Strategic Management

Guajilote was founded in 1991 as an attempt to develop La Muralla National Park. Guajilote Cooperativo was given the right to develop naturally fallen mahogany trees in La Muralla's buffer zone. People were allowed to live and work within this buffer zone. In 1998, Guajilote started facing major issues that could affect the future growth of the company. Forest fires, illegal logging, and slash-and-burn agriculture were threatening mahogany wood. If mahogany trees continued to decline, trade for its wood could be restricted internationally like ivory trade (Wheelen, p 8-1).

As a business venture, Guajilote has been able to improve its income and quality of life of the members of the Cooperativo. As it says in the case, these members were earning 2,000 lempiras a year, if they were lucky. Now since the membership of Guajilote, they earn 1,000 to 1,500 in one month. They have also been able to rise up prices of the mahogany slightly. There are also some negative points to this venture as well. A major concern is the threat of deforestation. Another concern was that the growth of Guajilote was limited by the amount of mahogany it could produce in one year. Guajilote was legally restricted to only getting the mahogany trees that were downed. This made it difficult to find the trees and more difficult to find the trees in a safe environment. There was also a lack of transportation. The cooperative did not own a truck and did not have enough money to buy one. The cooperative mainly relied on their distributor for transportation of the wood. If they had their own truck, they could sell the wood without the distributor (Wheelen, pp 8-4 through 8-5). The business should also realize how rare mahogany trees are to come by. When they find a tree that has fallen they should plant several trees in its place. Although it will take years for these trees to grow into a mature tree the company has also given itself a good reason to continue in the business they are in. Once the trees are gone, it will take a lot longer to have more trees. If they go ahead and start the process while they are milling the other trees, they have already gotten an advantage by knowing that if these trees do not get destroyed by fires, poachers, or slash-and-burn agriculture, then they will have more trees to manufacture in the future.

There are several strengths, weaknesses, opportunities and threats for Guajilote. Its strengths are that they are able to set up hand sawmills close to fallen trees. This at times was very difficult because the steep terrain. The second strength is that the cooperative was able to develop knowledge of markets and business practices for mahogany wood (Wheelen, p 8-2). Its weaknesses are the potential growth of Guajilote depends on the amount of mahogany it could produce in one year. It is also hard to find and process the wood because of the steep terrain. Finally, Guajilote did not have the funds for adequate transportation. To get a tree out of the forest, they used mule and manpower (Wheelen, p 8-2 & 8-4). Opportunities for Guajilote included economic growth for Honduras. Guajilote may be able to establish some direct links with furniture makers. This would enable the cooperative to make more money because they would not be going through a distributor (Wheelen, p 8-5). Threats for Guajilote would be the threat of deforestation by fires, poaching mahogany wood, and slash-and-burn agriculture. Another threat is potential restrictions placed by CITIES. If the population of mahogany continues to decrease CITIES would put mahogany under stricter protection laws (Wheelen, 8-5).

Strengths:

1. Ability to set up hand saw mills.

2. Ability to develop knowledge of markets and business practices.

Weaknesses:

1. Potential growth is limited to the amount of mahogany produced in one year.

2. Hard to find and process wood.

3. Lack of adequate transportation.

Opportunities:

1. Economic growth for Honduras.

2. Establish direct link with furniture makers.

Threats:

1. Threat of deforestation.

2. Potential restrictions placed on mahogany wood by CITIES.

For a company to have a competitive advantage they must first have a strategy that will outperform other companies in the industry. The company will need to figure out how to lower cost and differentiation. The lower cost strategy is the ability of a company to design, produce and market a product more efficiently than their competitor. The differentiation strategy is the ability of a company to provide a unique and superior product in terms of quality, features, or service after the sale (Wheelen, p. 147). By using the differentiation strategy a company believes that they can focus their efforts to better serve the special needs of a narrow strategic market. Since mahogany is such a rare wood, one would think that Guajilote would be able to take the differentiation approach to make their business successful. This is the only company that has the legal rights to the mahogany wood. This should give them a competitive advantage for a while. They would be able to get with local furniture makers and make more money. This would allow the company the extra money needed for better transportation. However, there are also some disadvantages to the mahogany wood. It is a rare wood and it is getting more rare every day. With the threat of forest fires, poachers, and slash-and-burn agriculture it is making it more difficult to make sure that the wood is kept in tact. There is also the difficulty of having the proper transportation to get them through the forest. At times the fallen trees can be on steep terrains making it harder to mill. This also makes it difficult to get the milled wood out of the forest. There is also a concern that CITIES could be put under a greater protection law. If any of these circumstances worsens then Guajilote will not have the competitive advantage that they have today.

Guajilote is a company that goes into the forest and finds the raw materials (the mahogany trees) as the first step in the chain. The next step in the chain is the primary manufacturing of this wood. This part of the chain can be rather tricky for the company. The terrain can be rather steep and dangerous. The team would then set up a temporary hand-sawmill as close as possible to a fallen tree. Men use a large cross-cut saw to disassemble the tree to make