Blood Bananas

Abstract: 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 its Colombian banana subsidiaries had made protection payments to terrorist groups from 1997 through 2004. The Justice Department began an investigation, focusing on the role and conduct of Chiquita and some of its officers in this criminal activity. Subsequently, Chiquita entered into a plea agreement that gave them the dubious distinction of being the first major U. S. company ever convicted of dealing with terrorists, and resulted in a fine of US$25 million and other penalties. To make matters worse, the industry was facing pressure from increasing retailer purchasing power, major changes in consumer tastes and preferences, and Europe’s imposition of an â€Å"onerous tariff† on companies that sourced bananas from Latin America. With this in mind, Fernando Aguirre, Chiquita’s CEO since 2004, reflected on how the company had arrived at this point, and what had been done to correct the course so far. He faced major challenges to the company’s competitive position in this dynamic industry. What would it take to position the company on a more positive competitive trajectory? Would this even be possible in this industry and in the business climate Chiquita faced? Teaching: The case provides a vehicle for analyzing strategic, contextual, and ethical challenges underlying Chiquita’s presence in Colombia, a primary global source for bananas. The case highlights the trade-offs that Chiquita made while paying protection money to ensure business continuity and employee protection. Historic information tracks the evolution of the company from its early focus on owning plantations; growing, importing, and distributing bananas; sourcing, marketing, and distribution, to â€Å"downstream† value-chain activities that were more profitable, less nature-dependent, and less risky. The case emphasizes Chiquita’s focus on risk avoidance, cost control, and globalization; the factors that contributed to the payment of protection money; and Chiquita’s failure to respond quickly and appropriately. The case discusses decisions made as Chiquita grew from a small firm to become an industry giant; innovation, and continuous improvement as drivers of industry consolidation; and how Chiquita responded to terrorist threats and the consequences of the response. Detailed information in the case helps the reader understand potential globalization challenges and those inherent in managing external threats and high visibility crises. The case fits well into MBA courses in industry and competitive strategy, general management, operations management, business ethics, or crisis management. Concepts from the case include emerging market risk that globalizing companies may encounter; implications of administrative heritage for organizational structure and communication flows; fundamental challenges of global coordination and control; and strategic communication role of the leader in a crisis. These concepts are applicable in multiple other industries. Blood Bananas: Chiquita in Colombia by  Mary B. Teagarden,  Andreas Schotter Source:  Thunderbird School of Global Management 16  pages. Publication date:  Nov 11, 2010. Prod. #:  TB0245-PDF-ENG 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 to terrorist groups from 1997 through 2004. The Justice Department began an investigation, focusing on the role and conduct of Chiquita and some of its officers in this criminal activity. Subsequently, Chiquita entered into a plea agreement that gave them the dubious distinction of being the first major U. S. company ever convicted of dealing with terrorists, and resulted in a fine of US$25 million and other penalties. To make matters worse, the industry was facing pressure from increasing retailer purchasing power, major changes in consumer tastes and preferences, and Europe's imposition of an â€Å"onerous tariff† on companies that sourced bananas from Latin America. With this in mind, Fernando Aguirre, Chiquita's CEO since 2004, reflected on how the company had arrived at this point, and what had been done to correct the course so far. He faced major challenges to the company's competitive position in this dynamic industry. What would it take to position the company on a more positive competitive trajectory? Would this even be possible in this industry and in the business climate Chiquita faced? Learning Objective The case provides a vehicle for analyzing strategic, contextual, and ethical challenges underlying Chiquita's presence in Colombia, a primary global source for bananas. The case highlights the trade-offs that Chiquita made while paying protection money to ensure business continuity and employee protection. Historic information tracks the evolution of the company from its early focus on owning plantations; growing, importing, and distributing bananas; sourcing, marketing, and distribution, to â€Å"downstream† value-chain activities that were more profitable, less nature-dependent, and less risky. The case emphasizes Chiquita's focus on risk avoidance, cost control, and globalization; the factors that contributed to the payment of protection money; and Chiquita's failure to respond quickly and appropriately. The case discusses decisions made as Chiquita grew from a small firm to become an industry giant; innovation, and continuous improvement as drivers of industry consolidation; and how Chiquita responded to terrorist threats and the consequences of the response. Detailed information in the case helps the reader understand potential globalization challenges and those inherent in managing external threats and high visibility crises. The case fits well into MBA courses in industry and competitive strategy, general management, operations management, business ethics, or crisis management. Concepts from the case include emerging market risk that globalizing companies may encounter; implications of administrative heritage for organizational structure and communication flows; fundamental challenges of global coordination and control; and strategic communication role of the leader in a crisis. These concepts are applicable in multiple other industries. ++++ Blood Banana Case Study they will find another job or another way of earning their living, the cycle of life doesn’t stop when you become unemployed ! and if you asked them would they prefer losing their jobs temporary or losing their lives forever? Am pretty sure they won’t chose the second alternative. The company already thought about its worker’s lives as their primary concern and didn’t take the second choice, so the least thing is t o think about their existence and to do what’s in their best interest. Last but not least, the fruit company if decided to leave will encounter huge costs of    abandon their current business and starting all over again in another place, but paying one time huge cost is more effective than paying annually amount of money to the AUC for God knows when ! plus they will have their current profits and they can sell their company in Colombia and gain extra money that will enable them to start again somewhere else. hey are a well-developed corporation, if they did a good strategy with a well written plan they will manage to start up over and maybe even better ! In conclusion, Chiquita was in a bad situation, and as a normal corporation whose aim is to make profits they need to consider what’s in their best interest and that is to execute the country. Costs will occur no matter what option they choose, but some were less harmful and less costly than others, it’s like what they say† the best of the worst† all the alternatives were ba d but abandon the country is the best between them. Blood banana Chiquita Inc. 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†¦ Blood Bananas Background Chiquita Brands International is one of the world’s largest banana producers that were founded in 1899. Founded as United Fruit Company, Chiquita has grown to be one of the top three companies in the banana business with a combined control of 60% market share. Chiquita had annual revenues of $4. 7 billion and operating plants worldwide with its main business coming out of Colombia. In this case study, it tells the story of the Chiquita business and how they faced many problems in the past years. The main problem in this study is how Chiquita paid the AUC terrorist group a combined $1. million from 1997 to 2004 and then told the United States Justice Department about their dealings. After the criminal investigation and plea agreement, the new CEO was faced with the decisions of a new direction for the company. Through this analysis I will help Fernando Aguirre come up with a feasible plan for Chiquita Brands International so that it can continue to be a dominant busi ness. Issues The key issue at hand with Chiquita Brands International is that after all of their problems, they had to face the decision with how the company would be position themselves positively.The company’s image had been shot and brand image is a very important concept for businesses to have to be able to survive in today’s business world. The CEO, Fernando Aguirre, did not know how to bring the company to a reputable standard and leave the past behind. The company now needs to learn how to move forward with their company to change the perceptions of their audience and still be a leading banana producer worldwide. Another key issue that Fernando must deal with is the reality of the issue that past, was Chiquita’s past executive team guilty or not guilty of the crime that they plead for.In order for the company to move forward, they would have to take a stance on the issue and clearly state whether they intentionally or forcefully made the payments to the A UC. Strategic Analysis There are a couple of things the company should look at to reroute the stance of their company in a positive direction. With these concepts, the company should be able to form a new plan that will help the CEO know what to do in the decisions he makes for the future of the company. These concepts will be listed below. †¢Mission and vision statement †¢Competitive strategy †¢Corporate strategy †¢Implementation of new policies and management Internal and performance analysis †¢Concise strategic decisions Mission and Vision Statement The company should look into its mission and vision statement so that its audience can know that the company is changing in a positive way. A mission and vision statement’s purpose is to define the company’s purpose, objectives, and value to the audience. It is important for the company to now implement CSR Responsibility, environmental sustainability, and SMART goals. With the implementation of these tactics, Chiquita’s audience will see that they are changing and know that they can earn the company’s trust again.Each goal that the company defines in their new statements should be specific, measurable, achievable, realistic, and time-based. With SMART goals, Chiquita will be able to easily move forward from their negative image to a more acceptable one. Competitive Strategy Because of their fallen reputation, Chiquita must now look at its stance compared to its competitors to see how they are now going to position themselves. Now that companies have seen them fall, they most certainly have taken advantage of some of Chiquita’s audience who has turned away from the brand.The best thing for Chiquita to do is to look at their models and determine whether they should focus on a Resource Based Model or an I/O Model. I believe Chiquita should focus on the I/O Model so that they can look at their external environment and gain a sustainable competitive advanta ge again. The I/O Model will shape the company and use the five forces to identify the attractiveness of the industry it’s currently in so that it can seek out an advantageous position to take again while reshaping its image. Corporate StrategyChiquita must look at their corporate strategy to analyze their global strategy and multi-business firms. Since Chiquita is a worldwide company, they must look at their globalization drivers. The globalization drivers are listed below. †¢Market driver †¢Cost driver †¢Technology driver †¢Government driver †¢Competition driver. Their main focus would be their market driver and their government driver. In the market drivers, Chiquita will need to analyze its customer needs, global customers and market channels in order to reroute their company’s image.In the government drivers, Chiquita will need to analyze its common marketing regulations, unrestrictive trade and investment policies and compatible technical standards so that their audience will know its stance on the past situations and see that they are doing whatever needed possible to be a reputable company again. Chiquita also has to look at their multi-business firms in its corporate strategy. They must manage their individual businesses to formulate a new business strategy and monitor and control their business performance with the new strategy.They can incorporate portfolio planning models to evaluate their business performance and formulate business strategies to allocate resources properly. With the new analyzing of these concepts, Chiquita will have better coordination, control, and profitability for the firm. Implementation of new policies and management Chiquita must implement new policies for the company as well as a strong management team. The new policies can be formulated in their new business strategy as well as can be incorporated in their new mission and vision statement.They also should implement a new management t eam that is sound and strong with following the new rules and regulations that will be put in place. Chiquita must accept its mistakes and move forward with a new team so that it can make the right decisions for the better of the company. Internal and performance analysis Through this strategic analysis, Chiquita must analyze its internal and performance. The best thing to look at through the internal analysis is the VRIN analysis framework.Even though the company should rely on the I/O Model, they should also look at their resources and capabilities because this is what will give the company its competitive advantage and set it aside from its competitors. Through the VRIN analysis, Chiquita will be able to continually analyze whether it’s producing valuable, rare, inimitable, and nonsubstitutable goods. This will also help give the company a sustainable competitive advantage. The company should also analyze its performance through financial assessment and real actions. Throu gh this, Chiquita will asses a better standing in the marketplace.A better performance will create a stronger stance for the company. Concise strategic decisions With the implementation of the concepts stated above, Chiquita should be able to be a more positive and reputable company. It should be easy for Fernando to implement these strategies and come up with concise decision. Concise strategic decisions will help the company have a stronger background to rely on and make their implementations work strategically. Arguments and Recommendations Above was listed how Fernando should implement various strategies and plans for the company.I will now recommend various decisions for the company in its past dealings with the AUC and how it should move forward from those decisions. I believe the root causes for Chiquita’s actions in Colombia that ultimately let to their conviction was their top management team decision-making biases and their values and ethics. Chiquita’s top m anagement team wasn’t making decisions in unison and you could tell this by the various executives either quitting or retiring. The guilt from the different stances each executive took made them eventually leave the company because they had dug themselves as well as the company into the ground.I also believe the cause for Chiquita to get convicted was their values and ethics. I believe this because in the case, Chiquita tried to change their core values in 1999 to better the company. If they believed in strong values and ethics from the start, they would have never had to revamp their core values. Chiquita should’ve taken charge from the start with their decision making styles and their values and ethics so that they would have never placed themselves in the position to pay the AUC which in turn led to their conviction.With a sound team with sound goals, Chiquita will always prosper internally. I believe Chiquita and its managers did have a choice in the AUC payments. Yes Chiquita was doing business in an unstable political environment but they should have taken a stance and fought for what they thought was right. The actions the manager partook in were not ethical principles and I believe they were looking out more so for themselves than the company as a whole. I believe Chiquita could have came up with a strategy that would have made both the company profitable and satisfy its stakeholders without paying the AUC.If Chiquita felt like it didn’t have a choice, they should have involved the law enforcements well before they started the payments. If they would have done this, they would have never had to worry about the safety of its company or the terrorist groups in Colombia. Other companies that should be worried about Chiquita’s experience are companies that were involved in similar circumstances as Chiquita. In the case, it stated that Chiquita was the first company to get convicted for paying terrorist groups.If similar companie s were doing the same, they should cease the payments and learn from Chiquita’s mistakes because it stated that the law was cracking down and getting harder on this crime. Companies that are doing business in lesser developed economies should keep the employees’ safety at heart but at the same time do business in ethical ways. The factors of the political and economic environment should also be in concern when doing business in these lesser developed economies so that they will make sound business decisions.This story changes my perspective about doing business abroad because it shows me that just because you have a competitive advantage and resources to make millions doesn’t mean you have a safe environment to run your business in. It helps me understand that there is more to business than making money and that you have to have all of your business standards and strategies in place to successfully operate a company abroad. The current CEO can implement the stra tegies I listed above in my strategic analysis to restore Chiquita’s reputation and ensure future competitiveness.With the implementation of these strategies, Fernando can lead the company in the right direction and provide a stronger stance for the company. The main thing for the company to do is to revamp its mission and vision statement because this is the most important start for the company. After that, it will help formulate the company’s competitive and corporate strategies that it must restructure. In these they will implement new policies and analyze their internal performance for the company. In the end, Chiquita should come up with concise strategic decision so that it can make the right plan for its company.