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Given the lack of education by its members, their success is impressive. COHDEFOR should be delighted with their experiment. Nevertheless, any future attempts to copy this model should be carefully analyzed and basic business skills, such as accounting, should be taught to members before letting them run a business.
SWOT Analysis Guajilote Cooperativo Forestal, Honduras
This business has committed and determined members and employees. There also exists a strong relationship among the members.
They are the only cooperative in Honduras with rights; granted by COHDEFOR, to harvest rare natural resources, such as mahogany.
Munguia doubled earnings in 1995 by renegotiating the sale price to the only local distributor.
There is limited capital outlay to maintain the equipment.
There will be a steady increase in price when the world-wide supply decreases.
The heaviest harvest opportunities are during the wet season, as more trees will become uprooted during this time.
A change in direction of the cooperative can be made quickly.
There is no educated leadership.
All staff needs more training and education
The record keeping is nearly non-existent.
There is no leadership succession plan in place. Munguia became the de facto leader within a year of joining the cooperative.
Santos Munguia runs the cooperative without input from any of the other members which will limit the ability to grow.
They cannot get a loan to buy the needed large equipment for further growth and efficiency.
There are limited distribution channels.
They have limited financial capital.
They have a good local reputation, but limited means to reach further than where they are.
There are limited resources and means to retrieve the resources.
It has dangerous work conditions.
There is difficulty in getting mahogany to the marketplace.
It could be possible to sell to "local" carpenters.
There is at this time no local competition.
They would like to add their own transportation division in order to market the mahogany directly without use of a distributor.
The global demand for furniture made of mahogany has increased.
Ecology issues have become of greater importance world-wide, increasing the value of eco-friendly produced furniture.
Mahogany could be further refined, adding value to the product and thereby increasing profit potential. There are a few carpenters in Honduras that do this work on a contractual basis with which they could form a partnership.
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Honduras has an unstable political climate.
The harvesting area has decreased every year
The right to harvest mahogany ends in 2001.
There was an unusually large number of forest fires last year and have been predicted for next year. These fires have killed the trees, young and old, as well as their seeds. This reduces further production of mahogany.
Campesinos have been moving into the La Muralla region, clearing the land and using the wood for cooking and heating fires as well as house building. La Muralla is the area with the highest concentration of mahogany.
Illegal logging is taking place thereby reducing available trees.
It is possible that in the future, there will be tighter trade restrictions on mahogany harvesting as the resource becomes more endangered by CITIES.
The transportation from Chaparral to Tegucigalpa is treacherous, taking at least three hours over rain soaked mountain roads.
Guajilote's only strategy so far, has been the political pressure placed on the distributor, San Pedro Sula. However, they are looking to the future with the intent of not needing Suazo to distribute the wood. This shows a competitive strategy in the formation phase. However, they have not set aside any funds to make this possible. Since it is very difficult for small companies to receive lines of credit from legitimate sources, they have not continued approaching banks or venture capitalists in order to secure the necessary funding for the new capital investment and the equipment needed to expand.
The fallen mahogany is difficult to locate, process, and distribute. Fortunately the members are dedicated and hard-working, willing to face and overcome these challenges.
It is a very simple, albeit dangerous and labor-intensive, operation: locate a fallen mahogany tree, set up a temporary hand-sawmill, disassemble the tree, carry out or float out the wood. Locating a suitable location to set up the large cross cut saw needed to disassemble the fallen tree is often difficult because of the steep terrain. This is often a very time-consuming process, limiting the number of trees Guajilo members can process in a year.
Currently Guajilote is selling the mahogany to the only local distributor. This has limited their profit potential.
Marketing and Sales
There has been very little marketing done, as there is only one distributor willing to come out to Chaparral because of its remote location and treacherous roadways. However they have contacted an exporter to assess the viability of adding furniture making to their operations.
The only service Guajilote is offering currently is the rough processed mahogany cut and pulled from the forest, being sold as a commodity only. It does have the benefit of being legally obtained
The only things purchased have been a work mule and maintenance materials for the saws. Being located in such a remote location limits the availability of suppliers. Procurement of the wood is a long, arduous process.
Guajilo has very little technology. They use large cross-saws, mules, and human power, taking advantage of local streams whenever possible to help bring out the processed mahogany. The members have little or no formal education: this limits what technology can be utilized.
Human Resource Management (HRM)
The cooperative has limited membership, originally selected by USAID and COHDEFOR. There have been strong bonds formed amongst the members. The profits are purportedly evenly distributed amongst the members. (However, there is some speculation that Santos Munguia and his nephew, Miguel Flores Muguia, were taking a bigger share than what was being paid to the other members.)
There is no formal training program in place. There are no formal member meetings to develop company strategy. The cooperative is very dependent
upon Santos for his strong leadership, without him I fear the cooperative may come apart as things are set up currently. The other members will need to take over more of the administrative tasks in order for Guajilo to grow and become more profitable.
Santos and Miguel run Guajilo, making all the business and financial decisions without consulting any of the other members. This could become a liability as the firm grows and Santos becomes more involved in local and national politics (Microsoft, 2005).
There are a few strategic alternatives that are open to Guajilote. They could form a strategic alliance with native carpenters and an exporter. This would in effect, form a value-chain partnership.
There needs to be vertical growth: they could add transportation division in order to eliminate dependence upon monopolistic distributor. This would potentially increase profits by enabling Guajilo to sell the mahogany directly in the market centers, eliminating Suazo's control of profit potential.
They should expand into the harvesting of other types of trees, both in the local community and within the protected forest.
Planting mahogany trees in suitable areas of the park, thus assures future harvests with accessibility.
I recommend that the cooperative agree to set aside a portion of the profits for capital improvements, such as 1) a computer with a basic bookkeeping software package in order to more accurately and more easily track profits and expenses without the reliance upon Miguel and Santos' informal bookkeeping system (and eventually the internet in order to further their goal of exportation), 2) a truck and driver, 3) maintenance supplies and, 4) training programs to further the education of the members to better run the cooperative. With this strategy (business plan) in place, they could more easily approach venture capitalists for the funding needed to accomplish these goals sooner since it shows a resolve of the cooperative to expand and the ability to repay, with a profit, the investors.
With the distribution division in place, they then could form alliances with native carpenters and export, not only the raw commodity, but also the value-added products world-wide. They could choose to educate themselves on the export process or hire an exporting company to do this for them. (I believe, given their education levels, that they should hire a trusted company to perform this function on their behalf.)
They have a relatively protected niche with few competitors world-wide. Even if they do nothing differently, their profits should increase due to the shortage of supply. However, this could also work against them as the trading rights could be removed at anytime with a worldwide ban on mahogany sales or a change in national government. As such, they should also look into rights to harvest some of the other trees in the forest, and form strategic alliances with locals, in order to expand their product line and cushion themselves from the possibility of a mahogany trade ban. They should also request the right to plant the trees on their own, move saplings to more accessible locations in order to assure future harvests.
Microsoft (2005) "The Value Chain" Retrieved on October 28, 2005 from http://www.marketingteacher.com/Lessons/lesson_value_chain.htm.
Wheelen, Thomas L. and Hunger, J. David. (2004). Strategic Management and Business Policy, 9th ed. Upper Saddle River, NJ: Pearson Prentice Hall.