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1.how would you characterize Chiquita's historical approach to global management?

2.Describe Chiquita's approach to human resource management in its global supply chain. What particular human resource challenges does Chiquita face as the purchaser, producer,and supplier of a commodity?

3. Does Chiquita's global corporate responsibility program create a conflict between owners and other stakeholders? Who are Chiquita's main stakeholders in the US and around the world, and how are they affected by Chiquita's CR program?

4. how would you characterize Chiquita's past and present leadership? how does leadership affect a company's overall reputation?

5. DO you believe Chiquita would have changed its policies without the presence of damaging stories in the media? If not what does this say about Chiquita's old management style?

6. what challenges does Chiquita's new ownership face in continuing to turn the company around and bring profitability back to its operations?

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In-Depth Integrative Case 4.2 Chiquita's Global Turnaround On January 12, 2004. Chiquita named Fernando Aguirre Yet despite Chiquita's apparent turnaround, lingering as the company's new president and CEO, replacing Cyrus problems remained in financial performance, organiza- Freidhem, who had held the position since the company's tional efficiency, and a strategy for the future. How could emergence from bankruptcy in March 2002. In his 23 years Chiquita sustain the positive momentum from its turn- with Cincinnati-based Procter & Gamble (P&G). Aguirre around in reputation and employee relations to deliver served in a variety of positions, including president of improved and sustainable business performance in a P&G Brazil and president of P&G Mexico. In his first global industry environment plagued by low margins and remarks to Chiquita employees and investors, Aguirre reit- intense competition? erated the importance of corporate responsibility: "In terms of managing businesses and people, while I am Chiquita's Background profit-conscious, I make decisions first and foremost based on values and principles. In that respect, I'm proud to be Chiquita Brands International Inc. is a multinational pro- joining a company with Core Values that guide day-to-day ducer, distributor, and marketer of bananas and other operations and one where corporate responsibility is an fresh produce. The company also distributes and markets important part of our company culture." fresh-cut fruit and other branded, value-added fruit prod- Over the past several years, social responsibility has ucts. Approximately 6) percent of its 2003 revenues of become the watchword of this traditional company with $2.6 billion came from bananas. Since adding new prod- midwestern roots but a checkered history. In 2004, ucts and acquiring Fresh Express, the U.S. market leader Chiquita scarcely resembled the company that once held in fresh salads, in 2005, bananas have totaled 43 percent a reputation as cold, uncaring, and indifferent, frustrated of Chiquita's net sales. In 2003, the banana division con- with mediocre returns, a lack of innovation, and a demor- sisted of 19,000 employees, mainly working on more alized workforce. Throughout the 20th century, hostile than 100 banana farms in countries throughout Latin relationships with its labor unions and employees and a America, including Guatemala Honduras, Nicaragua, reputation for immorality solidified by the actions of Ecuador. Costa Rica, Panama, and Colombia. Approxi- its predecessor company, United Fruit, helped to slow mately 45 percent of all bananas sold by Chiquita are Chiquita's growth. In addition, by the late 1990s, con from Chiquita-owned farms independent suppliers in sumption of bananas had declined in major markets, and Latin America produce the remainder. Chiquita is one of Chiquita's position in Europe had been compromised by the the global market leaders in banana supply and produc- European Union's preferential import relationships with its tion (see Table 1). Because Chiquita's exports are often members' former colonies in the Caribbean, Africa, and a substantial part of the foreign trade of the Latin Amer- the Pacific. These factors helped push Chiquita to seek ican countries in which the company operates, relation- Chapter 11 bankruptcy protection in November 2001. ships with suppliers, workers' unions, and communities Through a serious and dedicated internal analysis, a thor- are critical elements for success, ough reevaluation of its core mission and business princi- Chiquita sources bananas from many developing Latin ples, and a concerted effort to reach out to some of its count that histor strug primary stakeholders--such as employees--who had gled with poverty, literacy, access to affordable health care, become disenchanted and alienated, by early 2003, Chiquita hud engineered the beginnings of a turnaround. One of the most impressive aspects of this recovery was Chiquita's suc- Table Banana World Market Share Leaders, 1999, 2002, and 2005 cess in redirecting and redefining its reputation through a 2005 2002 1999 more open and transparent approach to its global operations and to the various stakeholder groups with which it inter- Chiquita 25% 23% 25% Dole acted. In addition, Chiquita had substantially reformed 25 Del Monte 15 labor practices and relations and initiated a set of projects Fyless in sustainable development and community action in its Nobo 11 various locations around the world. Both labor unions and nongovernmental organizations (NGOs) lauded these steps. 25 25 15 8 1 8 8 11 Source Banana un 575 In-Depth integrative Care 4.2 Chiquito's Global Turnaround 581 2011 Table 5 Chiquita Brands Balance Sheet as of December 21, 2014, 2013, 2012, 2011 (In thousands) 2014 2013 2012 Assets Cash and equivalents $ 47,160 $ 54,017 $ 2,601 Other current assets 535,904 575,178 987 Total current assets 583,064 629.195 3,588 Investments in and accounts with subsidiaries 110.220 108077 647421 Other assets 918.754 921866 18.919 Total assets $1.612.038 $1.659,138 $669,978 Liabilities and Shareholders' Equity Accounts payable and accrued liabilities $ 374.241 $ 406,307 $ 15,363 Total current liabilities 408,578 15.363 Long-term debt 637,518 629,353 259,520 Total abilities 1.288,704 1,284,700 299,576 Shareholders' equity 323 334 374438 370 402 Total abilities and shareholders' equity $1.612.038 $1.659138 $669978 $ 266 266 1,071,132 23,332 $1.094.730 378,944 $ 15,354 15.354 249,805 294,660 B00070 $1,094.730 Source Company reports Year Ended 12/31/2012 $3,078,337 2,743,040 275.231 33433 Table 6 Chiquita Brands Interational Income Statement, 2012-2014 (in thousands) Year Ended Year Ended 12/31/2014 12/31/2013 Net Sales $3,090.224 $3.057.482 Cost of sales 2,735,117 2,708,428 SG&A 218,061 233,706 Equity in earnings of subsidiaries doss) (2.750) (258) Operating income (los) 27,404 49.845 Interest expense 161 896) 161,144 Interest income 2.715 2.856 Lost on debt extinguishment (521) 16.275 Other income expense), net (9.906) 3,522 Income (los) before income taxes (42,204) (11.196) Income tax (expense) benefit (20,332) 14,619) Net income foss) 162,536 (15.815 (253,834) (45.299) 3,131 (1.793) (297,795) (105 239) (405,017) Source Comedy reports year in bananas driven by higher pricing and volume in In early 2014, Chiquita reached a preliminary merger North America, and initial recovery in Europe. Our salads agreement with Ireland-based fruit and produce company business did not perform as well as expected and we've Fyffes. The deal would have created the largest banana taken a number of corrective actions and adapted our struc- distributor in the world, with an estimated 160 million ture and strategy to be more successful and profitable." boxes of bananas sold annually. Around the same time, Beginning in 2012, however, Chiquita's sales and prof- Brazilian holding company Cutrale-Safra offered Chiquita itability began to stall. With global banana sales decreas- shareholders a buyout deal worth around US$14 per ing. Chiquita's revenue fell to US$3 billion, and the share. In October 2014, shareholders for Chiquita unex- company posted losses for three consecutive years (see pectedly rejected the merger with Fyffes and accepted a Tables 5 and 6). In 2014, following three years of flat slightly revised takeover bid by Cutrale-Safra. With the sales, Chiquita's management began looking externally close of the deal, Chiquita became a privately held Brazilian for new solutions for cutting costs and increasing revenue. company. 580 Part 4 Organizational Behavior and Human Resource Management After much deliberation, management concluded that reluctant to promote its achievements through the typical adopting the SA8000 standard would yield the most cred- mass communication vehicles. Indeed, when Chiquita ibility with external stakeholders because SA8000 gives attempted to advertise its certification process with com- detailed requirements for adequacy of management sys- mercials in Denmark that equated its Central American tems for implementation. Having an external standard banana farms with a "glorious rainforest," the ads were met forces Chiquita to push CR change down through cach with skepticism and thought to be unrealistic, organizational level so that the firm is able to meet third- Instead of mass advertising, the firm has opted for a party requirements. longer-term marketing strategy based on educating lead- In May 2000 Chiquita expanded its code of conduct to ing opinion makers and critics alike. According to Dennis include SA8000. Standards now included areas such as Christou, vice president of marketing-Europe, there is a food safety, labor standards, employee health and safety, natural suspicion among consumers about commercially environmental protection, and legal compliance. Recoge driven messages, He believes that customers feel more nizing the importance of labor support and its resounding trust in the message if it's delivered by an external body effect on corporate image. Chiquita began an open dia- rather than by the company or by a paid advocate of the logue with the International Union of Food Workers and business. That is a main reason why the firm is relying the Coalition of Latin American Banana Workers' Unions on viral marketing tactics and third-party testimonials as (COL SIBA), By June 2001, the firm had reached an the means of spreading its message. Retailers are treated agreement with both organizations, pledging to respect differently: They must be exposed to improvements at worker rights as elaborated in ILO conventions, address Chiquita because they determine which exclusive brand to long-standing health and safety concerns for workers, and carry on an annual basis. However, Christou believes that ensure that its independent suppliers did likewise. This creating brand recognition with consumers is possible made Chiquita the first multinational corporation in the through nonobtrusive, reputable means. agricultural sector to sign a worker rights agreement. Defining and conveying a brand's differences in a com- Management credits this agreement as having helped to modities marketplace is difficult. Nevertheless, Chiquita build a positive image, improving relations with both believes it can carve out its own niche by distinguishing internal and external stakeholders. In mid-2001, Chiquita itself as a leader in corporate responsibility. Instead of published its first corporate responsibility report detailing positioning itself solely on the basis of price, Chiquita is the firm's future CR strategies and goals. Both stakehold- hoping that its distinctive competency in CR will help it ers and media outlets have been impressed with the com- stand out from the pack. The company got a boost in this plete turnaround in the transparency of Chiquita's regard in April 2003, when Chiquita, along with Ben and corporate agenda, which has led to a much more favorable Jerry's, received the first Award for Outstanding Sustain- impression of the company. ability Reporting presented by the Coalition for Environ- In order to adhere to the organization's own core values mentally Responsible Economies (CERES) and the and to the SA 8000 labor standard, Chiquita routinely per- Association of Chartered Certified Accountants. In 2006, forms internal audits in all of its Latin American opera- Chiquita won Costa Rica's Contribution to the Commu- tions. NGOs also conduct external audits. After the audits nity Award for its Nature and Community Project, which are completed, each local management team plans correc preserves biodiversity and promotes nature conservation tive actions using the firm's code of conduct and core awareness values as decision-making guides. At year-end 2003, inde pendent auditors certified Chiquita's operations in Costa Rica, Colombia, and Panama to the SA8000 standard, Recent Performance, Acquisition, Chiquita's operations were the first ever to earn SA8000 and Future Path certification each of these countries. In its 2006 corpo- Chiquita drastically shifted its strategic decision-making rate responsibility report, Chiquita announced that it has models and broader corporate operating principles in the maintained 100 percent certification of its banana farms wake of its reorganization. Debt repayments and other in Latin America in accordance with the Rainforest reorganization costs resulted in significant losses. Chiquita Alliance, Social Accountability 8000, and EurepGAP stan-made great strides in improving its financial performance dards (environmental, labor, and human rights and food by cutting costs and streamlining its local and global safety standards, respectively). operations. In 2003, the year after it filed for bankruptcy, Chiquita's net sales were $2.6 billion, up from $1.6 billion the year before. In 2006, net sales reached a record Marketing the Message $4.5 billion (due in part to the acquisition of Fresh Express) Although it would seem advantageous for Chiquitato com. In 2011 the Chiquita Company celebrated its fourth con- municate and leverage the great strides it has made through secutive year of increasing profitability. Chair and CEO its corporate responsibility effort, management seems Fernando Aguirre stated that Chiquita "had a much better In-Depth integrative Care 4.2 Chiquitin's Global Turnaround 579 Table 4 Better Banana Project Principles Award for Chiquita's Nuevo San Juan Home-Ownership 1. Ecosystem Conservation Protect existing ecosystems, recovery Project in Honduras. Also in 2004, Chiquita earned the of damaged ecosystems in plantation area Ethic Award from the AGEPE Editorial Group and KPMG 2. Wildlife Conservation. Protect biodiversity, especially in Italy for its initiatives in the field of ethics, environ endangered species mental protection, and workplace improvements. 3. Fair Treatment and Good Conditions for Workers. Comply One recent set back for Chiquita's corporate responsi- with local and international labor laws/norms, maintain policy bility profile involved its banana-producing subsidiary in of nondiscrimination, support freedom of association Colombia. After a 2003 probe into the company's finances, 4. Community Relations. Be a "good neighbor' contributing to the social and economic development of local communities Chiquita self-reported to the U.S. Department of Justice 5. Integrated Pest Management. Reduction in use of pesticides, (DOJ) that it had made payments to left and right-wing training for workers in pesticide use/managementrisks. paramilitary groups in Colombia such as the AUC, ELN, 6. Integrated Waste Management. Reduction of the production and FARC. These payments, beginning in 1997, were of wastes that contaminate the environment and harm human made in order to protect the lives of its employees. health institute recycling Colombia has one of the highest kidnapping rates in the 7. Conservation of Water Resources. Reduce and reuse the world and a murder rate 11 times that of the United States. water used in production, establish butter zones of vegetation around waterways:protect water from contamination "It's certainly a common understanding that in order to do business in Colombia, payments have to be made for 8. Soil Conservation Control erosion, promote soil conservation and replenishment at best security, or at worst extortion explained Ron 9. Planning and Monitoring. Plan and monitor banana cultivation Oswald, general secretary of the International Union of activities according to environmental social and economic Foodworkers, which represents Chiquita workers in Latin measures America (including many in Colombia). The U.S. 1996 Anti-Terrorism Act makes it illegal to Source Adapted from interest Alliance Nomos sporo i Coco au Cuno Bore May 2002 www.dando.org support any organizations identified as a terrorist threat As of September 2001, the list of terrorist threats included the Colombian paramilitary groups. In a company press release, Chiquita chairman and CEO Fernando Aguirre and farms certified through June 2003 brought the total to explained, "The payments were always motivated by 65 percent. As of August 2006, all of the farms owned by our good faith concern for the safety of our employees. the Chiquita Company are certified by the Rainforest Alli- Nevertheless, we recognized and acted upon our legal ance. Along with all of Chiquita's farms, the Rainforest obligation to inform the DOJ of this admittedly difficult Alliance has also certified the majority of the independent situation." Officially announced in 2007. Chiquita faced farms connected to Chiquita. Treehugger.com also con- a $25 million fine for the payments it made in Colombia. tends that "Chiquita now recycles 100 percent of its plas- in anticipation of the decision, the company set aside tic bags into paving stones and has reduced pesticide use funds in 2006 to pay the fine. Chiquita does not believe by 26 percent." Table 4 presents the nine principles of the the fines will hurt its operations. Perhaps as a result of Better Banana Project. According to insiders, the adoption the pending DOJ investigation and decision, Chiquita sold of third-party standards has helped Chiquita drive a stron its Colombian subsidiary in 2004. ger internal commitment to achieving excellence and to cut costs. In 2003, the Rainforest Alliance estimated that Chiquita reduced production spending by S100 million as Global Codes of Conduct, Standards, a result of a $20 million investment to reduce agrochemi- and Labor Practices cal use. In a more recent effort to increase its corporate In late 2001, Ron Oswald, general secretary of the Inter- responsibility profile, Chiquita Bananas pledged to boycott national Union of Food Workers, was asked if he had seen oil from Canada's tar sands in November 2011, improvements in Chiquita's internal and external corpo Chiquita is receiving increasing recognition for its rate policies. He responded. "Yes. It is a company that is efforts. In 2005, SustainableBusiness.com, publisher of totally unrecognizable from five years ago." Clearly The Progressive Investor newsletter, named Chiquita to its Chiquita had come a long way. list of the world's top 20 sustainable stock picks, known Traditionally, relations between Chiquita and labor as the SB20, for the fourth year in a row. SustainableBusi- unions in Latin America were mired in conflict and mis- ness.com identifies its picks by asking leading investment trust. In 1998, after recognizing the need for change in advisers to recommend companies that stand out as world the way it deals with its line, Chiquita began striving to leaders in both sustainability and financial strength. In adhere to SA8000, the widely accepted international labor April 2004, the Trust for the Americas, a division of the rights standard. Management struggled with the decision Organization of Americas, selected Chiquita Brands as whether to adopt an outside standard or to develop an the winner of the 2004 Corporate Citizen of the Americas internal measurement gauge for corporate responsibility. 582 Part 4 Organizational Behavior and Human Resource Management declared bankruptcy. Chiquita's new ownership faces a challenging task of the media? If not, what does this say about bringing financial success back to the company. Future Chiquita's old management style? financial stability depends, in part, on external market 6. What challenges does Chiquita's new ownership factors such as steady or rising international banana face in continuing to turn the company around and prices and consumer demand, Internally, the company's bring profitability back to its operations? performance will result from the effectiveness of finan- cial controls on the cost side, and successful marketing, Exercise emphasizing differentiation and value-added produc- Chiquita's management, represented by the CEO, is con- tion, on the revenge side. Although Chiquita has gone sidering input from various groups about its strategic to impressive lengths to turn around its reputation direction and continued reorganization. Your group repre- and performance, it continues to face a challenging and sents one of the following interests: competitive international business environment and must make continuous progress in its management and oper- 1. Shareholders of the previous company who lost ations in order to achieve a healthy and sustainable most of the value of the shares after the company financial future. 2. Shareholders in the Safra Group Questions for Review 3. Employees and union representatives of North 1. How would you characterize Chiquita's historical American operations. approach to global management? 4. Employees and union representatives of South 2. Describe Chiquita's approach to human resource American operations. management in its global supply chain. What partic- 5. Representatives of the nongovernmental organiza ular human resource challenges does Chiquita face as tion Rainforest Action Network the purchaser, producer, and supplier of a commodity? Spend five minutes preparing two or three requests to the 3. Does Chiquita's global corporate responsibility (CR) management team about your group's interests and priorities program create a conflict between owners and other for the company. Then conduct an open forum in which you stakeholders? Who are Chiquita's main stakeholders discuss these requests among the different groups. in the United States and around the world, and how are they affected by Chiquita's CR program? 4. How would you characterize Chiquita's past and Source: The case was prepared by Professor Jonathan Doh and Hot at Vilanova Uwer as the basis for a discussion Addison research stance present leadership? How does leadership affect a was provided by Cory A and B Litino intended to late company's overall reputation? other tective or infective manager capabiy radiative responsity We appreciate tance from Shore Tory and Michal Mechel Coute 5. Do you believe Chiquita would have changed its International. Any aron main those of the authors policies without the presence of damaging stories in ENDNOTES 1. "Chiquita Names New CEO," Cincinnati Business Courier, January 12, 2004 2. Geert de Lombaerde. "Chiquita Outlook Improves owing EU eal." Cinco Business Courier, April 20, 2001. 3. Nicholas Stein. "Yes, We Have No Profits." Fortune. November 26, 2001. pp. 182–196. 4. Ibid. 5. Chiquita Brands International, Inc., 2006 Annual Report, http://investors chiquita.com/phoenix. zhtml?c=119836&p=irol-reports Annual 6. "Ethics & Code of Conduct," Chiquita, www. chiquita.com/ The Chiquita-Difference/Ethics Codes-of-Conduct.aspx 7. Marco Werre, "Implementing Corporate Responsibility: The Chiquita Case." Journal of Business Ethics 44, no. 2 (May 2003). pp. 247-260 8. Collin Dunn. "Chiquita Cleans Up Its Act." Tree Hugger.com. August 10, www.treehugger. com/green-food/chiquita-cleans-up-its-act.html, 9. Chiquita Brands International, Inc., "Chiquita Statement on Agreement with U.S. Department of Justice," press release, March 14, 2007. http:// investors.chiquita.com/phoenix.zhtml?c=219836&p =irol-news Article&ID=-974081. 10. Stein. "Yes, We Have No Profits." 11. "Chiquita Brands International, Inc.: Chiquita Reports Fourth Quarter and Full-Year 2011 Results." Chiquita, February 21, 2012, http:// investors.chiquita.com/phoenix zhtml?c=119836&p =irol-news Article&id=1663424.
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Running head: CHIQUITA'S GLOBAL TURNAROUND CASE STUDY

Chiquita's Global Turnaround Case Study
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1

CHIQUITA'S GLOBAL TURNAROUND CASE STUDY

2

Based on the case study, Chiquita’s historical approach to international or global management
can be viewed to focus on the corporate level, where the only motivation is making the most profit.
This created management that was non-engaging hence secretive and the managers were most
unreliable. They Managers were never accountable hence no one too responsibility when things
were not right. The company was desperate for new management that could build new better
relationships with stakeholders, employees being the primary ones across the world. By doing this,
Chiquita turned itself around both locally and internationally.

As observed from the case study, Chiquita approach to human resource management changed
after being exposed in 1998 by Cincinnati Enquire for poor workers and environment condition,
hence defined it four core values in 1999 that even today guides the strategic decision-making
process globally. This core values included integrity, respect, responsibility, and opportunity
which made their approach very successful and in its Company management global supply chain.
Also their approach to human resource steps from the better banana project principles which were
designed in 1992 to improve environmental conditio...


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