Windhorse Farm Strategic Position - Case Study Example

Introduction Windhorse Farm is an eco-friendly forestry and wood production company located in the Nova Scotia region of Canadad. Windhorse is a family owned venture that is part of a broad range of over 10,000 acres of the Acadian forest land which is owned collectively by 24 families. Windhorse is owned by the Dreschers who are part of the 24 families who run the huge Acadian forest range in southwestern Nova Scotia. Windhorse seeks to maximize profits without compromising its ecological and environmental standards. This means that Windhorse is concerned with the dollar value per unit of biomass which is measured on the basis of environmental metrics. This paper examines the business and strategic position of Windhorse. The paper would assess the strategic position and the elements of strategy which best defines Windhorse. The second part of the paper examines and evaluates the balance between the profit and corporate social responsibility elements of Windhorse Farm. Part A Internal Perspectives This section of the paper would look at the internal components of Windhorse. It would examine the elements of the company and try to deduce the strengths and weaknesses of the company. McKinseys 7 S In order to do internal analysis of a company, one of the most popular models is the McKinseys 7S model. It is a form of a strategy model which shows how a business evolved or developed (Karlof, 2010: p163). It is often used in the process of organizational diagnosis which requires a critical review of a firm and its elements in order to carry out change management (Witcher and Chau, 2011: p249). Montana identifies the seven components as strategy, structure, shared values, staffing, system, skills and style (2008). When applied to the Windhorse case, the following were deduced: 1. Strategy: Windhorses seeks to maximize profits from their forest products without sacrificing biodiversity. The strategy is to do so by using responsible tools and techniques to harvest products and locate a market for consumers who are willing and able to spend high amounts of money for specific products that they have on offer. 2. Structure: Windhorse is part of a wider group of businesses that own large acres of forest land together. The company is defined more by the larger structure of the community of families that own forests in the area. The company conducts its affairs through forest stewardship and adherence to forestry and environmental rules. This is achieved through compliance with rules and carrying out various activities that entices the markets including educating the public and expanding the affairs. The main units of the company include the processing unit and administrative section. 3. Shared Values: Windhorse and its primary internal stakeholders (allied families, management and employees) have a common view of promoting environmental responsibility by using a form of sustainable forestry to plant, harvest and process their product. However, the idea is to get the maximum profits that would safeguard the continuous existence of the business. The company respects environmental, economic, social and spiritual wellbeing of their wood and their customers. 4. Staffing: The nature of Windhorses affairs is such that it is modelled on a family structure system. The company uses third party processors to conduct the cutting and the processing of the wood from the forests. Marketing is done through in-house staff members who work alongside management to come up with strategies of selling. 5. System: Windhorse uses a centralized family administrative structure built around Jim and Margaret Drescher. 6. Skills: The main skills used are forestry techniques which are based on the FSCs rules and are carried out according to those standards. Marketing skills used involve the ability to identify unusual niches that demand the Windhorses services. 7. Style: The leadership style is mainly patriachal. The families are all tasked with finding the best opportunities for the companies unilaterally. This is influenced by the constraints put by allied families, their environmental values and the rules of the country relating the the environment. External Perspectives This section would examine the elements of the industry and the external business environment. This would culminate in the the examination of two different models of examining the industry and the external environment. Porters Five Forces Porters Five Forces is a method of identifying the elements of a given industry and shows how the industry operates and carries out its activities (Hill and Jones, 2011). It suggest that there are five main elements of a given industry that defines the industry which are as follows (Porter, 2008): 1. Threat of New Entrants: This threat involves the acquisition of new forest lands in southwestern Nova Scotia. This threat is likely. However, it is not a problematic to the competitive posture of Windhorse since the expansion would not really create a lot of conflicts for the industry. 2. Threat of Buyer Integration: This refers to a situation where buyers like the FSC could come up with a different set of forests in another part of the world and begin to produce for the same market. This is possible but not very likely to occur. 3. Threat of Supplier Integration: This is about the possibility of agricultural entities that produce seeds to Windhorse and the other Acadian forests becoming competitors. This is also possible because they can acquire farms in different parts of the world and begin to produce environmentally responsible woods for customers. 4. Threat of Substitutes: This is the biggest threat to Windhorses industry. It is about consumers seeking to get wood from places where environmental responsibility is not respected. This threat is described in the case study in the form of the entry of Chinese wood producers into the market. These competitors are dangerous because they offer their products at a very low price. 5. Competitive Rivalry: This refers to the competition between the various families in the Acadian forest. The rivalry refers to the differences in the way they all compete for customers. This is quite tough but the fact that most of them sell overseas makes the market a little less intense. PESTEL PESTEL analysis critiques and examines the macro business environment that a business operates in. The PESTEL analysis of the Windhorse and the Acadian forest is as follows: 1. Political: The numerous environmental protection laws that have been passed and improved by the Canadian federal government and state government of Nova Scotia provides a conducive environment for the success of Windhorse (Macmillan, 2010). Also, export promotion laws provide an opportunity for the company to grow. 2. Economic: The high value of the Canadian Dollar in relation to the US Dollar has made it difficult for businesses in Canada to trade overseas (IBM Business, 2012). However, the North American Free Trade Agreement has opened up the markets in the United States and Mexico and this provides an extended market (Macmillan, 2010). 3. Sociological: More people are beginning to appreciate the need for sustainable forestry practices. People seek to get a safer and more durable world for our generation and future generations. 4. Technological: Technology has made it possible for Canadian businesses to sell products and services far and wide. This allows Windhorse and its fellow companies to find environmentally responsible companies around the world and sell to them. 5. Environmental: Environmental accounting has increased in Canada. More businesses provide reports on what they have done to improve the environment. And purchasing from sustainable farms is one of the factors (Merem, 2009). 6. Legal: The Canadian Environmental Assessment Act of 2012 is the latest law on the environment. It provides the need for businesses to assess the impact of their activities on the environment and hence, it encourages people to use wood from sustainable sources. SWOT Analysis From the internal analysis, some strengths and weaknesses can be identified. Also, from the industry analysis and the PESTEL analysis, some opportunities and threats can be inferred. They are examined here below: Strengths Weaknesses 1. Environmental responsibility. 2. Link to other families and hence, collective bargaining strength. 3. Passionate leadership 4. Support from environmental authorities. 5. Specialized niche market 6. Legal rights to large acres of land 1. Problem with continuity and leadership. 2. Difficulty in identifying new market niche. 3. Higher cost of production due to environmental responsibility. Opportunities Threats 1. Protected niche and interest. 2. Increasing interest of consumers in products of company. 3. Improved trade and market conditions in USA and Mexico through NAFTA 4. Technological advantages in reaching clients far and wide. 5. Favorable environmental laws. 6. Control of specialized wood species. 1. High Canadian Dollar makes export expensive. 2. Threats of substitutes from developing countries. 3. New markets vulnerable to competition. Strategic Position Basically, Windhorse is a company that is steeped in its values of protecting the environment and carrying out environmentally responsible activities. Windhorse is a company that is positioned by the fact that it is supported by stakeholders like fellow families in the region it operates as well as the environmental authority and environmentally responsible consumers. Windhorse is protected by the opportunities that exists with the growing market of people who are responsible and sensitive to the protection of the environment. The local laws lead to the creation of intermediaries that supports. National law and NAFTA provisions allows the company to get a national and international market respectively. However, the competition from wood producers from the developing world who are not subject to high environmental laws makes it difficult for Windhorse to operate. Windhorse has the ability to expand its market penetration by finding different niches and options around the world. It can also improve technology to get in touch with more consumers and stronger partners. There are more favourable laws around the world so Windhorse can potentially improve its market penetration by finding different markets and niches around the world. The company is now facing a leadership crisis. This crisis relates to the fact that the Drescher family which owns it do not have people to inherit them. However, the company could find outsiders who are interested in the industry and promote it. The company also needs to hold on to market share because the market is very limited. Hence, there is the need for them to hold on to the market share that they control and expand their offerings and abilities in different areas and aspects of their operations. The company also needs to focus on the tonewood and other woods that are in demand. This is because the best way to maintain a reasonable level of the market share. The main idea is that it would offer Windhorse a competitive advantage and the unique nature of these specialized wood gives it an advantage over the competitors, particularly those from the developing world. Part B According to Mullerat, “corporate social responsibility is based on a company attaining balance between interest of all its stakeholders within its strategic planning and operations” (2010: p12). In other words, corporate social responsibility is about how to satisfy all the people connected to an entity. Basically, a business exists to make profit for its owners. This is because a business is formed when the owners come together to pool resources to set it up. In the conventional sense, the main reason for the establishment of a business is to increase the wealth of shareholders. However, the concept of corporate social responsibility requires that a business discharges appropriate connection and respect for the needs of other people that it affects. Another definition of corporate social responsibility states that it is “a concept that organizations, especially corporations have an obligation to consider the interests of customers, employees, stakeholders, ecological considerations in all aspects of their operations” (Asongu, 2009: p91). So there is a sharp contrast between corporate social responsibility which seeks to provide the interest and needs of all stakeholders and the conventional profit-orientation of business which seeks to provide enough returns for the owners of companies. Windhorse as a business involves making money for the Drescher family which is the primary shareholder. This is because although the Dreschers might be interested in promoting responsible forestry, they have a desire and an interest in making money to ensure the survival of the business and also, they need to make money as a reward for their investments. This is because if they had sunk funds into some other entity, that entity might have given them more profits. Hence, there is the need for the company to make some profits. However, in doing that, Drescher needs to be socially responsible and provide the needs of all stakeholders involved in its operations. Friedman, a business theorist known for his views on profit maximization put forward two critical views of doing business, which are: 1. A business is under the obligation to make profits in a competitive environment without fraud or deception. 2. Business executives have to follow the wishes of shareholders whilst obeying the laws and ethics (Carson, 2009) These two ideas indicate that although a business is meant to make profits and maximize the returns of investments they make, those charged with corporate governance and decision making ought to remain sensitive to the ethics, conventions and codes that govern the sector they operate in. This implies that there is the need for businesses to identify the needs and expectations of the different classes of stakeholders and work hard to attain them. An empirical study carried out by Carroll (2008) identifies that corporate social responsibility does not impact adversely on a business. In other words, being sensitive to the needs of different classes of people connected to a business and giving out your obligations to them does not in any way affect a business negatively. On the contrary, a research by Nussbaum (2009) indicates that corporate social responsibility helps to safeguard the long-term profitability position of a given firm. The research shows that the Drescher family seeks to be sensitive to its stakeholders. From the onset, Drescher manufactures with a view of promoting environmental responsibility amongst consumers. It produces with the view of maintaining the highest levels of sustainability. That in itself means that it is providing an ethical service that would provide the best interest for a group of stakeholders who are voiceless and unrepresented – the future generation. Thus the company is into the social responsibility business. However, since Windhorse is a business and not a charitable entity, it would need to make profit to safeguard its future. Hence, the company does well to find a niche market that is willing to pay high prices that would give it a profitable position. That is why it sets its sales in a way that consumers will pay high prices for the services that they produce and cover the investments they have made in order to ensure a decent profit. Windhorse is also sensitive to the environmental, social, and spiritual elements of its operations. This indicates that the company is not only interested in profits. It is interested in obeying the relevant forestry laws and rules and going ahead to provide sustainable services that would help safeguard the environment and the society. The company also aims at helping the society and people who want to use responsibly acquired wood. This makes it a pacesetter for other businesses to copy and provide the best quality services. Also, the spiritual elements which relates to faith based views of Christians and native Indians are put into consideration in the Windhorse case and operation. Conclusion This part has indicated that the primary reason why businesses are formed by their owners is to make the highest levels of profits and returns. This means that a company exists to make profits and provide the highest level of returns possible. This is because investors or people who form companies have several options they could use in utilizing their money. However, most investors put their money into business operations with the hope of getting more profits. Although profitability is the end of most businesses, it is not practicable to pursue a purely economic end in any business. Hence, there is the need for businesses to consider being lawful and ethical. A business has to follow laws, ethics and convention. One of the most popular ethics is to discharge all the obligations of a business to the people it affects and is affected by, also known as stakeholders. Stakeholders have expectations and a business needs to do everything possible to discharge all those expectations. Corporate social responsibility refers to the need to discharge obligations to all classes of stakeholders including the environmental and other social factors. Corporate social responsibility sometimes conflicts with the profit motive of a business. This is because a business would have to cut down on its profits by discharging all its obligations to the respective stakeholders of the company. Corporate social responsibility however has a long term implication on the operations of a firm. This is because it ensures that profits are acquired at a sustainable pace into the future. References Asongu, J. J. (2009) Strategic Corporate Social Responsibility London: Greenview Press. Caroll, A. B. (2008) “Relationship Between Corporate Social Responsibility and Profitability” The Academy of Managemetn Journal Vol 28 (2) June 2008. pp446 – 463 Carson, T. (2009) Business and Professional Ethics New York: FT Publishing. Hill, C., and Jones, G. R. (2011) Strategic Management Theory: An Integrated Theory Mason, OH: Cengage IBM Business (2012) Business Almanac New York: IBM Publishers. Karloff, B. (2010) Key Business Concepts: Concise Guide London: Routledge. Macmillan, F. (2010) Business Trends in Canada London: Oxford Business Groups. Merem, E. C. (2009) Environmental Accounting Ontario: Edwin Mellem Publishing. Montana, P. J. Nd Charnov, B. H. (2008) Management London: Routledge. Mullerat, R. (2010) International Corporate Social Responsibility Amsterdam: Kluwer Law International Nussbaum, D. (2009) Doing Business in the Global Environment Berlin: GRIN Verlag. Porter, M. E. (2008) Competitive Advantage New York: Simon and Schuster. Witcher, B. J. and Chau, V. S. (2011) Strategic Management: Principles and Practices Mason, OH: Cengage. Read More