GITAM INSTITUTE OF MANAGEMENT

U.S- CUBAN TRADE: WHEN DOES A COLS WAR STRATEGY BECOME A COLD WAR RELIC?
ANALYSIS OF METHODOLOGY
SUBMITTED BY: DIVYA VARMA (1225111209) NARESH (1225111221) PRIYANKA V (1225111233) RAJESH (1225111245) VAMSEE KRISHNA (1225111261) MBA I ST YEAR SECTION-B GROUP B
3/15/2012

CASE

USING

CASE

The primary focus on the reasons for the embargo to be enacted in US Cuba trade relations and gives an idea of the various laws & policies enforced (Cuban Democracy Act, Helms & Burton Act etc.) & their implications.

1) What is the main issue/opportunity/problem?

The main issue regarding the case the Cuban embargo gives the appearance of cold war relic that is no longer relevant in todays world. However, given the consensus that Cuba consistently violates human rights, the continuance of U.S. trade sanctions against Cuba is consistent with U.S. policy. In addition, Cubas expropriation of American property without compensation is internationally recognized as unacceptable behavior; thus, retaliation can be seen as an appropriate response. Finally, there is the continuing argument that if the Cuban economy can be further weakened, Castro may at last be overthrown. OPPORTUNITY: The opportunity in this case is to put an end to warfare and continue healthy relationships between the two countries for better economy of the trade and in other aspects for the well being of the countries. The alternative is to normalize the business relations with Cuba and impose some conditions. 2) Why this issue is important? The case is vital since, the structure and relationships of the American political system serve to reinforce the existence and specification of the Cuban trade embargo. The Pro-embargo supporters relentlessly lobby the U.S. Congress and presidential administration to tighten the embargo in order to spur the collapse of Cuban communism. 3) What are controllable and uncontrollable variables?

Controllable variables:
Finances: Finances play an important role in countries economy. This can be

controllable since the replacement supplies can be overcome, if Cuba continues the trade with US. If Cuba has undergone some restrictions on exports, this makes the line normal for the economy.
Investment strategies: If there is a rapid increase in investments, leads to decrease in

expenditure. If Cuba goes on increasing its investments more on exports, purchasing power will be more, and there will be no limit for investing. So, this can be controllable by balancing imports and exports

 Amount of import and export: Trading which is a part of economy, depends on the

revenue generated by imports and exports. If Cuba continues the quota system and limits the imports, here will be less scope for other nations to continue the trade. Due to this, it can be a part of controllable variable.

Uncontrollable variables:
US government policies: US enacted two acts on Cuba (Cuban democracy act, which

was passed by the US govt. in 1992, Helms & Burton act in 1996 was passed by the Bill Clinton) are uncontrollable since these policies disabled the trade relations and emigration between these two countries. These government interventions cannot be controlled. Cuban Government: When US cancelled the trade with Cuba, the government of Cuba, without viewing the down the pike, immediately relay on Soviet unions and maintained a strong relationship with other nations. Neither, the citizens nor other parties cannot have a control on this issue.
Mindset of other countries & government: Cuba when started relaying on Soviet

Union, had to undergo a loss in trade. This gave a chance to Soviet Union to misuse the Cuba trade. This gave a chance to other nations to parasite on trade and this cannot be controllable.

4) Who are the interested parties in the issue and why?

Interested parties: .

Soviet Union which has made the relations with the Cuba when US ignored and cancelled all its relations and agreements with Cuba.
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The US public, who are in great favor to establish the diplomatic relations with Cuba.

Other nations were hugely supported the US embargo because overtime the US role in the Cuba drama played to a less sympathetic audience worldwide. The citizens of both the countries, living in both the countries.

5) What are the alternative approaches for the issue? The alternatives for the issue regarding the case are as follows: -Chief alternative is to relax the embargo to an extent, so that the Cuban communism can be overcome. -The U.S. government may wish to facilitate the return to Cuba of U.S. companies whose properties were expropriated, even though any remaining assets are likely in a state of serious disrepair. - Normalizing business relations with Cuba by imposing some conditions.

6) What objectives, policies, strategies, tactics and actions would be taken with each?

The US followed certain policies to counter some of the moves made by Castro like: Requiring any exports sales to Cuba to be paid in cash in full beforehand Reducing the maximum number of times Cuban Americans could visit Cuba from once a year to once in 3 years Cancelling agreements to buy Cuban Sugar & Cuba seized US oil refineries as a result of which oil companies refused to supply oil to Cuba. Cuba had to look at the Soviet Union for alternate supplies. Cuban democracy act, which was passed by the US govt. in 1992. This act enforced ban on American travel to Cuba and also disabled the trade relations between US subsidiary companies and Cuba. Helms & Burton act in 1996 was passed by the Bill Clinton, which reinforces the provisions of the Cuban democracy act as well as added stipulations for penalizing foreign companies that did business with Cuba.

7) What are the potential effects on sales and profits and the likelihood of those

occurrences?

If the sales are more for any product, there will be a hike in the profits, if the sales show a downfall, profits too will show a downfall. Same reflects to the case, due to the embargo and cancellation of trade between the countries, and Cuba turned to Soviet Union for replacement supplies. Since the GDP of Cuba came down in 2006 PPP (purchasing power parity) fell drastically, thereby reducing the purchasing power and badly effects the economy. Cubas exports were also effected as export quantities reduced due to the quota followed by other nations.

8) Choose one of the alternatives and defend why your choice is best? The best alternative is normalizing business relations with Cuba by imposing some conditions. Illustrating this alternative with an example is that India and Pakistan, keeping their rivalry apart, and concentrating more on the trade transactions. This can be reflected to this issue, keeping the differences of US Cuba apart and normalize business relations by restricting to some conditions.

9) What are the future implications on the interested parties if your recommendation is implemented?

According to our perspective if our alternative is implemented, it would prove beneficial for both countries as many US companies & industries will be helped. Cuba also is attracting more & more investments & Texas A&M University survey gives positive evidence that US agricultural exports to Cuba can improve to about $ 1.24 Billion with other benefits from tourism & oil to follow.