EM-cafe - Problem The image of Juan Valdez and his trusty...

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Problem The image of Juan Valdez and his trusty mule has long become synonymous with the rich aroma and superior taste of Colombian coffee. The Colombian coffee industry is primarily represented by the Federacion Nacional de Cafeteros de Colombia (FNC), which has prided itself in successfully branding and differentiating a commodity that not only resulted in a price premium for Colombian coffee, but has also improved the image and quality of life for the entire country. However, during the mid 1990s, Colombian coffee producers were faced with rising competition, increasing supply and changing industry trends, leading to rapidly decreasing prices in the market for coffee. Profits were quickly eroded and by the turn of the millennium, concerns were raised regarding the long run sustainability of Colombian coffee producers. The underlying problem faced by the FNC is marketing and positioning Café de Colombia so as to maintain a profitable margin despite dwindling market prices, increasing competition, shifting industry trends, and a shrinking marketing budget. Situational analysis Political: While Colombia has enjoyed constitutional stability, there still remains the problem of guerrilla activity and internal conflict, which has caused many rural families to relocate to cities. Abandonment of the currency band resulted in a downgrade for Colombia’s sovereign debt as well as a 25 percent devaluation of its currency against the dollar. The negative impact on Colombia’s coffee industry is both direct and indirect. As guerrilla activities become rampant, much attention will be diverted towards dealing with the internal strife and away from profitable industries like coffee growing. Also, as the turmoil causes families to migrate, there will be less people in the rural coffee growing regions, which can lead to a decrease in both product volume and quality. Furthermore, currency devaluation implies there will be less real dollars for investments in infrastructures that require foreign technology as well as less money for international advertising, both of which can negatively affect the long run profitability and market share of Colombian coffee. Finally, increasing violence and drug trafficking due to guerrilla activities has damaged Colombia’s image to the outside world, and can potentially cause coffee consumers to steer away from Colombian coffee, as they may view purchasing as supporting the violence. Economic: The labor-intensive nature of coffee production provides a livelihood for one third of Colombia’s rural population. The FNC’s ability to maintain a historic premium for is coffee has positively impacted the associated communities by creating a rural middle class, lifting many coffee growers out of poverty. This has provided for an overall improvement in the quality of life for coffee-growing communities, as education,
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healthcare and a range of public services became accessible.
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This note was uploaded on 04/02/2009 for the course AEM 4420 taught by Professor Christy,r. during the Fall '06 term at Cornell.

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EM-cafe - Problem The image of Juan Valdez and his trusty...

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