Q1.) In 1994, Keith Linder has some problems. What are they?
Ans: The European Union (EU) neared completion of its single market, it began to adopt series of import restrictions, which threatened Chiquita’s sales, market share slide significantly which combined with mounting annual losses. Chiquita’s cash balances had fallen to $179 million from $712 million. A staggering $.13 billion in value had been destroyed, an amount which represented 66% of firm’s 1991 net worth
Q2) Exactly what is the EU Policy? And how does it promise to affect Chiquita?
Ans: in 1975, with the adoption of the ACP-EEC convention of Lome most members of the EC provided preferential access to banana imports from developing countries in the ACP region. These countries which were essentially the former colonies of Britain and France were granted tariff- free access to the EC market, while banana imports from other regions, including Latin America, faced a ...view middle of the document...
EC imports would be treated same as ACP
Q3) Why does the EU have this policy? What it is designed to do?
Ans: Germany lacked any banana producing former colony, it was a free market for bananas in the European community. Germany accorded duty-free access to imports from all source at the level of estimated consumption, resulting in entry that was efficiently free. Belgium, Denmark, Luxembourg, Ireland, Netherlands and Greece limited their policies. Whereas France, UK, Spain, Italy and Portugal paired tariffs barriers including quantative restrictions, import license requirements and import bans
As single market approached the full economic integration by 1992, Germany was pitted against other members of community. The debate centered on relative merits of preferential treatment and economic liberization.
Q4.) Whatever your view of Lindner’s situation in 1994, the harsh reality is that he and Chiquita are stuck in a difficult situation. If you are Lindner, what are you going to do to improve your company’s problem?
Ans: Being in Lindner’s position, I would have focused elsewhere for other markets, reduce shipments to EU, or even continued at the same rate and accept the fees associated and pay prices to avoid letting go of the market
Linder went about solving the problem through political parties which they influenced, instead of relying on political connections; Chiquita should have actively changed their marketing plan to help regain the cost sales from the Framework Agreement.
Chiquita should have followed Dole’s route by acquiring smaller EU distributors to obtain import license and sell more quantity of that allowed under Framework Agreement. It would help gain a better market share in the EU. But Chiquita did not do anything and endured losses for extended period and in longer run it depleted their cash reserves
Lindner should have reduced debts rather than focusing on cutting labor wages. The current portions of their long term debts had increased significantly and at the same time current assets were diminishing, Lindner should have shed the underperforming assets, cut costs, and focus on the core marketing plans required to tackle the EU import policies