1. What can Xavier do to turn the economical and his entrepreneurial weaknesses into strengths? 2. What can Xavier do to turn the economical and environmental threats into opportunities? Sub-problems which will be answered in the recommendation:
a.What investment alternatives can Xavier consider in order to expand his shrimp business in Ecuador? b.Would the problems of Ecuador prevent a joint venture with a foreign partner?
II. SWOT ANALYSIS
To get a full understanding of the case, first we need to put information into order. By understanding the strength, weaknesses, opportunities and threats to Xavier’s shrimp business, the greater picture will help us to get closer to a solution to the problem(s).
1.Xavier’s shrimp business:
•He is a leader in the creation of a public research institute; analysis of genetics to ensure longer life expectations and resistance of shrimps; •He developed is own hatchery system, solving technological problems; •He build his ponds in order to make his farming environmentally sustainable; •Special feeding system for baby shrimps;
•Two other family members are involved shrimp business (Ecuador and US);
1.Xavier’s shrimp business:
•Xavier does not understand the concept of hedging.
•Japanese shrimp businesses learned the art of shrimp farming from Ecuadorian shrimp farmers (copying the methods);
•People throughout the world shift towards consumption of more fish; eventual increase of demand; •Expanding his business by considering investment alternatives to stay competitive.
•Depletion of fish in natural habitats throughout the world would likely lead to higher fish prices in the future. •World price of shrimp fell by 50 per cent over the 1986-96; global expansion of shrimp farming would depress shrimp prices in the future; •Japanese shrimp industry is on the rise;
•Real interest rates are extremely high:
oBorrowing from other countries brought debt repayment in US Dollars; oBorrowing from neighbor countries (Colombia and Uruguay) might fear of using drug money and resulting in undesirable consequences. (result of political instability) oSignificant foreign exchange risk
•The emergence of a disease known as white-spot virus has jeopardized the industry’s growth; •The long-term cost of shrimp / prawn farming already has been devastating; 2.Environment:
•Prawn farms have destroyed an estimated 800,000 hectares of mangrove forests and created improbable saline deserts in some of the world’s wettest countries. •Impact on other species and vegetations.
III. ALTERNATIVE COURSES OF ACTIONS
…concerning problem no. 1: What can Xavier do to turn the economical and his entrepreneurial weaknesses into strengths? 1.Since Xavier does not understand the concept of hedging, he would be advised to hire additional personnel. Advantage: The newly hired is taking charge of the hedging aspect, while Xavier can be more focus on the administration of his business. Disadvantage: Additional costs and training.
2.Japanese farmers studied the art of shrimp farming at Xavier’s public research institute and have brought the methods to their own country. Xavier’s institute should keep certain information on their method procedures in the shrimp business as a company’s secret. Advantage: This discretion of certain information of their business will secure the uniqueness Disadvantage: International relationships might suffer.
…concerning problem no. 2. What can Xavier do to turn the economical and environmental threats into opportunities? (Comment: The threats in this case are varied and deeper to be analyzed in reality since the economical and environmental solutions are beyond Xavier’s capabilities. However, this paper is an attempt to find probable solutions.) 1.To avoid depression shrimp prices in the future,...