Blood Bananas: Chiquita in Colombia

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Part 1:

Introduction

1.      What do you think were the root causes of Chiquita’s actions in Columbia that ultimately led to their conviction?

The actions of Chiquita International emanated from several areas. First, the past of the company was a bit complicated because United Fruit Company (Chiquita’s predecessor) merged with AMK Corporation in 1970. Most of the times mergers pose management challenges thus creating unbalance within the new company formed. After the merger had been done, a 1.25 million bribe was discovered that the company had given to have its taxes cut by the authorities. The assumption of the company by Carl Lindner who was known for bottom fishing also contributed to the actions by the company management. Therefore, a combination of the above-explained factors might have contributed to a terrible start of Chiquita and thus causing problems for the company.

Second, the economic and political instability in Colombia. There was too much income inequality in Colombia coupled with recession, violence and focusing on the banana as the sole product created a turbulent economic atmosphere for the Company. Various terrorist groups such as AUC, FARC, and ELN spearheaded violence across Colombia. The CEO of Chiquita Fernando Aguirre attested to the fact that the government became unable to protect employees of Chiquita. Due to rampant violence, Chiquita was compelled to pay taxes to terrorist groups because company management feared of its employees being killed.

2.      Do you think Chiquita or its managers had a choice? Why or why not?

The situation in this case study is complex because as much as business ethics do not allow paying taxes to terrorists, the company and its shareholders have their interests which the management must ensure that they are satisfied. The management of Chiquita had both good and bad reasons for taking the actions it took. By paying the terrorist groups, Chiquita was protecting their employees from being killed or harmed because at one time many employees of the company were killed in the famous Banana massacre. The company also resolved to pay terrorists so as to continue doing the profitable business in Colombia. However, on the other hand, the Company had a choice to stop paying terrorists and leave Colombia to do business from another country.

3.      What other companies or industries should be worried about Chiquita’s experience? How does this story change your perspective on doing business abroad?

Any other company or industry operating in an economically or politically stable country should be worried of the experience that Chiquita had in Colombia. Chiquita’s case is a demonstration of how conflict, violence or terrorism in a country can yield problems for businesses. Therefore, any country that is prone to strong terrorist groups or strong paramilitary groups can be tremendously dangerous for businesses to operate in because businesses are likely to face similar consequences. From the case of Chiquita, it is also clear that a staple product or food that is central to the economy of the country is the most vulnerable. For this case, it was banana in Colombia which is the country’s main product. Therefore, this calls for vigilance by businesses that deal with such central products because they are highly profitable and also highly risky.

 

4. What can CEO Fernando Aguirre do now to restore Chiquita’s reputation and ensure future competitiveness?

There are several things that Aguirre can do to restore Chiquita’s reputation and competitiveness in the market. First, the aspect of transparency is crucial for any business to succeed. Aguirre can adopt more clear strategies to make sure that all the company dealings are made public to win back the public confidence. Secondly, Aguirre together with management can consider paying the people of Colombia as compensation for the loss that the people suffered due to Chiquita’s actions including harassment of workers and low pay to workers. This will show some remorse and commitment on the part of the Company management. Aguirre should also demonstrate his commitment to upholding the four core business values namely: respect, integrity, opportunity and responsibility which shows the public that Chiquita has become an ethical company. Aguirre should also give a press release to emphasize that the information about payments to terrorist groups was voluntarily given by the company.

Part 2

PESTEL Analysis

Political factors

The Colombian government is a republic consisting of three arms of government separated as the executive, legislature, and judiciary. The office of the inspector general oversees the welfare of the public and the membership of Colombia in Pacific Alliance gives an opportunity for Chiquita to freely trade goods and services among members of the Pacific Alliance. The highly educated labor pool provides for skilled workers needed to work in the banana industry. The value added tax in Colombia is currently 16% which is average and therefore people can still afford to purchase bananas locally. The country enjoys a relatively stable economy even though the high rate of crime and violence poses a challenge to Chiquita.

Economic factors

Colombia’s economy is largely supported by exports, and private consumption and the government has been promoting exports through the formation of Pacific Alliance and negotiation of Free Trade Agreements with other countries. The economy is relatively stable. However, labor costs in developing countries continue to rise which is a threat to Chiquita. Chiquita has an opportunity to grow because of the relatively stable economy in Colombia and South American countries. However, the rising labor costs is a threat because the company relies on suppliers to produce bananas.

Social environment

Colombia is among the 17 World’s megadiverse countries, and the life expectancy of people in Colombia is 74. The diversity in Colombia offers an opportunity for Chiquita to grow because it can offer various banana products to different people. However, the wealth gap in Colombia threatens the company because the Middle class becomes weak financially yet they are majority customers.

Technological factors

Information Technology sector has continued to steadily grow since 2009 because of heavy investment by Colombia government into the sector. Many business operations have been automated, and there is increased use of mobile technology. Chiquita can take advantage of business processes automation to increase efficiency in its operations. Furthermore, there is improved technology in Banana production which increases Chiquita’s efficiency in meeting banana demand.

Ecological factors

Global warming has been a challenge all over the world, and Colombia is also committed to curbing it. The global warming poses a challenge to banana farmers whose production depends on good weather. Waste disposal challenge has a great impact on Chiquita’s performance, and there are strict regulations by Colombia government which the company must adhere to.

Legal factors

Chiquita is impacted by various regulations including strict environmental protection laws in Colombia, and therefore the company must adhere to these laws to protect its brand and image. Antitrust law also poses a challenge to Chiquita because it limits the company’s ability to expand via mergers and acquisitions. The company, therefore, should pursue other expansion strategies apart from acquisitions.

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