As the manager of this business, it is my responsibility to create a strategy that will help Spaulding books and other small Canadian book publishing companies increase profitability. Spaulding's profit margins are low, there is little capacity for expansion in the Canadian market and they are undercapitalized which makes this company a very unappealing investment for other company's to acquire. Canada's foreign ownership restrictions won't allow a foreign firm to acquire more than 25% of a Canadian publishing house. Initially these restrictions were put in place to protect small publishing houses from competition with the huge foreign conglomerates, but in fact these restrictions made it virtually impossible for Spaulding to recoup his individual investment. So without foreign competition small publishing houses will never get back the personal investment they put in to start the company. The industry right now would be virtually non-existent without the help of government subsidies, loans and grant programs. The book publishing industry has to reach a point where it does not have to rely so heavily on government aid.
             Freer trade allows companies greater opportunities to eliminate issues of economies-of-scale by serving more markets. The basic factors that compel a firm to seek international trade and enter the international market are to increase profitability and to expand and reach more consumers. The larger the market is the more you create an economy of scale, in which the cost of the product is lower and the consumer base is larger. Evidence suggests that longer print runs decrease costs, larger companies with longer print runs have lower costs and fewer losses (pg.440). Canadian companies are so small they can't benefit from the same economies of scale as their American counterparts. U.S. competition is so large they can spread production costs and research and development costs over a larger...