Case 8

Guajilote Cooperativo Forestal: Honduras

I. CASE ABSTRACT

Guajilote (pronounced wa-hee-low-tay) was a forestry cooperative operating

out of Chaparral, a small village located in the buffer zone of La Muralla
National Park in Honduras’ Olancho province. The Guajilote Cooperativo
Forestal had been given the right to exploit naturally fallen mahogany in
La Muralla’s buffer zone. After locating a fallen tree, workers cut up the
tree and transported the resulting wood out of the forest. They then sold
the wood to a distributor who transported and resold the wood to furniture
markers in Honduran cities.

Guajilote appeared to be a reasonably successful enterprise providing

useful work and better pay than the cooperative’s members could earn as
subsistence farmers. It was managed by Santos Munguia, a rising and well-
connected leader who, through the use of his political connections, had
successfully increased the price the distributor paid to the cooperative
for its wood.

In 1998, the cooperative was facing some important issues. The potential
size of its membership and the growth of its operations were limited by
the amount of mahogany it could produce annually. Its inability to
transport the cut wood to major population centers meant that the
cooperative had to sell its wood to a distributor thereby restricting
Guajilote’s profit potential. The mahogany trees were themselves
threatened by forest fires, illegal logging, and by slash and burn
agriculture. There was a possibility of increasing international trade
restrictions if the mahogany species continued to decrease worldwide.
Given these concerns, what should Guajilote do to not only increase its
chances of survival, but also to grow in size and in sales over the coming
years?

Decision Date: 1998 1997 Revenues: $ 22,153

1997 Profits: Not Available

____________
Copyright © 2001, 2003 and 2005 by Thomas L. Wheelen and J. David Hunger.
Reprinted by our permission only for the Eighth, Ninth, and Tenth Editions of
Strategic Management and Business Policy and Cases in Strategic Management.

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 Case 8
Guajilote Cooperativo Forestal: Honduras

II. CASE ISSUES AND SUBJECTS

Forestry Cooperative Honduras

Vertical Integration Central America
Value Chain Strategy Formulation
Growth Strategies Competitive Strategy
Differentiation Strategy SWOT Analysis
Ecology Versus Economic Societal Forces in International
Development Business
Political/Legal Forces Mission
Distinctive Competency Executive Leadership
Competitive Advantage Entrepreneurial Venture
Stages of Corporate Development Economic Development
Lifestyle Business Corporate Strategy
Strategic Alternatives

III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS

(See Figure 1.5 on pages 20 and 21)

Strategy Evaluation &

Strategy Formulation
Implementation Control
Corporate Governance

Strategic Alternatives
Review Objectives &
Strategic Posture

Strategic Factors
External Factors

Internal Factors
Performance

Mission

1A 1B 2 3 4 5A 5B 6 7 8
X O X X X O O X X

O = Emphasized in Case X = Covered in Case

IV. CASE OBJECTIVES

Guajilote Cooperativo Forestal was written to provide a vehicle to

illustrate how an entrepreneurial business venture in a developing
nation could improve the living standards of its members, while
conserving the ecology of the region. The case can be used in
undergraduate and graduate classes in international business, strategy,
marketing, and/or entrepreneurship. This case has been successfully
used in a graduate level course in strategy.

The business venture is small enough that most students, regardless of

experience, can easily grasp how the work is done and why the
cooperative is both important to its members and contributes to
Honduras’ economic development. Since the case is fairly short and the
issues are relatively easy to grasp, this is a good case to assign for
an open class discussion or even to hand out for immediate reading and
analysis during a class.

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 Case 8
Guajilote Cooperativo Forestal: Honduras

Some of the teaching objectives to be accomplished with this case are:

1. To introduce the student to the tradeoff between economic development

and sustaining the natural ecological system of a developing nation.
Can both be achieved simultaneously? This is a dilemma facing most
developing nations. Guajilote Cooperativo Forestal is an example of
how one country was able to support both the conservation of its
forests and the economic development of its people.

2. To emphasize the importance of political connections in getting

things accomplished in many developing nations. The sociocultural and
political-legal forces present in the general or societal environment
of a country can strongly influence the growth and success of new
business ventures. Students should be encouraged to identify some of
these forces lurking within the case.

3. To illustrate the effectiveness of a simple structure and an

autocratic leadership style in managing a small entrepreneurial
venture. It can also be used to show how a venture’s growth could
mean that the structure will need to be changed and management
professionalized if the venture is to grow beyond its current size.
The concepts of stages of development or the organizational life
cycle can be used to show how an organization must change as it grows
and ages.

4. To gain skill at using SWOT Analysis to evaluate key strategic

factors in a case. There is sufficient information in the case to
enable a student to easily generate a list of Strengths, Weaknesses,
Opportunities, and Threats for Guajilote. This may one of its best
uses.

5. To serve as vehicle for value chain analysis in industry analysis.

The production of mahogany wood furniture could be viewed as a list
of separate operations along a value chain. Students could be
challenged to identify where the greatest profit margin might lie.
Although it appears in the case that bypassing its distributor would
act to increase the cooperative’s sales and profits as measured in
lempiras, the cooperative would have to radically change itself to
do so.

6. To illustrate various growth as well as competitive strategies.

Forward vertical integration is one obvious growth strategy. Are
others, such as joint ventures, possible? Although the cooperative
appears to have no explicit competitive strategy, a differentiation
strategy in terms of how the wood is being harvested seems
appropriate. Is this enough to provide the cooperative a competitive
advantage? Currently, the cooperative sells its wood as a commodity.
It could be argued that the future of Guajilote is dependent on its
being able to add value to its product.

V. SUGGESTED CLASSROOM APPROACHES TO THE CASE

VI. DISCUSSION QUESTIONS

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 Case 8
Guajilote Cooperativo Forestal: Honduras

1. What are the strengths and weaknesses of Guajilote?

2. What are the opportunities and threats facing Guajilote?

3. What are the strategic factors facing Guajilote?

4. Does Guajilote have any core competencies? If yes, what are they?

5. Does Guajilote have a distinctive competency? If yes, what is it?

reader can sympathize. When dealing with many organizations—at least in

Latin America—the lack of an obvious decision-maker is often a fact of
life. In this case, Santos Munguia is the apparent decision maker and
perhaps should “Own the decision.” It is more than possible, however,
that Munguia is in fact part of the problem. This possibility was
emphasized implicitly in how we wrote the case.

Rather than project one of the case authors into the case as a
consultant or in some other artificial capacity, we chose to keep
ourselves out of the case and to describe it objectively. Although
the first author was employed by USAID at the time of this case, he
was merely a visitor and an observer who had invited himself to
observe Guajilote Cooperativo Forestal simply out of curiosity and
academic interest.

We have no idea what happened to the cooperative after the events

described in this case. Since hurricane, Mitch did extensive damage
to the area in 1998, it is possible that Guajilote Cooperativo no
longer exists.

VIII. STUDENT STRATEGIC AUDIT/STUDENT PAPER

IX.
X. Parte I
XI. Current situation.
XII. Performance
XIII. Posture.
XIV. Mission
XV. Objetives
XVI. Strategies
XVII. Policies

PARTE II
External envioronment
Economy
Political legal
Sociocultural
Technology

1. What is your impression of Guajilote as a business venture?

2. Conduct a SWOT Analysis of Guajilote.(EFAS, IFAS and SFAS see Exhibit

1, 2 and 3)

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 Case 8
Guajilote Cooperativo Forestal: Honduras

A. Internal Environment
Strengths

Weaknesses

Opportunities

Threats

3. Does Guajilote have a competitive advantage and/or a competitive

strategy?

4. Describe the components of the value chain in the production and

sale of mahogany in Honduras.

5. What strategic alternatives are open to Guajilote?

XVIII. EFAS, IFAS, and SFAS Exhibits

Exhibit 1
EFAS (External Factor Analysis Summary)

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 Case 8
Guajilote Cooperativo Forestal: Honduras

Key External Factors Weight Rating Weighted Comments

Score
Opportunities
Falling world supply of mahogany .05 5 .25 Price will increase.

Sell direct .10 2 .20 Go to furniture makers.

Make own furniture .05 1 .05 Make what?

Obtain rights in other ranks .20 1 .20 Expand production.

Become true forestal .10 2 .20 Grow own trees.

Aging population .20 4 .80 Content fits population needs.

Threats
Cities convention .05 3 .15 Restrict saves.

Deforestation .10 2 .20 Cuts supply.

Campesinos .20 3 .60 Cutting supply.

Suazo as enemy .05 4 .20 May sabotage.

Political climate .10 4 .40 Could lose rights.

TOTAL SCORES 1.00 2.45

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 Case 8
Guajilote Cooperativo Forestal: Honduras

IX. IFAS, EFAS, AND SFAS EXHIBITS

Exhibit 2
IFAS (Internal Factor Analysis Summary)

Key Internal Factors Weight Rating Weighted Comments

Score
Strengths
Capable leadership .20 2 .40 Munguia is leader.

Good political connections .10 5 .50 Key to doing business.

Monopoly position in mahogany .05 4 .20 Only one in rank.

Environmentally friendly .05 2 .10 Only use fallen trees.

Employee morale .10 3 .30 Little turnover.

Weaknesses
Only one product .05 2 .10 Only mahogany.

Dependent on distributor .10 4 .40 No transportation.

Production limited .20 1 .20 Restricted to cut trees.

Little education .05 2 .10 Members illiterate.

No executive backup .10 3 .30 Questionable nephew.

TOTAL SCORES 1.00 2.60

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 Case 8
Guajilote Cooperativo Forestal: Honduras

IX. SFAS, EFAS, AND IFAS EXHIBITS

Exhibit 3
SFAS (Strategic Factor Analysis Summary)

Duration
Key Strategic Factors Weight Rating Weighted Comments
Score S I L
Strengths

Sell direct (O) .10 1 .10 X X Must get trucks.

Obtain other rights (O) .15 2 .30 X X Use connections.

Campesinos (T) .10 2 .20 X X Use connections.

Weakening environment.
Deforestations (T) .10 1 .10 X

Political climate (T,O) .05 4 .20 X X May change.

Munguia important.
Capable leadership (S) .75 5 .60 X X X
Good connections (S) .10 5 .50 X X X Very important.

Limited production (W) .10 1 .10 X Key constraint.

Can work among Suazo.

Dependent on Suazo (W) .10 4 .40 X

No back-up to Munguia .05 3 .15 X Not important yet.

TOTAL SCORES 1.00 2.65

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