Standard Fruit Company in Nicaragua specialized in banana production and export business. Its’ long standing history was however tainted when it suffered calamities due to volcanic eruptions, earthquake, inflation and effects of the revolution during the 1970s. The new Senior Vice President and General Manager was tasked to reach mutually satisfactory agreements with the new government headed by Sandinistas who spearheaded the revolution.
During the start of Standard Fruit’s (Standard, for brevity) operations, its base was Honduras in the 1950s and they bought fruit from Ecuadorian growers who established their farms in Costa Rica. Rapid expansion followed in the 1960s and they became prosperous enough, supplying 20% of the European market in 1973. They also engaged in vertical integration--- from production to distribution, marketing and processing of banana products. Food operations made up 80% of their corporate revenues.
External Analysis

Following are opportunities: * Nicaraguan government’s incentive package for foreign investments like Standard Fruit to include duty-free imports and partial exemptions from municipal taxes * Find entirely new group of producers to counter negative attitudes among Chinandega’s landowners * Expansion of the operation or markets to geographical areas to the north, south and east other than the West Coast for an opportunity to create new avenues of revenue.
Following are threats: * Spread of both Sigatoka and Panama diseases in the banana plantations * Lay off and workers’ unrest during Gen. Sandino’s rule * Signing of five-year purchase contract with independent growers in Chinandega City * Fierce winds which could reduce quantity and quality of banana harvest * Standard was required to share its profits with Nicaragua, remitting 30% of the income earned from the sale of Nicaraguan bananas in the United States * Negotiations were often difficult and took a long time just to agree on rates, electric companies * Bribing among public officials * Standard Fruit’s 80-20 sharing where 80% of profits go to the landowners and 20% for the company * National strikes and decentralization in the mid-1978 * Many in the government had strongly negative ideas on the activities of multinational banana companies in Central America * Other multinational companies or government could produce bananas more efficiently and market them more effectively * Revolution, according to newly installed government intended to honor previous laws and contracts, assuming they coincided with the political, social, and economic goals of the revolution. * Government’s creation of Ministry of Foreign Commerce to control all agricultural trade * Black Sigatoka had caused extensive damage to most farms and partnerships had to apply a much more expensive fungicide to control the outbreak * Dynamics of West Coast market changed and Del Monte entered the market in 1978 upsetting stability and profitability of Standard Fruit
Internal Analysis

Following are Standard Fruit’s strengths: * Standard Fruit has guaranteed fixed price per box of bananas meeting export-quality specifications * Rejects can be sold locally by growers * 13 partnerships with growers in Chinandega * Geographically separated farms to diversify agronomic risks of banana production * Provided decent housing facilities for workers for free * Setting up of schools and hospital * Short term disruptions (political, calamities and everything else) did not hinder the company to shift fleets, to export from different producing areas and never missed a shipment to their markets, simply replacing production with Ecuador volumes, thus avoiding the loss in markets, shares and their customers * Sale of non-exportable fruit to local markets
Following are weaknesses: * Banana’s delicacy and perishability present unique demands in cultivation and handling * Shipping economies are crucial to profitability * During the Revolution, Standard generally lost 15-20% of production through deficient agricultural practices and worker and worker inefficiency * Financial condition of partnerships declined with the farms’ productivity
Strategic issues: 1) Standard cannot continue to operate under a revolutionary atmosphere and must pursue negotiations with the new government as to the banana company’s productivity and competitiveness. 2) Company withdrawal may disrupt operations in the West Coast banana market. 3) Company has to determine under what conditions and set of economics could it continue operations in Nicaragua.

Strategic Alternatives:
Standard could explore the strength of the company and choose another base for its operations that replicate the dynamics in Nicaragua but with a totally different political atmosphere (sans revolution and less prone to calamities).
The selling of their 20% interest in all partnerships to the Nicaraguan government might help and Standard could expand to new regions where they could continue their known source of income and where bananas are plentiful and conditions are ripe for business.

Recommendations:

Franchising the company and exporting to other parts other than the West Coast market would somehow address all of the issues facing Standard Fruit Company. They could continue to grow in size and increase revenues without having to bear the worse conditions in their base in Nicaragua. They could take the time to explore other avenues of revenue like banana processing while continuing to pursue their current method of exporting and/or marketing.