White Gold In Benin Chinese Investment In Cotton Case Solution

While the production of raw cotton is usually done on small-scale farms, the making of yarn has a more oligopolistic structure. The production of cotton has also declined over the years due to price insecurity and foreign competition. All these factors combined have adversely affected the supply of cotton to CBT.

The company has four alternative options. It can either chose to do nothing and hope the situation improves or, as a second option, close the Benin operations completely. A third option is to purchase cotton from other African countries and bear the costs of importing cotton to ensure a steady supply. Finally, the company could get involved down the supply chain and invest in the production of cotton instead of buying it from others.

Currently, CBT is incurring losses and the uncertainty is not helping the situation, especially when considering that future prospects do not look good. Doing nothing, therefore, is not a desirable option.