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Chiquita Brands International A

Solution Id Length Case Author Case Publisher
2628 1342 Words (5 Pages) Terence Mulligan Harvard Business School : 797015
This solution includes: A Word File A Word File

The preventive and biased trade policy of the European Union served as the primary cause for the loss in sales for Chiquita Brands International. Along with the European Union, member states had embraced certain restrictions which damaged the leading position of Chiquita. Captain Lorenzo Baker, the initiator of introducing the tropical fruit (bananas) to the North American consumers founded the Boston Fruit Company (BFC). Gradually, after merging with the New Orleans-based competitor and certain name changes, it came to be called Chiquita Brands International. Progressively, Chiquita secured tremendous prestige and served as a contributor to several economic factors. In 1994, Chiquita dominated as one of the six largest firms in the banana industry. Furthermore, EC member states, except for Germany, continued to impose various limitations on imported bananas. By September 1994, Chiquita began to lose its market share. The financial position of Chiquita became slightly better in 1995 but required other strategies for restoration. 

Following questions are answered in this case study solution:

  1. What role has politics played in the history of Chiquita Brands, and its predecessor, the United Fruit Company? 

  2. What role has protectionism played in the global banana market? Is this role defensible?

  3. What should Lindner do about the EU’s banana policy?

Case Study Questions Answers

1. What role has politics played in the history of Chiquita Brands, and its predecessor, the United Fruit Company? 

Political aspects play a crucial role in determining the position of a business. If the governmental standings are in the favour of the business, it has more chances of success than if the political standings are against it. The European Union's restrictions, according to Chiquita Brands International's President and Chief Operating Officer, Keith E. Lindner, were the chief factor in the loss of the Chiquita Brand. The stock of Chiquita, which was trading at $40 in 1991, fell to $13.63 by the end of 1994. Partner states had enacted several import restrictions as the European Union (EU) drew closer to completing its single market, posing a challenge to Chiquita's monopoly on the $3 billion EU banana market. As the market share of Chiquita was corrupted, other unsettling costs swept in, which called for immediate action by the senior management.

In 1994, Chiquita and Dole which were U.S. based served as the major producers of the global banana industry. Latin America, accounted for approximately 75% of worldwide deliveries by capacity. A fresh banana import scheme that allowed the entire community of bananas imported from Latin America, where Chiquita is believed to be the largest producer, was approved by the EC on July 1, 1993. Companies like Chiquita would not be able to pay the tariffs associated with imports of bananas from Latin America that exceeded the two million metric ton threshold under the conditions of the new deal. To manage the quota, the EC developed a complicated licensing system, allowing Chiquita's rivals who had facilities in the EU to import an ample portion of the two million metric tons allowed by the plan. All of the other EC nations, excluding Germany, continue to place various limitations on imported bananas.

Several nations, including Greece, Belgium, Netherlands, Luxembourg, Ireland, and Denmark, implemented relatively simple protective measures with a 20% a.v. scope. import taxes on bananas coming from countries that weren’t desired. Some countries, including the UK, France, Portugal, Italy, and Spain, combined tariffs with several less evident non-tariff restrictions, such as quantitative quotas, import license requirements, and import bans.

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