The Business Strategies of the United Fruit Company - Paper Example

Introduction

The United Fruit Company (UFCo) was one of many industrial giants started in the latter half of the 19th century. The United fruit company was a corporation that traded in fruits ((majorly bananas) that were grown on Latin American farms and traded in Europe and the United States of America. The company was established in 1899 by the merger of Minor C. Keith's banana-trading concerns with W. Preston's Boston Fruit Company. Without the size and scale of their operation, it is very unlikely the banana would have become the low-cost household commodity that it is today. The United Fruit Company came to control as much of the Banana Industry as it did through owning the means of production, the railroads of the country they were operating in, the shipping from Latin America to the U.S.A. and Europe, controlling Central and South American governments, and controlling the lives of their workers.The United Fruit Company's roots go farther back than its name; it was an idea that was long established. During early 1870, several entrepreneurial individuals had set the way without their knowing of creating something that will become the United Fruit Company. Henry Meiggs was an American railroad entrepreneur who later built the rail lines in Chile and Peru in the mid of 19th century. In 1871, he signed a contract with the government of Costa Rica to build a railroad from the capital city San Jose to the port city of Limon (Internet Archive). Meiggs' nephew, Minor Cooper Keith left his Texan cattle ranch later that year to help his uncle with the project (Internet Archive). The first 25 miles of construction proved far more difficult than expected due to tropical diseases and poor working conditions. Around 5,000 people died during construction, including Henry Meiggs and two of Minor Keith's brothers who were with him during the construction (Internet Archive). Keith became in charge of the construction in 1874 after he survived the death from the harsh working conditions and tropical diseases. Keith pushed on with the construction despite the increase in number casualties (Internet Archive). The project became so dangerous that Keith struggled to find workers from Central America. To address this problem, he imported workers from New Orleans jails; of the 700 that arrived, only about 20 individuals survived (Internet Archive). He also brought in 2000 Italians from Louisiana, of whom many rose in rebellion, and many ran away into the jungle (Internet Archive). By 1882, 75 miles of the railroad had been built, but Keith was nearly out of money, and the Costa Rican government had defaulted on its financial pledges to support Keith. Under these conditions, Keith was made to borrow 1.2 million pounds from London banks and private investors to continue construction.

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Construction of the railroad was not to be finished until 1890. However, Keith had already realized there were not going to be enough passengers to cover operating costs and the much the debts he had incurred (Internet Archive). Keith had experimented with growing bananas along the existing rail line as a cheap source of food for his workers during financial hardship. Keith soon discovered he could keep his business afloat by using the existing track to bring the bananas to the port city of Limon and exporting them from there; by 1883, Keith owned three banana export companies (Internet Archive). When the railroad was completed in 1890, it was used solely for shipping bananas. In 1884, the Costa Rican government had renegotiated its debt so that it would give Keith a 99-year lease on the railroad once it was complete, along with 800,000 acres of tax-free land running alongside it (Internet Archive). With these new tax-exempt lands, he was able to grow his business and become one of the most powerful men in Costa Rica, marrying the daughter of the president and becoming Costa Rica's lead negotiator for dealing with its debt to British banks (Internet Archive).During one of his business trips to England, he organized the Tropical Trading and Transport Company (TTTC) with the aim of better coordinating the banana business and providing transportation to the rapidly growing number of shipments to the United States (Internet Archive). Keith also started growing bananas in Magdalena Columbia, partnering with Columbian banana growers in Panama (which was Columbian territory at the time) to transport the fruit to the U.S. (Internet Archive). Now in charge of a much larger, much more efficient operation, Keith controlled the banana growing and much of the rail-based transportation operations in Central America. His close relationship with further consolidated his power and worked for the Costa Rican government. By 1899, Keith had already developed the business framework in Central America that the United Fruit Company would build upon in the years to come.In 1870, Lorenzo Dow Baker was transporting a group of miners to Venezuela from Boston. When he was on the return trip, he fell short on cash, so he stopped at Port Morant in Jamaica to transport some cargo. He bought 160 stems of unripe bananas for $40, which he sold in New Jersey for $320 (Swiggum). Seeing the profit potential, the next year he began shipping bananas from Jamaica to Boston where he would sell them to fruit and produce commission firm that was partly managed by Andrew Preston (Swiggum). In 1882, Preston left the firm where he was employed to start his firm, continuing his business relationship with Baker. In 1885, in response to rapidly growing demand for bananas in the United States, Preston and Baker would merge their two businesses to form the Boston Fruit Company (Bucheli & Read). At its early stage, Boston Fruit Company had ten investors (one of whom was Preston) that put in $2000 each, giving them $20,000 worth of capital. During the incorporation of Boston Fruit Company in 1887, they had $500,000 of capital (Internet Archive). By 1895 the Boston Fruit Company owned 35 plantations consisting of nearly 40,000 acres in the West Indies and their lines of steamships to transport them (King 202).

The United fruit company had the ownership of huge lands in the Caribbean. The company was already dominating transport networks through the international railways of Central America and the steamship it owned. The company's policies of acquiring tax relieve that led to it creating foreign economies. Most of its foreign export earnings and benefits were not shared with the hosting countries. The company dominated the market by owning and controlling the distribution of banana lands.

By the end of the 19th century, Minor C. Keiths Tropical Trading and Transport Company controlled the means of production, land transportation, and governments in Central America. Boston Fruit Company controlled the means of production, shipping back to the United States, and a distribution network. Both companies had distinguished themselves from the many other fruit companies by expanding vertically as well as horizontally. They possessed complementary capital, with each of them owning the means of production in a different region. One company owned the land transportation network in Central America with a government that would support it and the other company owning their line of steamships and a distribution network, and they each serving different markets. The Tropical Trading and Transport Company served the South-Eastern United States while the Boston Fruit Company served the North-Eastern Markets. In 1899, Minor Keith, Andrew Preston, and Lorenzo Baker controlled 75% of the United States Banana Market (Bucheli & Read).In 1899, the New York City broker Hoadly and Company, went bankrupt (Internet Archives). Minor Keith held $1.5 million against this company, and he lost all of it. This loss affected the Tropical Trading and Transportation Companies finances enough to make him seek help, which he found from the Boston Fruit Company. That year, Tropical Trading and Transport Company merged with the Boston Fruit Company to become the United Fruit Company (UFCo) (Bucheli & Read).

The Boston Fruit Company saw the merger as a grand opportunity to greatly reduce risk and increase their scale. The risk-reduction would come largely from having plantations in both Central America and the Caribbean; this would make it, so natural weather events and diseases are less likely to destroy their rather delicate crop. In 1901, Guatemala through its government hired the services of United Fruit Company to manage the postal service in Guatemala. United Fruit Company created a tropical radio and telegram firm. In early 1930, the company had absorbed more than 25 competing firms. It had accumulated a capital of $215,000,000 becoming the leading employer in Central America (Ledgister, n.p). The idea of merging and absorbing other companies helped the united fruit company to control larger market share with little completion. The company later become a symbol of the exploitative export economy since it was holding a major role in the economy of the country.Bradly Palmer was the lawyer who arranged the merger and had nothing to do with either Keith, Preston or Baker before 1899, but he would go on to play an important part in the founding and early development of the United Fruit Company (Noonan 73-75). After the successful merger, Bradley became a director and permanent member of the UFCo's executive committee (Noonan 73-75). Bradley led the UFCo to either fully purchase or purchase a controlling share in 14 competitors, giving them control of 80% of the banana import business in the United States. Bradley would become quite rich, famous, and sought after from the success he appeared to bring to the UFCo (Noonan 73-75).

The united brands bought the Cincinnati-based American Financial Group owned by Carl Lindner after the Black's suicide. Lindner took over the company and renamed it Chiquita Brands International in 1984. The headquarters was later moved to Cincinnati in 1985 where the financial group was based. Standard fruit (now Dole Food Company) company was a major competitor of the united fruit company in the most of history.

Conclusion

The history of United Fruit Company shows how a company uses its strengths to increase its market share. The company uses its financial to edge out competitors by merging with other companies to reduce risk in exploring new markets. It is also advisable to incorporate other sectors of the economy to widen your business strategies. United Fruit Company took control of postal services in Guatemala to ease their transportation of fruits. A business unit needs to be all-around to reduce cost and over-come unnecessary expenditure.

Works Cited

Bucheli, Marcelo, and Ian Read. "United Fruit Chronology." United Fruit Historical Society, United Fruit Historical Society, 2001, webcache.googleusercontent.com/search?q=cache:http://www.unitedfruit.org/chron.htm&strip=1&vwsrc=0.

King, Moses. King's How to See Boston: A Trustworthy Guide Book. Macullar Parker Company, 1895, play.google.com/store/books/details?id=_8lHAAAAIAAJ.

"Minor Cooper Keith (1848-1929)." The Internet Archive, The Wayback Machine, 30 Oct. 2008, web.archive.org/web/20081030011947/http://www.unitedfruit.org/keith.htm.

Swiggum, Sue. "United Fruit Company." The Ships List, The Ships List, 23 Nov. 2006, www.theshipslist.com/ships/lines/ufruit.shtml.

Noonan, John Thomas. Persons and Masks of the Law: Cardoza, Holmes, Jefferson, and Wythe as Makers of the Masks. Farrar, Straus and Giroux, 1975.

Ledgister, F. S. J. "The Costa Rica Reader: History, Culture, Politics." Wadabagei: A Journal of the Caribbean and Its Diaspora 9.2 (2006): 100.