Susanne Audrey G.

Rexrodt CASE ANALYSIS July 10, 2010

MBA, 2nd year

Shrimp Farming in Ecuador

I. PROBLEM(S)

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).

Strengths Weaknesses

1. Xavier’s shrimp business: 1. Xavier’s shrimp business:

 He is a leader in the creation of a public  Xavier does not understand the concept
research institute; analysis of genetics of hedging.
to ensure longer life expectations and 2. Economy
resistance of shrimps;  Japanese shrimp businesses learned the
 He developed is own hatchery system, art of shrimp farming from Ecuadorian
solving technological problems; shrimp farmers (copying the methods);
 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);

Opportunities Threats

1. Health concerns: 1. Economy:

Susanne Audrey G. Rexrodt CASE ANALYSIS July 10, 2010
MBA, 2nd year

 People throughout the world shift  Depletion of fish in natural habitats

towards consumption of more fish; throughout the world would likely lead
eventual increase of demand; to higher fish prices in the future.
 Expanding his business by considering  World price of shrimp fell by 50 per
investment alternatives to stay cent over the 1986-96; global
competitive. expansion of shrimp farming would
depress shrimp prices in the future;
 Japanese shrimp industry is on the rise;
 Real interest rates are extremely high:
o Borrowing from other countries
brought debt repayment in US
Dollars;
o Borrowing from neighbor
countries (Colombia and
Uruguay) might fear of using
drug money and resulting in
undesirable consequences.
(result of political instability)
o Significant 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.
Susanne Audrey G. Rexrodt CASE ANALYSIS July 10, 2010
MBA, 2nd year

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, Xavier needs to expand his business into
the value-added parts.
Advantage: Innovations of product line will secure a wider consumer market.
Disadvantage: Expansion involves big funds of new equipments to be obtained
which might lead Xavier into considering investment alternatives. Thus, his
business might fall into debts.

2. Real estate rates from outside investors shall be considered.

Advantage: Asking for loans from foreign investors will give Xavier the
opportunity to expand his business and ensure that it is not “blood money” from
its neighboring countries.
Disadvantage: Xavier’s business is forced to repay the loan in a given time period
with added interest rates in Dollar. Thus, the business must run well to repay the
loaned amount.

3. Environmentally, Xavier needs to upgrade and up stock his equipment to ensure naturally
friendly methods in his shrimp business.
Advantage: In that way he is helping to lessen the burden of the natural
environment, and avoid issues with NGOs that see an environmental threat of his
business.
Disadvantage: Obtaining the equipments needed to ensure natural friendly
methods will require Xavier to invest into his business, making him consider
Susanne Audrey G. Rexrodt CASE ANALYSIS July 10, 2010
MBA, 2nd year

loans from banks, other national or international institutions who give financial
aid (with interest).

IV. RECOMMENDATION

First recommendation is to hire an additional staff that takes care of the hedging since Xavier is
total unfamiliar with its concept. This will give him ample time and space to keep focus on the
entire business rather than on little flaws that might just hinder the progress.

Second, keeping good business relations is a vital aspect in business in general. It is difficult to
say rather to disclose important method procedures in Xavier’s business to ensure the business
secrecy or value the Japanese relationship. However by assessing and comparing cases, we can
see that businesses like Microsoft, Bosch, Fastfood chains like McDonalds or KFC live from
keeping their specialty ingredients and methods disclosed to public, especially to competitors.
That is why it is recommended to withhold certain business information.

With regard on what Xavier can do to turn economical threats into opportunities, it is important
for his business to jump on the train of innovation. Through the process of including value-added
parts to his shrimp business will open new markets. The expansion of varieties will give him the
edge over his competitors.

However, this step will involve substantial amounts of funds to buy the equipments. Therefore, I
recommend Xavier to consider foreign investments although his business might be charged with
higher interest rate. That is always a game and a risk in business, especially if you deal on
international level. I believe that would be the better choice over a) asking for loans from a bank
in Ecuador, since the economy and governance is known to be unstable and easily trapped in
inflation, and b) getting loans from neighbor countries since it is known to be “blood money”,
and in cases of being unable to repay, it might become quite uncomfortable to that person and
eventually to his/her family. This answers the two sub-problems.

With concern to the environmental aspect, there will be always problems arising in the future.
However, it is believed that today’s technologies are technologically overhauled and built with
considering the fact of lessen the burden of Mother Nature. At the end, it is a call to Xavier’s
business to realize its social responsibility in upgrading his equipment to the best and most
environmental friendly standard. Yet, that leads him back how he is going to choose his
investment alternatives.