I. Relevant Case Facts
Chiquita Brand International Inc. is a multinational producer, distributor, and marketer of bananas and other fresh produce.
Majority of Chiquita’s sales come from bananas making up 60% of revenues and 43% of net sales in 2003 and 2005, respectively.
Chiquita relies on Latin American countries for its employees on their banana plantations.
In 1993, the company’s operations were severely hurt because the EU imposed restrictive quotas on imports from Latin America which gave preferential treatment to African, Caribbean, and Pacific countries’ banana imports.
Chiquita’s market share was cut in half after the EU put the restrictive quotas which made the company incurred losses of $200 million per year.
In April 2001, import volumes of bananas returned to it normal levels after resolving the dispute over access to European banana markets.
United Fruit, Chiquita’s predecessor, was involved in labor rights suppression and bribery scandal which affected Chiquita’s reputation.
In the 1990s, many human rights groups campaigned for the improvement of social conditions of employees in the banana plantations of all banana companies.
In 1998, Chiquita’s reputation was damaged because of a newspaper exposé saying that the company was guilty of labor, human rights, environmental, and political violations in Central America.
After the newspaper incident, Chiquita started to conduct activities and policies that will incorporate corporate responsibility throughout the company’s operations.
Chiquita implemented four key values in their business operations namely integrity, respect, opportunity, and responsibility.
The company also agreed to the Better Bananas Project in which the company allows external auditors to audit their farms annually.
Chiquita also made a partnership with Rainforest Alliance which monitors their environmental practices, especially in the aspect of deforestation.
In 2005, Sustainablebusiness.com awarded Chiquita as on of the top 20 sustainable stock picks world list.
Labor practices of Chiquita include the adherence to labor rights standards like SA8000 and open dialogues with worker unions making them the first multinational corporation in the agricultural sector to ever sign a worker rights agreement.
The company tried to promote its achievements through the use of mass media but the people thought it was unrealistic so they made use of testimonials from external to deliver the news instead.
Chiquita emerged from the bankruptcy in March 2002 under Cyrus Freidhem as CEO.
Fernando Aguirre replaced Freidhem in January 2004.
Chiquita succeeded in turning their reputation around but problems on financial sustainability, efficiency, and strategies for the future still remain in the company.
II. Determining the root problem
The current problem that Chiquita is facing is how to remain competitive and profitable in the international business environment as well as improve their management strategies and operations to ensure financial sustainability while sustaining the good reputation and employee relations that they have managed to build up in the past years.
III. Identifying the problem components
There are a lot of possible factors that can contribute to this problem that the company faces. External factors and internal factors can impose a problem on the company’s business operations. One external factor is the on-going globalization process. Globalization allows the entry of different firms in the market which adds to the competition. Free trade from globalization also results to lower prices of imports (Rodrik, 2007). This results to a decrease in the revenue of the company. Also, according to Samuelson, lower prices tend to discourage consumer spending because people will think that the prices will still lower in the future so they try to postpone their spending as much as possible. Again, this can affect Chiquita’s profitability, which is not good because the company has just got out from a bankruptcy in 2002 and has not fully recovered yet. Another external factor that contributes to the problem of the company is the consumer demand for bananas. The sustainability of the company’s finances depends on how much of their product the consumers will demand. The last external factor that contributes to the company’s challenges is the political/legal considerations. The restrictive quotas that the EU imposed in 1993 was really devastating for the company so the company’s profits can still be affected by international bodies like GATT and WTO because Chiquita is dependent on trade since most of their plantations are located in Latin American countries.
Internal factors, on the other hand, also contribute to the challenges of the company. The most important asset of a company is probably its human resource. If the relationship between the employees and the company is not very good, it will be detrimental for the company. Although Chiquita seems to have done all it takes to establish corporate social responsibility in their operations, some employees still became “disenchanted and alienated” in 2003 according to the case. If this continues, this will again cause scandals and newspaper exposés that affected the company’s reputation. The organizational culture that the company has also contributes to the problem of the company as well as the international culture.
What type of organizational culture is most representative of the company? Explain.
The organizational culture that is most representative of the company is the Clan culture where the organization “focuses on internal issues and values flexibility and discretion rather than seeking stability and control.” (Sampson, 2005) In the case, Chiquita tried very hard to rebuild its reputation after the Cincinnati Enquirer exposé. Their steps include the integration of corporate responsibility on their company operations to improve employee relations. The company also committed to the Better Bananas Project and Rainforest Alliance. They even decided to adopt the SA8000 standard and conduct open dialogues with worker unions to show that the company has not been violating any worker rights and that they even provide benefits for their workers. With the steps that the company has done to improve employee relations, it can be said that they have a clan culture because the company is very careful when it comes to internal issues. The company focused more on resolving these issues than seeking stability and control. This is why the company is now faced with the challenge of sustaining the kind of employee relations that they currently have and at the same time pay attention to the company’s profitability and financial sustainability. According to Sampson (2005), the usual goal of an organization with this kind of culture is to “manage the environment through teamwork, participation, and consensus.” This was exactly what Chiquita did since they want their employees to be satisfied with their jobs by providing them with homes, healthcare, and other benefits to expect participation and consensus within the organization.
In what way has international culture proved to be a challenge for the company?
As said earlier, the international culture in the company also contributes to the challenges that it faces. Since the company’s banana plantations have been operating in several countries, the employees in these farms may have different attitudes, beliefs, and values towards work. The company’s workforce is too diversified that is why the company needed policies which are derived from a world view. According to Schermerhorn et al., the challenge that globalization brings in a company is that its management styles may not work well overseas. People in other countries have different views and way of thinking that is why it became a problem for the company. For example, working overtime in the U.S. is normal but for those in other countries, it can be too much. At first, the company did not have a global mindset and just applied the management style that worked for them but apparently, did not work in other countries. But Chiquita stood up to the challenge and implemented global standards and integrated transparency in their operations in order to communicate well with people from different cultures.
IV. Generating Alternatives
Do nothing and stick to the current operations – the company is still gaining profits so there is no need for a change.
Invest on advertising – attract more buyers of Chiquita’s products and increase sales revenues.
Invest on high-end technology – to increase productivity without having to employ more workers.
Introduce new products – to broaden the line-up of Chiquita’s products which can add in generating income
Cut off some employee benefits – to reduce costs.
Create partnerships with popular companies – to increase the penetration of Chiquita’s products in the market.
Lay off some of the workers – to reduce costs.
Establish plantations in countries where labor is cheap aside from Latin America – to reduce costs.
Employ sales people – to increase sales revenues.
Shut down the operation of Chiquita – financial sustainability is impossible.
V. Evaluating Alternatives
1. The company’s net income has increased from 13, 195 to 134,440 (in thousands) from 2002 to 2005 but there is no assurance that these profits will always be present. Demand can always fluctuate and events like natural phenomena might destroy the company’s plantations. Also, if the company does no do anything and just continue its operations, there will be no room for improvements and progress.
2. The company has been around in the market for a long time and is the number one distributor of bananas in the world so there is no need for more exposure. Advertising would only add up to the company’s costs.
3. Investing on technology would increase productivity but could also be very costly. Also, this can only be successful if the workforce knows how to operate advanced facilities so the company still needs to hire skillful workers.
4. Introducing an addition to Chiquita’s products might stimulate the curiosity of the consumers. This could be a good option since the company’s products are tried and tested already so the consumers will not hesitate to try Chiquita’s new products.
5. Cutting off employee benefits can reduce costs but may trigger conflicts between the company and its employees.
6. Chiquita is already known worldwide so the company does not need popular companies to promote them. This would only add up to the company’s costs.
7. Staff lay-off would reduce costs but will decrease productivity. This will also contradict to the company’s sworn corporate social responsibility.
8. Establishing new plantations in countries with cheaper labor may reduce costs in terms of salary but land quality in those countries may not be suitable for producing bananas and other Chiquita products.
9. Employing sales people would increase the company’s costs and there is no assurance if it is the worth of the additional revenue they might bring.
10. The company is well-established and has been gaining profits for the last three years so there is no need for a shut-down. The company just needs improvement to ensure financial stability.
VI. Choose an Alternative
The best alternative is introducing a new Chiquita Product in the market. In this way, there is no need to lay off employees so the company can stand up to their corporate responsibility. The new product is expected to stimulate the curiosity of consumers and since Chiquita has already made its name in the agriculture industry, it will be easy to gain consumer support and eventually boost up the company’s revenues without having to sacrifice good employee relations. However, introducing a new product that will surely earn revenues should be well thought of. Additional products also mean additional jobs for employees so the company should think of better ways in dealing with its employees and to do business effectively in other countries.
What did the company have to learn in order to do business effectively in other countries?
According to Schermerhorn et al., there is no single best way to deal with multicultural workforces. The style of leadership that will be used, planning, organizing, controlling, and decision-making techniques depends and should be based on the country’s culture. Since the countries in Latin America have different cultures from the U.S., Chiquita should first get familiarized with the people in these countries and their values, traditions, and beliefs to somehow get an idea on how these people think. Then, the company should think of the appropriate approach that will work well with the people in that certain country. The company can also make use of specialists that have already experienced working in Latin America perhaps. That is why it is a good decision for the company to have Fernando Aguirre as CEO and president since he has already experienced working in Brazil and Mexico so he has, at least, an idea on how to deal with the Latinos.
VII. Implementation Plan
We have decided to introduce a new product for Chiquita Brand International Inc. so the company will not have to change its good employee relations while still earning more revenues. In order to accomplish this, brainstorming on what product to introduce should be done. Then, the product should be evaluated in terms of its projected profitability and how it will be promoted in the market. Lastly, the employees should have a briefing about the new product and the company will familiarize the assigned workforce in its production.
The table below is the plan for introducing the new product.
Form the team that will be in charge in the introduction of the new product.
Brainstorm on what product to introduce.
Evaluate the product’s market potential and profitability.
Product line manager
Design the products label and appearance.
Formulate promotional strategies for the product
Assign a group of employees that will be in charged in the production
Familiarize and train the chosen employees on the new product and its production process.
How well has the company been able to deal with diversity issues? What else does it still need to do?
Aside from the implementation plan above, the company still has to work on its workforce, especially now that they are going to introduce a new product. The company has already managed to handle its diversity issues by offering benefits and inviting external bodies to evaluate their company in terms of labor rights and the environment. In this way, the company has managed to reach out to its employees and be aware of the issues even if its plantations are located in other countries. The company did pretty well because it has been meeting high standards when it comes to their operations in other countries. Maybe it just needs to hire global managers who have the best knowledge when it comes to diversified cultures (Schermerhorn et al).If they cannot hire these managers, they can train their current managers to handle workers in other countries so their human resource in all parts of the world will never be neglected and their voices can also be heard.
VIII. Implementation Plan (Measures and Alternative Strategies)
Measurement and Controls
Review of management accounts every end of the month to monitor the company’s costs.
Review of financial accounts every end of the month to monitor profitability of the new product.
Implement an appraisal system to be aware of employee complaints on the additional product and the work environment in general.
If the company did not gain from the new product and incurred losses instead, production will just be pushed until the breakeven point before it stops and the company will have to return to its normal operations.
If the employees complain about their job, HR managers will be hired to handle the workforce issue.
Globalization has brought a lot of good things especially to companies who want to cut costs when it comes to labor. Many organizations have relied on third-world countries on their cheap labor. However, it seems that these companies do not recognize the need for better HR policies that are appropriate for different cultures. Companies, especially the multinationals, should always pay attention to organizational behavior. It is important to be aware of what is happening in other countries even if your company’s home base is not located there. People are still the best asset of the organization. Every company should take care of them especially if they are from another country because they have different cultures and values. It is the responsibility of the company to know the strategies and policies that will suit them.
Luthans, F. & Doh, J. (2009). International Management culture, strategy and behavior. (7th ed.). New York: McGraw-Hill/Irwin
McCuddy, M.K. Organizational Behavior, 8e by Schermerhorn, Hunt, and Osborn [Powerpoint]. Indiana, U.S.A: Valparaiso University.
Rodrik, D. (2007). Does free trade bring lower prices?. Retrieved December 4, 2008 from http://rodrik.typepad.com/dani_rodriks_weblog/2007/04/does_free_trade.html
Sampson, W.R. (2005). Organizational culture assessment and measurement. Retrieved December 4, 2008 from http://www.uwec.edu/sampsow/Measures/Culture-OCAI.htm
Samuelson, R. (2008). Recovery Killer? How lower prices could actually hurt the economy. Retrieved December 2, 2008 from http://www.newsweek.com/id/168326?tid=relatedcl
Cite this A Case Analysis on Chiquita’s Global Turnaround
A Case Analysis on Chiquita’s Global Turnaround. (2016, Oct 23). Retrieved from https://graduateway.com/a-case-analysis-on-chiquitas-global-turnaround/