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Upfront, this business venture sounds like a somewhat risky business venture.

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

This company, as a business venture, is very low. For example they do not have an annual report for the stockholders, and the problems in performance evolved, mainly because they do not have a mission statement and/or clearly defined goals. For a remote venture, though, it may have future potential, if/when it can find transportation, increase capabilities and resources and bypass the distributor to increase the firms' profit margin. However, as it stands, it seems that the potential threats are greater than the potential opportunities, with the limited cash flow, transportation, to name a few.

2. Conduct a SWOT Analysis of Guajilote.

A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats and is a simple and powerful way to analyze your company's present marketing situation.

Guajilote has several strengths. 1. Knowledge. The competitor is with cooperative's distributor, cutting and falling mahogany. Knows how to cut by using simple falling techniques. The business operations use simple technologies. First, finding the rare tree in high elevation. Second, due to the rough terrain, the cooperative set up a temporary hand sawmill as close as possible to a fallen tree. Third, after the tree has been cut, the transportation of the woods was organized by mule, manpower, or floating down the stream. 2. Relationship selling. Continuing depletion of mahogany trees around the world, the remaining wood should increase in value over time. 3. History. A component of a USAID (United States Agency for International Development) project. By exploiting the naturally fallen mahogany tree in a buffer zone, people were allowed to live and engage in economically sustainable activities within the buffer zone.
Guajilote had several weaknesses to contend with. Their per-unit costs of selling are low. Guajilote had been receiving low lempira per foot. Since Guajilote sell products to only one distributor, it has little control over the prices paid by the distributor. Lack of transportation was another major problem for Guajilote. The cooperative had been unable to secure the capital needed to buy its own truck - lending through legitimate sources was very tight in Honduras and enterprises like Guajilote did not typically have access to lines of credit. Another problems for Guajilote was that it has not expanded, and its IT disadvantages make if difficult to optimize on future diversification.
Guajilote did not operate in a democratic fashion. The prevailing opinion seemed to be that Guajilote was a lot better off with Munguia running the show by himself than with more involvement for the members. One member stated that before he had joined Guajilote, he was lucky to have made 2,000 Lempiras in a year; whereas, he made around 1,000 to 1,500 in one month as a member of the cooperative. Because of Guajilote, his family now had enough to eat and he was able to be home with his family. Guajilote processed around 36,000 feet of wood during 1997. Mahogany was fairly rare in a forest and Guajilote was legally restricted to downed trees. Moreover, with the difficulties of finding, processing by hand, and then moving the wood out of the forest, Guajilote was further restricted in the quantity of wood it could handle.
Several opportunities exist for Guajilote. They had the opportunity to expand to trade in larger center with increase profit margins Guajilote currently only trades locally. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as surrounding cities in a Honduras. New locations and specialty shops (chains and independents) and catalogs throughout the world, might be interested in selling high quality mahogany furniture - i.e., chests or chairs- that were produced in an environmentally friendly manner offer Guajilote opportunities to exploit market development.

Threats. Although Guajilote is a monopoly firm in a remote area, the amount of mahogany wood is limited and 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 as well.

3. Does Guajilote have a competitive advantage and/or a competitive strategy? Justify your answer.

Although Guajilote's operation and production of mahogany is slow and arduous, the competitive advantage for this firm is twofold. First, the Guajilote Cooperativo Forestal was exclusively given the right to exploit naturally fallen (not chopped down) mahogany trees in La Muralla's buffer zone. Thus, they have the monopoly in this region (differentiated advantage) as no one sells mahogany in the area. Although, Guajilote's mahogany is still sold as a commodity and the cooperative did very little to add value to its product, the continuing depletion of mahogany trees around the world meant that the remaining wood should increase in value over time (cost advantage).

In other words, for Guajilote's, they have no competition in the area, so in this sense, the firm has both cost advantage and differentiation advantage - especially, if/when they are successful in bypassing the distributor, who seems to be a threat to the company. Although using resources and capabilities to achieve either lower cost structure or a differentiated product creates competitive advantage, Guajilote's seems to utilize it's limited resources and capabilities as best as possible. A firm positions itself in the industry through its choice of low cost or differentiation. This decision is a central component of the firm's competitive strategy (http://www.quickmba.com/strategy/competitive-advantage/ http://www.quickmba.com/strategy/generic.shtml).

See http://www.quickmba.com/strategy/competitive-advantage/ for further information about competitive advantage

4. Describe the components of the value chain in the production and sale of mahogany in Honduras.

The goal of the activities in the value chain is to create value that exceeds the cost of providing the product or the service, thus generating a profit margin. Guajilote's work activities included three operations using very simple technologies. First, members searched the area to locate appropriate fallen trees. Second, the cooperative set up a temporary hand-sawmill as close as possible to a fallen tree. Third, after a tree was disassembled, the wood was either carried out of the forest using a combination of mule and human power, or floated down a stream or river. The wood was then sold to a distributor who, in turn, transported it via trucks to the cities to sell to furniture makers for a profit. (http://www.quickmba.com/strategy/value-chain/).

In other words, Guajilote's value chain links to the value chains of upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a competitive advantage depends not only on the firm's specific value chain, but also on the value system of which the firm is a part (Source: http://www.quickmba.com/strategy/value-chain/).

5. What strategic alternatives are open to Guajilote? Explain and justify your answer.

Some of the members of Guajilote wondered if the cooperative could do better financially by skipping the distributor completely. Another future alternative for Guajilote is to manufacture and trade with specialty shops (chains and independents) and catalogs, throughout the world, high quality mahogany furniture - i.e. chests or chairs. Guajilote could also consider making make and marketing furniture very profitably - even if it had to go through an exporter to find suitable markets. In fact, an U.S. exporter confirmed this, who OWNED a furniture export business in Honduras. After reviewing Guajilote's situation, this EXPERT concluded that the cooperative might be able to make and market furniture very profitably and estimated that Guajilote might be able to more than triple its revenues.

What do you think? Does this sound reasonable? Do you agree or disagree? Since it is an opinion of an expert, perhaps it is a reasonable assumption to make; however, one must trust the source of information and do other research as well.