Duffy-Mott organizational problem

Almost every year at harvest time in upstate New York there are serious conflicts between the Duffy-Mott processing plant and the Apple Growers Association. The Association charges Duffy-Mott with exploitation and devious behaviour in setting exceedingly low prices at which it will buy apples from local growers. Duffy-Mott contends that the farmers are unrealistic and ill-informed about conditions in the apple market that influence the price it can pay for the purchase of apples. Duffy-Mott complains that individual growers sometimes sell many of their apples in the fresh produce market and not to them as promised, while arguing that low yields or other factors that prohibited the fulfilment of short-term supply agreements. Furthermore, the Apple Growers Association has begun to organise its members to withhold apples to increase their bargaining power.

Duffy-Mott is the sole surviving apple processor in an area that previously supported several processing plants. The Duffy-Mott plant could not be cost effectively retooled for any use other than apple processing.

In recent years growers have attempted to develop alternative outlets for their apples, including fresh apple markets in Canada and neighbouring states such as Pennsylvania. Transportation and other costs of reaching these markets are so high that these alternatives have not substantially resolved the growers' problems.

1. Explain the general organisational problem (and it's contractual implications) that is illustrated by this conflict?

2. Suggest an alternative organisational structure that would improve the position of everyone involved. Explain why.