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Chiquita Banana Case

Good Essays

a. How did the Common Market Organization for Bananas (“CMOB”) affect Chiquita?
Six firms dominated the banana industry in the early 1990’s, three from Europe and three from the United States. In 1994, the three United States producers, Chiquita, Dole, and Del Monte, accounted for approximately 72.4% of world banana sales. Chiquita accounted for 48% of worldwide banana sales and 66.4% of banana sales of the three U.S. producers.

Prior to 1994, Europe accounted for nearly 40% of world banana imports by volume, of which roughly 60% came from Latin America, the primary location of Chiquita Brand International’s banana production. However, in 1993, a common banana import policy, council Regulation (EEC) 404/93, became effective four …show more content…

Since those numbers were not available in the case, we chose to compare the prices and consumption of bananas in Germany versus France prior to CMOB taking effect. (move to an end note: Germans, residents of the only free market for bananas in Europe, consumed 16.6 kg of bananas per capita at an average price per ton of 438 of ECU in 1991 while the French, residents of Europe’s most protective market, consumed 8 kg of bananas per capita with average price per ton of 604 ECU. (case p 7). The percentage change in price from France to Germany is (604 ECU-438 ECU)/438 ECU, which equals .379. The percentage change in quantity from France to Germany is (8 kg-16.6 kg)/16.6 Kg, which equals -.518. The absolute value of the percentage change in quantity over the percentage change in price is 1.3.) That calculation showed European demand to be elastic at 1.3, so for every 1% change in price, the quantity demanded will change 1.3%.

c. What are the supply side constraints in the banana market? The slope of the supply curve demonstrates how quickly a supplier can react to a change in prices. The following issues can affect the slope of the banana supply curve:
Labor: Bananas grow all year but in 13 week cycles, and they are harvested daily by cutting the stems by hand. (http://money.cnn.com/magazines/fortune/fortune_archive/2001/11/26/314058/index.htm). In its controversial

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