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Karlson, Daniel (2005) Organizational models in U.S. agricultural cooperatives. Other thesis, SLU.

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Abstract

Agricultural cooperatives play an important role all over the world. They have substantial assets, large turnovers and extensive market shares, especially in Europe and North America. North American agriculture cooperatives face strong competition, partly from many large and efficient manufacturers, but also since customers gets larger and fewer. However, the knowledge about how these cooperatives adjust their market strategies and organizational structure to mirror the markets is little known in a European perspective. The purpose of the thesis is to empirically investigate and theoretically explain how and why a number of U.S. agricultural cooperatives have adapted their cooperative organizational model as their market conditions have changed. The thesis is carried out on commission of, and with financial support from Stiftelsen Lantbruksforskning. With the help of U.S. expertise six agriculture cooperatives in five industries were chosen to be analyzed. During six weeks totally 15 representatives of the cooperatives were interviewed in the U.S. The product markets have not changed dramatically the latest years due to policy changes or sudden technical breakthroughs. It is the market powers that affect the development, where extensive structural change has lead to a concentration in the food industry. 4-5 food retail chains control 50 – 60 percent of the consumer market. This change is primarily driven by the desire to reduce transaction costs and benefit from economies of scale. These changes affect cooperatives in their choice of market strategies and organizational model. Cooperatives with high raw-product costs choose a differentiation- or focus strategy. One fascinating exception is Dairylea; it chose to gain regional control of assembling and distribution of milk. Its means to achieve this goal was favorably received by producers and has lead to a fourfold milk weigh-in. Cooperatives with low raw-product costs chooses among other market strategies, since they do not face the same market constraints. The change in the food-industry fuels organic growth among cooperatives, since they need to provide large quantities and offer extensive product portfolios to the customers. The strive for size and scope among cooperatives has imposed increased capital needs, which has forced cooperatives to utilize various solutions for ownership and control. Joint ventures and other strategic alliances are as common as allowing external parties to make capital investment in the cooperatives. An important observation is that such cooperatives will not let external investors get ownership control in the cooperatives. These investors are tempted by 7-8 percent dividends on invested capital. It is mainly the need for offering large volumes, many products and utilization of economies of scale that stimulates organic growth in the cooperatives. For such growth to happen producers must be tempted to join these large cooperatives. Hence they must pay well and individualize the ownership rights. This has lead to entrepreneurial cooperatives being common in the U.S., while traditional cooperatives to an increasing extent adopt characteristics that normally exist in entrepreneurial cooperatives.

Item Type: Thesis (Other)
Keywords: Cooperatives, co-operatives, agricultural, organizational model, market strategy, Land O'Lakes, Dairy Lea, CHS, U.S. Premium Beef, National Grape, Pro Fac
Subject (faculty): Faculty of Natural Resources and Agricultural Sciences > Dept. of Economics
Divisions: SLU > Faculty of Natural Resources and Agricultural Sciences
Depositing User: Jerker Nilsson
Date Deposited: 30 Mar 2005
Last Modified: 18 Aug 2015 09:34
URI: http://ex-epsilon.slu.se/id/eprint/505

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