Chiquita in Columbia - Research Paper Example

Lecturer’s Summary of critical issues The root causes for Chiquita & apos;s actions in Colombia Colombia where Chiquita had large banana plantations was faced with revolutionary guerrilla wars. As such, Chiquita operated in unstable environment. The Local government and the national army offered no help, and therefore, the government could not protect Chiquita’s employees. Chiquita was forced to pay bribes to the guerrillas that controlled the territories in which they carried out their operations. 50 employees of Chiquita had already been killed to signal what would befall the company if it continued defying the guerrilla demands. Strategic Analysis Industry dynamics Chiquita originally engaged in banana growing, but later shifted from farming activities and focused on profitable and less nature dependent marketing and distribution activities. The company established a long-term relationship with independent banana growers who were to be their source of products. The idea was to avoid risks, including natural disasters, environmental and social problems. The company wanted to transfer every production cost to local producers. However, Chiquita was credited with transforming banana trade by packaging, labeling and transportation by use of refrigerated ships. Value chain Bananas are inexpensive perennial fruits that grow repeatedly from the same root system. However, they were the main products that earned Chiquita’s significant revenues. Bananas grow all around the year and needs to be harvested daily. Once harvested, they were separated into bunches, cleaned, sorted, labeled and packed in cardboard boxes from where they were transported in refrigerated containers to the nearest port and loaded on to refrigerated ships. The cool atmosphere could prevent bananas from ripening as they were transported to their destinations, which included United States of America (USA), China, Russia, and Germany among others. Mostly, they were sold to large supermarket chains that had ripening rooms in which small amount for ethylene gas was introduced to hasten the ripening process. Upon ripening, they were sold as fruits to various customers. Industry attractiveness Banana is a fruit not popular among many people. However, Chiquita’s sought to add value to this product by proper packaging, labeling and transporting it to final consumers. Even though its major markets were in USA and European countries, the company owned and leased large tracks of land in Caribbean lowlands such as Guatemala, Costa Rica, Honduras, Panama, Nicaragua and Ecuador among others where it grew the crop in large scale. This led Chiquita’s to emerge as the world biggest exporter of bananas. Moreover, there were no other major competitors and the company controlled the industry. Global/general environment context Chiquita’s banana business did not operate without some challenges. Although the company was accused of numerous unethical malpractices, it also encountered some legal challenges, particularly with EU imposition of “onerous tariffs” on bananas imported from Latin America. Chiquita’s was widely known of its market influence wherever is had investments. This did not go well with members of the Europe Union who sought to impose barriers to prevent the Chiquita’s from entering their market. In 2004, Chiquita’s Cambodian subsidiary was found by the US courts guilty of paying bribes to terrorist groups in return for protection. This caused the company a fine of USD 25million dollars. Other notable disasters that have faced the company include natural disasters such as plant diseases. Resource requirements Large scale banana farming is both capital and labor intensive investment. Chiquita’s had to employ thousands of people to work in its farms. In addition, more resources were needed to buy and lease large tracks of land. Further, the company had to put more investments on social amenities such as hospitals and schools for those working in its farms. At some point, Chiquita’s switched from banana farming to distribution work. In this case, the company engaged in developing road networks, railways and increased its fleet of ships. In this vein, the company had to put additional investments on technological innovations in production and marketing to enhance product sales. Values and ethics Although, Chiquita’s was one of the largest fruit exporters in the world, the company was accused of numerous malpractices and unethical conduct that eventually led to its conviction. In 1975, Securities and Exchange Commission unearthed US$ 1.25 million scam where the company had paid to Honduran officials bribes in exchange of tax waiver for banana exports. In 2004, Chiquita disclosed that its Colombian subsidiary had made protection payments to terrorist groups from 1997 to 2004 making the US justice department commence criminal investigations to unearth the criminal activity. Further, the company was accused of mistreating its farm workers who labored for long hours in dangerous conditions. At some point, the company engaged a militia group to murder employees who were protesting against poor working conditions in company plantations. In addition, Chiquita’s did not only contaminate rivers with agrochemical, but also cleared tropical forests that served as water catchment areas through its banana plantations expansion program. Arguments and recommendations How Chiquita met fundamental ethical principles Chiquita was synonymous with the notion of a rapacious multinational company. In 1992, Dave McLaughlin, the Managing Director of Agriculture of the World Wildlife Fund, used his two Costa Rican farms to rein in environmental abuses in an endeavor named the “Better Banana Project." This project persuaded Chiquita in 1996 to allocate US$ 20million to overhaul the employment and environmental standards in all its 127 farms in Latin America. In this process, the company phased out toxic pest sides, built new warehouses for chemicals storage, started monitoring water quality, provided workers with protective clothing and commenced re-cycling programs. In late 2006, Chris will; sustainable agricultural chief of a New York City based environmental group, certified Chiquita’s progress by acknowledging the stride that the company had made. This act did not only make the company regain its eroded social position, but also improve its public image that later translated into increased product sales. Companies to be concerned about Chiquita and apos;s experience Dole and Del Monte are the other American fruit giants that should be worried of Chiquitas and apos;s experience. The two multinationals are the major competitors of Chiquita. These two companies engage with foreign governments by either buying or leasing tracks of land to plant fruits for industrial processing. However, faced with a similar challenge of operating in porous geographical regions, the companies could also be forced to engage with terrorist groups in return for protection. More so, regimes in countries where they operate are highly corrupt and may demand bribes to allow them trade. Such unethical actions could in future affect the companies since the same companies are expected back in the US to publish annual social reports including those of their foreign subsidiaries. Nevertheless, the biggest challenge that these two multinationals companies may face include multiple legal actions for such illegal activities which could also dent their public image leading to huge losses due to reduced product sales. How Chiquita story change my perspective on doing business abroad Chiquita’s, story provides sufficient evidence that some of the big multinational companies known for doing big business across the world are marred with illegal and unethical practices. As such, I would advocate corporate social reporting to also include their foreign transactions. This will not only help unearth such illegal and unethical practices, but also detour business from engaging in such activities. Companies should not engage in local politics, but instead comply with policies and standards of countries where they intend to invest. What Fernando Aguirre can do to restore Chiquita 's reputation and ensure future competitiveness Fernardo accepts that Chiquita, and the banana industry have undergone considerable volatility which he terms as an enemy for the company. Besides financial volatility, the industry is also experiencing shifts in consumer preferences among others customer needs. In addition, Fernado acknowledges the major challenge facing Chiquita is how to control costs and enhance innovations. Notably, cost saving programs initiated has not been successful in offsetting high costs. To overcome these myriad problems, Fernado asserts that the company must remain agile in such a competitive and fast-paced market environment characterized with growing consumer expectations. In addition, the management must develop good policies and powerful product brands. Moreover, Chiquita must transition from low margin commodities to value-added highly profitable products while at the same time maintaining excellence in cold-chain management, food safety, customer service, product quality and in-store execution. Read More