...Question 1 The level of market concentration is quite high which is proved using the HHI as shown below. (Considering the banana sales of 1994 as given in the case) Brand Banana Sales Market Share % Chiquita 2,377,032 48 Dole 960,400 19 Fyffes 563,324 11 Geest 528,719 11 Noboa 280,000 6 Del Monte Produce 240,000 5 TOTAL 4,949,475 100 Because there are few players in the industry, comparatively less competition and high concentration in the market, we consider the banana industry to be an Oligopoly market, which has high barriers to entry. The barriers to entry are: • High start up cost: A new firm entering the banana market will need to have huge capital to make banana production feasible. Banana production requires vast amounts of lands to grow the banana trees. Bananas are also a perishable item which increases their maintenance cost. • Economies of scale: Banana Industries have significant economies of scale where minimum efficient scales occur at high input levels. Thus a new entrant must produce high volume to reduce the cost and make profits. If a new entrant with vast land produces fewer bananas then it will be very costly to maintain the banana production. • Licenses: The government regulations may be very stringent requiring various licenses to trade banana in the world market. The licenses would be very expensive to own which is a barrier to new entrants. • Distribution channels: It is required to have a strong distribution system globally to distribute...
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...as United Brands in 1970, and then Chiquita in 1989, business in Latin America has continued in similar veins. In 1928, several thousand workers of Colombia's banana plantations began a strike demanding written contracts, eight-hour days, six-day weeks and the elimination of food coupons. Military forces murdered thousands of United Fruit Company Workers who were protesting. [1] Throughout the 20th century, the company was infamous for using a combination of its financial clout, congressional influence and violent refusal to negotiate with striking workers to establish and maintain a colony of "banana republics" in Latin America. Often the CIA and the US Marines provided the company's muscle, as in the case of the overthrow of the populist Guatemalan president Jacobo Arbenz in 1953. [2] In 1975, a federal grand jury accused United Brands of bribing Honduran President Osvaldo Lopez Arellano with $1.25 million, with the promise of another $1.25 million later, in exchange for reducing taxes on banana exports. Lopez Arellano was removed from power, but later investigations revealed repeated bribes carried out by the company. [3] Subpoenas were also issued regarding possible payoffs in Italy, West Germany, Panama and Costa Rica. [4] In May of 1998, The Cincinnati Enquirer published a series of articles that exposed Chiquita's still-questionable business practices. The articles, written by Mike Gallagher and Cameron McWhirter, reported cases in which the company used tactics...
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...Summer 2013 Summer 2013 Case Report: Blood Bananas: Chiquita in Colombia BUSA 4980 Chiquita Brands international was founded in 1899 after the merger of United Fruit Company and the Boston Fruit Company. As bananas be came more of a staple in every home so do Chiquita Bananas. Bananas are know to mainly grown in tropical places like Central America, Africa and Southeast Asia. Chiquita decided to have operations out of Colombia. During this time there was turmoil in Colombia and different terror groups form “against the government” & other wealthy people in the country. Some of these groups settled in the areas where Chiquita had facilities. Chiquita run into problems with theses groups around 1997, mainly with FARC (Revolution Armed Forced of Columbia) and AUC. They began to kidnap and kill employees of this company. The terrorist groups began asking for money in turn they would stop harming their employees. For Chiquita this decision to pay the AUC seem to be an easy one because or the lack for government and the lack of laws in place. There are many key issues that lead Chiquita Banana’s decision to pay the terrorist groups the FARC & the AUC. One key issues the increasing demand for bananas in new countries like Russia, China and other countries in the Middle East. Chiquita felt as if it had pressure to obtain and grow in these markets. Along with those new markets, Chiquita had their current demand in established markets like the United States and...
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...eaten routinely in the world. Founded in 1989, Chiquita was the successor of the United Fruit Company. For many years, Chiquita was the largest employer to be located in Latin America. They are known for revolutionizing the banana trade by using refrigerated ships for the first time. Bananas represent a collection of economic, environmental, social, political, and legal hassles. The rewards of doing business abroad are huge, but the risk can be massive. This case study questions the ethics and morals of Chiquita while doing business abroad. For more than a hundred years, the company now known as Chiquita has been paying bribes to Latin American government officials to receive preferential treatment, building an abusive monopoly, encouraging or supporting U.S. coups against smaller nations, exploiting local workers, putting in place dictatorships in Central America’s, and now doing business with terrorists. Doing business in Columbia has proven to be a major hazard since the country is just emerging from a deadly civil war and dealing with the effects of narco-terrorism. From 1997 to 2004, Chiquita made protection payments to the AUC terrorist groups. They were advised in 2003 to stop making protection payments, but continued to make the protection payments to prevent employees from being killed. The company had already lost fifty employees to death at the hands of the terrorist. In the year of 2004, Chiquita admitted to criminal responsibility to the U.S. Justice...
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...Chiquita’s Core Values: “Our Core Values of Integrity, Respect, Opportunity and Responsibility form the basis of our business performance and guide our everyday activities, including our giving programs. As part of our Core Values, Chiquita maintains a solid commitment to conducting business ethically, morally and in accordance with the law.” Short-term: 1. Agree to pay the AUC until a long-term strategic plan can be developed a. However unethical, it is not illegal, as the AUC had not been designated a Foreign Terrorist Organization by the U.S. State Department b. Chiquita employees would receive protection c. Time frame: 2 months 2. Refuse to pay the AUC and start a widespread campaign highlighting the positive impact Banadex has on Columbia a. Display American diplomatic strategy by refusing to negotiate with terrorists and forcing the Columbian government to provide military assistance. b. Chiquita contributed 70 million annually to the Columbian economy, something the Columbian government should make a point to protect. A widespread campaign highlighting the negative impact of Chiquita leaving the country would garner public support for government intervention. c. Time frame: 3 months Long-term 1. Sell off the Banadex subsidiary in Columbia a. This would keep the company from being at legal risk b. Chiquita’s employees would still be employed by the acquiring company – who may or may not choose to do business with the AUC c. Time frame: 1 month 2. Create...
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...Q1.) In 1994, Keith Linder has some problems. What are they? Ans: The European Union (EU) neared completion of its single market, it began to adopt series of import restrictions, which threatened Chiquita’s sales, market share slide significantly which combined with mounting annual losses. Chiquita’s cash balances had fallen to $179 million from $712 million. A staggering $.13 billion in value had been destroyed, an amount which represented 66% of firm’s 1991 net worth Q2) Exactly what is the EU Policy? And how does it promise to affect Chiquita? Ans: in 1975, with the adoption of the ACP-EEC convention of Lome most members of the EC provided preferential access to banana imports from developing countries in the ACP region. These countries which were essentially the former colonies of Britain and France were granted tariff- free access to the EC market, while banana imports from other regions, including Latin America, faced a variety of restraints that differed widely across each of the countries in the community. Imports from EC territories (Martinique, Guadeloupe, the Canary Islands, Crete, and Madeira), like imports from ACP countries, were given duty-free access to all markets within the community. In 1993, The EU adopted new policy regarding import of bananas in Europe, Third-country imports would be taxed at rate of 30%, on excess of 2 million tons of import would be taxed over 250%, making it impossible for third country to export more than 2 million tons. Traditional...
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...Blood Bananas: Chiquita in Columbia Blood Bananas: Chiquita In Columbia is a difficult case that touches on fundamental questions of ethics and morality while operating a business abroad. It is a case that depicts the challenges faced by a company trying to maintain production and protect its employees while navigating between two very different cultures in a hostile situation. the lines of the ethics and morality are not as straight forward as they seem on the surface, and Chiquita’s management struggles to make decisions that will transcend both cultures’ view of right versus wrong. was one of the largest and growing fruit company in America who faced a dramatic problem in the 90’s with the AUC, a Colombian paramilitary organization that promoted violence act and considered to be terrorist, what happened was they inquired the fruit company to pay them specific amount of money monthly that was required for their security services as they claimed! The situation was straightforward, either Chiquita pays for the terrorist Chiquita Brands International and its leaders learned a very hard lesson about paying off terrorist groups to protect their employees. Over the past 25 years, no place has been more perilous for companies than Colombia, a country that is finally beginning to emerge from the effects of civil war and narco-terrorism. In 2004, Chiquita voluntarily revealed to the U.S. Justice Department that one of its Colombian banana subsidiaries had made protection payments...
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...Joshua Cortez Blood Bananas Chiquita is a brand that has been through major turmoil, scandal and success. Through it all they have had to deal with significant labor relation issues that go far beyond your typical corporate labor relations issues. From being accused of supporting terrorism and drug trafficking to contributing to the economic collapse of Columbia, Chiquita has had to endure many self-inflicted wounds. Chiquita is one biggest and most powerful food marketing and distributing companies in the world, and one of the world's largest banana producers. The company shows annual revenues of approximately $4.5 billion and about 25,000 employees operating in more than 70 countries. The banana market, worth about $5 billion a year in 2001, is the most important global fruit export. The majority of the 14 million tons of bananas exported every year come from Latin America. Between 1997 and 2004 Chiquita was faced with a terrible situation in Columbia. The United Self-Defense Forces of Columbia (AUC) was known to terrorize the locals. Chiquita had a large plant in Columbia and was a premier employer of the Columbian people. The AUC knew that if they could intimidate Chiquita it would be a profitable endeavor. The AUC used kidnapping, torture, disappearance, rape, murder, beatings, extortion and drug trafficking as was of intimidating employees. Chiquita the brand was very invested in Columbia and because of the profits and climate they tried to turn a blind eye to employee...
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... | | |Semester: Fall 2013 | | |Class Location: Washington DC Center | | | | Case Study #3: Blood Bananas: Chiquita in Columbia Andreas Schotter http://hbr.org/product/blood-bananas-chiquita-in-colombia/an/TB0245-PDF-ENG Due Date: Wednesday, November 6th, 2013, 11.59pm. Submit your paper via Blackboard. Task for Students Use just the information contained in the case study and what you have learned in class to complete this assignment. 1. Make a list of the top five (5) opportunities and five (5) threats facing the Chiquita Brands International company. 2. Use the information in...
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...October 24, 2002 G302 Breakout Session 9: International: Chiquita Banana Case Goal of this session: To appreciate the importance of government trade policy to a company’s profits, and thus the importance to the company of trying to figure out why protectionism happens and how to counteract it. Handouts for students: none. Handouts for TA's: Nov. 29, 2001, Seattle Times article "Chiquita Files for Chapter 11". Overheads: Exhibit 1, income statement. Chiquita Brands Case Write-up Questions: 1. What is the European Union's past and present policy on banana imports? How would you defend their 1993 policy? 2. What problems does Chiquita have in this case? Look carefully at the numbers in the exhibits. 3. What did Mr. Lindner do about the EU's banana policy? What should he have done? The Chiquita case teaching notes are quite good. All of the questions I have below are important. Chiquita’s appropriate response is perhaps the least important, since it isn’t clear there is much they could do. Be sure and save time for your wrap-up at the end. (5 minutes) Administration We will post the midterm scores on Oncourse when they are available. That could be as early as Friday, but since they are machine-graded, there is always a chance of a glitch. (20 mins) Chiquita's Problems Q. In 1994, Keith Lindner has lots of problem. What are they? A. Here you want to put a list up on the board. The Harvard teaching note has a good...
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...Chinas banana Industry Analysis of Chinas banana Industry Marketing strategy of a foreign Company in China Marketing Strategy Prof. Shui This essay describes the current situation of the banana Industry in China, as well as the factors which influences the change of the National and International market situation based on latest examples. As the Chinese Market supplied an enormous amount of bananas every year, numerous importers need to comply with the demand. How the situation in China has changed in recent years, what role plays Chiquita in this strongly growing industry and which marketing strategies are being implemented. All of the mentioned before will be analysed and evaluated on the following pages. Bananas are the most traded fruit worldwide and the fifth most traded agricultural product. In China bananas are the fourth fruit listed as the most important in the tropical corps industry. The Banana is a perennial plant that replaces itself. Bananas do not grow from a seed but from a bulb or rhizome. The time between planting a banana plant and the harvest of the banana bunch is from 9 to 12 months. The flower appears in the sixth or seventh month. Bananas are available throughout the year, they do not have a growing season. Bananas are grown in tropical regions where the average temperature is 80 F and the yearly rainfall is between 78 and 98 inches. In fact , most bananas exported are grown within 30 degrees either side of the equator. ...
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...by ruining its reputation and alienating employees, suppliers and the local community around it. With recent expansions in global businesses and the decrease of trade barriers worldwide, the importance of ethics in business has been further underlined. Chiquita Brands International Inc., is a leading marketer and distributor of high quality fresh produce. The company is one of the largest banana producers in the world. Like any company operating across borders, Chiquita was faced with a terrible dilemma. Operating in a country without political stability and high crime, the company was threatened to pay security charges to terrorists in order to continue their business smoothly. The situation that faced Chiquita is very critical as it involved the lives of thousands of innocent people and employees, and on the other hand billions of dollars worth of business. The decision is not easy. Chiquita can pay off these terrorists to keep the business running and ensure the safety of its employees, but what about the lives of the other innocent people being harmed by those criminals? Does Chiquita have the conscience to bare such a cost? Where are human rights? and ethics? After careful analysis and consideration of the case, it is proposed that it is in the company’s best interest not to pay the AUC. This decision will surely cause the company major drawback and losses, but will hopefully save them the trouble of dealing with criminals. This will also protect the company’s reputation...
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...Bananas Case Introduction Chiquita Brands International is a successful company with a long history that began in 1899 as the United Fruit Company. The company has endured over time through changes in leadership, acquisitions, and process changes to become one of “the big three” banana distributors in the world. While they have become successful; their past has been tarnished by paying bribes to government officials, supporting U.S. coups against smaller nations and exploiting local workers. The company that originally revolutionized the banana trade by using refrigerated ships was now faced with the decision of whether to continue to pay a terrorist organization in Colombia, South America to ensure the safety of their employees, stop payment and face the consequences or sell the business and exit the country. Background The issue at hand is partly the result of the industry itself. Bananas grow best in tropical regions, such as the Caribbean, Central America, Asia and Africa. They are critical cash crop for many of the lesser-developed countries. The banana producing country in question here is Colombia, South America which has a population of over 45M people, the second largest in South America. It has the 4th largest economy in Latin America although the income inequality is prevalent due to very uneven wealth distribution. It is in this environment that paramilitary organizations such as the AUC thrive. According to Fernando Aguirre, a former Chiquita CEO, “These...
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...Firms and Industries Chiquita and Fyffes merger Master in Management Thomas Diwo Rick Geurten Ma. Camila Gutiérrez Philipp Seifert Armand Taherí Table of content 1. Banana market 3 1.1 Chiquita Brands 3 1.2 Fyffes 3 1.3 The Cutrale Group 4 1.4 The Safra Group 4 2. Merger Chiquita and Fyffes 5 3. Benefits of the merger Chiquita and Fyffes 7 3.1 The perfect match 7 3.2 Vertical integration 8 3.3 Horizontal integration 8 4. Future markets 11 5. Recommendations and conclusions 12 5.1 Recommendations 12 5.2 Conclusions 12 6. References 13 7. Appendix 16 1. Banana market 1.1 Chiquita Brands Chiquita, incorporated 1899 and based in the United States of America, is an international marketer and distributor of bananas and other fresh products, sold in 70 countries. It is the main banana distributor in the U.S. The company operates in three business segments: Bananas, Salads and Healthy Snacks, and other fresh fruits and vegetables. Bananas include the sourcing (purchase and production), transportation, marketing and distribution of bananas. Salads and Healthy Snacks include ready-to-eat, packaged salads, such as healthy snacking products, fresh vegetable and Chiquita-branded fruit smoothies in Europe. Banana sales amounted to 64% of its consolidated net sales in 2011. In North America, it often sells bananas and related services under one-year contracts to national and regional grocery retailers. In Europe and the Mediterranean...
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...Alternative Courses of Action 1. Concentrate on the Americas 2. Diversify Production 3. Expand to Europe More Aggressively 4. Diversify Product Line 1.Concentrate on the Americas Based on our analysis of Chiquita Banana’s financial struggles we have a number of possible solutions for improving the company. Chiquita Bananas had no way of predicting that the European Union would favour its former colonies over Chiquita’s locations in Latin America. After the European Union put quotas and tariffs on Chiquita’s products, Chiquita should have re-evaluated whether or not to continue to export to Europe. Although they would lose a significant amount of business if they stopped exporting to Europe, the reason they were in debt in the first place was because Europe restricted import of their products and this was a problem since Europe was Chiquita’s main market. If the company had concentrated within the Americas then they would not have been forced into so much debt. 2. Diversify Production In order to limit the amount they were affected by natural disasters, the company could have grown bananas in other parts of the world. This would be better for the company because if natural disasters did strike in an area where they grow their products then it would not be such a financial blow as they would have more sources to receive...
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