Professional Documents
Culture Documents
Juan Isaza
Southern New Hampshire University
MBA 665: Government Impact on Business
Dr. David Bretl
To: Roberto Velez
Overview
Our humble beginnings start with a mustachioed fictional character; now we are a brand
recognized as the only international coffee brand that truly belongs to the coffee growers. We
are Juan Valdez; we are the Federation of Coffee Growers of Colombia (FNC), we are
Procafecol, we are Cenicafe—we are a rare hybrid. For we are a part public works organization,
and also a democratic federated organization. And, we are also a marketing company—an
represent the welfare of thousands of coffee growing families (more than 500,000). Our brand is
on a quest to captivate the world our Premium Colombian Coffee. It was in 2002 that the
Federation of Coffee Growers of Colombia (FNC) created the brand, Juan Valdez, through
Procafecol. Since then, Juan Valdez has grown on such a massive scale, that it can be found in
22 countries (Deaton, Kumar, & Quigley, 2018) through over 320 shops (Juan Valdez, n.d.).
Our strategy relies on three main facets: premium products, excellent customer service,
and offering unique experiences through our unique ambience and unique ingredients. Our
growth has come with heavy competition from other major international brands such as
Starbucks, Costa Coffee, Peet’s Coffee, and Tim Horton’s (Deaton, Kumar, & Quigley, 2018).
Other threats, outside of competition, lie on the unpredictable customer taste preferences, and the
constant fluctuations in coffee bean prices. A major possible threat to the industry as a whole is
how prone the coffee bean is to decease. Colombia and other countries have been prey to
various types of coffee leaf rusts (Deaton, Kumar, & Quigley, 2018). Thus, the largest risk of all
is macro-economic, for the economic stability of Colombia is uncertain. And, most of our coffee
Our main competitor, Starbucks, operates on a very efficient strategy that relies on
various tenets, such as: a wide variety of top quality and varietal products along with superb
customer service, professionalism, and trendiness. Moreover, Starbucks provides its customers a
wide variety of beans from all over the world—each geographic location offers a distinct taste
not possibly able to be found anywhere else. Whereas we offer a wide variety of coffee beans
and therefore offer different tastes, but our tastes are all from Colombia, and Colombia only. We
compensate this weakness by offering our premium coffees at a price point slightly lower than
that of our competitor. For example, a shot of espresso is priced at a cost that is 17% lower than
A key factor that has contributed our success is our political independence. For this
reason, we are able to keep most of our earnings and are able to manage our own business. Thus,
we indeed have many dealings with Colombian and foreign governments. But, we remain
apolitical. Most countries with weak growers’ organizations are at mercy of their respective
contrast, our Colombian farmers can keep 95% of the world price through the Federation
(Bentley & Baker, 2000). Furthermore, our Colombian farmers can count on a guaranteed price
through the orchestration of the Federation—Colombian farmers capture the largest percentage
of earnings per bean in comparison to all other coffee producing nations (World Bank, 2002).
However, this all comes at a cost; it is called, the coffee ‘contribución’ tax. Reports show that
the Colombian Government, through the National Coffee committee, has pursued its own
macroeconomic agenda and political priorities instead of directly benefiting the coffee growers.
For the FNC has contributed an estimated $535 million USD to the government of Colombia.
We operate a coffee price stabilization scheme which promises our Colombian coffee
grower a guaranteed fair price regardless of the international price—this is the most basic main
function of the Federation. However, times of crises of low coffee prices have led the
government to act and aid the Federation with financial support packages. But, that is not all that
the government of Colombia does for our Federation. For the government of Colombia plays
many roles in the diversification of coffee. It aids the Federation in its market research, technical
Moreover, the government provides subsidies in the plantation of new stock—especially in areas
Joint efforts between humankind and nature have created what many believe to be the
best coffee in the world (Norton & Dann, 2013). The rigorous processes have advanced the
terroir to be added onto the World Heritage List of Cultural Landscapes by the United Nations
Educational, Scientific, and Cultural Organization (UNESCO, 2017). Thus, no other coffee
Colombia—for Colombia has established four different PDOs: Cauca, Huila, Nariño, and
Divisions
that are all elected democratically at the local level by the coffee growers themselves. The 371
Departmental Committees are responsible for electing the National Coffee Congress. All
elections are executed at the grassroot level. The number of seats representative of each
Department of the Congress are determined by the proportion of coffee grown in each respective
department. The Coffee Congress serves as the highest authority of the Federation and is
responsible for electing a general manager and a sub-manager. External relations are handled by
the general manager whist the sub-manager handles internal operations. The behaviors of the
managers are very much like those portrayed by executives of large corporations. Thus, the
managers do not have to respond to a board of directors, they are accountable to the Coffee
The policies of our organization are arrived at by political consensus by all the growers.
The decision-making processes require extensive time, which in result makes us conservative in
our decision making and in our responsiveness. This systematic approach makes us not very
prone to fall into short-term thinking or speculation, for our decision-making framework does not
Project Teams
A unique factor that differentiates us from all growers’ associations is our partner and
project teammate, Cenicafe—short for, The National Coffee Research Centre (World Intellectual
Property Organization, n.d.). The leading coffee research center has built a cutting-edge research
facility is over 12,500 square-meters and houses over 200 professionals that are all passionate
about growing the best coffee. The professionals are by the many; meteorologists, biologists,
geologists, agronomists, and ‘cuppers’ (term for most sophisticated palates around the globe).
The research institute, known as one of the world’s leading coffee institutions, is responsible for
moving coffee industry forward with its various agronomic achievements (World Bank, 2002).
The institute is responsible for further developing our brand with its research and development.
In between the research facility and the coffee growers, is our Strong Extension Service
Department. The Strong Extension Service Department is a team composed of 1,500 specialists
which provide first level technical assistance to our coffee growers. Moreover, they advise the
The government of Colombia plays a key role and participation in setting the internal and
external coffee prices and how it taxes the coffee. Thus, we, the federation, have contributed an
estimate of over $800 million to the government in the last 20 years (World Bank, 2002). The
government, along with the federation, play a stabilization price scheme, where the coffee-
grower of Colombia is guaranteed the best price around the world. The coffee growers of
Colombia receive a 70-75% of the FOB price (Department of Environmentally and Socially
Sustainable Development, 2002). In addition, Colombian coffee is sold around the world at a
20% higher price than all other coffees (World Intellectual Property Organization, n.d.).
However, the government of Colombia is not the only government to have influenced the
regulations of the federation; for the coffee region has been added to the World Heritage List of
Cultural Landscapes by the United Nations Educational, Scientific, and Cultural Organization
(UNESCO) (UNESCO, 2017). Thus, four different regions have been declared as PDOs
(Protected Denomination of Origin). And, the coffee has also been declared as GI (Geographical
Indication).
are not given—they are earned for how our teams respond toward the regulations placed by
various governments. For all coffee that states 100% Colombian must meet rigorous standards
of quality. All of our coffee is hand-picked; thus, not all of the coffee is hand-picked—only the
top-class seeds are selected and handpicked. And, ALL exporting shipments are inspected.
Moreover, we perform taste testing around the world to test if the coffee stating 100%
Colombian is true 100% Colombian Coffee (World Intellectual Property Organization, n.d.). We
place our hand on our heart and hold onto a true testament—to truly benefit the growers. And,
we do so with integrity. For we have provided our growers with thousands of schools and
hundreds of hospitals and clinics, as well as many infrastructure projects and roads. The
government of Colombia can provide diversification initiatives for the coffee growers. However,
it is noted that the we, the federation, have made a superior impact in comparison than that of the
Stakeholders
We are a big and powerful organization—we are our own entity. We provide all social
services to our growers—to a greater impact than that of the government. Therefore, our most
vital internal stakeholders are the coffee growers—over 550,000 families of them. Conversely,
our brand, Juan Valdez, is the “only internationally recognized coffee brand belonging to the
coffee growers.” (Juan Valdez, n.d.)—the coffee growers are actual part owners of the company.
In result, they are directly impacted by the performance of our brand. Other vital stakeholders
are the employees, professionals, and entities revolved around the product. The whole world is
at stake, for a disruption of our coffee would cause the whole chain of coffee production and
consumption to be impacted. It can also be said that our Country, Colombia, is an external
stakeholder. Thus, the only country to sell more coffee than us, is Brazil. However, Colombia is
the number 1 supplier of Arabica coffee (Colombia only sells Arabica coffee)—the coffee of
Colombia ranks second to petroleum as top exports (Bentley & Baker, 2000). Therefore, every
country and every consumer within that country that consumes our coffee is an external
Our internal stakeholders have played a vital role in the development of the brand and
entity of Juan Valdez and its owner, The Federation of Coffee Growers of Colombia. Main
players in the international roasting industry challenge us throughout time by playing tactics that
convey short-term interests. However, we continuously show our true legitimacy, and our
necessity to plan in accordance to longer term in a cyclical manner which provides the growers
Current Environment
such: 5 traders dominate 48%, while 45% is managed by 5 importers, and 5 roasters control 55%
(World Bank, 2002). The organization of small farmers has seen tremendous growth over the
years. With innovative strategies, our farmers have positioned our coffee brand to be certified as
GI. Our brand has created a global identity that is transparent and clear—it seeks to provide the
world the best coffee. For these reasons and more, the coffee of Colombia is sold at a 20%
higher price. In 2009, the federation produced more than 9.6 million bags of coffee (each bag is
of 60-kilograms), and most of it was exported (World Intellectual Property Organization, n.d.).
Analysis
Business Environment
While we may appear to the eye of the beholder as a governmental entity or a business
with social sensibilities, we are, essentially, a group of organized smallholder farmers. Or, as we
proudly say, we are ‘cafeteros’. Thus, we have struggled to avoid governmental take-over. For,
we are responsible for the welfare of over 550,000 coffee farming families. As the Federation
we are, we have built thousands of roads, thousands of schools, and hundreds of hospitals and
clinics (World Intellectual Property Organization, n.d). In fact, we are responsible for lowering
levels of illiteracy throughout our coffee regions to a degree much more significant than that of
the other urban areas throughout our country by our own government. We have taught more
than 360,000 children and have built over 6000 schools (World Bank, 2002). Yet, we pay a
contribution tax much higher than any other agricultural sector. All, to just help conduct our
own policy. Our coffee growers have contributed over $600 million to the national government,
which a high-level report showed to have no benefit to the coffee growers. Instead, the
government, through our federation, has occasionally used this money for its own
macroeconomic political priorities and policy goals (World Bank, 2002). This political
As of late, our coffee farmers have been struggling due to heavy rains, lower prices, and a
stronger peso currency has reduced export income. However, the government will not aid the
Federation with any supplemental funds, as it does not have the fiscal space for such aid (Reuters
Staff, 2018). The continuous reduction in governmental aid to agricultural sectors makes it
coffee prices are high (Bentley & Baker, 2000). Thus, the government has aided in advancing
the coffee sector by building roads and other dire necessities. The Coffee Fund is large enough
to be a macroeconomic influence. However, the fund ought to remain within the coffee sector.
All funds are in need. Therefore, it can be said that the action of the government may be of a
threat hence it is using our funds through our federation to fund other political agendas. The
‘contribución’ tax can be considered fair if our growers make the decision to pay such tax; if
they understand how it is determined, and how it is spent. It is critical that accountability and
transparency be improved for us to continue funding appropriately. The coffee sector’s taxation
ought to be targeted to provide essential goods, research, and technical assistance (World
Sustainability
The high-level report noting that on occasion our government has utilized our paid tax
funds for other macroeconomic political priorities not benefiting our coffee farmers, ought not to
undermine the efforts and contributions that our government has made on the suitability of our
business. For the government has, on separate occasions, put up 30% of matching funds, it has
built roads, schools, hospitals, and clinics. And, it has aided us with necessary tools in our
diversified initiatives—it has provided technical assistance, market research, credit, and
organizational skills. While we are apolitical, the government does hold half the seats within
The National Coffee Congress. Thus, the lack of accountability and transparency from our
government through our federation show us the challenges of appearing credible as we fulfill
Institution) suggests that we restructure and reinvent our institutions into more agile and lean
agencies to improve these practices, which would ultimately increase sustainability and better
our business practices (World Bank, 2002). We need to become a better organization for our
coffee growers. Thus, the government has the ability to shut us down. But, we are too critical
for the overall economy of Colombia. Therefore, our business is likely to be around for as long
as coffee exists in Colombia. However, the brand could be changed. For which we need to
Internal Resources
Although we are our own entity and we remain to be apolitical; our roots with the
government will forever be closely tied. We make too great an impact on society to not to. And,
our close relationship with our government has allowed all the fruition we have accomplished—
one hand washes the other. Thus, in 1935, our Federation was forced to accept the ruling of
appointing half of our National Committee with government appointees. Since then, we have
gained more control, hence only 6 members of our now 14 National Committee must be
governmental appointees. In addition, the Colombian President no longer has to approve our
committee’s measures (Bentley & Baker, 2000). Thus, it is not a matter of being adequately
maintenance (some more than others). And, ours, with the government is one that will always
remain.
We are properly equipped to deal with the current issue at hand. The complexity of the
task will require that the different 15 Departmental Committees meet for how they will
restructure the institution. Moreover, the Commission of Adjustment of Coffee Institution will
oversee the process along with the members of the Departmental Committees. These individuals
are the ones who ought to be in charge of the restructure; for they are the ones that are elected at
Communication
The high-level report noting the occasional spending of Coffee funds by our government
on other political priorities to no benefit to our coffee growers was reported by the CAIC
(Commission of Adjustment of Coffee Institution) (World Bank, 2002). The 170-page report
further notes of the government’s role and its participation in setting coffee taxes and internal
taxes for other political priorities, outside of the coffee sector. The report is readily available to
anyone and was communicated publicly. Therefore, it has been communicated to all
stakeholders, including the public, through newsletters, the radio, and the internet.
Company Image
The improper allocation of funds never looks good. The company image is tarnished by
the publication of such claims. Thus, both the internal coffee prices and coffee tax have been
the degree of being distorted and inefficient. These reasons have led to a growing awareness of
the need for transparency in how the tax is determined and how it is allocated. It is difficult for
business to thrive if the tax levied on it constantly changes. And, within the coffee sector, coffee
other coffee organization. Our research center, Cenicafe, has become one of the world’s leading
coffee research institutions. Our impact at the social, as well as the environmental and economic
levels are unlike anything else. But, our management of funds, according to various studies is
not efficient (Brown, 2014). Thus, this issue does have a positive aspect. For it presents our
federation an opportunity to finely restructure ourselves to better serve our coffee growers.
Response
A widespread reform. However, this reform cannot go through if the business
environment is disturbed. There is too much stake to disturb the environment. For over 550,000
coffee farming families depend on this dire business. However, we need to restructure. Various
studies and institutes are suggesting a widespread reform (Brown, 2014). We truly do need to
become more efficient and transparent with our funds and imposed taxes. Thus, our stand of
openness towards assessments and evaluations is what segues us into bettering our business
environment to better serve our coffee growers. We cannot continue, as one entity, doing what
various entities ought to do. Our range of options vary; but, the ultimate goal is for us to no
longer be: the regulator, the producer, the exporter, and the executor of official policies. As our
research center, Cenicafe is its own body, we must do the same with our Federation.
Restructuring our one entity, our federation, into various agile agencies, comprising all into one
Federation, would only make us better, stronger, faster, and more responsive—and more
sustainable.
Impact
These courses of action may have an impact of small degree on our current business. For
our product is not what is at stake, but rather the management of funds. We aren’t tarnishing our
image, we are restructuring—we are evolving. Therefore, we may see an impact on business—
we may see a drawback from coffee farmers and employees. We may see confusion and
eagerness. We may see a slight decrease in sales. However, that is the short-term impact. The
Operational implications with organizational change are complex. Thus, we need to
become a more agile institution by splitting into multiple, maybe two, three, or four, agencies.
This would require that operations change. We will not operate in the same manner. Some
individuals may have to be let go and some may need to be hired. Adjusting into new and more
defined roles will require effort. The human resources department will aid in developing job
descriptions and ought to review all factors affecting the need for reorganization.
The financial impact along with the organizational change impact will be the most felt.
The Federation, as a single body entity, ought to separate its public and private roles. It also
should reevaluate its finances. Moreover, it ought to restructure its allocation of finances—how
the money is spent, where it goes, and its purpose ought to be revaluated. To accomplish this,
we need to go through an entire reform. Implications are by the many—finance is a very delicate
subject. We will need external resources to aid in the reorganization of financing. The impact,
in the short-term, will be very much felt. Thus, we are changing our financials entirely.
However, in the long-run, we will be a more agile and transparent Federation. In result, we will
Ethical implications are not to be worrisome. Thus, we are restructuring in an ethical
manner—the result is what will be more of service to our coffee growers. The purpose of the
restructure is to be more ethical. Our three essential functions: provision of public services, price
stabilization, and commercialization, will not stop functioning. It is not what we do that needs to
External Resources
External resources are those parties involved that will aid in the process of organizational
change. Thereof, constituents such as, change agents will be involved, as well as the
Commission of Adjustment of Coffee Institution, all our involved parties; The National
urgency and of dire necessity. All parties, while guarding their own interests, ought to have the
full interest of our coffee growers in mind. After all, it is what benefits them most that would be
ultimately decided. Opposing views will be at the center of organizational change—some for the
government and some for the business. The end goal, however, is to result in a Federation that is
Recommendations
Centered around the nearly 550,000 coffee farming families, The National Coffee
Committee agrees on policies regarding our allocation of parafiscal and fiscal resources. The
committee is constructed by 15 delegates all deriving from different departments spread out
around the country as well as four ministers: Rural & Agricultural Developments; Finance &
Public Credit; Industry & Tourism, Trade, as well as the Director of the National Planning
Department. The Ministers of Agriculture and Finance are the only governmental members who
have enough voting power to balance the scales between government and coffee representatives.
provide technical assistance of first level to the coffee growers. They also provide advice
strengthened and guided by Cenicafe, our leading coffee institution, which is responsible for
performing research and advancing the coffee sector with its innovation.
All these project teams ought to remain engaged in their current efforts; for our
organizational change would not affect them at all—it would just benefit them in the long run,
for we would ultimately become a better federation. The organizational change is aimed at the
top; at changing the framework, not the mechanisms of the federation. Thus, all project teams
ought to continue doing what they have always done. The federation is not changing its work,
and not how it does it, nor what it does—it is changing its functions. The one federation of
Communication
We need to be proactive about how we will mitigate the impact of negative information.
In today’s day and age, information spreads very quickly. Severe negative information may be
image, losing suppliers or buyers, etc. It is imperative that we develop a concise plan to
It is of importance that we develop a concise, clear, and consistent response towards what
may be said. Our plans to change our framework are purposed to make us into a more agile,
lean, and transparent federation. If we decide to go through this change, it is because we are
seeking betterment. Our response needs to be genuine and it ought to target what needed to be
changed, how we are doing it, and the results we are seeking.
importance that we understand ho the public is reacting to news regarding our change. It is of
importance that we monitor how our brand is being mentioned online and how our employees
Solution
One of the main objectives for our organizational change, as suggested by The
We are currently the regulator, the exporter, the executor of official policies, and the producers’
association—embodying all these roles create an entanglement within each individual role.
Thus, our double role as market competitor and regulator undermines simple regulatory
practices. Therefore, it is suggested that we divide ourselves into two main entities. We would
still be one federation, but we would be one composed of two main bodies—all composed of
different project teams. We would still be what we are: a commercial Company owned by the
coffee growers themselves. However, the entity and management of this body would be
separated from the new FNC and the government, for we would not receive subsidies nor special
tax treatments. The other body of the federation would be a trade union organization; which
would entail our current mechanisms—being funded by the coffee fund. The trade union
organization would continue its current functions—servicing the coffee growers with funds
stemming from its own resources and or private grants (Echavarría, Esguerra, McAllister, &
Robayo, 2015). Our institution will evolve into an institution comprised of various forms which
will be more transparent. Our quality, specialty, productivity, and promotional campaign are all
of superiority. However, we need to better manage all factors that increase competitiveness and
doing so in ways that benefit the entire sector (World Bank, 2002).
Political Influence
Decisions agreed upon at The National Coffee Committee are very influenced by the
government, for they occupy half of the votes. Prior to our decision to change, the entire
federation was benefiting from special tax treatments, now only the sector working closely with
public development will receive those special tax treatments. Moreover, it is suggested by The
National Coffee Committee that coffee policy be determined by the government. Thus, we and
the government both seek to become a more agile and lean federation so that we can better serve
Our coffee funds are managed by us and overseen by the government are utilized for
three functions: (1) Our institutional function; research, extension service, programs targeting the
social well-being of the coffee growers, and programs related productivity and competitiveness;
(2) commercialization, sales, exports, all commercial functions, and the guaranteed purchase
rate; and (3) the industrial function; which transforms green coffee into soluble coffee for end
customers (Echavarría, Esguerra, McAllister, & Robayo, 2015). Once we go through our
changes, we will no longer be responsible for social policy in coffee areas; for social policy
ought to be the responsibility of the government and ought to not be delegated by a private
association (us) (Echavarría, Esguerra, McAllister, & Robayo, 2015). Therefore, we will be able
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