The following are discussions on the fundamental reason for the company’s selection: whether it was the only option for management; what the outgoing management team can do to restore the company’s reputation; how corporate governance plays a part in it; and what ethical and strategic actions the firm should take.
The case analysis
Chiquita is a US firm that has spent millions of dollars in Colombia on banana plantations. The United Fruit Company was its origin. It’s worth noting that Chiquita has a significant banana plantation in Colombia, which provides the majority of its staff. Bananas from Chiquita are transported to the company’s key markets, such as the United States, where they’re transformed into various items including banana juice.
Prices start at $12
Prices start at $11
Prices start at $12
Chiquita, Del Monte, and Dole are the major players in the banana industry. As a result, Del Monte and Dole are Chiquita’s main rivals. Notable, the firm was confronted with an especially difficult scenario as a result of unpredictable consumer preferences. The sector also presented an uneven financial climate that made the company’s financial condition unpredictable.
Colombia’s banana industry has served as a breeding ground for bloodshed, with several hostile factions rising up to oppose the Colombian government, resulting in a series of civil conflicts. The most notorious terrorist organizations, the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN) grew stronger than the country’s authorities.
The government of Colombia and other companies were demanded to pay compensation to the two groups. These two terrorist organizations created a hostile environment that was bad for Chiquita to conduct banana production. As a result, in an effort to create a more favorable climate, the company made some decisions that damaged its reputation (Schotter and Teagarden 2).
The root cause of Chiquita’s action in Colombia
The desire to protect its workers from the attackers was the primary root cause for Chiquita’s decision. The two organizations seen as a major security risk in Colombia have created an unfavorable climate for business operation. The terrorist organizations were also accused of extorting money and kidnapping people, according to the case. Sixty-two Chiquita’s employees were allegedly murdered as a warning sign against their failure to pay their part of the ransom. The insurgents’ threat caused fear in Chiquita’s workers. If this situation persists, some staff would want to leave their jobs.
Since the Colombian government was unable to restore order and stability, the firm decided to join forces with a paramilitarism organization formed to combat the two terrorist organizations by protecting several social, political, and economic interests. This was stated to be the quickest method of ensuring security for those who were in danger of dying. The firm was in danger of financial ruin. To establish a secure financial position, it was necessary to provide an environment that permitted employees free movement to and from work and ensured timely delivery of banana fruits to their target markets.
Flexibility is utilized to save money. Flexibility is an important tool that every practicing business should have access to. In this case, the firm was attempting to cut costs in order to fulfill its profitability expectations. Opportunity costs, like as other expenditures, are undesirable. As a result of this strategy, the company incurred a fine worth millions of dollars (Schotter and Teagarden 5).
Did the managers have a choice?
The scope of the inquiry includes two opposing viewpoints. The first is whether the bosses had a choice before being informed of their engagement and afterward. Prior to receiving notification, the managers had no alternative but to remain affiliated with the terrorist organization.
If a firm is based in a foreign nation, the country’s government is under obligation to guarantee political stability. In contrast, economic stagnation is caused by political instability. The Colombian government was unable to provide security for its citizens. In other words, the Colombian state could not assure political stability.
Chiquita, a banana company that had been operating in Colombia for many years, discovered a local solution to ensuring its employees’ safety. When it came to the second aspect of the question, after Chiquita’s executive leadership was notified of potential risks, they had two options: withdraw their activities in Colombia (Schotter and Teagarden 10).
What can the current management do to restore Chiquita’s reputation?
In order for the firm to rebuild its reputation and establish a strong competitive foundation, it must begin by addressing the needs of families who lost their loved ones during the AUC’s security operations.
The second choice is to engage in corporate social responsibility, such as by donating funds to construct schools and hospitals for the families of the victims. The third option is to contribute to the development of infrastructure, such as roads. Last but not least, it is strongly advised that the firm change its name. Mismanagement of a company’s reputation is bad for business.
Customers would prefer to be associated with businesses that respect the rule of law, the environment, and human life. Companies who don’t care about the human or environmental well-being of their customers might lose their clients, resulting in lost income. Because of a bad reputation, a company could go out of business due to the loss of consumers.
As a result, Chiquita’s first course of action is aimed at apologizing to the general public. It also demonstrates that they respect human well-being. If the general public understands this image properly, it may be the start of a turnaround for the business. The second and all future actions are geared toward informing the public about the company’s care for Colombia’s economic development and well-being. The firm could use the name change to alter its first impression on consumers (Henslowe 35).
The role of corporate governance in the process
The goal of corporate governance is to create value for a company’s shareholders while also safeguarding the interests of other stakeholders. As a result, it will be responsible for ensuring that Chiquita’s current objective, reputation repair, serves the best interests of investors and stakeholders (Mullerat and Brennan 6).
The ethical and strategic actions of the company
It is moral for the firm to distance itself from the terrorist organization. In exchange for a favor, bribery of government officials should be halted. These two methods would guarantee that the company’s operations are ethical. If the firm still wants to operate in Colombia, it should seek assistance from other countries to restore security. That would be an acceptable approach for a business seeking to bring peace and security to its personnel and Colombians (Tencati and Perrini 22).
Amnesty International suggests that the business distance itself from the terrorist organization in order to build a positive image. It should also react to the demands of the victim’s families. The use of an ethical and lawful security force is advised. If the coordination is feasible, deploying a legal military force is the greatest approach to provide security.
To summarize, the company’s decision was motivated by the necessity to safeguard its employees. However, the method chosen was unlawful. The satisfaction of their pick resulted in a damaged corporate image. To establish a good reputation, businesses should act ethically.
Chiquita Brands International is a fruit and vegetable company based in Cincinnati, Ohio. Bananas are its primary product, and it is the leading banana supplier in the United States. Chiquita has been in operation for over one hundred years and was an early mover in the globalization of the banana business.
Bananas have been a low-cost way to transport “the tropics” across the world since they were first imported. Bananas have become a cost-effective method of transporting “the tropics” to North America and Europe over time, as they have become a frequent grocery purchase. It is easy to overlook that bananas are cultivated on another continent, given how prevalent they have become as a grocery item.
Bananas are one of the world’s major profit makers in supermarkets, as they are the third most important staple crop behind wheat and coffee. In fact, bananas are one of the main profit producers in supermarkets (Schotter and Teagarden). Because to their popularity and how reliant the global community is on them, banana production might create a variety of economic, social, environmental, political, and legal challenges.
Unfortunately, Chiquita International’s misdeeds have had a negative influence on the company in the past. It has given bribes to Latin American government officials, exploited local employees, and done business with terror groups (Schotter and Teagarden). Chiquita has caused a lot of damage in Colombia in particular.
Because the nation has recently emerged from a bloody civil war and the consequences of terrorism are still visible, it’s easy to see how Chiquita would succumb to these unethical techniques. While this is understandable, it is not ethical. This paper will look at additional aspects of Chiquita’s operations and take a closer look at workplace ethics. It will also evaluate Chiquita’s corporate social responsibility stage, its social responsibility in the food production sector, its issue maturity, and finally the future of ethics within Chiquita’s operations.
Bananas are not only important business for Chiquita Brands International, which was one of the first to bring bananas from other countries into the United States. Bananas represent a slew of economic, social, environmental, political, and legal difficulties for Chiquita Brands International.
Chiquita has a long history of bribing Latin American government officials in exchange for preferential treatment, encouraging or supporting U.S. coups against small countries, establishing dictatorships in Central America’s “banana republics,” exploiting local employees, establishing an abusive monopoly, and now doing business with terrorists.
1 For American multinationals, the benefits of conducting business abroad are enormous, but so are the dangers. Colombia has always been one of the most dangerous places in the world, and it is still recovering from a long and deadly civil war and the aftereffects of widespread drug-related terror. Chiquita learned this lesson the hard way. It made several millions of dollars profit growing bananas in Colombia before being destroyed by its reputation.
2 In 2004, Chiquita pled guilty to criminal charges brought by the US Department of Justice that one of its Colombian banana suppliers had made protection payments to terrorist organizations from 1997 through 2004. As a result, a high-profile inquiry and legal procedure ensued. In 2007, Chiquita accepted a plea bargain in order to resolve its criminal case.
The Chiquita litigation was highly contentious, but with the settlement, the company anticipated it might now shift its attention to growing its business. However, in 2010, the victims’ relatives filed a separate lawsuit against Chiquita in an American court, seeking compensation.
At the same time, authorities in Bogota and on Capitol Hill were examining other U.S. firms for potential ties to terrorism in connection with their business activities. With this in mind, Fernando Aguirre, Chiquita’s CEO since 2004, examined how the company had gotten to this point and what steps had been taken to correct it so far.
Although Chiquita faced significant competitive difficulties in this fast-paced market, the firm had created a solid foundation. What would it take to move the company into a more favorable competitive position? Is this even feasible in this industry and business climate, as Chiquita was?
Chiquita Brands International: Defendant
On September 17, 2007, in a courtroom in Washington D.C., the atmosphere was contentious as both sides’ attorneys pointed fingers at one another. Chiquita Brands International Inc. had already agreed to a plea bargain that included a $25 million fine and five years of probation time. In addition, Chiquita was required to hire an ongoing compliance officer.
The defense’s client did not budge, and the prosecutor attempted to target Chiquita again. He charged that during almost seven years of paying off Colombian right-wing terrorist groups, including the AUC (United Self Defense Forces of Colombia), the company made millions in profits. The US$1.9 million paid by Chiquita “fueled violence” and “paid for weapons and ammunition to kill innocent people,” according to Malis.
3 This document was prepared by Professors Andreas Schotter and Mary Teagarden, with the assistance of Monika Stoeffl, for the purpose of classroom discussion only, and not to suggest either good or poor management. This document is authorized for usage in Estrategia 2013-I Preg. Montes only by Juan Carlos Montes at UNIVERSITY DE LOS ANDES COLUMBIA from January 2013 to May 2013.
Chiquita’s lead defense attorney, Eric Holder Jr., countered that the facts had been shading in Chiquita’s favor for years. “Being a little too cute and crafty,” he said, as well as “a little deceptive.” Holder stated that the government was partially to blame for Chiquita’s situation.
Colombia’s AUC was added to the list of “specially designated foreign terrorist organizations” in company with mostly Middle Eastern groups like Al Qaeda and Hamas by US Secretary of State Colin Powell in 2001. “The people of Chiquita had a right to know that their government was selling them out,” Holder declared. “In 2003, Chiquita asked the Department of Justice if it should stop paying terrorists. All the government had to do was say yes and stop paying them, but they never did.”
Bananas are Serious Business
Bananas are a cheap way to bring “the tropics” to North America and Europe because they are one of the first tropical fruits to be traded internationally. Bananas have grown so common, inexpensive food that we take for granted where they come from and how they get into our diets. Bananas thrive in tropical climates with an average temperature of 80°F (27°C) and a yearly rainfall of 78-98 inches (198-249 centimeters), such as in the Caribbean and Central America.
Bananas can be found almost everywhere, with the exception of extreme northern and southern latitudes. In Iceland, banana plants grow in soil heated by geysers. The sunflower family includes bananas. Bananas are perennial plants that develop from the same root system and are related to the orchid, lily, and palm families. Green bananas are harvested while still immature and ripen during transit; as soon as a banana stem is removed from the plant, it begins to mature.
Bananas are harvested in late winter or early spring. The fruit is ferried to packing houses, where it is packed into boxes and stored on refrigerated trucks for transport to supermarkets across the world. From planting to shop, it takes around two weeks. Bananas were first written about in ancient India, over five hundred years ago. There were numerous unique types growing in the wild that were poisonous because of their flavor, and some varieties even made people sick.
Indian agriculturalists experimented with crossbreeding wild banana varieties, but while some of the resulting hybrids were edible, they were also sterile, necessitating that the original plants be crossed again each time someone wanted a new edible banana crop. They eventually developed a hybrid that produced offshoots (suckers) that could be planted to grow into new bananas plants full of sweetness. Bananas were carried eastward by Alexander the Great and his armies during the fourth century BC.
The banana was first mentioned in Chinese literature around 200 AD, and it subsequently traveled westward to Africa. It then likely arrived in the Canary Islands, Central and South America, the Caribbean, and other parts of the western hemisphere via Spanish explorers’ ships. Other interbreeding strains were developed along the way.
In China, new cultivars were also developed. A Chinese banana somehow arrived in Great Britain and became known as the “Cavendish Banana,” after a prominent English family. The Cavendish became the progenitor of all bananas sold today on a commercial basis.
Bananas are one of the most popular fruits worldwide, with more than 300 different varieties present in 2010. Only around 20 of these are cultivated commercially, mostly in Africa, Asia, and Latin America. Bananas were the world’s third most important staple crops in 2010, after wheat and coffee, making them crucial for economic and food security. Bananas are a significant profit-maker in supermarkets.
Bananas are a popular fruit in the United States. Every year, an average of 27 pounds is consumed by Americans. Bananas are also popular in Europe. In Sweden, for example, per capita consumption was 35 pounds. Eastern European consumption was on the rise and had already reached 20 pounds per person each year.
Bananas, in their history and in their current state, have always been a humble fruit with a long record. However, the banana business creates significant environmental, economic, social, and political concerns. Traditionally, the banana trade has signified economic imperialism, global trading injustices, and agricultural nation exploitation.
As we learned in class, the benefits of international business are significant, but so are the dangers. The ethical concerns that Chiquita faced while doing business in Columbia are a few examples of these risks. Chiquita was the first fruit company to successfully internationalize its banana trade; it did so by paying attention to retail growth and adopting industry trends.
Chiquita’s competitive advantage was built when it revolutionized the banana trade by using refrigerated ships for the first time. Chiquita engaged in bribery payments to Latin American government officials in order to obtain special treatment, which aided US coups against smaller nations.
Many studies should be conducted before a firm decides to internationalize, including culture, political situation, and much more. Such a lawsuit against your business may be avoided by knowing other countries’ legislation and regulations. Employees should be provided with codes of conduct, as well as ethical hotlines, from the top management.
Companies should consider long-term objectives rather than short-term ones; companies with a culture of making money at any cost are frequently confronted with issues like Chiquita. Even though outsourcing is a wonderful approach to save money, businesses must exercise extreme caution while picking the countries in which they outsource to avoid developing a negative reputation. If a firm decides to outsource work to, for example, Nigeria, things are badly corrupt, and doing business is difficult because of the corruption, but outsourcing from there could be quite lucrative but in an unethical manner.
Depending on your CEO’s character, you may want to project a certain image of your business. You can either make unethical decisions and see your stock rise rapidly in wall street at any cost, or you can do things right and build up a steady profit slowly. Adhering to your core values and assisting the community while also ensuring that the general public recognizes your company in a favorable light will attract clients who spend more money.