This way of eager about an organization’s value is not necessarily latest. Ray Kroc, the founding father of McDonald’s, reportedly once asked a bunch of MBA students to inform him what business they thought he was in. They volunteered that he was within the hamburger business. He replied: “My business is real estate.” Similarly, Baker describes HBC primarily as “an investment company at the intersection of real estate, operating companies and digital companies.”
Canadian tire: Much greater than a retailer
Similarly, Canadian Tire is usually considered a retailer, but its ecosystem is more complex than most individuals might realize because its portfolio of assets extends beyond essentially the most well-known store. Over time, the acquisitions of Mark’s (formerly Mark’s Work Wearhouse), Party City, the Helly Hansen clothing brand and SportChek have allowed the corporate to mix assets in retail, automotive and gasoline, financial services and specialty brands, thereby expanding the retail of the Improve company presence and strengthen market position in multiple sectors.
The company can also be known for its Canadian Tire paper money, first introduced in 1958, an early loyalty program with money rewards. By using its own pseudo-currency, the shop looked like a board game come to life and was extremely popular. Today, Canadian Tire’s money is digital and Canadian Tire Bank has been licensed under the Banking Act since 2003. Canadian Tire Financial Services is a subsidiary of the corporate and now offers bank cards, insurance products and other financial services. So is Canadian Tire a bank, an insurer or a retailer? It’s the entire above. And this plays a very important role in driving loyalty, as measured by the frequency and amount the patron spends through its Triangle Rewards program, which replaced Canadian Tire Money in 2018.
Investors may even spend money on Canadian Tire’s real estate holdings through a REIT (Real Estate Investment Trust) through the Toronto Stock Exchange. The REIT owns the buildings and land that Canadian Tire (and other of its retail brands) leases from it. The contracts stipulate that the REIT is entitled to annual rent increases.
The combination of those assets and subsidiaries creates a mutually reinforcing momentum for the corporate. This also makes it difficult to define Canadian Tire’s relevant market. How should an analyst explain Canadian Tire Petroleum’s gas stations and convenience stores where people earn points and other incentives through Triangle Rewards? Or PartSource, the specialty auto parts retailer owned by Canadian Tire? The same query arises at Mark’s (clothing and shoes), SportChek (sportswear), Helly Hansen (outdoor clothing) or Party City (party accessories). The more diverse an organization’s holdings are, the tougher it might probably be to value the corporate.
Overly simplistic calls for greater competition miss this critical point and simplify an increasingly complex set of economic issues. More and more corporations are shifting from competing inside industries to competing to construct vast ecosystems of assets. Attempting to divide corporations into clearly defined areas or industries misses the purpose. Trade is a posh network of relationships between many various interest groups. Just while you think you’ve gotten it found out, an organization can change shape and disrupt a rigid industry definition.
Companies increasingly need to integrate into every aspect of our every day lives and include us of their ecosystem. As we go about our every day lives, every thing we do becomes a method of cashing out, and we transfer a portion of our paycheck to a monopolist or oligopolist. Industries, go away. We are the capital.
by Denise Hearn and Vass Bednar. Copyright 2024. Reprinted with permission from Sutherland House Books.
