Guajilote Case

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Business, Management Year 4 Strategy Formulation Solution1. The business is certainly located in rural areas and considerations of how this may affect tribal people should be considered. The use of natural resources can be profitable but environmental considertaions such as the impact of deforestation on the global climate needs are vital. Mahogany is a rare wood and the tree does take a long time to grow. This business venture should plant so many trees for each Mahogany tree it finds felled. 2. Strengths: 1. Setting up hand sawmills at the fallen trees. 2. Developing a knowledge of markets and business practices. Opportunities: 1. Contributing to Honduras' economic growth. 2. Establish a good working relationship with distributors like Santos Munguia. 3. Establishing direct links with local furniture makers. Weaknesses: 1. Massive funding required to drive operations. 2. Size and growth of the company is limited by the amount of mahogany produced per annum. 3. Hard to find and process the trees. 4. Lack of adequate transportation. Threats: 1. Deforrestation and impacts on the environment. 2. Pressure groups like Greenpeace and CITES. 3. Natural disasters like forest fires. 4. Decline in numbers of trees. 5. Treacherous terrain and wet weather. 6. Lack of co-operation from Honduran authorities. 7. Corrupt distributors not paying the workers for the wood worth. 3. This comapny does have a competitive advantage in that it can develop its links with local furniture manufacturers. It is possible to operate within the constraints of Cites, if transport costs are met by local buyers. Help provided to these local manufacturers may be achieved by setting up IT systems that monitor input and output of wood. Guajilote's strategy is weak in dealing with deforestation issues. It should engage in planting more mahogany trees. Greenhouses could be set up to cultivate the seedlings. The local population needs to be educated about the importance of up-keeping its natural resources and in conservation matters. 4. The value chain is: Site (forests) --> Transport (carts and river) --> Collection (distributors) --> Sale (manufacturers) --> Exporting (USA and Europe). 5. This company's strategic alternatives include: co-operating with Cites. Develop a sound strategy that for every tree felled, 10 new trees will be planted. Convince the government of Honduras that their natural resource needs to be protected and developed. This includes providing jobs for workers in greenhouses cultivating the seedlings. A proportion of the sale of the wood could be allocated to the development of new schools and clinics in rural Honduras. The local population, via the co-operation of village headmen, need to be educated on the importance of conserving their environment. Children need to be taught this at schools via the provision of posters and books.

GUAJILOTE COOPERATIVO FORESTAL, HONDURAS

Nathan Nebbe and J. David Hunger

Guajilote (pronounced wa-hee-low-tay) Cooperativo Forestal was a forestry cooperative that operated out of Chaparral, a small village located in the buffer zone of La Muralla National Park in Honduras' Olancho province. Olancho was one of 18 Honduran provinces and was located inland bordering Nicaragua. The cooperative was one result of a relatively new movement among international donor agencies promoting sustainable economic development of developing countries' natural resources. A cooperative in Honduras was similar to a cooperative in the United States. It was an enterprise jointly owned and operated by members who used its facilities and services.

Guajilote was founded in 1991 as a component of a USAID (United States Agency for International Development) project. The project attempted to develop La Muralla National Park as an administrative and socioeconomic model that COHDEFOR (the

Honduran forestry development service) could transfer to Honduras' other national parks. The Guajilote Cooperativo

Forestal was given the right to exploit naturally fallen (not chopped down) mahogany trees in La Muralla's buffer zone. Thus far, it was the only venture in Honduras with this right. A buffer zone was the designated area within a park's boundaries, but outside its core protected zone. People were allowed to live and engage in economically sustainable activities within this buffer zone.

Guajilote in 1998 was facing some important issues and concerns which could effect not only its future growth, but also its very survival. For one thing, the amount of mahogany wood was limited and was increasingly threatened by forest fires, illegal logging, and slash and burn agriculture. If the total number of

mahogany trees continued to decline, trade in its wood could be restricted internationally. For another, the cooperative had no way to transport its wood to market and was thus forced accept low prices for its wood from the only distributor in the area. What could be done to guarantee the survival of the cooperative?

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This case was prepared by Nathan Nebbe and Professor J. David Hunger of Iowa State University. Copyright ©1999 by Nathan Nebbe and J. David Hunger. This case was edited for SMBP-8th edition. Reprinted by permission. Presented to the Society for Case Research and published in Annual Advances in Business Cases 1999.

OPERATIONS

Guajilote's work activities included three operations using very simple technologies. First, members searched the area to locate appropriate fallen trees. This, in itself, could be very difficult since mahogany trees were naturally rare. These trees were found at elevations up to 1,800 meters (5,400 feet) and normally were found singly or in small clusters of no-more-than four-to-eight trees per hectare (2.2 acres).

Finding fallen mahogany in La Muralla's buffer zone was hampered due to the area's steep and sometimes treacherous terrain. (La Muralla means steep wall of rock in Spanish.) The work was effected by the weather. For example, more downed trees were available during the wet season due to storms and higher soil moisture - leading to the uprooting of trees.

Second, the cooperative set up a temporary hand-sawmill as close as possible to a fallen tree. Due to the steep terrain, it was often difficult to find a suitable location nearby to operate the hand-sawmill. Once a suitable work location was found, men used a large cross-cut saw to disassemble the tree into various components.