As learned in class, the advantages of international business are great, but so are the risks. Some of the risks involve ethical issues as the ones Chiquita faced doing business in Columbia. Chiquita was the first to successfully internationalize banana trade; Chiquita did so by paying special attention to retail development and followed industry trends. Their competitive advantage was acquired when the company revolutionalized the banana trade by using refrigerated ships for the first time.
Chiquita was involved in paying bribes to Latin American government officials in exchange for preferential treatment, encouraging US coups against smaller nations, putting in place dictatorships in Central America’s, exploiting local workers and creating abusive monopoly and doing business with terrorists. The time in which the business of bananas was booming had a very important role to play with Chiquita’s conviction. At that time, Columbia was in a very unstable political environment. The Revolutionary Armed Forces of Columbia (FARC) and alter the National Liberation Army (ELN) were constantly fighting.
The cultural presumption of “no law” made it less challenging or morally okay for Chiquita to get caught up in the no law land and make unethical decisions. The bananas industry was very prevalent at the time, number 3 on the list of staple crops in the world after wheat and coffee. Bananas were heavily consumed so it was an attractive market for many companies at the time. Banana supplier or producers who had the most crops of bananas were in many European countries, Columbia. Ecuador and Costa Rica were the largest producers.
Chiquita choose to have outsourced in Columbia because it was one of the top banana producing country in 2007. A close attention to the vertically integrated supply chain of producing bananas was essential because bananas are a perishable good. It required careful control of growing, packaging, transportation, ripening and finally distributing. They used their capabilities to come up with refrigerating shipping to importing countries so that the bananas do not spoil while getting to those importing countries, doing so give them the advantage of keeping bananas fresh and not over ripped until delivery.
This meant keeping customers happy, hence more revenues. Although, there were only few suppliers, they had a good profit from economies of scale. They bargaining power of suppliers because they were the only distributor that offers large quantity of bananas at relatively lower prices than the average’s price in the industry. They had a cost differentiation business level strategy, which is why they had to outsource where they could find the best labor cost, low cost of labor to have more revenues.
They build long-term relationships with their customers, which was retailed based such as super markets that preferred their products. Chiquita success in internationalizing their market came from the fact that they studied the banana industry very well, had unique non imitable resources, capital, innovation which gave them competitive advantage over the other banana producing companies. Chiquita succeeded in acquiring the required scale and upfront capital to enter the international banana trade. Their main competitors were Dole, and Del Monte.
Dole, Del Monte and Chiquita were the top leading companies in the banana industry. They were known as “The Big Three”. Chiquita paid close attention to retail development and followed industry trends. The top management set the tone for employees and supervisor. If a top management tone is to make unethical decisions, so will the rest of the company. Chiquita failed to hold up to the corporate responsibility. They failed to abide by their core values, for example their integrity is to conduct business “ethically and lawfully”.
Many companies that face severe financial problems get pressured to make sure they satisfy shareholders. Pharmaceutical industry might be more prone to face what Chiquita faced years ago. Before a company decides to internationalize, many researches should be done on culture, political situation and so much more. Knowing other countries’ laws and regulations will prevent such lawsuit against your company. Codes of conducts, ethics hotlines should be provided to employees and that has to come from the top management.
Companies should look at long-term goals versus short-term goals; companies whose culture is to just make profits at any cost faces these type of situation Chiquita faced often. Even though outsourcing is a great way to cut back on costs, companies should be very careful which countries they select to outsource in to prevent them from having a bad reputation. For example if a company chose to outsource in let’s say Nigeria, things are very corrupt and doing business, outsourcing from there could be very profitable but in a very un ethical way. How you want to represent your firm depends on the character of you as a CEO.
Either you make unethical decisions and get profitable very fast and get shares doubled in the wall street at any cost, or you have ethics and you rather do things right and slowly get to profits. Strategic planning is extremely important in doing business abroad, abiding by your core values and helping the community, making sure the public recognizes your firm in a positive always attract customers which generate more revenues. The current CFO Fernando Aguirre believes that he understands the long journey that Chiquita had taken from its current situation.
He plans to restore Chiquita’s reputation by having the right products and have them availably ready for distributions. I understand that bananas still account for 43 % of Chiquita sales but I think they should stop producing bananas and find a substitute; maybe coffee or other top leading crops within the industry. It is really hard clear a company’s reputation after such negative legacy. They should focus more on their core values, revise them and actually reflect those on the company and the public. The journey will be long but I am yet to see them become once again the number leading firm in the bananas industry.