Introduction
Below are discussions on the root cause of the company’s choice: whether the company’s management had any other choice; what the incumbent management team can do to restore the company’s reputation; the role of corporate governance in the process; and ethical and strategic actions the company should take.
The case analysis
Chiquita is a US company that has invested millions of dollars in planting bananas in Colombia. It came into existence after the United Fruit Company. It should be said that the company owns a large plantation of bananas in Colombia, which is the largest source of its labor force.
Chiquita transports the banana fruits to its major market segments like the United States and the fruits are processed into different products such as banana juice.
Chiquita, Del Monte and Dole are considered the major players in the same industry. Therefore, Del Monte and Dole are Chiquita’s major competitors. Notable, the company faced a tough situation due to random changes in consumer preferences. The industry also posed a steep financial terrain that rendered the company’s financial position volatile.
The banana business in Colombia has been a breeding zone for violence as numerous hostile groups have come up to fight against the Colombian administration leading to an outbreak of civil wars. The most notorious terrorist groups, FARC and ELN, emerged more powerful than the country’s administration.
The two groups demanded funding from the government of Colombia and other businesses. These two terrorist groups created a hostile condition that was unfavorable for Chiquita to conduct the banana business. Consequently, in an attempt to create a favorable environment, the organization made some choices that ruined its reputation (Schotter and Teagarden 2).
The root cause of Chiquita’s action in Colombia
The chief root cause for Chiquita’s action was the desire to provide protection to its employees against the terrorists. The two groups being considered as a major threat to security in Colombia created an unfavorable situation for business operation.
These terrorist groups were engaged in extortion and kidnapping in addition to allegedly killing fifty Chiquita’s employees as a warning sign against the failure to submit their portion of the funds. The insecurity created by the insurgents inflicted fear in Chiquita’s employees. Such a situation could result in lower workers’ efficiency. Some workers would prefer to quit the company if the insecurity condition persisted.
Since the Colombian government would not restore peace and stability, the company resolved to associate with the AUC, a paramilitary group, created to counter the two terrorist groups by protecting different social, political and economic interests. According to the company, this was the fastest strategy to providing security to the employees whose lives were in danger.
The company experienced a season of financial insecurity. In order to build a stable financial position, a secure environment was a necessity that would allow free movement of employees to and from work. It would also ensure free and faster transportation of banana fruits to their destined markets with timely delivery.
The company was trying to cut costs in order to meet the desired profitability levels. Opportunity costs, just like other costs, are undesirable. Therefore, the elimination of shortages equals the elimination of opportunity costs. Unfortunately, the company’s strategy to achieve their goal resulted in a penalty worth millions of dollars (Schotter and Teagarden 5).
Did the managers have a choice?
The question under consideration has two sides. The first side is whether the managers had a choice before being warned of their engagement and after the warning. Before the warning, the managers did not have any other choice but to continue their affiliation with the terrorist group.
To justify this stand, if a company is operating in a foreign country, it is the duty of the foreign country’s government to ensure political stability. On the other hand, political instability leads to insecurity thus economic stagnation. On the contrary, the two terrorist groups overpowered the government of Colombia. In other words, the Colombian government could not guarantee the political stability of the country.
This being the case, Chiquita found a local method of providing security to its employees. Concerning the second face of the question, after the company’s management received a warning against their engagement, they had a choice of withdrawing their operations in Colombia (Schotter and Teagarden 10).
What can the current management do to restore Chiquita’s reputation?
In order for the company to restore its reputation and create a strong competitive platform, it should begin by responding to the needs of the families who lost their members during the security operations of the AUC, the terrorist group funded by the company.
The second possible action is to engage in corporate social responsibility such as donating funds to build education and health facility for the victims’ family members. The third action could be to finance the development of infrastructure such as roads. Lastly, it is highly advisable for the company to change its name. The company’s damaged reputation is unfavorable for business.
Customers would like to associate themselves with companies that show respect for the rule of law, the environment and human lives. Companies that show no concern for the human and environmental well-being could lose their customers that would mean loss of revenues. Eventually, a business could be out of operation due to loss of customers because of bad reputation.
Therefore, the first proposed course of action for Chiquita is intended at apologizing to the public. It also shows that they value human well-being. If the public gets this picture clearly, it could be the beginning of building good reputation for the company.
The second and all following actions are for sending messages about the company’s concern for the Colombians economic progress and well-being. The change of name would help the company alter its first impression to the costumers (Henslowe 35).
The role of corporate governance in the process
Corporate governance revolves around creating value for a company’s shareholders while at the same time protecting the interest of other stakeholders. Therefore, its role in the process would be to ensure that Chiquita’s current goal, reputation restoration, is conforming to the interests of shareholders and stakeholders (Mullerat and Brennan 6).
The ethical and strategic actions of the company
It is ethical for the company to disassociate itself with the terrorist group. The payment of bribe to the government officials in exchange for favor should be aborted. These two strategies would render the company’s operations ethical.
If the company is still interested in operating in Colombia, it should seek for international help to restore security. That would be a legal strategy to creating peace and security for its employees and the Colombians (Tencati and Perrini 22).
Recommendation
The company should disassociate itself with the terrorist group in an attempt to build a favorable reputation. It should also respond to the needs of the victims’ families. Provision of security in an ethical and legal manner is recommended. The best strategy for security provision is to deploy a legal military force, if the arrangement would work.
To conclude, the company’s action was driven by the need to protect its employees. However the strategy used was illegal. The reward of their choice was a damaged company reputation. To build a favorable reputation, the company should operate in an ethical manner.
Works Cited
Schotter, Andreas and Mary Teagarden. “Blood Bananas: Chiquita in Colombia.” Thunderbird. (2010): 1-16. Print.
Henslowe, Philip. Public Relations: A Practical Guide to the Basics, London: Kogan Page, 2003. Print.
Mullerat, Ramon, and D. Brennan. Corporate Social Responsibility: The Corporate Governance in the 21st Century, Alphen aan den Rijn: Kluwer Law International, 2011. Print.
Tencati, Antonio, and F. Perrini. Business Ethics and Corporate Sustainability, Cheltenham: Edward Elgar Pub, 2011. Print.