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Delhaven Orchards Case Study

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Delhaven Orchards Case Study
02.07.2020
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Six External Forces Impacting Delhaven Orchards

The six external forces such as political, economic, technological, societal, competitive, and global one can significantly impact the Delhaven Orchards farm. The reason is that they ultimately shape the specific environment of the organization and influence its abilities to obtain resources (Karakowsky & Guriel, 2014, p.8).

First of all, the government pushes towards regulations that may negatively influence the organization, for instance, by making the industry more facilitating for foreign competitors. Such regulations may also be beneficial, for instance, by creating free trade between countries (Karakowsky & Guriel, 2014, p.10). Thus, the Canadian government’s reduced regulations made the Canadian horticulture industry more attractive for foreign competitors from the US, Chile, China, and Poland, thus influencing Delhaven Orchards (Guriel, 2016). Besides, the government controls salaries that can be higher than in other countries. Consequently, Delhaven Orchards has to pay about 35% to 50% of production costs to apple growers (Guriel, 2016). Additionally, Ontario, where the farm is located, is the most expensive jurisdiction to grow fruits and vegetables in North America due to high labor and food safety regulations (Guriel, 2016). However, the Canadian government establishes a low corporate tax rate what allows Delhaven Orchards to charge lower prices (Karakowsky & Guriel, 2014, p.27). Moreover, the political environment is stable which makes it easier to plan and forecast business doings.

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Secondly, the Canadian economy is growing, hence potentially facilitating all businesses contributing to higher profits. However, this growth is slow and cannot significantly impact the Delhaven Orchards in the recent future (Karakowsky & Guriel, 2014, p.13). Besides, there is a low unemployment rate of around 7%; it can mean for the farm that it will be harder to find needed employees (Karakowsky & Guriel, 2014, p.14). Moreover, this specific job market is challenging because urban people do not want to relocate for low wages, and rural people are remote and have different lifestyles (Guriel, 2016). It entails challenges in finding new workers. Finally, the economic forces can influence the prices for resources, land, and other things leading to higher production costs or conversely.

Thirdly, the technological forces are one of the most significantly influencing Delhaven Orchards’ forces. Canada has always been dependent on resources (Karakowsky & Guriel, 2014, p.18). Thus, it is emphasized on agriculture, and apples represent the second most valuable fruit crop in Canada providing more benefits for horticulture industry (Guriel, 2016). However, Canada is transforming and tries to focus on more innovation (Karakowsky & Guriel, 2014, p.18). Consequently, due to increased need in innovations, Delhaven Orchards now uses a new method of growing apples; there are more trees of smaller size on the field that provide more apples faster and better (Guriel, 2016). Besides, Delhaven Orchards adapted new technologies while reducing the impact on the environment such as drones that look for crop problems. Additionally, the apples are also stored in a new way using the controller of the atmosphere (Guriel, 2016). However, due to innovations, Delhaven Orchards experiences the lack of demand. Thus, new genetically engineered apples gradually become substitutes for the natural ones (Guriel, 2016).

Fourthly, societal forces include consumer tastes and preferences that are frequently changing in Canada. Therefore, consumers started to be more interested in broadening their diets and now purchase more such fruits as berries and tropical fruits instead of apples (Guriel, 2016). It negatively influenced apple production in Canada that is now stagnant including Delhaven Orchards’ profits. Moreover, due to societal forces, the consumers increasingly prefer to buy cheaper foreign apples which also negatively influenced Delhaven Orchards’ sales (Guriel, 2016). Besides, Canadian urban people do not want to work only half of a year contributing to the employment challenges for Delhaven Orchards.

Fifthly, competitive forces also have a significant impact on Delhaven Orchards. There is a strong competition in the industry not only from local farms but also from the foreign ones. They are able to supply more apples at lower prices. Thus, in 2014, Canada imported more than two hundred thousand metric tons of apples (Guriel, 2016). The large competitors force the small farms to adapt. Accordingly, Delhaven Orchards has to cut the production cost by searching for cheaper labor, cheaper ways of growing, and etc. The competition dictates the trend.

Finally, Delhaven Orchards is influenced globally. Canada’s proximity to the US defines the strong presence of the US in the Canadian business sector and environment (Karakowsky & Guriel, 2014, p.22). It also influences horticulture industry. Thus, the majority of goods are exported to the US increasing the sales volume, and the US farms are the main contributors to the competition in the industry. Being a major trading partner, the US strongly influences the Canadian economy that has an impact on Delhaven Orchards as well.

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The Explanation of the SAWP Program through Four Work Perspectives

The Seasonal Agricultural Workers’ Program (SAWP) could be explained in the light of the neoclassical work perspective. The neoclassical perspective assumes that labor markets are perfectly or near perfectly competitive. The supply and demand can themselves ensure the optimal assignment of skills and the fairest distribution of wealth (Karakowsky & Guriel, 2014, p.48-49). Besides, the workers have access to the information and are free to choose the workplace. Thus, the workers from Jamaica, Barbados, Trinidad and Tobago, and Mexico are aware of other supplies but choose the supply of SAWP (Guriel, 2016). They agree to the wages offered, and the employers agree to skills they offer. The invisible hand of the market guides them. As a result, near sixteen thousand SAWP workers arrive only in Ontario each year (Guriel, 2016). Moreover, according to the neoclassical theory, the government and unions should not interfere in the business. For instance, by controlling the minimum wages, the government worsens conditions of seasonal workers, because employers then have to hire fewer employees, to cut on the facilities for workers, or to deduct the return airfare ticket from their earnings. Moreover, the SAWP employers themselves understand that they should offer at least a little bit more than the market wage rate in order to attract qualified workers according to the neoclassical perspective. So, they offer $14.36 – 14.80 per hour for higher skilled workers and $11.27 – $12.54 per hour for lower skilled ones (the minimum wage in Ontario is $10.25 per hour) (Guriel, 2016). As a result, Delanghe credits the success of Delhaven Orchards to his SAWP workers.

The managerial perspective shares the views of the neoclassical perspective according to the interference of the governments and the unions in the business. The unions and collective bargaining are unnecessary. The management is able to control the working and employment standards. Thus, the structure of SAWP discourages workers from complaining about their employer or the working conditions (Guriel, 2016). However, the managerial perspective is more related to the human resource management (Karakowsky & Guriel, 2014, p.50). Managerialists state that employers and employees share a common goal to increase the profits and the productivity of the business, so there shouldn’t be any conflicts between them. The management will treat workers well in order to make them more productive. Indeed, the structure of the SAWP does not provide treating workers well. The employers are able to end their contracts whenever they want or to pose fees for transferring to a different employer (Guriel, 2016). However, in the case of Delhaven Orchards, for instance, there is a SAWP worker who keeps returning to the same employer for 27 years what means that they share common goals (Guriel, 2016).

The SAWP program could be best explained in the context of industrial pluralist and critical perspectives. The industrial pluralist perspective differs significantly from the previous two. It emphasizes the imbalance between employer and employee because the first one is concerned about the efficiency, and the second one cares for the equity. According to it, workers lack the bargaining power, and unions are very important (Karakowsky & Guriel, 2014, p.50). It is especially the case of the SAWP program. The SAWP workers are claimed uniquely vulnerable because of the closed work permits, employer power to end contracts, the naming system, economic need, employer-provided housing, social and family isolation, dangerous work, and ineffective sanctions for employers (Guriel, 2016). The unions and collective bargaining here are extremely important to fight for the rights of seasonal employees. Moreover, according to the industrial pluralist model, even if the workers have the necessary information about the job supply, in practice, people do not move flexibly and easily from job to job (Karakowsky & Guriel, 2014, p.51). Thus, many people, especially Canadian citizens, do not want to work temporary only part of the year, relocate, change jobs, and leave families and friends (Guriel, 2016).

The critical perspective also believes that the interests of the employer and the employee are conflicting. The employer’s goal is to reach maximum effort at a minimum cost using the labor. For these reasons, the SAWP program was originally established to receive necessary work force at a low wage cutting the production costs (Guriel, 2016). Besides, according to the critical perspective, employees depend on the employers for their economic needs, and there are always more workers than the job offers. So, the labor is disadvantaged and subjected to exploitation (Karakowsky & Guriel, 2014, p.53). For instance, the SAWP workers are usually the citizens of poor countries who have strong economic needs, and employers use the advantage of this and dictate their own rules. Thus, the SAWP workers claimed to be uniquely vulnerable as it was previously mentioned (Guriel, 2016).

The Management Philosophy for Delhaven Orchards Farm

The behavioral management philosophy would be the most suitable for Delhaven Orchards farm. In any organization, employees not only want to satisfy their economic but also personal and social needs. Workers are people first, and the organization should be a social system through which they can satisfy their needs.

Firstly, productivity is a very important component of any business including the horticulture industry. The more apples will be produced and cropped, the bigger profit will be earned. Thus, the Delhaven Orchards should provide special attention to its employees. According to the human relations perspective of the behavioral philosophy, this approach will contribute to higher performance (Karakowsky & Guriel, 2014, p. 100). Besides, hiring seasonal workers under the SAWP program entails the feeling of vulnerability by the workers. There are barriers for transferring to different employers; the contract may be ended by the employer at any time; the work may be dangerous, etc. (Guriel, 2016). Such a feeling decreases the productivity of employees. The Delhaven Orchards has to consider this behavioral factor.

Secondly, according to the Follett, Delhaven Orchards has to perform the function of coordination (Karakowsky & Guriel, 2014, p.101). The organization should encourage its workers to maximize their productivity through involvement in coordinating, but not through forcing. Thus, Hector Delanghe should be closely interconnected with its employees in their daily work and manage from the inside but not from the above. It will not only provide better understanding of the business processes but also serve as an example for the employees contributing to higher overall performance. Furthermore, they must work as collaborators and have the ability to take part in the decisions according to their work. This participation will contribute to better decisions because as a rule, the persons involved make better decisions than those that are not. Special attention should also be paid to higher performance because people usually prefer to be managed themselves, and they would know why they are compliant (Karakowsky & Guriel, 2014, p. 101).

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Thirdly, according to modern behavioral science, the Delhaven Orchards has to create a motivated workforce but not for controlling purposes. It should study the factors that influence the workers’ motivation and motivate them. The motivated employees see the goals clearly and work better to reach them.

Additionally, the reason of suitable behavioral philosophy is that Delhaven Orchards is a small organization with only five full-time employees, ten seasonal workers and ten summer students that are employed each year (Guriel, 2016). There is no need for extra rules and regulations as well as administrative regulations that are necessary for large companies. The small organization is likely to perform better with the minimal rules (Karakowsky & Guriel, 2014, p. 105).

However, it is also reasonably to use the contingency approach for the Delhaven Orchards uniting both classical and behavioral management philosophies. The reason is that all organizations and people are different (Karakowsky & Guriel, 2014, p.102). Some people work better with clear rules and guidance, and some do their best when they are minimal. For the Delhaven Orchards, it will also be reasonable to use the classical philosophy in order to standardize and compartmentalize the business. The growing and cropping of apples involve the set of standard processes that are also various from collecting and storing to shipping. So, the classical philosophy would be more suitable here.

The Most Suitable Structure for Delhaven Orchards

The behavioral management philosophy is based on the organism metaphor and conceives the organizational structure of being organic. Thus, the most suitable structure for the Delhaven Orchards would be the organic one that means the organization is a living organism with mutually connected and interdepended parts that share a common life (Karakowsky & Guriel, 2014, p. 127). This suitability can be explained using four elements of the structure such as work specialization, centralization, span of control, and formalization.

First of all, organic organizations maintain jobs that are differentiated and require more various responsibilities. It is suitable when there is a social specialization in the organization, and the employees are hired based on their professional skills that cannot be routinized (Karakowsky & Guriel, 2014, p. 128). This is the case of Delhaven Orchards. There, the employees are originally hired according to their skills. Those with better agricultural skills who are able to manage livestock or daily farms are paid higher wages (Guriel, 2016). The work of such people cannot be routinized.

Secondly, the organic structure assumes there are team relations in the company rather than a superior-subordinate approach to authority (Karakowsky & Guriel, 2014, p. 128). Currently, the authority of Delhaven Orchards is centralized with the Hector Delanghe at the top of the hierarchy that makes all the necessary decisions. This is a mechanistic structure. However, it means low or even no involvement from the side of workers contributing to their “unique vulnerability” (Guriel, 2016). The most suitable way here will be to use the approach of decentralization creating the organic structure. The decision-making process decentralized between the ordinary workers rather than centralized on one manager will bring the Delhaven Orchards to faster and more efficient decision-making process as well as to better working environment.

Thirdly, for the Delhaven Orchards, the most suitable span of control is wide and flat one, what is assumed by the organic structure of the organization (Karakowsky & Guriel, 2014, p. 131). The reason is that flat organization cut the costs because less management requires fewer expenses to be covered what is very important for the Delhaven Orchards. Moreover, the flat organization encourages the decision making by the employees by turning supervision into being less close as well as contributes to faster transmission of information, communication, and decision-making process due to few levels of hierarchy. Besides, the Delhaven Orchards is a very small organization with only five full-time workers, so there is no real need for the tall narrow span of control.

Finally, the organic structure of the organization involves low formalization. That is, the employees are less restricted by the rules and regulations (Karakowsky & Guriel, 2014, p. 130). The less formality is suitable for the Delhaven Orchards because it will first help to face the issue of the unique vulnerability of the seasonal workers. The latter are restricted with the fees for transferring to different employer, and so on (Guriel, 2016). Next, Delhaven Orchards operates in a rapidly changing environment where are many competitors, strongly variable consumer preferences, and economic conditions that have significant impact. So, switching from one set of rules and regulations to a new one may be problematic. Moreover, the less formalized organization involves higher individual discretion in the work performance, thus contributing to the decision-making process.

Recommended Business-Level Strategy for Delhaven Orchards

For Delhaven Orchards, it would be recommended the cost-effective business-level strategy. The reason is that the farm sells the product that everybody else has, so there exist very limited ways to sell it except for the price adjustment (Guriel, 2016).

There are three sources of the cost-effective business-level strategy such as economies of scale, learning curve economie,s and the access to low-cost factors of production in the context of which the recommended business-level strategy will be explained (Karakowsky & Guriel, 2014, p. 174).

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First of all, the economies of scale assume increasing the production volumes in order to reduce the total production cost (Karakowsky & Guriel, 2014, p. 174). This increase should be one of the Delhaven Orchards’ main purposes because it is the farm’s main competitive disadvantage. The foreign competitors that are the main threat to the Hector Delanghe’s business have larger economies of scale where they can grow more apples at lower production cost, and thus imposing lower prices (Guriel, 2016).

Secondly, the learning curve economies assume increasing of the experience such as learning by doing and decreasing defects of products in order to reduce the total production cost (Karakowsky & Guriel, 2014, p. 174). The Delhaven Orchards has also to focus on learning how to perform better or how to use better technologies, etc. This learning will contribute to the efficiency of the business processes, thus making the production cost decrease.

Thirdly, the access to low-cost factors of production assumes searching for cost-effective resources in order to reduce the total production cost, and thus creating a competitive advantage (Karakowsky & Guriel, 2014, p. 174). The Delhaven Orchards should also perceive its strategy to utilize the low-priced resources because it has the most direct impact on the production costs.

In the horticulture industry, it will be easy for the Delhaven Orchards’ competitors to respond to each source separately, but the combination of three sources will create strong competitive advantage that would be very difficult for the rivals to absorb.

Moreover, being a cost leader, the firm is able to be flexible in response to the pressure coming from five forces (new entrants, bargaining power of buyers, substitute products, bargaining power of suppliers, and rivalry among existing firms) in the industry environment (Karakowsky & Guriel, 2014, p. 174). Therefore, this is extremely important for Delhaven Orchards because the horticulture industry has little barriers for new entrants, the customers define the supply and the price for it, there is a threat of substitutes such as genetically modified apples or other fruits, the suppliers impose the price for the resources (thus defining the production costs), and there exists a strong competition in the industry.

Finally, when competition in the horticulture sector moves toward price competition, (as it happened with Delhaven Orchards), an organization with the cost-effective strategy would likely to survive it because it is able to reduce the price while continuing obtaining high profit margins as well as to absorb the increased costs for raw materials keeping the price at the same level (Karakowsky & Guriel, 2014, p. 174).

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