r l d War I y e a r s . They were e i t h e r p r i v a t e , c o n t r a c t o r common c a r r i e r s . Common h ighway c a r r i e r s , u n l i k e the common c a r r i e r r a i l w a y s , o f t e n e x p e r i e n c e d v e r y l i t t l e r e g u l a t i o n , e s p e c i a l l y t ho se l i c e n s e d f o r i n t r a p r o v i n c i a l s e r v i c e . W i th the s i g n i f i c a n t p o s t - S e c o n d Wor ld War growth i n t r u c k c o m p e t i t i o n , r a t e - m a k i n g f l e x i b i l i t y became i n c r e a s i n g l y impor t an t t o the r a i l w a y s . In 1948, the r a t e form " c o m m o d i t y - c o m p e t i t i v e " ( m o d e - c o m p e t i t i v e ) was o f f i c i a l l y d e s i g n a t e d and r e c o g n i z e d i n the Board o f T r a n s p o r t C o m m i s s i o n e r s ' (now the C a n a d i a n T r a n s p o r t Commiss ion) annua l r a i l w a y W a y b i l l A n a l y s i s . In 1951, w h i l e the Tu rgeon R o y a l t i o n recommended and saw adopted Commiss ion on t r a n s p o r t a -the "one and o n e - t h i r d - 68 -r u l e " to s e t a c e i l i n g on l o n g - h a u l / s h o r t - h a u l r a t e d i f f e r -e n t i a l s , changes made the same y e a r to r a t e f i l i n g p r o v i s i o n s d i d a c h i e v e f u r t h e r r a t e - m a k i n g f l e x i b i l i t y f o r t he r a i l w a y s . In 1955, t h e amendment t o t h e T r a n s p o r t A c t t o e x t e n d A g r e e d C h a r g e s t o c o v e r m o d a l l y - c o m p e t i t i v e , a s w e l l a s m a r k e t - c o m p e t i t i v e , s i t u a t i o n s f u r t h e r i n c r e a s e s t h i s f l e x i b i l i t y . In the 1 9 6 0 ' s , the r a i l w a y s a l s o made p r i c i n g i n n o v a t i o n s o f t h e i r own, w i t h i n t h e e x i s t i n g r e g u l a t o r y p a r a m e t e r s . These i n n o v a t i o n s were a imed a t r e a l i z i n g two m a r k e t i n g g o a l s : to improve p l a n t u t i l i z a t i o n and to d i v e r s i f y p r o d u c t . P r i c i n g was an a b v i o u s t o o l to b r i n g abou t b e t t e r p l a n t u t i l i z a t i o n . F o r examp le , c a r l o a d - v o l u m e i n c e n t i v e p r i c e s , o r " s t e p - r a t e s " , were h e a v i l y p r o m o t e d . L i k e w i s e , new r a t e s were a s s o c i a t e d w i t h new " p r o d u c t s " . Two phases may be i d e n t i f i e d i n t h e d i v e r s i f i c a t i o n o f t h e r a i l w a y s ' p r o d u c t : an equ ipment pha se and a s c h e d u l e s p h a s e . E a c h phase p r o d u c e d a new s e r v i c e / p r i c e c o m b i n a t i o n s . - 69 -In the early and middle 1960's, s i g n i f i c a n t new equipment designs were produced. The standard boxcar no longer had universal shipper appeal. Thus, s p e c i a l i z e d new r a i l c a r s -such as the temperature-controlled car, bulkhead f l a t c a r s , or " a l l - d o o r " boxcars - were designed and put into service. This d i v e r s i f i c a t i o n gave b i r t h to a whole v a r i e t y of new r a i l rates. Special rates were developed for sp e c i a l equipment. In the 1970's, t r a i n routing and schedules have become an important aspect of product development and the r e s u l t i n g new services have also produced customized rates. The passage of the NTA i n 1967 relaxed r e s t r i c t i o n s on large-volume p r i c i n g . Examples abound of new-service/new-pri c e combinations developed a f t e r 1967. U n i t - t r a i n and car-block rates, as well as intermodal (e.g. r a i l - t r u c k ) rates, per shipment volume rates, annual volume rates, seasonal rates, and d i r e c t i o n a l rates, (e.g. s p e c i a l back-haul) were allowed for the f i r s t time in 1967. The Support Funct ion -Marketing Research/Marketing Information System  Marketing information may be divided into information produced exte r n a l l y and information produced i n t e r n a l l y . 70 -E x t e r n a l l y , there are primary and secondary sources. The railways have c a r r i e d out primary marketing research from time to time, on a project b a s i s , rather than i n an ongoing systematic fashion. This work has generally been done by the corporate Research Departments. Examples include research studies of p a r t i c u l a r firms or i n d u s t r i e s , c a r r i e d out with a wide focus, encompassing a firm's or industry's n a t i o n a l or i n t e r n a t i o n a l a c t i v i t y , or a more r e s t r i c t e d focus, concentrating on r e g i o n a l operations. There have also been studies on modal competition; these, too, have vari e d i n breadth of focus. In general, recent studies have been more f i n a n c i a l l y q u a n t i t a t i v e than e a r l i e r ones. A sample of postwar CP R a i l study t i t l e s i s given i n E x h i b i t 1. CN and CP R a i l have t r a d i t i o n a l l y gathered secondary data, such as shippers' market s t a t i s t i c s and competitors' operating and f i n a n c i a l data, on a continuing b a s i s . The method of accumulation, however, has not been f u l l y integrated or systematized. Trade magazines and government publ i c a t i o n s have been the sources f o r t h i s type of informa-t i o n and Corporate L i b r a r i e s , the r e p o s i t o r i e s . Regional o f f i c e s are kept informed of Corporate L i b r a r y a c q u i s i t i o n s . Current p e r i o d i c a l s are c i r c u l a t e d within both headquarters and r e g i o n a l marketing and departments. - 71 -EXHIBIT 1 A SAMPLE OF TITLES OF CP R a i l RESEARCH STUDIES (1948 to 1970) (The department which prepared the study and the date of the study, where known, i s shown i n parentheses) "Summary of the Working Papers f o r the Study of the Costs of 'Handling Grain and Grain Products i n Western Canada" (1948) "The Trucking Industry i n Western Canada" (Department of Research, 1952) "CPR's Share of Railway Carload T r a f f i c Market Compared with that of the CNR and Trends i n National Production - 1949 to 1960 " (1960) "Potash i n Saskatchewan" (Department of I n d u s t r i a l Development, Winnipeg, 1962) "Secondary Industry Location and Railway T r a f f i c " (Department of Research, 1964) "Analysis of Highway Development i n Ontario" (Department of Research, 1965) "An Economic Analysis of the New Brunswick Cold Storage Company, Saint J o h n , N.B." (Department of Research, 1965) "Analysis of Highway Developmment i n Canada", " ... i n Quebec",. " ... i n Western Canada", " ... i n the Maritime Provinces" (Department of Research, 1966) "The Iron and S t e e l Industry of J a p a n " (Department of Research, 1969) "The Proposed Kootenay & E l k Railway" (Department of Research, 1969) "An An a l y s i s of CP R a i l Equipment Requirements and P r o f i t a b i l i t y of Fresh Potato T r a f f i c O r i g i n a t i n g i n New Brunswick and Maine" . (Department of Research, 1970, ) " P r o f i t a b i l i t y of CP R a i l Pool Car T r a f f i c " (Market Development/ Department of Research, 1971) (Available courtesy Canadian P a c i f i c Limited, Corporate L i b r a r y , Windsor Station, Montreal) W h i l e e x t e r n a l d a t a g a t h e r i n g has e x i s t e d f o r some t i m e i n the r a i l w a y R e s e a r c h and T r a f f i c d e p a r t m e n t s , t h e m a j o r b r e a k t h r o u g h i n i n f o r m a t i o n c o n t r o l i n t h e m a r k e t i n g a r e a came i n the l a t e 1 9 5 0 ' s and e a r l y 6 0 ' s w i t h t h e c o m p u t e r i z a -t i o n o f b a s i c i n t e r n a l r a i l w a y a c c o u n t i n g d a t a . The new T r a f f i c R e s e a r c h d e p a r t m e n t s s e t up a t t h i s t i m e were c h a r g e d w i t h e n s u r i n g t h a t m a r k e t i n g - r e l a t e d p r i n t o u t s -whether o f i m p o r t a n c e to p r i c i n g , s a l e s f o r c a s t i n g , o r p r o d u c t deve lopment management - were w e l l i n t e g r a t e d and a v a i l a b l e on a c o n t i n u i n g b a s i s t o c e n t r e s o f m a r k e t i n g d e c i s i o n - m a k i n g a t h e a d q u a r t e r s and a t t h e r e g i o n s . S y s t e m -i z a t i o n i n t he p r o d u c t i o n o f t h i s k i n d o f i n f o r m a t i o n was p r o b a b l y the e a r l i e s t example o f t h e m a r k e t i n g c o n c e p t i n a c t i o n i n C a n a d i a n r a i l w a y s . Today , the M a r k e t i n g I n f o r m a t i o n Systems a t CN and CP R a i l a r e p a r t o f a l a r g e r c o r p o r a t e Management I n f o r m a t i o n Sys tem w h i c h i n c l u d e s a number o f s u b s y s t e m s . A t C a n a d i a n P a c i f i c L i m i t e d , f o r examp le , t h e s e i n c l u d e P l a n n i n g , A p p l i c a t i o n s , and Systems Deve lopment i n w h i c h r a i l w a y M a r k e t i n g and S a l e s s u b - s u b s y s t e m s e x i s t ; and O p e r a t i o n s , S u p p o r t , and A d m i n i s t r a t i o n i n which, r a i l w a y M a r k e t i n g has no s e p a r a t e a t t e n t i o n . In t o t a l , a t C a n a d i a n P a c i f i c L i m i t e d , o v e r 100 p e r s o n s a r e e m p l o y e d . i n . t h e c o r p o r a t e Management I n f o r m a t i o n Sy s tem, - 73 -L i a i s o n between the various marketing functions and the Mar-keting Information support System i s assured by a Manager, Marketing Information Centre. At CP R a i l , a current p o s i -t i o n guide, describes his job as: "(providing) a l l necessary t r a f f i c information to enable Marketing and Sales Department to measure, control and e f f e c t i v e l y execute duties involving sales, p r i c i n g , market research, t r a f f i c analysis, s p e c i a l studies, equipment u t i l i z a t o n and forecasting", "(co-ordinating) data processing budget and (following) i t through",(and) "(developing) new sources of data and (introducing) new methods of disseminating information." Integration and Co-ordination Integration and co-ordination of marketing a c t i v i t i e s at CN and CP R a i l would appear to be achieved in several ways and at several l e v e l s . For example, at the highest l e v e l , where marketing strategy is formulated, senior o f f i c e r s i n non-marketing departments such as Operations, Engineering and Finance have t r a d i t i o n a l l y played a considerable r o l e . It was noted in Chapter II that product-market strategies - 74 -include market development, product development, and d i v e r s i f i c a t i o n s t r a t e g i e s . Senior railway o f f i c e r s in the engineering, operating and finance departments have played important roles in the formulation of market development st r a t e g i e s , l i k e the s e t t i n g up of rail-based systems for bulk commodity handling, and in the formulation of product development s t r a t e g i e s , l i k e the introduction of new equip-ment and t r a i n scheduling. S i m i l a r l y , senior executives from a broad base of corporate departments contributed to d i v e r -s i f i c a t i o n s t rategies such as the s e t t i n g up of railway consulting services to design in d i s t r i b u t i o n systems for shippers. This multi-departmental input to marketing strategy-making has a considerable co-ordinating and integrating e f f e c t . Below the strategy l e v e l , at the program l e v e l , i n t e g r a t i o n and co-ordination are achieved through functional organiza-t i o n a l structures. Figures 10 and 11, showing the 1975 CN and CP R a i l headquarters marketing organizations, i l l u s t r a t e t h i s . Heavy s o l i d - l i n e boxes hi g h l i g h t the marketing mix functional elements of these organizations. Figures 12 and 13 (pages 81 and 8 2) show that t h i s functional approach to organizing marketing a c t i v i t i e s e x i s t s also at the regional l e v e l . - 7 5 -*" tfl i l 11 c f l 0 <3 2"i J 1 1c C. r ; s 4 * • j ! * ; • c. «• 2 : • * ^ * 1 ; i» £ «" ! 1^ * ' > V 1 « 5 "3 #• t «. * 1 1M~J + r «• «• S • f" 3 . 2 v £ « tr % 6 5-S 1. c •I 5* v * -X' « > > f J t r * 0 i t » d IS u 0 a « t <-«• I 0. V a j '6 of 5 J-1 ? r 0 /> s i •- 3 • r * e V 0 -n .i '« 0 % > a 5 • e rl c e t t ( V C (t - 5 ^ t "5-? u X r y J - * .! *.i iti\ • i s v «» 76 V ** ul 0-t. cr C c 3 > > S o *. 6 I 1 i i o <r h t t •h a c t E ft. » -8 -c if I 1 f 5 < 5 -a 5 * tf 0 V s •if c * t £ 0 J ft 0 o e tf V J £ r •a t •3 .'3 a — 0 -3 « f tf 0 * - i n -k s pointed out in Chapter I I , the functional approach to organizing marketing a c t i v i t i e s contemplates a program manager for each element of the marketing mix and a marketing manager to ensure co-ordination among the various programs. Figures 10 and 11 show that at CN the l a t t e r o f f i c e r is c a l l e d the Dire c t o r , Market Planning and Development and at CP R a i l the General Manager, Marketing Development. They show further that the mix elements at CN are c a l l e d Equipment and Service & F a c i l i t y ( i . e . Product) Planning, Sales and Freight P r i c i n g and the support element (MIS) i s c a l l e d Systems Development, while at CP R a i l , these are c a l l e d Product Development, Freight Sales. P r i c i n g Economics/Pricing, and Marketing Information Centre. While the o f f i c i a l charts of both the CN and CP R a i l organ-izatio n s show Sales and P r i c i n g on a s i m i l a r organizational l e v e l to that of the market development function, t h i s s i t u a t i o n e x i s t s only owing to the h i s t o r i c a l importance of sales ( t r a f f i c ) and p r i c i n g (rate-making), as shown i n Figures 7, 8 and 9 (pages 49, 50 and 53). Informally, the influence of market development i s indeed growing. At CP R a i l , evidence of this upswing is pr i c i n g ' s representation in the market development organization, as P r i c i n g Development. In C h a p t e r I I , i t was p o i n t e d out t h a t o t h e r p h i l o s o p h i e s e x i s t f o r o r g a n i z i n g m a r k e t i n g a c t i v i t i e s - s u c h a s t h e c u s t o m e r , p r o d u c t and r e g i o n a l a p p r o a c h e s - and t h a t each has i t s m e r i t s i n e n s u r i n g i n t e g r a t i o n and c o - o r d i n a t i o n . CN and CP m a r k e t i n g o r g a n i z a t i o n s t o d a y a r e , i n e f f e c t , c o m p o s i t e s o f a l l the a p p r o a c h e s . The c u s t o m e r , o r marke t segment , a p p r o a c h i m p l i e s an o r g a n -i z a t i o n t o p r o v i d e s e p a r a t e , h i g h - l e v e l a t t e n t i o n t o c e r t a i n c u s t o m e r s or g roups o f c u s t o m e r s . CN N a t i o n a l S a l e s Managers and CP R a i l M a r k e t i n g D i r e c t o r s e x i s t f o r e a c h o f about a h a l f - d o z e n i m p o r t a n t i n d u s t r y g r o u p s u s i n g t h e r a i l mode. M a r k e t segments i n c l u d e f o r e s t p r o d u c t s , c o n s t r u c t i o n m a t e r i a l s , v e h i c l e s , and f u e l s and c h e m i c a l s . In F i g u r e s 10 and 11 , N a t i o n a l S a l e s Managers and M a r k e t i n g D i r e c t o r s a r e h i g h l i g h t e d by b r o k e n - l i n e b o x e s . S i m i l a r cu s tomer o r i e n t a -t i o n e x i s t s a t CN and CP R a i l r e g i o n a l o f f i c e s . T h i s i s seen i n F i g u r e s 12 and 13 . The p r o d u c t a p p r o a c h i s e x p r e s s e d i n t he way t h e r a i l w a y s a r e o r g a n i z e d a round s e r v i c e s . E x p r e s s - a n d - I n t e r m o d a l S e r v i c e s a t CN i s a s e p a r a t e " p r o d u c t " or s e r v i c e s e c t i o n o f t he M a r k e t i n g Depa r tment . A t CP R a i l , O v e r s e a s T r a d e and I n t e r m o d a l S e r v i c e s have t h e same c h a r a c t e r i s t i c . Each o f - 79 -these CP R a i l , product u n i t s themselves have operating and marketing arms, the l a t t e r one with a s i g n i f i c a n t number of marketing functions. In Figures 10 and 11, d o t t e d - l i n e boxes h i g h l i g h t the Marketing Department product u n i t s . Figures 12 and 13 (pages 81 and 8 2) show that s i m i l a r product o r i e n t a t i o n e x i s t s , to a c e r t a i n degree, at CN and CP R a i l r e g i o n a l o f f i c e s as w e l l . Regional organizations are the means by which CN and CP R a i l achieve i n t e g r a t i o n among geographically dispersed marketing elements and personnel. A d m i n i s t r a t i v e l y , i n a s o l i d - l i n e r e l a t i o n s h i p , the re g i o n a l marketing group reports to the reg i o n a l v i c e - p r e s i d e n t . F u n c t i o n a l l y , i n a d o t t e d - l i n e r e l a t i o n s h i p , the l i n k s are with the headquarter marketing department. Figures 12 and 13 show the CN and CP R a i l functions at headquarters and region. Connecting l i n e s show administrative r e l a t i o n s h i p s and alphabetic l e t t e r s i n d i c a t e f u n c t i o n a l l i n k s between headquarters functions and t h e i r r e g i o n a l counterparts. (A c a p i t a l l e t t e r i s used f o r the headquarters function and the corresponding lower-case l e t t e r i s used for the r e l a t e d r e g i o n a l function.) - ao -Figures 12 and 13 show that today a considerable number of the marketing a c t i v i t i e s are decentralized. The d e c e n t r a l -i z a t i o n , however, i s not t o t a l . Indeed, the c h i e f marketing functions can be put i n t o three categories: those exclusive to a p a r t i c u l a r o r g a n i z a t i o n a l l e v e l (headquarters or region), those divided between l e v e l s , and those "duplicated" at both l e v e l s . At both CN and CP R a i l , the marketing information system (MIS) and product development are i n the category of marketing function which i s exclusive to a p a r t i c u l a r o r g a n i z a t i o n a l l e v e l . These functions are performed only at headquarters while, of course, any outputs are made a v a i l a b l e to a l l or g a n i z a t i o n a l l e v e l s either on a regular or a by-request basis. MIS output sent out r e g u l a r l y to r e g i o n a l and d i s t r i c t - a l e v e l below region - o f f i c e s includes sales and p r o f i t a b i l i t y s t a t i s t i c s . At the d i s t r i c t sales o f f i c e , these are i n the form of monthly "forwarded" and "received" carload t r a f f i c data, sorted f o r the d i s t r i c t , by customer and by commodity. - 81 -« 5 U i •.1 < 6 b fi ! c 2 a f i e -3 < e • c he jM 0 > * 0 tf> •3 0 • 0 c • •3- . * W I*! s l tf « TS r £ It o- « r 2 u ? 3 t i it A- » T C J \ o I-* f 5-« ii'-i fi LtS 5" ; »- y j * > -4. « - * < / • n v ? S ^ J f ii 11 -ii c * £ * » 1 * n -7 (a 'H c tf •5 > 0 IS O E 5 i " > </ "3 c •a 5<f e 5 tf t Ii *3 tf w w t o it »-w l ¥ la \ t i v t J. y « t 0 J J*3 d<r I 1 t< 4 « J i 0 3 t J tf I d tf tf I j: It ? v O ui i o (9 n. tf _s f ! | . v * «f-• ' e ' t tf < fi- J q » * 1 ft Vis - * <r ; ^ .o % e. 0 o-<-0 2 5 » i-g J« 0 il ? S * -t% 6 £ f — Z ° •a >• t s & o v Q. t •' i , 3 ^ ^ i f * / •- * \- -> -* 5 '? C- tf ^ J I -r- 82 ~ e s i a * P * t5 o 1 in "5 5: y •a j-«• r - c-> O V ¥ c 6 P 1 4 — I S>.5T c v *• i CJ o tf * « 6 .1 r-t r * -8 • 5 r r. c < i 4 I 1 y 6 in I t U J L - J — i 4-v5 c * v *- » ui c Jt c i — 11 * J s 0 « J . 5 r C u. L_ J> cr «« i i ¥ I-J ^ t #< uJ V V S 3 J> -0 0 4 1 0 "S c J 4-< o 0 i . » o n u » i ¥ r 6 • <: C I \ S i It 3 *• C c M 3i 5 2 > ifi 2 J - .83 -Sales, at both railways, i s i n the category of marketing function which i s divided between l e v e l s . Sales t r a i n i n g , revenue planning, sales research and sales promotion are headquarters functions, while personal s e l l i n g i s a f i e l d function with reporting l i n e s to the re g i o n a l o f f i c e . An example of the category where there i s some d u p l i c a t i o n of types of marketing a c t i v i t i e s between headquarters and regions i s p r i c i n g . Headquarters p r i c i n g s t a f f generally determine rates for movements between regions; r e g i o n a l s t a f f , for i n t r a - r e g i o n a l t r a f f i c . At CP R a i l , but not at CN, the p r i c i n g development group also have r e g i o n a l counterparts, i n c e r t a i n regions. The r e g i o n a l counterpart of the headquarters P r i c i n g Development Manager i s the re g i o n a l P r i c i n g D i r e c t o r . The market d i r e c t o r s are c a l l e d by the same t i t l e s at both headquarters and region -although headquarters d i r e c t o r s cover the f u l l range of markets served through the system, rather than j u s t the two or three key customer groups of a p a r t i c u l a r region. In summary, today's CN and CP R a i l marketing organizations are composites of the f u n c t i o n a l , customer (market segment) and product approaches to marketing organization and, i n each r e s p e c t , t he f i v e CN and f o u r CP R a i l r e g i o n a l o f f i c e s r e f l e c t to a c o n s i d e r a b l e d e g r e e t h e h e a d q u a r t e r s p a t t e r n . D e c e n t r a l i z a t i o n A key a s p e c t o f t he r a i l w a y s ' deve lopment o f t h e i r m a r k e t i n g c a p a b i l i t i e s to meet i n t e r m o d a l c o m p e t i t i o n i n t h e 1 9 6 0 ' s was the d e c e n t r a l i z a t i o n o f m a r k e t i n g a c t i v i t i e s and o r g a n i z a t i o n . The o t h e r ma jo r t h r u s t , o f c o u r s e , was t h e deve lopment o f a s e t o f m a r k e t i n g mix e l e m e n t s . The move to se t up m a r k e t i n g o p e r a t i o n s as c l o s e t o t h e cus tomer as p o s s i b l e was a ccompan ied by t h e d e c e n t r a l i z a t i o n o f c e r t a i n o p e r a t i n g a c t i v i t i e s as w e l l . A t CP R a i l , t h e O p e r a t i o n s d e c e n t r a l i z a t i o n even p r e c e d e d t h a t o f M a r k e t i n g . F i g u r e 14 t r a c e s the deve lopment o f t h i s d e c e n t r a l i z e d management f o r b o t h CN and CP R a i l . In t he t r a d i t i o n a l s t r u c t u r e , b o t h r a i l w a y s , on b o t h t h e T r a f f i c and O p e r a t i o n s s i d e s , had s o l i d f u n c t i o n a l r e p o r t i n g l i n e s f rom the f i e l d l e v e l s t h r o u g h t o h e a d q u a r t e r s . F i g u r e s 15 and 16 show the t r a d i t i o n a l r e p o r t i n g l i n e s o f CN and CP R a i l ' s t r a f f i c a c t i v i t i e s , f r om t h e h e a d q u a r t e r s t h r o u g h to the d i s t r i c t - a n d c i t y l e v e l s . - 86 -v n d CD c o c r 2 0 % % Z o .il r <s •3 I t ? -I ll vol > .tu o Ul c <r 0 « v $"•»</> <» i« t «- t r 31-* 0 M J o I* "5 5 «» 7-c o 7-f 0^ 5 t i. i 0 c e is + a-tr <s .£ o -0 ty tf il-ex r t* 1-L JC . <r 3 Q. 0 V t . J 1 * 0 I i t - r 4* cr 6 c tt z I u- h c a u (- ^ o cr ? '5 ty u <t u-n e — cy US 7 1—^ I • u-T I <r a tf w e i p >->» 9 £ i £ 5 a r «° 0 I 0 5 < 0 ty> cf -0 1 "v 1 o -8 6 cy £ t V < c a .5 <S 5 £ £ tf V C C .i 1 r 3^  - > " s- J < 1 f £ s i .0 »-+ r s o r ? - '8 7 ~ i d a: o - f t Il c r if -0 v cy X. UJ •a 5 l-d c V ? f V * > 0 in ¥ 0-j °cr-» » cr cf • < £ •o -4 i j 4 •5 d O j 0 e tf o J d t r o 0> f l -OS ? • d V .0 P-O i. d < i. t d c. -5 cj c <s s o . 1% v 3 cT> t , Si d d -. 88 The t r a n s i t i o n a l phase o f the 1960 ' s saw CN j o i n t l y d e c e n t r a l i z i n g d e c i s i o n - m a k i n g f o r s a l e s and most o p e r a t i o n s a c t i t i v i e s to two s e p a r a t e f i e l d l e v e l s : r e g i o n and a r e a . F i g u r e 17 shows the a d m i n i s t r a t i v e r e p o r t i n g l i n e s , from a r e a t h r o u g h r e g i o n to h e a d q u a r t e r s , o f the CN s a l e s o r g a n i z a t i o n o f the m i d - 1 9 6 0 ' s p e r i o d . Meanwh i l e , CP R a i l a l s o e x p e r i m e n t e d w i t h d e c e n t r a l i z a t i o n o f d e c i s i o n - m a k i n g , but o n l y on the o p e r a t i o n s i d e and o n l y down to the r e g i o n a l l e v e l . In the 1 9 7 0 ' s , w i t h the e x p e r i m e n t a t i o n o f the 6 0 ' s b e h i n d them, the CN and CP R a i l have bo th s e t t l e d on d e c e n t r a l i z a -t i o n o f most m a r k e t i n g and o p e r a t i o n s a c t i v i t i e s - t o s i n g l e f i e l d l e v e l o n l y , the r e g i o n . C o n c l u s i o n Wh i l e C h a p t e r I I I examined the c i r c u m s t a n c e s s u r r o u n d i n g the r a i l w a y s ' a d o p t i o n o f the m a r k e t i n g concept and the c r e a t i o n o f the f i r s t o r g a n i z a t i o n a l u n i t s which engaged i n m a r k e t i n g p r a c t i c e s , Chap te r IV has l ooked at the subsequent deve lopment o f m a r k e t i n g o r g a n i z a t i o n and p r a c t i s e s - w i t h s p e c i a l a t t e n t i o n b e i n g g i v e n to c u r r e n t r a i l w a y m a r k e t i n g . - ..8.9 — LU d o (5 u. tf ' 1 •I '0 IL v cr i . tf v <r "3 » d-<J-o _* c-9 , U v> e *- 1 c. tf o C " 3 6 tf t U. 1. s-.r* § J - o I. \A P-<> 1) 3 •I 0 I 1 t a*. * 73 tf r= o If y .S a 6 0 a 2 3 1 0 ~ -> * « o < 1 t \ + ej C» * V £0 r h t » cu * tf • cj I t tf " c •a * t 5 -i 01 •r- # >-• Ji <U . -e *-- 9.0 -The deve l opment o f the CN and CP R a i l m a r k e t i n g p rograms f rom e a r l y s t a t e m e n t s o f o b j e c t i v e s and t a s k i d e n t i f i c a t i o n t h r o u g h the 1 9 6 0 ' s t o t h e p r e s e n t day i n d i c a t e s a p a t t e r n v e r y s i m i l a r to t h a t d e m o n s t r a t e d i n o t h e r i n d u s t r i e s and d e s c r i b e d i n m a r k e t i n g t e x t b o o k s . L e a v i n g b e h i n d t h e t r a d i t i o n a l p r o d u c t i o n o r i e n t a t i o n , t h e f i r s t s t a g e s were t h e d e v e l o p m e n t o f a s t r o n g s a l e s f o r c e and s a l e s management c a p a b i l i t y . T h i s o c c u r r e d i n t h e m id t o l a t e 1 9 6 0 ' s . L a t e r , i n t he 1 9 7 0 ' s , new m a r k e t i n g a c t i v i t i e s l i k e p r o d u c t - , p r i c i n g - , and m a r k e t - d e v e l o p m e n t were i n i t i a t e d . To accommodate t h e s e new a c t i v i t i e s a l o n g w i t h t h e o l d e r i n d u s t r i a l deve lopment and s a l e s and t o f a c i l i t a t e manage-ment and e n s u r e a c t i v i t y i n t e g r a t i o n a r e l a t i v e l y comp lex m a r k e t i n g o r g a n i z a t i o n a l s t r u c t u r e was d e v e l o p e d - a t h e a d q u a r t e r s and a t r e g i o n . I n r e c e n t y e a r s , c o r p o r a t e - w i d e c o n t r i b u t i o n s to m a r k e t i n g e f f o r t s have begun t o be made. M a r k e t i n g t o d a y i s n o t m e r e l y s e e n as a m a r k e t i n g d e p a r t m e n t f u n c t i o n , b u t a s one i n w h i c h e v e r y r a i l w a y employee p l a y s a p a r t . J u s t a s r a i l w a y m a r k e t i n g i s f ound to have d e v e l o p e d a l o n g a f a i r l y common e v o l u t i o n a r y p a t h , so t oo the p r e s e n t r a i l w a y o r g a n i z a t i o n s and p r a c t i c e s a r e f ound to r e f l e c t t h e b a s i c t e n e t s o f t e x t b o o k m a r k e t i n g . CN and CP R a i l engage i n t h e - 91 -b a s i c m a r k e t i n g f u n c t i o n s o f p r o d u c t d e v e l o p m e n t , p r o m o t i o n and p r i c i n g . ( D i s t r i b u t i o n i s e x c l u d e d a s i n t r a n s p o r t a t i o n compan ies i t i s l o g i c a l l y i n d i s t i n c t f rom t h e p r o d u c t . ) They have m a r k e t i n g i n f o r m a t i o n s u p p o r t sys tems and t h e y m a i n t a i n o v e r a l l i n t e g r a t i o n t h r o u g h the p r o c e s s e s o f s t r a t e g y and program f o r m u l a t i o n and t h r o u g h p r o d u c t , cu s tomer and r e g i o n a l a p p r o a c h e s to o r g a n i z a t i o n . The d e v e l o p m e n t s made i n r a i l w a y m a r k e t i n g c a n b e s t be a p p r e c i a t e d by compar ing t r a d i t i o n a l t r a f f i c o r g a n i z a t i o n and p r a c t i c e s w i t h p r e s e n t d a y o n e s . Indeed t h e y p r e s e n t a sharp c o n t r a s t . In 1955, f o r example , a d i s t r i c t f r e i g h t a g e n t , the t r a f f i c d e p a r t m e n t ' s r e p r e s e n t a t i v e a t a f i e l d l e v e l , was s i m p l y an o r d e r t a k e r and cus tomer s e r v i c e r . He c o u l d d i r e c t l y q u o t e a p u b l i s h e d r a t e t o a s h i p p e r o r on new o r l a r g e movements he c o u l d r e f e r h i m to t h e h e a d q u a r t e r s r a t e s depa r tment were a q u o t a t i o n c o u l d be made b a s e d on a c r u d e a s se s sment o f market f a c t o r s and a c o s t i n g f o r m u l a d e r i v e d f r om b r o a d sy s tem a v e r a g e s . The p r e s s u r e s o f t r u c k c o m p e t i t i o n i n t h e 1 9 5 0 ' s and 1 9 6 0 ' s , however , c a u s e d r a i l w a y c o s t i n g and p r i c i n g to become b o t h more s o p h i s i c a t e d and more d e c e n t a l i z e d . The f r e i g h t a g e n t , w i t h h i s d i r e c t f u n c t i o n a l l i n k t o h e a d q u a r t e r s , was r e p l a c e d i n t i m e by t h e d i s t r i c t s a l e s manager . Today , under the d i s t r i c t s a l e s - 92 -manager are sales respresentatives assigned to d i f f e r e n t commodity groups. Over him i s a r e g i o n a l sales manager. In ad d i t i o n , the d i s t r i c t sales manager i s supported by a f u l l array of re g i o n a l marketing personnel i n c l u d i n g industry market and p r i c i n g d i r e c t o r s able to design and p r i c e d i s t r i b u t i o n systems. - 93 CHAPTER V SUMMARY AND CONCLUSION This t h e s i s has attempted to shed some l i g h t on th.e development of f r e i g h t services marketing i n the Canadian railways. CN and CP R a i l , the two p r i n c i -p a l Canadian c a r r i e r s , have been the subjects of the study. The t h e s i s opens i n Chapter II with a d i s c u s s i o n of what marketing i s . The following are the basic tenets of marketing theory. Customer o r i e n t a t i o n i s the guiding philosophy of marketing. The fundamental st r u c t u r e of marketing p r a c t i c e i s the integrated marketing mix comprising product development, d i s t r i b u t i o n , promotion and p r i c i n g , supported by a marketing information system. Marketing a c t i v i t i e s may be organized around functi o n , customer group, product or regions. I t i s further indicated that the normal evolution of marketing i n a fir m takes place through several d i s t i n c t phases. A f i r m u s u a l l y moves from the t r a d i t i o n a l emphasis on production through the sales force stage, sales management, and f u l l y integrated marketing management f i n a l l y to become a f u l l "marketing organization". Next, i n Chapter I I I , the thesis attempts to provide an understanding of the forces and f a c t o r s which caused the railways i n i t i a l l y to move toward the marketing philosophy. I t assesses developments i n the post-Second World War Canadian environment and addresses the questions: what happened that a f f e c t e d the railways, how di d i t a f f e c t them, and what kinds of responses d i d i t provoke. The post-Second World War environment of Canadian railways was characterized by s u b s t a n t i a l economic growth and a corresponding increase i n demand for tra n s p o r t a t i o n . Yet r a i l d i d not share i n the growth. Highway transport technology made s i g n i f i c a n t advances and trucking competition eroded the t r a d i t i o n a l l y most p r o f i t a b l e railway markets. Developments i n the regulatory area r e f l e c t e d t h i s growth i n competition. Regulations governing the railways' f i l i n g of mode-competitive r a t e s were somewhat relaxed i n the 1950's. The net impact on r a i l operating income of these post-war developments was negative. Various measures were adopted to counter the competition. Among the e a r l i e s t measures was the i n s t i t u t i o n of piggyback s e r v i c e s . A longer-term response was the adoption of marketing concept. I t - 95: -e n v i s a g e d c o n t i n u a l l y a d a p t i n g r a i l w a y s e r v i c e s t o an e v e r -c h a n g i n g t r a n s p o r t a t i o n m a r k e t - p l a c e . C h a p t e r IV t r a c e s t h e deve lopment o f m a r k e t i n g a t CN and CP R a i l , f rom i t s b e g i n n i n g s t h r o u g h to t h e p r e s e n t d a y . S p e c i a l a t t e n t i o n i s g i v e n t o p r e s e n t o r g a n i z a t i o n and p r a c t i c e s , w h i c h a r e a n a l y z e d i n te rms o f t h e m a r k e t i n g t h e o r y p r e s e n t e d i n C h a p t e r I I . The e a r l y r a i l w a y a t t e m p t s a t p u t t i n g t h e m a r k e t i n g c o n c e p t i n t o p r a c t i c e were the T r a f f i c R e s e a r c h d e p a r t m e n t s . Ma rke t r e s e a r c h , r e v e n u e f o r e c a s t s and r a t e s r e s e a r c h a c t i v i t i e s were c a r r i e d o n , t h e l a t t e r two mak ing u se o f s a l e s d a t a p r o d u c e d by new r a i l w a y computer sys tems and new more s o p h i s t i c a t e d c o s t i n g t e c h n i q u e s . S h o r t l y t h e r e a f t e r t h e s e a c t i v i t i e s became d i s t i n c t m a r k e t i n g s p e c i a l i z a t i o n s . In t h e mid and l a t e 1 9 6 0 ' s s a l e s programs r e c e i v e d c o n s i d e r a b l e emphas i s and the t r a i n i n g o f a v a s t , d e c e n t r a l i z e d s a l e s f o r c e r e c e i v e d p r i o r i t y . I n r e c e n t y e a r s a b a l a n c e among m a r k e t i n g a c t i v i t i e s has been a c h i e v e d and the m a r k e t i n g d e p a r t m e n t as a who le has g a i n e d c o n s i d e r a b l e p r o m i n e n c e . The p r o g r e s s i o n toward becoming f u l l " m a r k e t i n g o r g a n i z a -t i o n s " was no t u n i q u e to t h e r a i lway ? : . O t h e r i n d u s t r i e s , - 96 -as noted in marketing theory, have gone through s i m i l a r stages i n the development of t h e i r marketing p r a c t i c e s and organizations. Current CN and CP R a i l marketing organization and p r a c t i c e s s i m i l a r l y are reasonable r e f l e c t i o n s of the general precepts of marketing theory. Product development, promotion, p r i c i n g and a marketing information systems are i d e n t i f a b l e and the mix of a c t i v i t i e s are integated by both planning and c o n t r o l procedures and the marketing organization s t r u c t u r e i t s e l f . This structure i s a composite of several approaches to organizing marketing a c t i v i t i e s , i n c l u d i n g organization by function, product, customer group, and region. In examining the phenomenon of railway marketing, two questions might n a t u r a l l y be asked: did the railways have any choice but to adopt the marketing approach and what e f f e c t d i d t h i s d e c i s i o n i n fa c t have on t h e i r economic fortunes. In answer to the f i r s t question, i t seems, that there was l i t t l e a l t e r n a t i v e to the course chosen. The developments of the post-war environment, the s u b s t a n t i a l resources at stake and the wisdom of railway management of the time more or l e s s d i c t a t e d i t . As f o r the second question, the answer offered by railway management i s that the e f f e c t of marketing has been p o s i t i v e . I n t u i t i v e l y i t would be d i f f i c u l t to dispute t h i s . S c i e n t i f i c a l l y , however, i t might be hard to produce q u a l i t a t i v e evidence. While CN and CP R a i l have achieved a considerable degree of marketing s o p h i s t i c a t i o n , there i s s t i l l much scope f o r the further development of railway marketing techniques. Even a cursory examination of current marketing texts shows that the railways have not applied or have been unable to apply much standard i n d u s t r i a l marketing theory. Railway experimentation must continue to take place. Tried techniques must be applied and new techniques developed. This i s the challenge for the future. - 98 -FOOTNOTES (Chap te r I ) ,i ' (1) The terms " C N " and "CP R a i l " a r e u sed i n t h i s t h e s i s t o d e n o t e the r a i l w a y d i v i s i o n s o f C a n a d i a n N a t i o n a l and C a n a d i a n P a c i f i c L i m i t e d , t h e c o r p o r a t e e n t i t i e s . W h i l e i n f a c t t h e terms " C N " and "CP R a i l " were c o i n e d o n l y i n t h e 1 9 6 0 ' s , i n the i n t e r e s t o f c o n s i s t e n c y t h e te rms a r e u sed i n t h i s t h e s i s f o r a l l t i m e p e r i o d s . (2) S t a n t o n , W . J . , and Sommers, M .S . ; Fundamenta l s o f M a r - k e t i n g , C a n a d i a n E d i t i o n ( M c G r a w - H i l l R y e r s o n L i m i t e d : T o r o n t o , 1973 ) . (3) Waterman, A . M . C . , " T h e Measurement o f Economic F l u c t u a t i o n s i n Canada , J a n u a r y 1947 to December 1 9 6 9 " , a 1971 s t u d y p r e p a r e d f o r t he P r i c e and Incomes Commi s s i on , ( I n f o r m a t i o n Canada : O t t a w a , 1973 ) . (4) P u r d y , H . L . , T r a n s p o r t C o m p e t i t i o n and P u b l i c P o l i c y  i n Canada , (The U n i v e r s i t y o f B r i t i s h Co lumb ia P r e s s : V a n c o u v e r , B . C . , 1972 ) . (5) M c D o u g a l l , J . L . , C a n a d i a n P a c i f i c - A B r i e f H i s t o r y , ( M c G i l l U n i v e r s i t y P r e s s : M o n t r e a l , 1 9 6 8 ) . ( C h a p t e r I I ) (6) S t a n t o n and Sommers, op. c i t . , Chap. 1. (7) I b i d . (8) I b i d . , Chap. 2 (9) " A v a i l a b i l i t y " i s t he c h i e f o b j e c t i v e o f t h e m a r k e t i n g mix " d i s t r i b u t i o n " f u n c t i o n . (10) K o l l a t , D . T . , B l a c k w e l l , R.D. , and Robeson , J . F . , S t r a t e g i c M a r k e t i n g , ( H o l t , R i n e h a r t and W i n s t o n : New Y o r k , 1972 ) , Chap. 10. (11) I b i d . , p. 282, t a k e n f rom M a r k e t i n g D e f i n i t i o n s : A  G l o s s a r y o f M a r k e t i n g Terms , c o m p i l e d by t h e Commit tee on D e f i n i t i o n s o f t h e A m e r i c a n M a r k e t i n g A s s o c i a t i o n , (Amer i can M a r k e t i n g A s s o c i a t i o n : C h i c a g o , 1 9 6 0 ) , p . 1 0 . (12) S t a n t o n and Sommers, op_. c i t . , Chap. 22. - 99 -(13) Ibid., Chap. 24. (14) Ibid., Chap. 23; also K o t l e r , P., Marketing Decision  Making: A Model Building Approach, (HoIt , Rinehard and Winston, Inc.: New York, 1971), Chap. 13, p. 423. (15) Ko l l a t et_ al_. , op_. c i t . , p. 252. (16) Kotler, o_p_. c i t . , p. 568. (17) Kollat et_ al_. , op. c i t . , p. 462. Kotler has proposed a marketing information system he c a l l s a marketing information and analysis centre (MIAC). This combines "marketing research" (doing project work) with "marketing i n t e l l i g e n c e systems" (performing continuous scanning of the environment) and " i n t e r n a l accounting systems". Services performed by the MIAC are divided into information gathering, processing, and u t i l i z a t i o n s . (Kotler, op. c i t ; , p. 568 f f ) (18) K o l l a t , op. c i t . , p. 462. (19) Ibid., p. 41. (20) Stanton and Sommers, op. c i t . , Chap. 1. (Chapter III) (21) These variables were suggested from K o l l a t t , Blackwell and Robeson's discussion of the s t r a t e g i c decision-making process ( K o l l a t t et a l . , Chap. 1). (22) Barnstaad, R.C., and Fraser, C.F., "Economics of Transportation - A Summary (of the Harvard-McGill Study)", Montreal, December 6, 1956, p. 2 (Document available courtesy Canadian P a c i f i c Limited, Corporate Library, Windsor Station, Montreal) (23) Emerson, R.A.; Vice-President; CP R a i l , "Revolution on the R a i l s " , (an address to the Canadian Railway Club: Montreal, December 8, 1958), p. 8. (Text available courtesy Canadian P a c i f i c Limited, Public Relations Department, Windsor Station, Montreal). (24) Scott, W.G., Manager, T r a f f i c Research, CP R a i l , "Convincing Railroad Managers of the Future of t h e i r Industry", (an address to the Railroad Personnel Development Group: Montebello, Que., October 18, 1962), p. 2. (Text available courtesy Mr. Scott) - 1 0 0 -(25) Royal Bank " 'Trendicator' Report", Vol. 2, No. 5. (26) The exception of t h i s continuous series of p o s i t i v e changes is shown as a minuscule negative change for the third-quarter of 1954. (27) Carr, D.W., and Associates, "Truck-Rail Competition in Canada", a study prepared for the Royal Commission, Report of the Royal Commission on Transportation, Vol. I l l , (The Queen's P r i n t e r : Ottawa, Ontario, 1962) (28) Ibid., p. 12. (29) Ibid., p. 13. (30) CP R a i l Vice President, I.D. S i n c l a i r , in February 1962 made references to "the a p p l i c a t i o n of the new concept of t o t a l d i s t r i b u t i o n costs" ( S i n c l a i r , I.D., Vice-President, CPR, "The New Look in T r a f f i c P r i c e s " , (an address to the Canadian I n d u s t r i a l T r a f f i c League's 6th Annual T r a f f i c and Transportation Conference: Toronto, February 15, 1962), p. 2). Later in 1962, he said: "Today ... t r a f f i c management embraces the whole f i e l d of d i s t r i b u t i o n l o g i s t i c s " ( S i n c l a i r , "Transportation Reappraised", (an address to the London D i s t r i c t Transportation Club: London, Ont., March 22, 1962), p. 4) and "The control of d i s t r i b u t i o n costs is a r e s p o n s i b i l i t y which is shared by c a r r i e r s and shippers" ( i b i d . , p. 2). (Texts of addresses, courtesy Canadian P a c i f i c Limited, Public Relations Department, Windsor Station, Montreal.) (31) Purdy, op. c i t . , p. 204. (32) "Between 1959 and 1967 ... over $500 m i l l i o n was paid to the railways to cover the s h o r t f a l l in revenues due to the rate freeze." (Darling, H.J., "An H i s t o r i c a l Review of Direct Transport Subsidies in Canada", (Report prepared for the Economic and S o c i a l Analysis Branch, Canadian Transport Commission: Ottawa, June 1975), p. 29) (33) The Report of the Royal Commission on Transportation, op. c i t . , Vol. I I , p. 33) (34) B u z z e l l , R.D., Gale, B.T., Sultan, R.G.M., "Market Share - A Key to P r o f i t a b i l i t y " , Harvard Business Review, January-February 1975, pp. 97-106. - 101 -(35) This phenomenon is discussed by McDougall (op. c i t . , p. 116). (36) In interviews, senior o f f i c i a l s at both CN and CP R a i l had t h i s view. No studies were re c a l l e d being done at either railway assessing the benefits of a marketing approach or recommending a s h i f t in emphasis, for the railways, toward marketing and away from operations. (37) "Canadian National Railways Annual Report, 1960", p.4. (Chapter IV) (38) Scott, W.G.; Manager, T r a f f i c Research, CPR; " T r a f f i c Developments in the 60's", (an address to the Peterborough T r a f f i c Club: Peterborough, Ont., September 21, 1960), p. 9. (Text available courtesy Mr. Scott) (39) Ibid., p. 5. (40) Ibid ., pp. 5-6. (41) McDougall, J.L., o_p. c i t . (42) This was renamed Intermodal Services in the 1970's by both CN and CP R a i l in recognition of the growing volume of container t r a f f i c , as well as t r a i l e r t r a f f i c , being handled by the railways. (43) At CP R a i l , Product Development u n t i l recently was c a l l e d Service Planning. - 1 0 2 - -BIBLIOGRAPHY Books A n s o f f , H. I . , C o r p o r a t e S t r a t e g y - An A n a l y t i c A p p r o a c h to  B u s i n e s s P o l i c y f o r Growth and E x p a n s i o n , ( M c G r a w - H i l l : New Y o r k , 1965) . Bowersox, D . J . , L aLonde , B . J . , and Smykay, E.W., ( e d i t o r s ) , R e a d i n g s i n P h y s i c a l D i s t r i b u t i o n Management - The L o g i s t i c s  o f M a r k e t i n g , ( C o l l i e r - M a c m i l l a n : L o n d o n , 1969 ) . C h a n d l e r , A . D . J r . , S t r a t e g y and S t r u c t u r e , (The M . I .T . P r e s s : Cambr idge , Mass . 1962 ) . R o l l e r , D . T . , B l a c k w e l l , R.D. , and Robeson , J . R . , S t r a t e g i c  M a r k e t i n g , ( H o l t , R i n e h a r t and W i n s t o n : New Y o r k , 1972 ) . K o t l a t , P . , M a r k e t i n g D e c i s i o n Mak ing : A M o d e l B u i l d i n g  A p p r o a c h , ( H o l t , R i n e h a r t and W i n s t o n : New Y o r k , 1971 ) . M a l l e n , B . E . , M a r k e t i n g i n the C a n a d i a n E n v i r o n m e n t , ( P r e n t i c e - H a l l o f Canada: S c a r b o r o u g h , O n t . , 1 9 7 3 ) . M a l l e n , B . E . , and L i t v a k , I .A., ( e d i t o r s ) , M a r k e t i n g :  Canada , ( M c G r a w - H i l l o f Canada: T o r o n t o , 1 9 6 8 ) . M c D o u g a l l , J . L . , C a n a d i a n P a c i f i c - A B r i e f H i s t o r y , ( M c G i l l U n i v e r s i t y P r e s s : M o n t r e a l , 1968 ) . P u r d y , H . L . , T r a n s p o r t C o m p e t i t i o n and P u b l i c P o l i c y i n  Canada , (The U n i v e r s i t y of B r i t i s h C o l u m b i a P r e s s : V a n c o u v e r , B . C . , 1972 ) . S t a n t o n , W . J . , and Sommers, M .S . ; Fundamenta l s o f M a r k e t i n g ,  C a n a d i a n E d i t i o n , ( M c G r a w - H i l l R y e r s o n : T o r o n t o , 1973 ) . A r t i c l e s B u z z e l l , R.D., G a l e , B . T . , S u l t a n , R .G.M. , " M a r k e t S h a r e - A Key to P r o f i t a b i l i t y " , H a r v a r d B u s i n e s s R e v i e w , J a n u a r y -F e b r u a r y 1975. T i l l e s , S., "How to E v a l u a t e C o r p o r a t e S t r a t e g y " , H a r v a r d  B u s i n e s s Rev iew, J u l y - A u g u s t , 1963. - 103 -Non-Government R e p o r t s C a n a d i a n N a t i o n a l R a i l w a y s and C a n a d i a n P a c i f i c L i m i t e d , " A n n u a l R e p o r t s " , 1945-1965. R o y a l Bank " T r e n d i c a t o r * R e p o r t " , V o l . 2, No. 5 ( J u l y 1 9 7 5 ) . Government P u b l i c a t i o n s D a r l i n g , H . J . , " A n H i s t o r i c a l Rev iew o f D i r e c t T r a n s p o r t S u b s i d i e s i n C a n a d a " , (Repor t p r e p a r e d f o r t h e Economic and S o c i a l A n a l y s i s B r a n c h , C a n a d i a n T r a n s p o r t Commis s i on : O t t a w a , June 1975 ) . Waterman, A . M . C . , " T h e Measurement o f Economic F l u c t a t i o n s i n Canada, J a n u a r y 1947 to December 1 9 6 9 " , a 1971 s t u d y p r e p a r e d f o r t he P r i c e and Incomes Commi s s i on , ( I n f o r m a t i o n Canada: O t t awa , 1973) . A n n u a l Economic Rev iew, Depar tment o f F i n a n c e , A p r i l 1975. R e p o r t o f t he R o y a l Commis s ion on T r a n s p o r t a t i o n , M.A. M a c P h e r s o n , Cha i rman , (The Q u e e n ' s P r i n t e r : O t t awa , O n t . 1962 ) . S t a t i s t i c s Canada C a t a l o g u e s . C a n a d i a n T r a n s p o r t Commis s i on , " W a y b i l l A n a l y s i s " , 1 9 6 8 " . U n p u b l i s h e d M a t e r i a l s CN and CP R a i l i n t e r n a l company memoranda and r e p o r t s . CN and CP R a i l f i l e s o f company o f f i c e r s ' s p e e c h e s . 

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