An effective leadership is the one, which motivates its people to attain the highest level of their output without robbing them of their rights. Communication and conflict resolution deals with the interactions among human beings in an organization. Conflict occurs when two or more people hold differing opinions towards an event, phenomenon or person. To have an effective leadership model, there must be a comprehensive conflict resolution mechanism with sufficient communication structures. Proactive approach of leadership anticipates future occurrences that may influence the effectiveness a management style. Reactive approach is an old dimension of leadership whereby leaders make decision after a situation that requires them to do so occur. The model postulated in this paper underscores that an all rounded leadership model should encompass both proactive and reactive approaches.

Leadership Model through an Effective Communication and Conflict Resolution Structures


Business executives as well as scholars have described leadership in various forms. Although the topic encompasses a myriad of concepts and postulations, there are certain basic tenets, which define a good leadership structure. The ultimate objective of all these theories is the attainment of organizational results in the simplest manner possible. This is occasioned by the multiple dynamic constraints facing organizations (George & Jones, 2004). As a result, proactive leaders attempt to device means of coping with new constraints in a future date. As contained in leadership grid, all managerial leaderships are founded on the concerns for productivity and people, as well. Striking a balance between the two constraints is a major concern for many leaders because the two have divergent objectives (Burns, 1998). An effective leadership will look into the concerns of both production and people without bias on either side. 

An effective leadership is the one, which motivates its people to attain the highest level of their output without robbing them of their rights. Such a leadership responds in good time whenever necessary (David, 2009). The response is communicated to the target person in various forms like verbal, written or implied. Among the many aspects that define an effective leadership style are communication and conflict resolution. The attributes of a style borrows most of its features from the manner in which information is conveyed from the source to the receiver as well as how divergent views are handled.  The way in which these two features are addressed can be successfully used to classify various leadership styles.  The two aspects are critical in determining the efficacy of a leadership style adopted by an organization. Although leadership is concerned about how resources of an organization interact with one another, human resources play a vital role in determining the efficacy of a leadership style. The effectiveness of this vital resource has a lot of stake on the overall leadership portfolio. Nevertheless, this does not negate the importance of other resources.

With the information above, this term paper seeks to postulate how effective communication and conflict resolution will result in an effective leadership style. By the end of this paper, there should be a coherent understanding of the extent to which communication and conflict resolution affect the efficacy of leadership. This will be achieved through examining the interactions of various variables of communication and conflict resolution. The two aspects surround how a person or a group of people anticipate to behave in a certain manner and ends up developing behavior aimed at attaining job satisfaction and contentment (Billington, 1997). The model postulated in this paper represents a chronology of events right from the time a person anticipates to behave in a certain manner to the time when the resultant behavior yield satisfaction or conflict with authorities or colleagues. In these sequential interactions of people in an organization, the paper will look at how communication and conflict resolutions would result in a streamlined leadership structure. It moves away from the orthodox techniques addressing leadership in generalized theories. It goes on to put across an argument that modes of conflict resolution and communication are the core features of classifying a leadership genre in an organization (Hackman & Johnson, 2003).

The model underscores the importance of having and effective leadership structure through good communication and conflict resolution. Its argument is founded on the fact that it is not possible to have a successful conflict resolution in an organization without an effective communication at all levels of communication. Since it may not be possible to eliminate conflicts in an organization, seeking the best techniques of solving them will ensure that the organization stay on the course of attaining its goals.

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To discuss this leadership model effectively, it is prudent to establish the grounds of effective communication and conflict resolutions.  Communication and conflict resolution deals with the interactions among human beings in an organization. The two aspects deal with how information is exchanged amongst people with an intention of getting a response an achieving given objectives at personal and organizational scope.


Communication is a complex aspect of leadership. Although the word is used often, there is no concise definition even in the context of those who are considered communication gurus. The concept is deeply rooted in the human behavior such that it would be difficult to discuss any leadership model without mentioning communication (Barrett, 2006). It can be said to be the art and science of transmitting information from the source to a recipient. The communication in the scope of this paper is limited to transfer of information from one person to another. The persons in question here fall in the category of either followers or leaders. For the sake of this discussion, the scope of communication will be restricted to a simple model where a sender transfers information to the receiver. This is a simplistic approach of communication forming the foundation of other complex theories.

Conflict Resolution

In an organization where there are many people, there is a high tendency of conflicts coming up. These conflicts could be intentional or accidental. Conflict occurs when two or more people hold divergent opinions towards an event, phenomenon or person. It can also refer to a contest or struggle between people holding opposing values, beliefs, goals, ideas or needs (Bercovitch, 2004). Such differences degenerate into a conflict if the people cannot withstand each other’s different opinions. Since the occurrences of such conflicts are common in workplaces, a shrewd leadership structure has mechanisms of dealing with such disparities in opinion to avert the possibility of interfering with performance. The impact of such differences may be detrimental towards attainment of organizational goals. Conversely, it may be beneficial if managed diligently, thus resulting in a better way of doing things (Wilmot & Hocker, 2001).  This paves way for the critical aspect of leadership concerned with averting the detrimental impact of conflict. Conflict resolution is an aspect of leadership that does not necessarily mean that all conflicts will be eliminated but the affected parties will learn to tolerate one another without affecting the productivity (Cathy & Christina, 1996; Dana, 2001). It is also concerned with the techniques of diffusing the differences.

The sections below examine how the two aspects defined above determine the efficiency of a leadership style. The two are interrelated in their scope and application. Conflict resolution is only possible when there is an effective communication between individuals or groups holding differing opinions. Therefore, to have an effective leadership model, there must be a comprehensive conflict resolution mechanism with sufficient communication structures. These factors of an effective communication are detailed in the variable models outlined below.

Model Variables

The following variables constitute core tenets of the model that integrates conflict resolution and effective communication as the most influential way of attaining desirable leadership model. The variables are derived from the manner in which people carry out day-to-day activities with a thought realizing some results.

As stated earlier, conflicts occur due to differences in ideology or failure to communicate in an effective manner. This occurs when a situation falls far much below the expectations of a person. Such constraints determine human behavior at different levels of an organization.

Ideally, there are two opposing views of organizational goals. While the organizational strategy may look into streamlining its operations by minimizing running costs and redesigning way of doing things, individuals are interested in bettering their career growth and maximizing gains through salaries and compensations (Kouzes & Posner, 2002). Both individual’s needs and organization’s requests may not be sharing similar objectives as stated. Such disparity is of paramount importance in determining whether the leadership style in place is sufficiently effective to avert the possibility of these differences degenerating into conflict (Ivancevich, Konopaske & Matteson, 2007). In this respect, an effective leadership structure will avail conditions that will make every party contented without compromising on desired organizational results and individual expectations.

Proactive Approach

This approach of leadership anticipates future occurrences that may influence the effectiveness a management style. The policy makers who employ this approach in the practice enjoy the benefit of being prepared. Although they may not prepare for all situations, most foreseeable aspects are gathered for in the execution of daily duties. Leaders who choose to pursue this approach will always find themselves satisfied as their followers (Robbins, 2004). Proactive approach creates an environment of certainty thus eliminating chances of suspicion and dishonesty. There are certain variables that employ the aspect of a proactive approach in reinforcing leadership techniques. These include foundational features characterizing the possible behavior of leaders and followers. Such aspects of a proactive approach are discussed below within the context of conflict resolution through effective communication.

Behavior Intentions

Several theories have been put forward to explain what motivates people to behave in a certain manner. Through the theory of reasoned action, it is possible to establish the motivation or rather a driving force that inspires people to behave in a certain manner. Theory of reasoned action proposes that an individuals’ behavior is a factor of an intention to act in a given manner in because of behavioral beliefs, attitude, and subjective norm towards the same behavior (Kondalkar, 2007). Therefore, one of the best methods of predicting behavior is understanding and individual’s intentions. It is the cognitive representation of how an individual is ready to act in a given manner, and it forms a prerequisite antecedent of behavior.

Therefore, an established behavior in a certain manner within an organization can be argued as premeditated and sufficiently informed by what person intents to achieve by being part of an organization. In some cases, such intentions contradict those of leaders thus creating a potential conflict between individuals and organization leadership because of the potential disparity between organization’s requests and individual needs (Hersey, Blanchard & Johnson, 2008). The extent to which individual interests may cause a conflict is a factor of some other variables. These variables form the constraints of a behavior intention whose ultimate impact could be differences in ideology between individuals and organizational leadership.

It is imperative to establish behavior intentions beforehand to avoid the occurrence of conflict. This will applaud the fact that the best stage of resolving a conflict is before it starts. With proactive leadership skills, such undesirable behavior intentions, which may degenerate to a future conflict between the leaders and followers, can be averted by having a robust, accurate and easily accessible communication structure. Most conflicts escalates to unmanageable stages like industrial action, boycott or rioting not because the affected parties desires so but due to failure to avail effective communication channels beforehand. If a leader succeeds in understanding the intentions of his/her potential followers before committing to work together, chances of conflict occurring in the future are low. Of all the conflict resolution techniques, this proactive one is the most effective one. Such an approach will not wait until the damage is done to swing in to action. Conversely, it attempts to resolve a conflict before its occurrence. However, it is a prerequisite for the leaders, and followers to understand the behavior intentions of one another accurately before taking action (Hollway, 2005). Although this is desirable, it is unfortunate to learn that it does not always happen. There is a tendency of either parties acting in a falsifying manner. If either of these parties succeeds in camouflaging the actual behavior intentions, then the conflict resolution will shift to a reactive approach.

While seeking to understand behavior intentions, some organizations have devised comprehensive methods of grilling people before committing to working with them. A perfect illustration of this phenomenon is inherent in the multi stage interviews organized for individuals seeking to become  part of an organization. This strategy seeks to establish a workable way of understanding individuals’ intentions to inform further decision-making processes. The success of this approach lies squarely on how effective a chosen communication mode is. In a bid to communicate effectively as a preventive measure for future conflicts, interviewees are usually subjected into written, verbal and pragmatic inquiry. The results of each model are examined for correlation with one another. In this respect, effectiveness of communication is a measure of how best it retrieves information from the candidate to help leaders in decision-making. Having a liberal and multi-directional communication mode helps in obtaining such vital information as behavior intentions of an individual.

Another means of resolving conflict before it occurs is seeking to change the individual intentions. When a leadership system is accurate enough in retrieving information from the followers, then seeking to avert future conflicts would be done by attempting to transform such intentions to favorable ones. Attainment of such information is only possible when there is an effective means of communication.

Expectations and Goals Commitment

Expectancy theory tends to raise an emphasis on goal setting and employee expectations as important aspects of motivation in the workplace. According to the theory, setting of goals enables the employee to beware of what the organization expects from him/her (Droar, 2006). This creates confidence within the workforce thus easing the management process. Goals direct the employees’ energy towards the accomplishment of organizational visions. Expectancy theory argues that the people that perform best are those who are goal oriented. Organizational goals play an important role in directing the actions of both employees and employers. On the other hand, organizations need to set realistic and achievable goals with measurable outcome to enable employees to know what is expected of them. Besides directing employees’ on the attainment of organizational aims, objectives and vision, goal setting promotes the establishment of quality assurance indicators designed for job performance. In an employment relationship, employers and employees usually have their own expectations. Firstly, there are expectations regarding what the employee expects to receive from the organization and what the organization intends to offer to the employee. Secondly, there are expectations regarding what the employee intends to offer to the organization and what the organization anticipates to receive from the employee. Inappropriate goal setting and failure to meet expectations of either party is likely to result in conflicts.

Establishing a common ground will minimize the chances of conflict between the employer and the employee. Prior to commencing an employment relationship, both parties should present their offers and expectations after which negotiations may be necessary (Sidle, 2005). Effective communication is paramount to exploring the needs and expectations of both the employee and the employer. Appropriate goal setting enhances employees’ commitment to organization’s shared vision while unrealistic and unachievable goals set them for failure. Therefore, organizations can minimize or resolve conflicts through setting of realistic and attainable goals as well as taking into consideration employees’ expectations in order to make them as comfortable as possible while still be able to accomplish its ultimate organizational goals (Yukl, 2006).

As stated above, the expectations of different parties in an organization vary according to motivation behind the decision to behave in a certain manner. Apart from averting potential conflicts through negotiations as stated above, policy makers may also find a way of establishing the needs of the followers through a reliable communication channel. Having the policies which favor both the leaders and followers will go a long way in not only establishment of a harmonious relationship but also enhances attainment of organizational goals. 

Reactive Approach

Reactive approach is an old dimension of leadership whereby leaders make a decision after a situation that requires them to do so occur. Reactive leaders end up posting dismal performances as compared to proactive ones. Though not desirable, this approach is sometimes inevitable due to dynamism that comes about leading a group of followers. When unanticipated conflict occur, the concerned parties should swing into action with due diligence to avoid worsening the already bad situation (Lussier & Achua, 2004). In such cases, everyone must employ appropriate communication skills in a bid to restore harmonious coexistence between leaders and followers. The variables outlined below represent how reactive approach may be used to resolve conflicts inherent in human interactions.

Locus of Control

The locus of control is what an individual takes responsibility for the happenings in his/her life. A locus of control reveals the influence of environment/circumstances or individual traits/characters on the control people’s activities. Research suggests that individuals with moderate to strong inner locus of control usually perform better (Vroom & Sternberg, 2002). Expectancy theory argues that managers with an internal locus of control practice participative management styles while those with an external locus of control are authoritative (Komives & McMahon, 2006). People with an external locus of control are prone to stress and clinical depression and tend to be vulnerable to manipulation and abuse. On the contrary, people with an internal locus of control tend to be peaceful and take responsibility for their successes and mistakes. This implies that managers with an external locus of control are more likely to be involved in conflicts than those with an internal locus of control. This is due to the fact employees tend to rebel against an authoritative manager, as opposed to a participative one (Huczynski & Buchanan, 2007). Therefore, placing people with an internal locus of control in managerial positions is one way of minimizing or resolving conflicts in organizations.

Job Design

The nature of the job description is another potential source of conflict within the work place. This occurs when conflict comes about the nature of job design, leaders or followers should respond by outlining such discrepancies without creating a situation of severing the relationship under threat (Northouse, 2007). There should be a mechanism of constantly monitoring the level of job satisfaction amongst employees. To make these monitoring efforts fruitful, leaders should also communicate their intentions of change, expectation or disappointments for easy corrective actions in good time (Guastello, 1995). Three aspects detailed below will determine the extent of job design-related conflict.

The level of freedom demanded by a follower is a potential source of conflict. Whereas some employers will want to be in charge of what goes on under their stewardship, some employees would like to enjoy the freedom that comes alongside being a professional in a certain field. These two divergent views are equally important in the realization of organizational goals. Therefore, the leadership in such organization must look into these concerns bearing in mind that both the leaders and followers have a stake in attaining success. This can only be attained by creating a communication mechanism that collects the views of emerging issues to aid in better policy formulation (Greenleaf & Spears, 2002). For the sake of confidentiality, an organization may choose the use of suggestion box to allow them collect all pertinent issues regarding job design satisfaction.

Equity, Valence and Rewards

The equity theory demands that employees receive their fair share for skills and efforts put towards the achievement of organizational outcomes. Equity focuses on equivalence between input and output. Valence is the positive or negative values of people regarding outcomes, whereas reward indicates people’s desire for outcomes and rewards for efforts and skills put on their jobs. Imbalances and incongruence between input and output presents a ground for de-motivation and inequity and probably leads to conflicts. The equity theory argues that feelings of inequity originate from a person’s evaluation as to whether he/she gets adequate compensation for his/her contributive inputs (Champoux, 2004).

As part of conflict resolution, equity ensures everyone benefits from organization’s outcomes but with varying proportions. Most employers offer rewards or promotions to their best employees. This creates a sense of satisfaction among the employees and motivates them to work harder thus minimizing conflicts (Miner, 2005). Currently, employees have been empowered and thus able to engage in protests whenever equity issues are violated. Organizations have often employed communications to inquire the areas with inequity. Hence, it is worth noting that equity is an essential element of conflict resolution.

Organizational Support

An effective leadership model should also consider equipping its workforce through the provision of necessary support. Organizational support is a critical leadership variable whose impacts are of far-reaching capacity in an organization. It includes all the prerequisite conditions and resources availed by an organization in a bid to realize its objectives.  An organization that neglects this responsibility discourages productivity by not availing the necessary incentives to aid in execution of day-to-day activities (Kellerman, 1994).

Organizational support may take the form of material or immaterial offers. Immaterial offers like motivation, incentives and promotion are neglected by many organizations who believe that providing employees with what they just need is the main factor of performance. Taking this dimension of the variable will result in a tremendous performance, which could have been hardly realized in the absence of the same.

Research Method of Testing the Model

The model outlined above looks at leadership in two dimensions. One of the sides is the proactive approach and the other one is reactive perspective of leadership. The test of this model is aimed at establishing whether it makes leadership any better or not. Both qualitative research methods is useful and relevant in the examination of the models’ efficacy.

While using qualitative methods, researcher may select key indicators of effective communication and conflict resolution techniques through a questionnaire whereby the postulate variables are ranked in a scale of five according to the perceptions of the respondent (Winston, Fields & Cabanda, 2011). The high values should be designed to imply positive result while a low score reveals that the variable is not contributing to the performance and satisfaction of followers or employees (Klenke, 2008).


Globalization, open market system, technology advancement and people’s desire to excel in their fields of work has led to an increase in competitiveness and resultant work-stress. This has made the management of human behavior an important aspect in any given organization. Leadership and motivational theories have been employed to create a positive work environments and consequently increase productivity, organizational growth and job satisfaction of employees. Scientific advancement has made management of human resources more challenging (Jackson & Mathis, 2007). This situation has facilitated designing of appropriate situational models for managing human behaviors in diverse conditions. Although there is no specific model for managing human behaviors, standards models can be modified to match various situations and work settings (Spillane & John, 2004). New ways of managing organizations have emerged following the diminishing of the traditional ways. Redesign of work and organizational structure has now become the order of the day, and this has posed more stresses on employees. This calls for better leadership styles in order to strike a balance between increasing organizational performance and promoting employee satisfaction.

This model has discussed conflict resolution and communication as critical aspects to effective leadership model. The model underscores that an all rounded leadership model should encompass both proactive and reactive approaches (Torbert, 2004). It also managed to point out that nearly all aspects of leadership circumnavigates the tenets of conflict resolution and effective communication. All the variables outlined above draws their objectivity from the manner in which they handle issues pertaining to conflicts management and transfer of information.


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Leading Human Resources (9th ed.). Upper Saddle River, NJ: Pearson Education.

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American Depression


The Great Depression is one of the worst economic down turn to have ever occurred in America. The condition occasioned by a number of issues drove many American families to the lowest levels of poverty ever. This made them vulnerable to lack of basic commodities like food, clothing and shelter. As the effects of the great depression continued to bite most families were more than willing to not only accept donations but also go a step further in asking for the same. To help in understanding the actual scenario of this era, this will examine assistance appeal letters written to Mr. B. Virdot as a response to his advertisement, which ran for only one day in a local daily. It pools ten of letters from those families, which expressed their interests in the advertised Christmas assistance offer.

American Experience during the Great Depression

Discussed here below are some of the lessons that can be learned on the experiences of American families who could not withstand their lacking in basic commodities.

From the ten letters read, it is evident that Americans experienced tough moments during the Great Depression. As these letters were read, it became apparent that nearly no families during this trying era could meet their needs as anticipated. Most of the families who forwarded their letters expressed their sufferings in failure to meet daily needs. Most of them acknowledged that depression was to blame for their predicaments.

Large families whose sole breadwinner was the husband characterized the era of depression. Most letters attributed their predicaments to the failure of these husbands to secure sufficient wages through employment. The era of the Great Depression brought about job loss since most organizations downsized their workforce after failure to meet their wages costs. Depression also led to escalation of the cost of basic needs and reduction in wages, which made most families as represented in the letters beggars.

The humongous response received in form the letters after a single advertisement served to reveal that nearly all the families found it hard meeting basic needs. One should ask himself that if after a single advertisement that much response was obtained, how about if it was a periodical one.

What comes out clearly from these letters is that there is a sudden shift from what was once an affordable life to a struggling one. This point out most of these predicaments like lack of food and clothing came about at the time of depression.

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From the letters, it also became clear that most Americans were hopeful that things would look up after the Depression. They exuded confidence that the conditions they were undergoing would soon diffuse after acquiring jobs.

Mothers whose husbands could no longer provide the basic needs wrote most of the letters. It portrayed a non-traditional scenario whereby a woman who used to sit and be a homemaker had to find ways of obtaining basic needs. In this era, husbands were responsible for earning income, which could be used by the entire family in meeting basic requirements. Depression era created a different dimension of this situation by putting inevitable responsibility on mothers to look for food and shelter. In most of the assistance request by these mothers, they blame most of their sufferings on the inability by their husbands to provide due to failure to secure steady jobs and business.

Finally, during this depression era, most families reduced their expenditure to basic needs. Some went further to cut on needs like shoes, posh shelter and Christmas celebration.


Although the letters displayed some of the features characterizing the Great depression, some aspects of it that makes it inappropriate for sufficient use by a historian. It will not be sufficient to understand  the facts and details of the depression by reading these letters. First, the letter lack peer review, which is a prerequisite of all scholarly sources. There is no evidence or proof to argue that these letters are not emotional expressions of women seeking to benefit from a philanthropist. Lack of credibility of these sources makes them inappropriate for use as scholarly source.

Another limitation of these sources in providing accurate information to understand the Great Depression is evident in its narrow scope. The letters are limited to families in Ohio, which may not be sufficient to understanding the situation of the entire country. As recorded in other sources, The Great Depression cut across the land. Thus, limiting the study to Ohio with an objective of understanding the entire concept of the Depression is not enough to make a conclusive judgment.

Furthermore, the letters lack in content necessary to understand amicably the Great Depression. The letters are limited to the undesirable consequences of the depression without mentioning other aspects like causes, dates and how it ended. With the same limited scope, the letters do not give details of how the Depression affected other sector apart from households. Nevertheless, they can be useful when used as part of other sources because they are from first-hand victims of the Great depression.


Gup, Ted.  A Secret Gift: How One Man's Kindness--And a Trove of Letters--Revealed the 

Hidden History of the Great Depression. Westminster: Penguin Group, Inc, 2010.


Behavioral science is a finance field that puts forward theories based on psychology in order to explain stock market anomalies. The assumption in behavioral science is that the information structure and market participants’ characteristics have a systematic influence on individuals’ investment decisions and market outcomes. The paper argues in favor of an empirical approach to explore investor behavior and biases, and impacts of irrational decisions on market performance. It goes ahead to show that behavioral finance is related to herding behavior, thought contagion, risk aversion, investor sentiment, affect pricing model, social responsibility in investment decisions, charts and the effect of past performance over future uncertainty, analysts: unbiased experts or self-serving opportunists, and the case for behavioral finance. This essay gives summarizes these research findings discussed in the paper and analyzes its conclusion.

Unconscious Herding Behavior

Human behavior function ‘herding’ is derived from ‘impulsive mental activity’ and  reaction to other people’s actions. In relation to financial markets, herding causes emotional changes. Therefore, the rational brain can have control over them. Herding, being rooted in the limbic system is impulsive, immutable and uncontrollable. Financial professionals, being a close group, share information in virtual and real space thus vulnerable to emotional herding. The investing public can also form beliefs based on information obtained from media, industry publications among others. This type of herding results from lack of knowledge and social tendencies to following the crowd. Financial professionals also follow the herding behavior patterns perhaps due to the need for consensus. Cognitive dissonance occurs when financial professional hold contrary views. This may call for explanations for choosing one over others.  This desire to go with crowds results in making of relatively similar buying and selling decisions. Though this behavior is vital for survival, it tends to prolong market trends hence leading to decreased productivity in financial markets.

Thought Contagion

The modes of contagion include Quantity Parental Mode, Efficiency Parental Mode, Proselytic Mode, Presentational Mode, Adversative Mode, Cognitive Mode and Motivational Mode.  These modes support the theory stating that new economic or financial thinking are slow in penetrating the ‘normal’ and that whereas we witness the market anomalies and unable to elucidate them by CAPM, there is no definite financial model encompassing the human behavior.

Risk Taking and Risk Aversion

Risk taking propensity appears in individual or group decision-making as in the case with herding behavior and thought contagion. People who adopt risky behavior in certain situations can take more risks in managing investments. He observes that risk-taking behavior tends to increase in groups and gives the possible explanation that the group provides an individual with a distribution of risk within its members. This results in less responsibility on an individual, as opposed to responsibility in individual decision-making.

Prospect Theory illustrates the preferences for risk behavior in opposition to utility maximization function that suggests that investors need to be indifferent between choices with the same expected utility. The theory also postulates that attitudes toward gains and losses change depending on reference point. Traditional finance perceives analysts as rational thinkers who strictly base their predictions of future performance and earnings on data. Nonetheless, studies show the existence of inefficiencies in forecast due to interference of data by the analysts’ biases. Therefore, the author suggests that analysts who predict loss are likely to go for riskier behavior in the future leading to overestimation of earnings. Security and potential maximization are two main goals people have. The goal of risk takers is to maximize potential while the risk-averse inventors want security.

Investor Sentiment

Risk choice behavior is usually change with circumstance, but Dreman et al. (2001) claimed that investor sentiment was constant in the 1998 bull market and declined in 2001. Several surveys were taken in 1998 when the stock market was on the rise and in 2001 when there was a rapid market decline. The surveys yielded results showed that invested had similar opinions regarding long-term investments, allocation of assets between bonds and stocks, views on risk and buying on down markets.  The analysis of survey results was based on age, gender and income. The data showed that men are more likely to take risks than women are while low-income individuals are more risk averse than the high-income ones. Finally, both age groups of over and below 60 years demonstrated similar confidence in future US market performance, with the older group being less likely to accept large portfolio swings in relation to their retirement cash flow needs.

Cash Availability and Optimism

The conduct of investors while making investments decisions is dictated by the correlation between cash availability and overreaction in the financial market. The modern portfolio theory and ‘invisible hand’ are two theories that typically apply to markets. The invisible hand theory applies to well to the consumer market since consumers buy services and products for their need satisfaction while the modern portfolio theory applies to asset markets with the assumption that investors balance reward and risk in the purchase of securities to maximize utility. For decades, prices for consumer goods have been relatively stable in developed economies including US while security prices fluctuate on ‘expectations and motivations of others’. 

Affect Pricing Model

There is an element of emotion in the determination of asset pricing models. It implies that people have similar alignment towards the purchase of sale of stock in the same manner as they do for cars, jewelry and cars. The process of arriving at a decision regarding acquisition of stock is emotive and thus, investors go through some levels of stress. This model explains with illustration the importance of incorporating this emotional aspect in the formulation of CAPM. Although the proposed is not superior to earlier ones, it should be used in practice.

Charts and the Effect of Past Performance over Future Uncertainty

This dimension considers the influence of historical performances of a company’s stock. The decision to purchase will be dictated by price comparisons regardless of the fact that past occurrences may not necessarily replicate themselves in the future. The use of charts to depict stocks behavior over time has wide application in such financial decisions. The popularity of charts is occasioned by its ability to summarize stock movements in a succinct output.

Social Responsibility in Investment Decisions

Social responsibility is an emerging trend in the corporate arena. There are sufficient efforts aimed at adoption of socially responsible investing to the extent of influencing stock purchase or sale decisions. Pressure emanating from the customers, investors and regulatory bodies compel companies to act in socially acceptable manner. An occurrence of irresponsible behavior is likely to scare way customer making the stocks of that company less glamorous than before. Although it may be difficult to predict the occurrence of socially unacceptable risks, investors need to stay abreast with company’s strategy and policy as a means of managing risk proactively.

Analysts: Unbiased Experts or Self-Serving Opportunists

Analyst’s advice is another factor in investment decision making. Many investors are swayed in to engaging the services of an analyst in a bid to make the most optimal investment decision. However, the accuracy of this factor is questionable due to the potential conflict of interests in the process. Inventors are at a risk of receiving fallacious advice from these analysts whose intentions are more of satisfying the interests of their employers other than the potential investor.

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The Case for Behavioral Finance

Although there have been claims that price shifts are occasioned by lead indicators in the market, investors are sometimes irrational in their decisions. They are prone to emotional swings, psychological fluctuations leading to occasional irrationality in judgments. These are heuristically determined behaviors whose perceived outcomes are characterized by sharp shift in stock prices. This aspect of behavioral finance is similar to that of mass action where thoughts of one individual tend to gains wide acceptance among the peers.

Conclusion Analysis

As the paper ends, there is a resounding existence of parity between scientifically backed decisions and subjective behavior ones. Although either side of this argument is right in its own perspective, it is proving concise that the two elements of investment decision-making are mutually independent. The differences between the two can only be resolved by seeking a common ground, which incorporates the philosophy of scientific rationalism and subjective behavior. This will ensure that the practical aspect of heuristic, emotional and mass-oriented are amalgamated in widely accepted decisions. By doing this, the newly established models and formulae will not only reflect actual trends in the market but will go a long way in delivering reliable and accurate statistics.

Executive Summary

This thesis revolves around Vertraco, a shipping line company located in Rotterdam.  It is currently strongly considering an expansion via the transport of products, i.e., bananas, from plantations in the Dominican Republic to parts of Europe.  Vertraco as a shipping company wants to start a new line of services to the Dominican Republic. The company basically wants to have a contract with the banana plantations located in the northern part of the island for the transportations of the bananas to Europe, particularly Zeebrugge and Rotterdam. This transportation includes inland transportation from the plantations to the port of Manzanillo and the ocean transportation from the port to Europe. All logistics in the full logistic chain has to be investigated. Normally, the majority of the bananas are transported to the southern parts of the islands where the main ports are.  Vertraco wants a different sailing schedule: transportation of the bananas from the plantations to a port on the north coast called port of Manzanillo. The port of Manzanillo is a relatively small port but there are already other shipping lines with vessels from this port to Europe.  It is the task of the paper to find out, through the use of both secondary and primary data, if the business concept is feasible.  The primary research was done through the actual and personal interviews made with the heads of aforementioned banana plantations.  The primary research was supported by the secondary research taken from both online and offline libraries about pertinent information useful in getting accurate conclusions. In the analysis of the collected data, it is clear that the new business is very feasible and quite promising.  It is however recommended that a more detailed and complete research follow this thesis to ensure that all important and pertinent data needed by Vertraco to ensure success is covered.


CHAPTER 1 – INTRODUCTION ...................................................................................... 1

1.1:  Introduction ................................................................................................................... 1

1.2:  Study Background ......................................................................................................... 1

1.3:  Research Questions ....................................................................................................... 2

1.4:  Aim and Objectives ........................................................................................................

CHAPTER 2 - LITERATURE REVIEW .............................................................................

2.1:  Introduction ....................................................................................................................

2.1.1 Return Cargo ..................................................................................................

2.1.2 Clients ............................................................................................................

2.1.3 Competitors .................................................................................................... Geest Line .......................................................................................... NYKCool ........................................................................................... Maersk ................................................................................................ CMA CGM ........................................................................................

2.1.4 General Information about the Dominican Republic .....................................

2.2:  The Organic Banana Industry in the Dominican Republic ........................................

2.2.1 Banana Growth in the Dominican Republic .................................................

2.2.2 Competitive Advantage ................................................................................

2.2.3 Environmental Advantage ............................................................................

2.2.4 Research on the Transportation of Bananas .................................................

2.2.5 Cultivation and Distribution of Bananas ......................................................

2.2.6 Important Points on the Storage and Distribution of Bananas ....................

2.3:  PEST Analysis .........................................................................................................

2.4:  Michael Porter’s Five Forces Framework ...............................................................

2.5:  SWOT Analysis .......................................................................................................

2.6:  Value Chain Analysis ..............................................................................................

2.7:  Porter’s Generic Strategies ......................................................................................

CHAPTER 3 - DATA AND METHODOLOGY ..............................................................

3.1:  Introduction ...................................................................................................................

3.2: Data Used ......................................................................................................................

3.3: Methods and Techniques ...............................................................................................

3.4: Script from the Interviews .............................................................................................

CHAPTER 4 – RESULTS ...................................................................................................

4.1: Introduction ..............................................................................................................

4.2: Findings on the Port of Manzanillo ..........................................................................

4.2.1 Anchorage ....................................................................................................

4.2.2 Findings on Stow-Aways .............................................................................

4.2.3 SWOT Analysis of the Port of Manzanillo ...................................................

4.3 Findings on the Port of Rio Haina ............................................................................

4.3.2 Pilotage .........................................................................................................

4.3.3 SWOT Analysis of the Port of Rio Haina ....................................................

4.4 Findings on the Port of Caucedo .............................................................................

4.4.1 Anchorage ....................................................................................................

4.4.2 SWOT Analysis of the Port of Caucedo ......................................................

CHAPTER 5 – CONCLUSIONS .......................................................................................

5.1: Conclusions ...................................................................................................................

5.2: Recommendations .........................................................................................................

5.2.1 Classified Recommendations .......................................................................

5.2.2 Specific Recommendations ..........................................................................

REFERENCE LISTS ...........................................................................................................

APPENDICES .....................................................................................................................


1.1: Introduction

Vertraco Shipping B.V., spearheaded by its managing director, has been considering implementing a new business idea that will be the subject of this thesis. The new business has been in conception for a year now and research has been conducted to verify its feasibility.  It would be this paper’s task to do further research on the topic with the use of both primary and secondary data touching on such aspects as competitors, port capacity, the banana business and the possibility of transporting cargo from Europe to the Dominican Republic. The information collected by Vertraco will likewise be used in this paper and consolidated along with the other data to be collected. 

1.2: Study Background

The company subject of this thesis is Vertraco Shipping B.V.  It is located in Rotterdam and the line of business is the general management of Europe Caribbean Line N.V. which is a joint venture between Vertraco Shipping B.V. and a ship broker, Vertom Scheepvaart-en Handelmaatschappij B.V.  The company is likewise engaged in other activities of ship-brokering such as sales and booking for Europe Caribbean Line (ECL), operation of a reefer service (transport of cargo in refrigerated containers or with refrigerated ships) between Europe and Suriname, Guyana, serves as a managing agent of Ligne Guyane Francaise B.V. and forwarding and inland transport.  ECL is a unique liner service trading between Europe and the Caribbean and north coast of South America. The services include FCL and LCL cargo, break-bulk and reefer cargo. Ligne Guyane Francaise B.V. is a shipping company registered at the island of St. Maarten. 

The ownership of ECL is divided between Vertraco and Vertom with each one holding 50% share of the company.  Its main line of business is carrying-trade and inland navigation. Vertom is in charge of the vessels and everything that has to do with them, e.g., fuel, crew, and insurance of the vessels. Vertraco is in charge of everything that has to do with the cargo on the vessels. Vertraco is likewise in charge of giving instructions to all agents assigned in the ports.  Ligne Guyana Française B.V. is also a shipping company, which Vertraco owns 100%.  However, it is currently in a dormat status with no activities being done.

1.3: Study Questions

The research questions that this thesis aims to answer are as follows: Research questions

A.What is the current size of the banana business (e.g. number of companies, cropsize, etc.) in the northern part of the Dominican Republic? 

  • What are the banana transport options for the Dominican Republic particularly witht he routes to take and which companies to deal with (nationally and to and from Europe)?
  • How does the national transportation of bananas in the DR take place? Are there special requirements?
  • How does the overseas transport from the DR to and fro Europe of bananas take place? Are there special requirements?
  • What is the current capacity of the port of Manzanillo, as determined by the size and number of ship handlings per week, etc.?
  • What are the amounts of freight and key criteria offered by the (potential) customers? Which other shipping lines handle currently the transportation of bananas from the DR and more specifically the port of Manzanillo to Europe (competitors)?
  • Who are potential customers for shipping goods from Europe (more specifically Zeebrugge and Rotterdam) to the DR. 
  • What are the costs and other parameters for establishing the price for the banana plantation owners?
  • What is the best value proposition of Vertraco Shipping to offer to the banana plantation owners?

The answers to all these questions are necessary to enable Vertraco to gauge the feasibility of its objectives.  Aforementioned questions are to be answered by the end of this thesis given the presentation of data, the methodologies and analysis applied to the collected data and the findings from the analysis.

1.4: Aim and Objectives

The purpose of this study can be condensed and broken down into four main objectives, i.e., (1) to identify the banana plantation owners that may be able to provide more ocean trade from the northern part of the Dominican Republic to Europe, Zeebrugge and Rotterdam; (2) to establish the key drivers and barriers for implementing the new business case by means of learning about the competition, the infrastructure of the DR and primary market research of plantation owners and port authorities; (3) to estimate whether  this business case is profitable for Vertraco via a cost- benefit analysis and perhaps an ROI calculation; and (4) to define the best entry strategy for Vertraco Shipping through the formulation of the best business proposition (including the routes to Europe) of Vertraco Shipping to the plantation owners.



2.1: Introduction

The main task of this study is to find out the degree of difficulty regarding the new scheduled service and to know if the idea for the new business deal is feasible. The main purpose is to investigate whether this business idea is viable or not. The plan is to have a weekly service from Manzanillo to Portsmouth and Flushing, for a period of three years.  The intention of this offer is to get a contract which is valid for at least one year. The minimum volume required is 150 x 40ft HC reefer containers of bananas per week. The service will be run with three container vessels, which are scheduled to arrive in Flushing every Monday.

The service offer is based on a free on board (FOB). Shippers should ensure the following requirements: (1) The vessel will not be in the port for longer than 36 hours, (2) quay is considered safe for container operation, (3) smooth operation for all cargo to be loaded and discharged, (4) the shipping line will not be liable for local charges, storage charges of empty containers and local handlings, (5) shippers have to set the reefer containers to the required transport temperature and ventilation and (6) the line and the captain of each vessel should be instructed how to handle the reefer units.

The following charges are applicable for this service: (1) Freight USD3,350 per 40ft HC reefer; (2) Bunker surcharge will be valid at the time of shipment and are always set by the shipping line. The bunker surcharges are changed on a monthly or yearly basis; and (3) THC Europe will be €195 per 40ft HC reefer (excl. plug in charges). In the Dominican Republic it is FOB. In the UK and the Netherlands the THC costs are for the receiver.  The charges for handling costs in Flushing are as follows: (1) Handlings costs for empty containers are €17,50 per TEU, (2) handling costs for full containers are €22,00 per TEU, and (3) SPI  €7,50.

Vertraco is considering a weekly service carrying bananas from the port of Manzanillo to Portsmouth and Flushing. The main idea is that the vessels will be discharged in Flushing at the CCS location, and the bananas can then be collected from their warehouse on pallets. It is very important to do this research concerning the following: (1) The port of Manzanillo, most importantly how well the port is equipped and to what extent it is able to handle container vessels (necessary amount of reefer plugs), (2) the total time schedule of the operation, (3) stevedoring charges in the port of Manzanillo, including other possible local charges, (4) required documentation and (5) local requirements and special local working procedures.

Vertraco wants to use the port of Manzanillo for services because the majority of the plantations are located very close to the port. This will result in a shorter inland transport period from the plantation to the port of loading (aanvoerroutes). If the service offered is from one of the southern ports of the Dominican Republic, the company will have too much competition from other shipping lines such as Maersk, Zim and CMA CGM. 

Another constraint to initiate the plan in the southern ports is the aspect of high inland transportation costs.  The inland transportation costs for the bananas from the plantations to the southern ports are between $800 and $1000 per container. The transportation time is between 6 and 8 hours. To transport the bananas from the plantations to the port of Manzanillo is between $100 and $200. The goal is to ship 150 x 40ft HC reefers on a weekly basis and in the prime of the season a minimum of 200 x 40ft containers. The company also plans to ship a minimum of 25 x 40ft   return (return) cargo on a weekly basis. The best method to transport the bananas overseas would be with the use of a 500 TEU vessel. However, there are no 500 TEU vessels available which can connect 200 reefers. The reefers need to be connected constantly, because of the special transportation methods used for bananas. In order to ship the reefers, the company will have to use vessels between 1000 and 1200 TEU (Twenty foot Equivalent Unit). These large vessels are also necessary because they have sailing speed between 19 and 21 knots. Smaller vessels have a sailing speed of 16 knots, which would result in the demand of more vessels and a higher cost price. 

Vertraco has calculated that if they use 3 vessels with a sailing speed between 19 and 21 knots. On a weekly basis, this will result in €2 million profit on a yearly basis. On the other hand, if they were to use 5 vessels with a sailing speed of 16 knots, the annual turnover would result in € 2 million in loss.

2.1.1 Return Cargo

Another goal of Vertraco is to transport 25 containers per week as return cargo. The reason why Vertraco plans to carry some return cargo from Europe to the Dominican Republic is to generate income to cover the expenses of the voyage to the Dominican Republic. However, research has shown that the majority of the import cargo is consumed in the southern ports of the Dominican Republic. This means that the return cargo will have to be trucked to the southern part of the island.

2.1.2 Clients

The target group of clients of Vertraco shipping are the banana plantations in the Dominican Republic. The client list consists of Savid Dominicana Sa, Plantaciones del Norte, Grupo Banamiel, Productos Dominicanos, South Banana Fenix, Finca Bananera, Banama.

The red-highlighted province in the map above is the province of Valverde in the Dominican Republic. It situates four of the nine potential customers. Santa Cruz de Mao or simply Mao is the head municipality of the province of Valverde.  The main economic activity in the province of Valverde is agriculture. The main products in the municipality Mao are rice, bananas and plantains.

2.1.3 Competitors Geest Line

Geest Line first started out as a horticultural business in the U.K. The services of Geest Line run exclusively to the Caribbean. Currently it ships bananas from the northern part of the Dominican Republic to Europe. There are also two trips per week from Le Havre (France) and Portsmouth (the UK) to the port of Manzanillo, Dominican Republic. Geest Line is one of the few shipping lines in the world to carry a standard 10ft container in its container size options. The 10ft container loads are ideal for smaller loads and personal effects. It has been reported that Geest Line is currently not in the best financial shape. Recently they lost 2000 pallets of fruit from the Dominican Republic. With the present environment, this volume will be extremely difficult to replace. Geest Line used to carry this volume from the port of Manzanillo to Portsmouth, UK and thereafter transported to Flushing by reefer trucks. As of January 2010 this volume will be shipped by NYKCool to Antwerp and trucked from there to Flushing. Another idea of establishing a service loop directly from Manzanillo into the port of Flushing was considered by Vertraco. NYKCool

NYKCool is located in Stockholm, Sweden. NYKCool is an operator of specialized reefer vessels. This fleet consists of about fifty ships all between 380,000 and 760,000 cbft. All ships operate in all major reefer trades on a global basis.  The main activity of NYKCool is to operate as carrier of fresh fruit and other perishables.

The new intended set-up of Vertraco Shipping would consist of a weekly container service from Manzanillo to Portsmouth and Flushing and then back to Manzanillo. The round voyage time will be 21 days. Three container vessels with a carrying capacity of 600 TEU and 200 reefer plugs would provide ample space for all the westbound and eastbound activities. The vessels would be provided with all the equipment necessary to be able to work on Manzanillo. The idea is also to become more independent from shore cranes and work inbound empties with an additional gang in order to implement shorter operations time. Maersk

Maersk Line is a Danish shipping company and is the largest in the world. Maerk Line has local offices all over the world but its headquarters is still located in Denmark. The Maersk Line fleet comprises more than 500 vessels and a number of containers corresponding to more than 1,900,000 TEU. CMA CGM

The head office of CMA CGM is located in Marseille, France. It is the third largest shipping company in the world. CMA CGM consists over a fleet of 360 vessels, and serves over 400 ports of call.

2.1.4 General Information about the Dominican Republic

For a long time the main export products of the Dominican Republic were sugar, coffee and tobacco.  However, the service sector has taken the place of the agriculture business as the economy’s largest employer. Regarding the total work force, the service sector makes up for 60.2%, the industry 15.5%, construction 11.5%, agriculture 11.3% and mining 1.5%. According to the Dominican Republic’s Centre for Exports and Investments about 35% of Dominican farm exports are bananas. Their most important buyer is the U.K., followed by Belgium, Sweden and Germany.

The Dominican Republic is not an ideal maritime destination due to the inconvenience of its ports and the problematic entry procedures. Ships must obtain special permits from the authorities in order to leave Dominican territory. In most countries, once a boat enters a port, an arrival permit is issued, which can be used to enter all the ports in that country. However, the Dominican Republic does not provide this facility and requires permits for each port.  The ports and terminals in the Dominican Republic are Boca Chica, Caucedo, Puerto Plata, Rio Haina (second largest port of the Dominican Republic), Santo Domingo and Manzanillo.

2.2: The Organic Banana Industry in the Dominican Republic

A study of literature on the organic banana industry in the Dominican Republic and on the potential capacity of the port of Manzanillo will be done next to further gauge the feasibility of the objectives set out in this paper at the beginning.  This is because it is important in knowing how to gain more clients for this port. Most of the plantation employees only speak Spanish and this can create a problem in understanding the preferences and needs of the clients. The business idea cannot be sufficiently profitable if there is no possibility of increasing the amount of return cargo. That is why it is also important to find out when exactly this young business idea will be at its most profitable.  Currently there are not a lot of clear options to gain return cargo for the Dominican Republic. 

Basically, the task of learning about the organic banana industry of the Dominican Republic is done to know how and when this business can be profitable to Vertraco by profiling the main suppliers on the market for more ocean trade concerning bananas from the northern part of the Dominican Republic to Europe.  It is also necessary to be able to identify the main obstacles in the new business idea as well as know the most logical distribution process from the port of Manzanillo to Europe.  It will also help in defining the best entry strategy for Vertraco Shipping and how Vertraco can attract more clients for return cargo.

From this literature review, it is expected that certain data will be acquired such as the current capacity of the port of Manzanillo, the current size of the banana business in the northern part of the Dominican Republic, what are the other shipping lines handling the transportation of bananas from the port of Manzanillo to Europe, the process and requirements of banana distribution, how overseas transport is done and if the potential market for bananas in Europe is growing.  It is also the intention in this literature review to learn if organic bananas are indeed popularity or just a niche market, to be able to make an inventory of the needs of customers, to know how the complete logistical process from the plantations to the European port take place, to learn what the best generic strategy for Vertraco is for it to create a sustainable competitive advantage on the market and to find out what options Vertraco has to gain more return cargo with the goal of being more profitable.

2.2.1 Banana Growth in the Dominican Republic

The Dominican Republic is the largest supplier of organic bananas all over the world. Three quarters of all bananas exported from the Dominican Republic are currently certified organic. The Dominican Republic is accountable for roughly sixty percent of the global supply of organic bananas. The pioneer of the organic banana agriculture is Finca Girasol Inc. In the Dominican Republic itself organic agriculture still has a long way to go. For now, the major markets for organic tropical products are still Europe and North-America. 

Due to the rapidly increasing awareness of the environment and sustainability among consumers, the market regarding organic and fair trade products has much more possibilities than for example ten years ago. During the research a few people with valuable knowledge from the Dominican Republic have been interviewed. These interviews have shown that the reason why the Dominican Republic is the world’s largest producer of organic bananas is because of the following.

The favorable conditions in Europe that applied to for the import of bananas originating from A.C.P. countries did not apply to the Dominican Republic. The aforementioned favorable conditions are primarily favorable import duties and procedures. Mainly the quotas that were allocated to the different A.C.P. countries apply to regular bananas. By growing certified organic bananas which were not limited by quotas, the Dominican Republic found a niche where they could avoid the limitations of the quotas and other procedures. 

A.C.P. stands for African, Caribbean and Pacific ex-colonies of E.U. countries that gained independence during the 20th century (mainly the second half of the 20th century). Under the Lome- agreement, later replaced by the Cotenou-agreement, the EU grants the ACP countries favorable import duties, taxes and procedures for their product to be imported and sold on the EU-market.

Most of the organic banana plantations are located in the north western region (the provinces of Valverde and Monte Cristi) of the Dominican Republic. In these regions agricultural firms are dominant and are accountable for 70 % of the area and 80 % of the production of organic bananas in the country. In the province of Azua in the southern region of the Dominican Republic there is also a large production of organic bananas. In the southern region there are about thousand small farmers dominating the production. These small producers have been the beneficiaries of the government-sponsored land-reform programme that was in charge of distributing land formerly owned by the Grenada Fruit Company.

The majority of the bananas grown in the Dominican Republic are for export. The organic certified bananas are being shipped to the European Union, North America and Japan. Currently, the majority of the bananas shipped from the Dominican Republic are targeted at the UK. Demand for organic certified bananas is almost certain to increase, especially in Northern Europe. However, production constraints (the result of endemic disease problems in traditional banana exporting zones) have led to very limited supply.

When looking at the map above, it can be seen that the province Monte Cristi (1) is located in the northern part of the Dominican Republic, very close to the Haitian border. The majority of the banana plantations are located in the province Valverde (2). The province of Valverde is located right next to Monte Cristi. Looking at the locations of these two provinces, it is clear that the port of Manzanillo (located in the province Monte Cristi) is in a very strategic position.

2.2.2 Competitive Advantage

The organic production of bananas is much easier in the Dominican Republic and also fewer inputs are necessary compared with other countries. In the Dominican Republic there are hardly any pests and diseases present that affect banana plantations elsewhere. In the Dominican Republic there are certain characteristics that contribute to the decrease in the amount of pests and diseases, i.e., the dry climate (especially Azua, which is dryer than other regions of the country) and the fact that the country is an island.

These characteristics have helped to avoid the pests that are common on banana plantations in the majority of banana-producing countries. In particular, Banana plantations in the Dominican Republic have been free of black sigatoka. Black sigatoka is a fungus which is harmful for the bananas. The black sigatoka forces producers in countries such as Costa Rica, Ecuador and Honduras to use significant amounts of agrochemicals. 

Black sigatoka is one of the main constraints on the organic production elsewhere because so far no effective organic treatment has been found yet. Various other banana diseases such as crown rot also do not have organic treatments.  These types of pests and diseases make it very difficult and expensive to produce bananas organically. One of the main threatening diseases is black sigatoka, which is caused by the fungus Mycosphaerella fijiensis. The favourable climate conditions have created competitive advantages for the Dominican Republic to produce organic bananas. This has resulted in the fact that the Dominican Republic gained the position of main world producer of organic bananas since the early nineties.

2.2.3 Environmental Advantage

The shift from pesticide-induced production to organic production automatically has positive effects because it has reduced the use of chemical inputs. That is why it is very important to stimulate the organic banana industry.  If there is more demand for organic bananas, more small farmers might become interested in growing organic products. 

Bananas are normally grown with one of the highest pesticide loads of all the tropical crops. And even though bananas present very little risk of pesticide ingestion to the consumer, the environment where they are grown is heavily contaminated. This is the main issue, because the contaminated environment tributes to environmental damage. It is a well known fact that the environmental damage is getting worse by the day, so even the smallest stimulation of more ecological friendly solutions are favoured.

2.2.4 Research on the Transportation of Bananas

To have a better view on the process of banana transportation, a look on the company of the top brand of bananas will be made. Chiquita Brands International has implemented various new strategies concerning her shipping-related logistics. The company will consider various structures, including sale and lease-back of its owned ocean-going shipping fleet, sale and/or outsourcing of related ocean-shipping assets and container operations.

Great White Fleet, a wholly owned subsidiary of Chiquita is in charge of managing Chiquita’s global ocean transportation and logistics operations. The unit operates 12 owned refrigerated cargo vessels (so called reefer ships) and charters other vessels to transport fresh fruit products from Latin America to North America and Europe. The owned vessels consist of eight reefer ships and four container ships, which transport about 70 percent of Chiquita’s banana volume to Europe and North America.

Regarding the transportation of bananas there are three main possibilities, i.e., ex-plantation, FOB or CIF.  In the succeeding chapters, it will be determined which possibilities are the best suitable options for Vertraco Shipping.

2.2.5 Cultivation and distribution of bananas

On the organic banana plantations in the Dominican Republic, soil fertility is maintained and enhanced by the use of organic fertilizers. These organic fertilizers consist of coffee husks mixed with animal dung. The banana harvest starts when the bananas are still green. If the bananas are left to ripen while still attached to the banana plant they would be overripe and inedible when they reach their market, which is most of the time on the other side of the globe. The green bananas are removed from the stem and then washed in large cold water baths. The purpose of the washing is to remove any insects and plantation debris, to cool the bananas down and to remove latex from when the banana was cut from the plant. The time frame from the harvest until the delivery to the shop retailer is twenty days. 

The transportation of bananas is done with specialized refrigerated containers on container ships. The bananas are loaded into refrigerated cargo vessels or refrigerated containers and shipped green at a controllable temperature of 14.5 degrees. Temperature controlled logistics is of great importance to avoid premature ripening of the bananas. The bananas are imported in boxes, because this way of packaging creates a more convenient process of transportation. After the ocean voyage from the tropics, the bananas are unloaded from the vessels and then taken immediately to a ripening centre. The bananas are then stocked in hermetical ripening rooms for a period of five to eight days at a temperature not exceeding 14.5 degrees. This temperature stimulates a homogeneous ripening of the bananas of a different size. 

In the ripening centres the bananas go from green to yellow. The ripening rooms are air-tight and filled with ethylene gas to induce ripening. The temperature in the ripening centres has to be monitored very accurately. If the temperature is too cool, the bananas will catch a chill and their skins will first turn to a dull yellow colour and then black. If the temperature is too warm the bananas will ripen too quickly and this will result in decreased shelf life. The retailer can also order ungassed bananas, and then the bananas will show up at the supermarket fully green. Green bananas that have not been gassed will never fully ripen before they become rotten. 

2.2.6 Important Points on the Storage and Distribution of Bananas

The banana transport requires long distances from the tropics to the world markets. In order to obtain maximum shelf life, the bananas are harvested before they are mature. Bananas require careful handling, rapid transport to the ports, cooling and refrigerated shipping. The main purpose is to prevent the bananas from producing their natural ripening agent, ethylene.

The storage and transport take up about three weeks at 13-15 degrees. On arrival, the bananas are stored at 17 degrees and treated with a low concentration of ethylene. After a couple of days, the bananas start to ripen and are then ready to be distributed for final sale.

2.3: PEST Analysis

A PEST analysis involves analyzing the external macro-environment that has an effect on all companies. Normally, such external factors cannot be controlled by the company and there are times when they even present themselves as threats. It is vital to make an analysis of how these factors are transforming now and how they are probably going to transform in the future, deriving suggestions for the company.

Political Analysis

  • Legislation on wage (overtime and minimum wage)

  • Taxation (tax rates and incentives)

  • Tariffs and other trade regulations

  • Protection of intellectual property

  • Legal framework for contract enforcement

  • Political stability

Economic Analysis

  • Rates of interest
  • Rate of inflation
  • Efficiency of financial markets
  • Stability of currency of host country 
  • Exchange rates
  • Comparative advantages of host country
  • Intervention of the government in the free market
  • Type of economic system in countries of operation

Social Analysis

  • Class structure
  • Demographics

Technological Analysis

  • Rate of diffusion rate
  • Effects on value chain structure
  • Effects on cost structure
  • Impact of technology on product offering
  • Recent developments in technology

The quantity of macro-environmental factors is practically limitless, which might determine whether the strategies of a company would succeed or fail. However, the effects of these factors are likely to emerge in the closer environment through transformations in the competition that surrounds companies.

2.4: Fishbone Diagram

2.5: Michael Porter’s Five Forces Framework

Michael Porter’s Five Forces is "Porter's five forces" is one of the most commonly used frameworks for the purpose of business strategy development and industry analysis.  Porter declared that these five forces model must be used at industry level (Porter 1980) and constitutes the structure presented in the diagram below:

1. Rivalry

Rivalry is measured by economists through the use of industry concentration indicators.  Should the rivalry existing among companies in a certain sector is low, the industry is taken to be a disciplined one.  If on the other hand, a rival organisation acts in a manner that would result into other organisations’ counter-response, then rivalry becomes intensified.  To be able to successfully gain advantages over rivals, a company may choose to act according to the following competitive moves:

  • Altering prices – prices of a product or service may either be lowered or raised to gain advantage, even if it is temporary.
  • Supplier relationship exploitation
  • Being creative via the use of distribution channels
  • Improvement of product differentiation

Competitive Strategy: Techniques for Analyzing Industries and Competitors 

by Michael E. Porter 1980

2. Threat of Substitutes

Substitute products are defined in the 5-forces framework as the other industries’ products.  A threat of substitute occurs, according to the economist, when the demand for a certain product is affected if a substitute product changes it price.  Buyer inclination to substitutes and switching costs are the other determinants of said threats.

3. Buyer Power

In a producing industry, customers’ impact is what may be called buyer power.  The determinants of such power are the brand identity, bargaining leverage, buyer information, buyer volume, price sensitivity, substitutes available, product differentiation and Buyer’s incentives.

4. Supplier Power

The supplier power may be known via its determinants, i.e., differentiation of inputs, supplier concentration, impact of inputs, importance of volume to supplier, threat of forward integration and presence of substitute inputs.

5. Barriers to Entry / Threat of Entry

Theoretically, any organisation can enter or exit a market.  Should there be free entry or exit, profits becomes nominal. Threat or barrier to entry is not just dependent on the adjustments to normal equilibrium which are normally done y the markets.  It may be the result of varying sources such as the following:

  • Entry to an industry is inhibited by asset specificity
  • Internal organisational economies of scale
  • Proprietary knowledge and patents may be cause for entry restriction
  • Barriers may also be caused by the government

Essentially, the Porter’s five forces’ message is that where the said 5 forces are high, the industries are not ideal to enter or compete in. The Porter’s 5-forces analysis could lead to the conclusion that an industry is either attractive or not to compete in.  There may however be some limitation to this framework and may not be complete on its own.


The reason for Porter’s five forces model is because it is very important to analyse the external factors. First a detailed description was made of who are exactly the customers, suppliers, competitors and new entrants. The list of these groups was determined together with the thesis company, because it had to be thoroughly clear who their precise customers, competitors and suppliers were. At first, it was also a bit complicated and unclear to determine the exact customers, competitors and suppliers, as the thesis company delivers different types of services within the shipping industry. To find out which companies related to Vertraco belong in which groups, the five forces model of Porter was the best and most clarifying option. 

2.6: SWOT Analysis

An organisation’s internal environment is its strategic capability.  It is basically consist of competences and resources.  A method by which one may think of an organisation’s strategic capability is by recognising and considering both its strength and weaknesses.  The main aim of this type of analysis is to form a general view of the both the organisation’s influences and constraints internally to be used in future strategic choices. Commonly, the mixture of competence and resources provides one company an edge over the others which others may find hard to imitate.

It is the goal of a SWOT analysis to determine the extent to which an organisation’s strength and weaknesses can be dealt with and to be able to possibly reduce threats that may be identified and to take advantage of what good may be found.

1. Strengths

The strength of an organisation are its capabilities and its resources, which it may use to gain or develop a competitive advantage over other firms.  Examples of such strengths include:

  • Strong brand names
  • Cost advantages derived from proprietary knowledge 
  • Good and strong reputation especially to clients
  • Favourable and open access to distribution contacts and networks
  • Patents

2. Weaknesses

Weakness is considered to be the absence of certain strengths.  For instance, the following may be taken as weaknesses of an organisation

  • Weak brand name
  • Absence of patent protection or lack thereof
  • Bad reputation to clients

3. Opportunities

An analysis that focuses on the external environment may reveal to the organisation new opportunities that can promote growth and profit.  Examples are the following:

  • Entry of newer technologies
  • Removal or ease of barriers in international trade
  • Customer need that remains unfulfilled
  • Easing of rules, policies and regulations

4. Threats

Threats to the organisation may however be the result of changes in the external environmental. The following are examples of such threats:

  • Consumer tastes shifting away from the products provided by the firm
  • Entry of substitute products
  • New policies and regulations and added barriers to trade

Limitation of SWOT Analysis

The SWOT analysis is designed to assist in getting discussions focused on future decisions and choices and whether or not an organisation is able or not to handle and support its strategies.  The two main dangers to this type of analysis however are the following:

  • The SWOT analysis may become a very long list but it would not indicate which is more important that the other.
  • The danger of over-generalising is also highly probable.  

2.7: Value Chain Analysis

A better understanding of a company’s activities through which it via the creation of value and competitive advantage is by separating the business system into a series of activities that are value-generating such as the value chain diagram presented above.  It was Porter (1985) who introduced this generic value model which is made up of a sequence of activities that are commonly found in most companies.

2.7: Porter’s Generic Strategies

In order to create a sustainable competitive advantage, Vertraco must choose a generic strategy. To do so, Vertraco must study the behaviour of her main competitors. Then it is known, what kind of generic strategies are implemented by the competitors. The chosen generic strategy must be perfectly applicable to the market situation and be realistic to carry out. 



3.1: Introduction

This thesis will make use of various models and frameworks as its methodology and will be using both secondary and primary data to be analysed and gain the findings required to be able to accomplish the objectives.  The succeeding topics will detail each framework and models description and how they will be used to achieve an accurate data analysis.

3.2: Data Used

The analysis of this paper is based on both primary and secondary data collected.  To come up with results through the use of secondary research, general research was done to get acquainted with the case study and the vocabulary of shipping terms. More data about the special requirements for the transportation of bananas are collected for analysis. Information are also taken from online sites which are used by Vertraco on a regular basis. Additional data were taken from online and offline libraries.

This paper also made use of primary data. To find research outcomes through primary research, interviews have been held with people carrying a certain expertise concerning the different kinds of fields regarding the shipping business and the banana industry, e.g., shipping company executives, the customs office, banana plantations executives and Rotterdam World Port Centre. More information were gathered from attendance in the semi-annual meeting of the Caribbean Shipping Association. This year the conference was held in Curacao. This conference is attended by people from all over the Caribbean and Latin America. These people do not only work at a shipping company, but can also be active in other fields related and useful to the shipping industry such as software specialists, companies specialized in port technology and port operators. The CSA conference was the perfect opportunity to do interviews with the people representing the Dominican Republic.

3.3: Methods and techniques

The main method used in the paper is the use of surveys through personal interview of the head and important officials of companies in the Dominican Republic.  First hand information will be gathered from them to be able to gauge the feasibility of having a transport business between Europe and the Dominican Republic.  The interviews held are numerous and lengthy and quite informative as will be seen in the next topic.

3.4: Script from the Interviews

From the interview made with Mr. Coen Bos, CEO of Fyffes, the following questions and answers were conducted and the information below is the result of the primary methodology made.

On the question what are your expectations regarding the demand of organic bananas, the answer was “I personally believe that the consumption of organic bananas will increase, but not very hard as organic bananas will stay a niche product. Especially now during the crisis, most consumers are not willing to pay extra just to purchase organic products. I expect that the demand for organic bananas will increase once the crisis is over.”

On the question is the market value of organic bananas higher than the market value of regular bananas, the reply was “Yes, the market value of organic bananas is higher. The consumer prices are higher. The difference between organic bananas and regular bananas is about €0,50 per kilo. Production costs of organic products are higher than regular products, because you need to use special products during the cultivation process. Farmers of biological bananas also produce less per hectare than farmers of regular bananas.”

For question “do the clients prefer to receive the bananas in container vessels or reefer vessels and why”, the reply was “Importers prefer to receive their cargo with reefer vessels. The reason for this is that in the past importers have had some negative experiences with container vessels such as unreliable sailing schedules. Reefer vessels have a more reliable image among importers.”

The rest of the Q&A went as follows:

1. Are you familiar with the banana production in the Dominican Republic? 

Yes, Fyffes also does business with the banana industry in the Dominican Republic. 

2. What are the pros and cons of the banana industry in the Dominican Republic?

The main advantages are:

  • You do not have to pay import duties in Europe. This is because of the agreement with the ACP countries, which gives these countries the liberty to export to Europe without having to pay import duties. Although I have to say that this advantage will decline in the future, as there have been made other agreements with other countries. These agreements imply that countries who have to pay import duties, will pay much lower import duties from now on. If this happens, then there will be no noticeable advantage for the ACP-countries anymore.

The disadvantages are:

  • The Dominican Republic lies north, so they have large production fluctuations as a result of the geographical locations (climate conditions).
  • The Dominican Republic is located directly in the hurricane area. The hurricanes cross the Dominican Republic above or beneath, but they cause flooding. These floodings cause the farms to overflow with water.

3. Do you prefer ex-works, FOB or CIF?

We prefer FOB, because we like to arrange our own transport. We are a fairly large company so we can have better negotiations with the shipping lines. Then it is easier to arrange better conditions for the transport than if the farmers would have to do it themselves.

4. How is the current situation of the banana industry in the Dominican Republic according to you?

Currently the situation is very good. The Dominican Republic has had an enormous increase in production. The production of bananas in the Dominican Republic has increased with 500% during the last ten years.

From the interview made with Gustavo Taveres, Vice President of Maritima Sominicana S.A, the following Q&A was derived at: 

1. What are according to you the biggest weaknesses of the port of Manzanillo?

  • It is far from the area that manages local cargo.
  • The inland roads to Manzanillo are not good, even from the plantations (poor infrastructure)
  • Very protected bay
  • Trucking syndicates make the inland transportation very expensive
  • Most of the importers do not want to receive their cargo via Manzanillo because cargo transport is very expensive

2. What is the port of Manzanillo mainly used for?

Manzanillo is used for 2 types of cargo:

  • Organic bananas (we did not have quotas on the bananas, we entered the market without quota)
  • Colen clinker for the cement factory that is located in the Santiago area

3. Does the port of Manazanillo have port equipment?

Manzanillo does not have any cranes and other equipment. It is a finger pier. The vessels have to be geared with cranes. To do the cargo in containers you have to have: containers, chassis and gen set.

4. How does this procedure take place?

First chassis with an empty truck. Then it goes alongside the ship. The ship puts empty containers on top of the chassis.  The ship’s crane has to pick up the containers. The empty containers go to the plantations where they get loaded with the bananas and then they come back to the port. 

5. What is a gen set?

That is a small generator that provides electricity for the container so that the container can cool the fruit. You need one gen set per every chassis per every reefer container unless you have a power pack (large generator) at the port.

6. Other weaknesses

Another problem at Manzanillo is that it is not very modern. In a modern port they can plug it in very easy. Also, Manzanillo is that the port is not ISPS certified. It is a publically owned port and the government is very inefficient.  Another problem possibly growing for the future is the fact that Colombians smuggle drugs via the Dominican Republic and they use commercial ships for it. The route is Colombia, Manzanillo and then Europe. They put the drugs in in Colombia and the DR is used as a transshipment point. This is now done because the other lanes are checked more frequently. They have planes that drop the drugs into the country. The planes fly low so that the radar does not detect them. 

When the shipping lines do not have enough cargo, they start looking at things they would otherwise not do. For example Maersk Lines did not have enough cargo because of the crisis. Of course they want to fill up their container. If we say for example they charge $3800 to take a container from Caucedo to Rotterdam and the port of Manzanillo has lower rates, the shipping company can drop the rate from Caucedo and pick up the trucking expense for the plantations. 

6. Does the government have any plans to develop or expand the port of Manzanillo?

The government does not have plans to do that. They would like a private company to come in and do a concession. 

7. Do you believe that this new service line is feasible?

It is feasible to export bananas via the port of Manzanillo but to do import cargo not so much. The other two competitors also do not bring in import cargo. The reason for this is the fact that the customs department is not very modern. You first have to go to the customs house. To have import cargo for the touristic regions in the north such as Puerto Plata is also not necessary. The region between Manzanillo and Puerto Plata is empty.  Another option would be to bring import cargo to the south coast and then sail to the north coast for export cargo.

In other interviews made this time with other companies, the interviews were made with the presidents of banana plantations.  The interviews were divided into three areas, namely, the general part, logistics and miscellaneous.  The interview went as follows:

A. General part 

1. What is your role within the company? 


2. Do you already have clients in Europe whom you deliver bananas to? (Yes or no). 

Yes. We have an office in France. This office distributes bananas within Europe.

3. Who are currently your shipping-agents who deliver your product in Europe?

Geest Line, CMA CGM, sometimes Maersk

4. On a monthly basis, what is the amount of bananas you have for sale? (in kg. or ton)

We distribute 40 high cube containers per week. The size of the containers is 40 ft. 

5. I have understood that currently the plantations have an increased production of bananas. Is this correct? (yes or no)

6. If so,what is the reason for this?

The production has increased. There are 2 factors for the increase of the banana production, i.e., more land available and in summertime the production always goes up.

7. With the current production capacity of the plantation, do you want to get more clients in Europe? (yes or no) Why?

Yes. I try to have more clients in Europe. We are contacting more clients in Europe. The production is increasing, so we will export more bananas. Interesting countries are France, Germany, Holland, Belgium, UK, Italy and Spain, Poland, Sweden.

B. Logistics

1. The shipping company has the following options: Rotterdam, Zeebrugge and Portsmouth). Are these ports interesting options for you? (Yes/no) 

Rotterdam and Portsmouth,  Zeebrugge. I am interested to find a port in Genua.

2. If the company says no: which ports in Europe would be interesting for you and why?

Which port in the DR do you currently use to transport the bananas to Europe?

Manzanillo and Rio Haina

3. If the company says the port of Caucedo, the next question was, do you think the port of Manzanillo is an interesting option? (Yes or no) If no, please explain why not.

 CMA goes from Rio Haina to export to Italy. All the export for Italy goes from Rio Haina.

4. What are the factors which would make it questionable to do the transportation via the port of Manzanillo?  If the company replies that it makes use of the port of Manzanillo, the next question will be, why do you think Manzanillo is the best port for the transportation of your products?

We prefer the port of manzanillo because the port of manzanillo is close to our plantations. We have 2 production centres. The first production centre is north of the DR and the second centre is in the south of the dr. rio haina is close by t the second production centre (azua) of the dr. Manzanillo is close to the first centre. (Mao, Monte Cristi and Santiago) the majority of the production of the bananas in the dr  (92 percent of the banana production ). Loading costs and connecting costs are cheaper from Manzanillo. 

5. If the plantation does not use the port of Manzanillo, the question would be, would an alternative transportation route from the port of Manzanillo to Europe or more specifically to one the mentioned port options in Europe (Rotterdam, Zeebrugge, Portsmouth ) be an interesting option for your company?  Do you prefer the transport of your products in the form of container cargo or loose cargo?

I prefer containers. It depends, because the freight costs will be lower when you put the fruit on the deck. It depends of the costs, how high it is. 

6. When they choose one of the options, the next question is: Why do you prefer this option?

Because we control the transport from the packing house to the port. If you give me the price of the containers with gen-set from the packing house, I prefer   the logistics .the energy service  when the containers are packed before the    we have a company in the port of manzanillo.name of the company is reefer service. We pay for this logistics. At the moment we pay a lot of money for that. It gives service and electricity. If the sea freight price is good, we can speak about this. At the moment we use the service of Geest line.  We rent the service of the chassis. Geest line gives us the containers. The company rents the chassis. The other companies with reefer service.  Reefer service provides connecting and electrical services per container per day. We rent the chassis per day. We get the containers for free. We pay for the loading costs per pallet.

C. Miscellaneous

1. What are the performance indicators for the quality of your distributor? 

The address of the representative is France. Our homepage is www.banama.com.do

Our home page is in English. The price, handling, speed of delivery and service (which specific extra services would make Vertraco a more interesting option) are the points that are very important for us. I prefer that you contact the woman in France. 

In the last interview I made in another company, the person I surveyed is its president, Fulvio Pellegrini. As with the other interview, the portions and questions are the same.  The interview went as follows:

A. General part 

1. What is your role within the company? 

President (for 10 years in the company).

2. Do you already have clients in Europe whom you deliver bananas to? (Yes or no). 

Yes, we have clients in the UK, Germany, France, Spain, Italy 

3. Who are currently your shipping-agents who deliver your product in Europe?

Cool Carrier at the Manzanillo port and CMA CGM at the Rio Haina port.

4. On a monthly basis, what is the amount of bananas you have for sale? (in kg. or ton)

100 containers of 40 ft.

5. I have understood that currently the plantations have an increased production of bananas. Is this correct? (yes or no)

Yes, they have increased with 25%.

6. If so,what is the reason for this?

Various new clients in Germany and the UK

7. With the current production capacity of the plantation, do you want to get more clients in Europe? (yes or no) Why?

Yes, but only biological bananas to increase the volume of sales

B. Logistics

1. The shipping company has the following options: Rotterdam, Zeebrugge and Portsmouth). Are these ports interesting options for you? (Yes/no) 

Yes, Zeebrugge and Portsmouth are interesting options. Rotterdam is a very expensive port.

2. Which port in the DR do you currently use to transport the bananas to Europe?

Manzanillo, Rio Haina and Caucedo.

3. What are the factors which would make it questionable to do the transportation via the port of Manzanillo? 

The vessels on Tuesday are problematic, because one week is necessary for all the preparations.

4. Why do you think Manzanillo is the best port for the transportation of your products?

It is located very close to the plantations. In time 40 to 45 minutes.  They handle the fruit with more care at the Manzanillo port.

5. Do you prefer the transport of your products in the form of container cargo or loose cargo?

Loose cargo

6. Why do you prefer this option?

I prefer loose cargo, because for truck loading they require a minimum of 20 pallets. With loose cargo, I do not have this.

7. Now we already have discussed the preferred type of cargo. Now I would like to ask you some questions about your requirements or demands regarding the transportation. What are the performance indicators for the quality of your distributor? 

  • Price (what is too expensive? Be more specific and keep on asking)
  • Handling 
  • Speed of delivery
  • Service (which specific extra services would make Vertraco a more interesting option)
  • If other, please explain……..

My performance indicators are:

  • Trucks in good condition
  • 7 days to return the equipment without payment

My research is focused on Vertraco Shipping. I am not an employee of this company, but these are the services they offer.

Vertraco Shipping can also provide extra services regarding transport, storage and refrigeration. They can arrange the whole process of transport and storage. This could be very interesting for your company, as everything is then laid into one hand.

  1. Vertraco can offer the transport from the plantations to the Port of Manzanillo. After that Vertraco can completely take care of the product storage in the Port of Manzanillo. 
  2. The products will be stored in containers and the port of Manzanillo has the ability to plug in these containers (necessary for refrigeration )
  3. The storage in Zeebrugge, Rotterdam or Portsmouth.
  4. Transport from European ports to the customers.

8. Aside from ocean transport, what kind of aforementioned extra services would be interesting for your company? 

Those are all very interesting options. I am especially interested in the transportation to the clients. Ocean transportation can be expensive. To lower the price, it is preferred to have return cargo as well. 

9. Is there any type of products the plantation needs coming from Europe? (such as cardboard boxes or fertilizers)?

Yes, products such as boxes, plastic, pallets, strips, corner protectors and ornaments.

C. Miscellaneous

1. Are there any topics/ issues you think that are important for this research, which I have not addressed?

In general we discussed everything. I would also like to say that my company is also interested in the distribution of other fruits such as pineapple, dried coconuts, mangos, avocado, vegetables and melons.

2. Would you like to see the report of my research (anonymously)?

Yes, why not.



4.1: Introduction

Using the various frameworks and models as well as the literature review, secondary and primary data collected, important and useful information were derived at.  The results of the methodology applied will be seen in this chapter and from said results, the conclusion and recommendations will be made.

4.2: Findings on the Port of Manzanillo

The port of Manzanillo is located in Manzanillo, Monte Cristi. It is a finger pier with berth facility to the west and east side, located in the northern part of the Dominican Republic. It is also very close to the Haitian border. The port of Manzanillo was built in the 1950’s by the Dominican Fruit Company (La Grenada). La Grenada is a North American fruit company dedicated to the export of bananas and other minor fruits of the Dominican Republic. 

The port is currently under a leasing-trade for reconstruction and is still being supervised by the Dominican Port Authority. This port is generally used for the transport of material for concrete, the export of domestic products such as fruits, foods and animals to Europe and sometimes for general cargo and container cargo operations. This port is mainly used to export bananas but is also able to handle various types of cargo like general cargo, containers, clinker, cement, coal and break bulk.

The port of Manzanillo was originally designed for a maximum unit load of 15 tons. It has only one steel and concrete finger pier about 230 m long by 27 m wide. The water depth at the end of the pier is about 38 ft, and near land it is only 18 ft. under normal circumstances both sides of the pier can be used for docking.  The port size is very small with a maximum draft of 10.66 m and a length of 230 m.  The pier width is 27 m. and high above MLLW of 4 m. (means lowest low water).  It has a min. of range of depths of 5.5-13 m. and a recommended maximum draft of 9 m.

4.2.1 Anchorage

Anchorage is the location where the vessel can be anchored. Excellent anchorage is available in the Manzanillo bay to the North East of the dock in about 20 fathoms of water. A fathom is a nautical term and stands for a conversion equivalent of 1.83 m.

The limitations are as follows:

  • There are no shore cranes or container handlers available
  • The port of Manzanillo does not have any plugging facilities for reefer containers.

Speed of operations:

  • 10 containers /hour/gang loading rate
  • discharge rate empty containers 12/hour/gang with self-sustained vessel crane

The following stevedoring charges apply at the port of Manzanillo:

  • Stevedores discharge $ 70.00 per empty container
  • Stevedores loading $125.00 per full container
  • Terminal handling charge $65.00 per container


  • No special  documentation is required
  • No special requirements at this port
  • No special local working procedure at this port

The anchorage area is located to the east of the dock with a depth of 20 fathoms of water. The anchorage area also consists of good holding ground of mud and sand.  Pilotage is the conducting of a ship into and out of the port or through dangerous waters. The pilot does not belong to a shipping company but has to be licensed to perform these activities. The pilot can also be the helmsman of the ship, meaning that he is steering the vessel. The pilot and harbour master should be contacted via channel 16. The pilot can board the vessel about one mile from the harbour entrance. The harbour master is the official responsible for construction, maintenance, operation, regulation, enforcement, administration and management pertaining to marinas, ports and harbours. 

4.2.2 Findings on Stow-Aways

All ports within the Dominican Republic are facing drastic problems concerning stowaways. The unauthorized boarding of vessels is a very common problem within these ports.

4.2.3 SWOT Analysis of the Port of Manzanillo


  • The location is geographically very advantageous because the vessels do not have to start sailing from the south side of the Dominican Republic
  • The port of Manzanillo is very close to the area where the plantations are located
  • The transportation costs from the plantations to the port of Manzanillo are significantly lower than the transportation costs from the plantations to the ports of Caucedo and Rio Haina in the south.
  • There are less competitors at the port of Manzanillo, in comparison with the ports of Rio Haina and Caucedo


  • The port of Manzanillo is  a relatively small port
  • The port does not have highly advanced equipment, and no container handling equipment
  • The port does not offer a wide variety of services to the customers
  • No reefer plugs


  • In the future the port can be used to transport other types of cargo necessary for the tourism industry and seaside resorts
  • The main competitor has lost a significant amount of cargo to handle due to internal financial problems
  • The global demand for organic products is growing rapidly


  • The plantations are not signing many new contracts at the moment
  • Limited berk space and may be occupied by other ships.

4.3 Findings on the Port of Rio Haina

The port of Rio Haina handles the majority of import cargo. It is the main port of the Dominican Republic and about 70 % of all cargo is handled at this port. This port is solely used for cargo operations incoming from several countries in the Caribbean zone. The Rio Haina port has two terminals, located on both sides of the Haina River. The oldest terminal is called Haina Occidental Terminal and the newest terminal is called Haina Oriental Terminal. This port handles the majority of the maritime activities on the island.

4.3.1 Anchorage

It is advised that vessels anchor off the port of Santo Domingo, which is located only six miles away to the east of Rio Haina. Anchorage at Rio Haina is considered unsafe and only to be done in case of emergency. The anchorage is about 3.4-4.6 meters deep.

4.3.2 Pilotage

Pilot and harbour master are contacted by radio channel 16. The pilots board the vessel about one mile from the harbour entrance with the use of a small boat or approximately 35 feet in length.

Port size: medium

Maximum draft: 9.14 m

Harbor size: small

Maximum vessel size: over 500 feet in length

Harbor type: coastal breakwater

The port of Rio Haina is in the possession of 0-24 ton lifts, 50-100 ton lifts, fixed cranes, mobile cranes, and container handling equipment.

4.3.3 SWOT Analysis of the Port of Rio Haina


  • Relatively large port
  • In the possession of various types of port equipment


  • The location is relatively far from the banana plantations
  • The vessels have to sail from the southern side of the island, which is a small detour to sail to Europe



  • Currently almost all cargo is being handled at the port of Caucedo

4.4 Findings on the Port of Caucedo

The port of Caucedo is located about 15 miles from the Dominican capital Santo Domingo. The main activity of this port is the handling of local and transhipment cargo. The harbour of Caucedo is only used for cargo operations coming in from various countries in the Caribbean zone. The port of Caucedo is the most recent and most modern port of the Dominican Republic. The port of Caucedo has an estimated 30 % of the maritime cargo movement in the Dominican Republic, and is only surpassed by the occidental port of Rio Haina. The port of Caucedo has one container terminal, which is located next to Las Americas International Airport. Several of the bigger shipping lines have the port of Caucedo in their sailing schedule, such as CMA CGM, MSC, Hapag Lloyd and Maersk.

The port of Caucedo offers various types of services to the local market, which include:

  • Loading and unloading of containers
  • Safe storage of loaded containers
  • Complete refrigerated cargo services
  • Assistance in the customs inspections process (verification of cargo)
  • Over dimensioned cargo handling
  • Vehicle discharge and storage

4.4.1 Anchorage

Anchorage is prohibited in the Andres bay. It is advised that vessels waiting for berthing stay adrift in open waters to the south-east.

Port size: medium

Port authority: DP World Caucedo

Berth: 622 metres

Depth: 13,5 metres

Container yard: 50 hectares with a storage capacity of 40,000 TEUs

Reefer plugs: 654 plugs + 350 connections by mobile generators

Port equipment

Post-Panamax cranes: 5

Mobile harbour cranes: 2

Rubber Tire Gantries (RTGs): 20

Chassis and trailers: 79

Reach stackers: 6

Empty handles: 5

Forklifts: 9

Trucks: 66, Buses: 3, Pick-ups: 20

Port operations

Inbound yard lanes: 12

Outbound yard lanes: 4


Navis operative system: Sparcs, Express, Web access

Berth Length: 600 m (a berth is the place beside a pier, quay or wharf where a vessel can be loaded or discharged)

High above MLLW: 3 m

Min. or range of depths: 13.5 m

4.4.2 SWOT Analysis of the Port of Caucedo


  • Relatively large port
  • In the possession of various types of port equipment
  • The port of Caucedo offers a wide variety of services to her customers
  • Customer convenience, by offering all of the services online or by making use of the call centre.
  • The port of Caucedo has the possibility of reefer storage, including electric plugs and monitoring for $100.00 per day.
  • Currently the port of Caucedo is already handling most of the incoming cargo in the Dominican Republic, which gives Caucedo a strong comparative advantage


  • The location is relatively far from the banana plantations
  • Congestion, since a great deal of shipping lines operate in the port of Caucedo



  • The port of Rio Haina has approximately a similar handling capacity as the port of Caucedo



5.1: Conclusions

There is definitely a market opportunity to increase the growth of the transportation of bananas from the port of Manzanillo to Portsmouth and Rotterdam. It is recommended to obtain more detailed information and especially with respect to the logistics in the port and between the port and the plantations. Based on the primary research there can be concluded that it is important to pay attention to the smallest details, to avoid unforeseen problems that may be very costly. Also very clear and written procedures must be made with all parties involved:  The ports, the stevedores, inland trucking, the shippers, the pre-trip inspection of reefer containers, maintenance of clip-on gen sets, documentation, arrangements with the  port authorities, ships owners and captain, etc.  

All of the above information and conclusion are derived based not only on the literature review and the secondary data collection.  What is even more important and vital to the thesis is the actual interviews made with presidents and high officials of the prospective Dominican Republic companies that may prove to be good partners in the transport of bananas from DR to Europe.  The business concept is quite promising and with further negotiations and dealings with them can prove productive for Vertraco.

5.2: Recommendations

It would be best to investigate the cost structure for cargo from Europe to be discharged in one of the ports on the south coast, and then sail around the island to the north coast where the port of Manzanillo is located, for the loading of bananas. Empty containers that become available on the south coast port after the general cargo has been stripped from these containers will have three options, i.e., (1) loaded on the next vessel for carriage to Manzanillo; (2) Trucked empty to the banana plantations for loading of bananas and then further to Manzanillo. This looks like an expensive option, but the inland trucking costs will be partly offset by the stevedoring costs for loading on board a vessel in the southern port and the stevedoring costs for discharging in Manzanillo. Stevedoring is the activity of loading and discharging of vessels; or (3) A combination of both alternatives.

5.2.1 Classified recommendations

Find private stevedoring company (contractor), who is willing to invest in port equipment in Manzanillo for: container handling (reach stacker), empty container handler, power packs for plug-in facilities for reefer containers ( to build a buffer of some containers ready to be shipped), PTY (pre-trip inspections of containers). 

To investigate if a local stevedoring and agency company is interested in a partnership to do the stevedoring and trucking. It is recommended to have a tender select a stevedoring company who will also do the trucking if required. 

With regard to the interviews made with DR companies, it would be recommended that certain compromise be made to be able to answer the needs of each one.  Doing so would attract and entice the banana plantations to do business with Vertraco and transporting their bananas via Vertraco Shipping would be more likely.

5.2.2 Specific Recommendations

During the research and interviews the conclusion could be made that it is probable that the banana shippers will not find a FOB (free on board) contract whereby they are responsible for the road transportation of the bananas. It is possible that they prefer that the shipping line also is responsible for the road transportation whereby the banana producers (shippers) are selling their bananas ex-plantation. It should also be further investigated if the above is not correct who the buyer is. It should also be investigated if the buyer is paying for the transportation or the shipper.  

Regarding the transportation of bananas, there are three options, i.e., ex-plantation, FOB port (Free On Board) or delivered to European ports (CIF). This stands for cash, insurance and freight. In the first case the European buyer will be responsible for both road transport and ocean transport. In the second case the European buyer is only responsible for the ocean transport. In the third case the shippers (producers of the banana) are responsible for road and ocean transport. Investigate the possibility of a value added service to the shippers and/or buyers by offering intermodal transport services: this means transportation from the plantations to the port in Europe or warehouse in Europe. But to do this, it is also important to sign good contracts where every detail is mentioned. The most important contracts are the stevedoring contract and port services, the trucking contract (if applicable), the agency contract, the shipping contract (contract for ocean transport) and the contract for cleaning and pre-trip inspection of reefer container.  

It is found that the various banana plantations do not have one sale contract. Some sell ex-plantation, while others F.O.B. port or CIF. Vertraco should come to a uniform arrangement. F.O.B. is preferred to limit liability. It is also recommended that Vertraco studies what special insurances are required or recommended for this type of reefer services, especially if road transportation is also included.


The study of social processes has witnessed tremendous developments over the decades. Researchers, especially from the fields of sociology and Psychology, continue to present findings and evidence on the dynamics of different social phenomena (Julian, et al. 1995). Among the social phenomena that have been probed extensively include interpersonal and romantic relationships, engagement and marriage. However, there is a feeling that not so much work has been done on how scholastic modeling can be applied to social processes in attempt to explain the interconnections between different variables amongst the social phenomena under scrutiny.

Contemporary investigations give much emphasis on the continuous time models using individual data (Hadeler, 2010). Researchers, from both the field of sociology and discipline of Psychology, continue to work with variety of models using individual data in analyzing dynamic social processes. Actually, the dynamic social processes have become of great interest in almost all fields of sciences and social science. (Hadeler, 2010).

Leo‘s study applied scholastic modeling in studying the population growth of the sexes (Leo, 1968). The researchers utilized stochastic models in describing changes taking place in a sample numbers of men and women population in different age intervals within some period of time (Leo, 1968). Their first case of study was where either the numbers of females or males were marriage dominant. Their second case of study was where the numbers of neither males nor females in the different age intervals were marriage dominant (Leo, 1968). This study paved way for possible future investigations into the marriage social phenomena based on the scholastic modeling. Concomitantly, Forrester and Alfred focused on the dynamic modeling of the Arms Race. The study was centered on two models of engaged couples in tempestuous relationship (Forrester, & Alfred, 1985). Their study was exceptionally significant in the system dynamics introductory course applying the paradigm of scholastic modeling (Forrester, & Alfred, 1985). 

Hadeler investigated into the aspect of pair formation, in which case, a number of pair formation approaches were observed in multitype populations (Hadeler, 2010). This work attempted to address the classical two sex problem in much details based on the law of pair formation. It adapted a general approach to separation process and pair formation in studying one sex multitype population, and applied the same approach in studying two sex multitype populations (Hadeler, 2010). In trying to distinguish between the chosen and the choosing sex group, the study finds the ultimate model is symmetric, with a high probability for asymmetric in the rates of preference. Pair formation problem is then linked to the problem of connecting stochastic matrix to sub-stochastic matrix, so that probabilistic interpretation can be realized to the known formulas representation in pair distribution (Hadeler, 2010).

According to Wilhelm, “nonexistence or existence of exponentially persistent age distributions is determined by the vital rates of two sex population” (Wilhelm, 1994).  Wilhelm notes there has been a growing interest in the study of the dynamics of two sex populations, considering pair formation as the main reproduction step (Wilhelm, 1994).   The pair formation model is thus given great emphasis in the field of epidemiology and demography, especially when modeling sexually transmitted disease (ETDs) (Wilhelm, 1994).   Wilhelm posits that even though death and birth are generally assumed to be linear processes, pair formation models are useful nonlinear processes, given the fact that the very act of mating is nonlinear (Wilhelm, 1994).  

Carlos, Wenzhang and Jia formulated and analyzed a pair formation model for multiple groups baring arbitrary mixing probability and general rates of paring (Carlos, Wenzhang, & Jia, 1995). By using equal average durations for all relationships and assuming that the recruitment rates were constant, these researchers found that the dynamics were relatively simplified. This was due to the monopolistic features of dynamical systems linked with paring of heterogeneous population of females and males (Carlos, Wenzhang, & Jia, 1995).

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In examining matches between marriage couples, Linder (2003) used the structural approach. The structural approach was a two sided matching model which enabled the researcher to sort out the marital couples with regard to marriage market flexibility, utilizing the agent’s preference (Linda, 2003). The study found that for white men, education was less desirable in predicting marriage propensity as compared to wage. As for the black men, education was more desirable in predicting marriage ability compared to wage. It was also observed that there was more flexibility in the marriage market for the white men (Linda, 2003).

Catherine and Debra looked into the subjective processes in which the premarital partners became less or more committed to marriage with time (Catherine & Debra, 1997). This research identified two processes in commitment, that is, the relationship driven commitment process, and the event driven commitment process. It found that in the relationship driven commitment, there was smooth evolution of the commitment characterized by few reversals. In this instance, the partners in commitment process paid attention on factors such as their interactions, joint networks, activities that involved both of them and positive believes regarding the relationship. There were extreme variations in the event driven commitment. The event driven commitment process was coupled with massive downturns and sharp upturns. Partners in this commitment process focused on factors such as negative relationship believes, self disclosure, separate interaction in their social networks, conflicts, and negative network believes (Catherine & Debra, 1997). The researchers resolved that the partners in event driven relationships were less committed to marriage and were most likely incompatible. The partners in relationship driven process were more committed to marriage and were most likely compatible (Catherine & Debra, 1997).

This paper will be examining the extent to which scholastic models have been applied in modeling dynamic social processes. It follows the fact that different social processes can be investigated using the mathematical paradigms of scholastic modeling. There will be an extensive review of the previous literatures on the application of scholastic models in social phenomena. In the research conducted by Alessandria, Sergio and Gustavo, the social phenomena in focus was love dynamics, a problem that is know to reside in the filed of social Psychology (Alessandra, Sergio, Gustavo, 1997). Their study borrowed majorly from the attachment theory which they used in explaining the problem of romantic relationships. The researchers focused on the existence of cycle dynamics in romantic relations, arguing that the application of differential equation in modeling the dynamics of feelings was manifested in their cyclical love dynamics model (Alessandra, Sergio, Gustavo, 1997). This dissertation looks into how Alessandra, Sergio, Gustavo, (1997) utilized the mathematics paradigm in demonstrating how love dynamics can be stochastically modeled to further expound on the understanding of this social phenomena. It presents a comprehensive review on how scholastic modeling applies in romantic relationships, the case of cycle dynamics in romantic relations.

 The structure of this project would be as follows: Chapter one present the general overview on the use of scholastic models in studying dynamic social processes, including relationships, engagement and marriage.  It briefly reflects on how scholastic modeling has been applied in studying these social processes. Chapter two of this dissertation will be focused on the stochastic nonlinear dynamics of interpersonal and romantic relationships. Chapter three will investigate into the dynamic of marriage and engagement using a stochastic dynamic. 


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