Business Policy and Strategy Case Study: Chiquita Brands and AUC

This case study examines the strategic and ethical challenges faced by Chiquita Brands, specifically their subsidiary Banadex in Colombia, when confronted with extortion demands from the paramilitary group, United Self Defense Forces of Colombia (AUC). The assignment delves into the decision-making process Chiquita should undertake, weighing the advantages and disadvantages of paying the AUC versus refusing. It explores the potential benefits of refusing to pay, such as upholding ethical standards and preserving brand value, while also acknowledging the risks to employee safety and business operations. The study also addresses the ethical issues Chiquita must consider, including compliance, governance, and the implications of supporting a criminal organization. Furthermore, the assignment provides practical suggestions for Chiquita, such as seeking assistance from both the US and Colombian governments, and emphasizes the need for a comprehensive approach to managing this complex situation. The assignment references relevant literature to support its arguments and provides a well-rounded analysis of the case.

Running head: BUSINESS POLICY AND STRATEGY
Business Policy and Strategy
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Question 1: What should Chiquita do?
Answer: Carlos Castano ,the leader of United Self Defense Forces of Colombia (AUC), one of
the most violent and brutal paramilitary forces that existed in Colombia had proposed to provide
security to the employees and property of Banadex ,subsidiary of Chiquita Brands, in return of
few thousand dollars per month (Chiquita.Com ) . Considering the situation, Chiquita should opt
for the option of refusing to pay the money to the Colombian paramilitary organization, United
Self Defense Forces of Columbia (AUC).
Question 2: Why should Chiquita do so? What possible advantages might your
decision (in question 1) bring to Chiquita? Provide evidence to support your
decision.
Answer: Carlos Castano , the leader of the United Self Defense Forces of Colombia (AUC) , a
Colombian Paramilitary organization is demanding money every month in return of providing
security services to Banadex. The AUC are the violent paramilitary organization that is known
for their notorious activities that includes assassinations, guerilla warfare and others (Rosenau) .
Some of the possible advantages of choosing the option of refusing to pay the money demanded
by AUC are as follows:
 Even if they had agreed to pay the money to AUC, it was not guaranteed that they would
not harm their employees working in Banadex, Colombia .If they are supported and
encouraged, they might demand for money in future also so it would create a situation of
panic for both the employees and management of Banadex. They would also increase
their networks and connections with the money taken from Banadex, which would
increase the potential threat, and they might apply the same for other developed

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companies as well. On the other hand by choosing to refuse to pay the demand money to
AUC, they would be able to set an example or role model to other companies as well that
they are not in favour of supporting extortion or blackmails. This would increase the
respect and brand value of Banadex globally.
 Banadex , subsidiary of Chiquita Brands at Colombia would be able to prevent huge loss
of their market share and the distribution they have created in Colombia over almost 100
years by choosing to not to exit from the country abandoning their business in Colombia
(Wicks and Mead). If they chose to refuse to pay the demand money to AUC not only
they would be able to avoid blackmailing but also they would be able to prevent huge
loss as Banadex was responsible for managing Chiquita’s extensive plantation holding
and it was Chiquita’s most profitable international operation. They should also not exit
the country or abandon the operations at Banadex, Colombia because Banadex was
responsible for 4400 direct and additional 8000 indirect jobs in Colombia. If they choose
to exit the country, this decision would jeopardize the livelihood of those workers and
employees associated with Banadex in Colombia, rather they should operate in Colombia
and chose to refuse to pay the demanded money to the violent paramilitary organization
in Colombia.
 By the 1990s Colombia had become a very violent country and activities like
kidnappings, murders, blackmails and other detrimental activities have become very
common. Thus considering the scenario, it is not logical or advisable to agree to the
demands of AUC and pay the demanded money, as it would encourage other
organizations and criminal groups to extract money from Banadex by force or other

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unethical means. Thus by taking the decision of refusing to pay the extortion money,
Banadex would be able to prevent any potential future threats to the company.
 The other advantage of this decision of Banadex would be that it would create a feeling
of trust in the employees and workers of Banadex as no employees or workers would
like to work in an organization that supports terrorist or criminal groups .
The Federal Bureau of Investigation (FBI), the law enforcement agency of USA and the
intelligence and security serviced of USA has advised all the companies to not indulge or
entertain extortions or blackmails of any criminal or terrorist group (Parkman and Peeling).
They are advised to inform the security agency of the country about such incidents to avoid such
threats to their business and employees. If any company is convicted in indulgence in such
activities, they may be fined and punished by the United States Justice Department. Thus
considering the situation and considering the federal laws of USA, the appropriate decision for
Chiquita Brands would be to opt for the decision of refusing to pay the demanded money to
AUC.
Question 3: What possible drawbacks might Chiquita face if it decides to
implement your decision?
Answer: The drawbacks that the Banadex may face if they do not agree to the terms of the
violent paramilitary organization, AUC of Colombia are:
 If Banadex reject the offer of protection from Carlos Castano, the leader of the United
Self Defense Forces of Colombia (AUC), they are high chances that they would kidnap
or execute the employees of Banadex considering the ample evidence of the brutality of
the paramilitary organization, AUC. Thus, the decision of refusing to pay the demanded

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money to the paramilitary organization would jeopardize the life and property of the
employees and workers of Banadex.
 The employees and workers may leave their jobs in fear that the paramilitary
organization, AUC of Colombia may harm them or might kill them , if they come to
know that Banadex have decided to reject the offers from AUC and refused to pay them
the demanded money . The employees are well aware of the notoriety and brutality of the
paramilitary organization, AUC and may chose to leave their jobs considering the fact
that Banadex are not concerned about the security and safety of their employees
(Acemoglu, Robinson and Santos) . This is also one of the drawback or disadvantage
by Banadex if they take the decision to refuse to pay the demanded money to AUC.
Question 4: What ethical issues should Chiquita consider?
Answer: The ethical issue that the Banadex, the subsidiary of Chiquita Brands should consider
is that they should follow the compliance and Governance issues, which is one of the vital ethical
issues that needs to be followed by any business organization (Shaw and Barry). It is the
responsibility of Chiquita Brands to fully comply with the environmental laws, federal and state
safety regulations, fiscal and all civil right laws. Thus, taking in account the ethical consideration
they should not entertain the demands of the violent paramilitary organization of Colombia and
should refuse to pay the demanded money, as it is unethical and against laws to pay money
against blackmailing (Weiss). It is also not ethical to finance the paramilitary group like United
Self Defense Forces of Colombia (AUC) as they would use this money to conduct crime and
terrorist activities that would be against humanity (Nussio and Oppenheim).

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Question 5: What general suggestions/tips would you provide to Chiquita?
Answer: Some suggestions or tips that are needed to be followed by Chiquita Brands are as
follows:
 It is suggested and recommended that the Banadex, subsidiary of the Chiquita Brands
should seek the help of the US government , to take actions and preventive measures in
order to counter the paramilitary organization, AUC of Colombia. It is the ethical
responsibility of the US government to protect and safeguard people of their own country
in the region of Colombia. It is also not possible for the Banadex, to hire a security
company to protect the plantation and employees at Banadex, Colombia, as it would cost
a lot to hire sufficient men to withstand the force of 8000 to 11000 paramilitary fighters.
It is only possible for the government to combat such large and violent paramilitary force.
 The company Banadex contributes to almost $70 million annually to the Colombian
economy in the form of capital expenditures, pay roll, taxes, social security, pensions and
local purchases of goods and services. The company had been operating in Colombia for
almost about 100 years and it had engaged almost 8000 local Colombian workers
working for Banadex, Colombia. Considering these conditions, Banadex also should seek
help from the government of Colombia, as they are capable of protecting the plantation
and employees of Banadex against the violent terrorist organization of Colombia, AUC.
It is also the duty of Colombian government to safeguard the employees and property of
Banadex, who had been doing business in their country for more than 100 years,
employed several people of Colombia for their business and had contributed a huge
amount to the economy of the country. If the Colombian Government do not help
Banadex in this situation , it would have more adverse effects in future as these

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paramilitary organizations like United Self Defense Forces of Colombia (AUC) would be
encouraged to do such activities more often and it would affect many other companies
thriving in Colombia .

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References
"Home | Chiquita". Chiquita.Com, 2018, https://www.chiquita.com/. Accessed 14 Oct 2018.
Acemoglu, Daron, James A. Robinson, and Rafael J. Santos. "The monopoly of violence:
Evidence from Colombia." Journal of the European Economic Association 11.suppl_1 (2013): 5-
44.
Nussio, Enzo, and Ben Oppenheim. "Anti-social capital in former members of non-state armed
groups: A case study of Colombia." Studies in Conflict & Terrorism 37.12 (2014): 999-1023.
Parkman, Tim, and Gill Peeling. Countering Terrorist Finance: A Training Handbook for
Financial Services. Routledge, 2017.
Rosenau, William, et al. "Why They Join, Why They Fight, and Why They Leave: Learning
From Colombia's Database of Demobilized Militants." Terrorism and Political Violence 26.2
(2014): 277-285.
Shaw, William H., and Vincent Barry. Moral issues in business. Cengage Learning, 2015.
Weiss, Joseph W. Business ethics: A stakeholder and issues management approach. Berrett-
Koehler Publishers, 2014.
Wicks, Andrew C., and Jenny Mead. "Chiquita in Colombia." Darden Business Publishing
Cases (2017): 1-11.