Download Marketing by the cooperative

Marketing by the cooperative
Zvi Galor
www.coopgalor.com
1. Cooperative Marketing
A marketing cooperative is set up in order to
market and sell the surplus produce of its members,
being such a surplus, as they cannot consume
themselves.
Marketing cooperatives generally sell
agricultural produce, but there are also those,
which sell fish produce or handicrafts.
There are
also
other definitions of cooperative marketing.
Margaret Digby defines a marketing cooperative as a
system in which a group of farmers join together in
order to carry out part or all of the processes
involved in bringing the produce from the producer
to the consumer.
The Bank of India defines a
marketing cooperative as a society of farmers,
organized for the purpose of helping the members to
market their produce, so as to obtain higher
profits than is possible by way of private
marketing [1].
The
reasons
for
cooperatives are:
When there is
consumption.
the
a surplus
establishment
of
such
in production
over the
In order to save expenses for middlemen who benefit
from the producer in various fields, such as: bad
weight, very low prices and loans at high rates of
interest.
When the system in force is archaic, it does not
meet the requirements at all, involves many
middlemen or compensates very weakly for the
producer's work.
Thus, a marketing cooperative
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must offer its members a more efficient service
than that in force, so that its members obtain a
greater profit from their work.
When establishing a marketing cooperative, it is
indispensable
to
study
various
aspects
and
problems:
What products shall we produce and sell on the
market? Whet, experience in regard to production?
What
species
are
marketable
every
season,
quantities and qualities that are preferred? What
are the perishable items that can be stored and
under what conditions?
What is the present
marketing system?
What system of payment is
practiced for the producers?
Is any advance
payments allowed just after the crop, or will
payments be effected only after the sale of the
products? What is the best marketing circle of the
production? Does the product undergo a process for
its improvement? To have a sound knowledge of the
medium of the improvement.
Financing Problems: One producer expects to get his
money upon immediate sale of his products. Another
producer
wishes
to
receive
a
down
payment.
Whereas, the cooperative is paid only after the
sale of its products.
Sometimes, it is even
necessary to store the crop for many months before
it can be sold.
It is also possible that the
output will be sold at a distant market, which
entails transportation costs-, or, sometimes, the
retailer will delay payment of his bill. All these
factors produce a clash of interests
between the
needs
of
the
producer
and
the
existing
possibilities of the cooperative.
Therefore,
working capital is indispensable to meet the
requirements and to comply, at least partially,
with the interests of all.
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Possibilities:
An important working capital
to
farmers. Financing on short-terms by a bank.
Financing by a cooperative bank. Establishment of
a financing enterprise where the members of the
cooperative are also the shareholders.
Such a
financing enterprise will be established by the
marketing cooperative. It is the most advantageous
and
cooperative
solution.
Cheap
credit
is
allocated to the farmer provided he sells all his
output through the cooperative.
When the cooperative has determined the exact
quantities, which it will be able to sell, it is in
its own interest to make agreements for sates in
advance. A sound sale crowns the producer's work.
This is the reason why the establishment of a
cooperative is a necessity to the farmer.
The
cooperative prevents unhealthy competition between
its members, sorts out the products conscientiously
and directs the supply towards the demand.
The
cooperative
has
to
cope
with
all
the
abovementioned
problems
when
selling
its
production. Other problems also arise, such as: A
small supply of different products; thereby
small
quantities for sate. The production of vegetables
and poultry must be sold several times each week.
As the agricultural cooperatives are far away from
the market, transportation costs go up. Bad roads
and high transportation costs further increase the
cost price of the product. [2]
The marketing cooperative was created in order -to
push up the selling price as much as possible and
to increase the return to the member’s -For their
output [3]. The cooperative offers its members an
improved bargaining position in regard to services
such as transportation, and is capable of affecting
a better sale.
The better the service the more
members will be keen to join the cooperative. More
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members in the cooperative will enable a reduction
in the price for various services, as well as in
running costs.
The cooperative makes it possible
to
maintain
services
such
as
storage,
bulk
transport,
extended
credit,
markets
survey,
cooperative education, which the single farmer is
generally unable to achieve [4].
Marketing cooperatives in developing countries
encounter many difficulties.
G. Hyden describes
some of them [5].
Many of the marketing
cooperative in Tanzania was set up by local
politicians who were influential at the national
level. The main argument was that cooperatives
would minimize exploitation. The cooperatives were
set up without any feasibility study or field
survey, and as a result they fell into considerable
monetary dependence on external organizations, such
as
marketing
organizations
or
financial
institutions.
Since the cooperatives were set up
to suit external decrees
(the politicians), the
marketing cooperatives' fields of activity neither
accorded nor covered, either functionally or
regionally, the needs of the productive units at
work in the rural areas.
The cooperatives were
troubled by grave management problems, and in
parallel by lack of skilled manpower.
In
Bangladesh
a very extended
system
of
agricultural cooperatives was organized [6].
The
marketing cooperatives, which are of the third
level, are concerned with four main activities the marketing of agricultural produce of all kinds,
the
marketing of semi-industrial
products
(handicrafts), marketing of fisheries produce, and
marketing of dairy products.
Agricultural villages form the base of this
structure, whereby every fifteen villagers make up
a secondary level unit.
All secondary level
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cooperatives are organized into a third level
cooperative.
Though these cooperatives have made
significant achievements, they are also faced with
weighty problems.
The first problem is credit.
The farmer would like to sell his produce for cash,
and this requires the cooperative to have command
of considerable liquid resources, for which it must
obviously pay dearly. One of the solutions to this
problem is, of course, to sell the farmers' produce
on a commission basis [7].
But as is the case in
India, so in Bangladesh, the cardinal problem of
the marketing cooperative is the lack of any link
between marketing and credit [8]. Further problems
in Bangladesh are the great distances between the
cooperative branches and the farmers in the
villages. The management of those cooperatives is
not professional, and many of
the societies are
in fact reduced to waiting for things to happen
[9].
At the other end of the scale we have examples of
marketing cooperatives, which have been successful.
In Jordan, the olive marketing cooperatives have
changed the farmer’s methods of cultivation.
The
farmer was obliged to pick the
olives carefully
and in a selective manner, so as not to harm them.
The olives were transported directly to the oil
press, without interim storage.
The farmer could
step up production, but he was required to supply
better quality and cleaner produce.
The produce
was graded into various quality levels, and this
grading also increased the demand on the part of
the consumers.
The cooperative
also
succeeded
in influencing
prices.
The cooperative led to
an increase of the return to the farmer by 1% over
the market price, with customers being on the look
out for the cooperatives olive oil, as they were
confident of its quality (10).
5
The
carob marketing societies in Cyprus have also
been successful, and so have other marketing
societies.
Among the reasons for this success we
may note the fact that the farmer was more
exploited in the past. The marketing cooperative,
on account of its size advantage, has attained
lower marketing costs than the private traders, on
top of the high level of management [11].
Another example is the agricultural marketing
system in Algeria. This system, which had been
influenced by the socialist dogmas, which placed
the State above all. Is an example of severe
failure in everything that concerns marketing? The
system has tailed in all that concerns transfer of
information, packing, transport and storage [12].
2. Models of Marketing Cooperatives
Marketing is the process that an agricultural
product goes through on its way from the producer
to the consumer.
Traditional marketing involves several intermediary
stages within this process.
The result is, of
course, that the consumer pays an exorbitant price
and the producer receives a very low price for his
production. Naturally, it is in the interests of
both producer and consumer that the number of steps
in the marketing process be reduced as much as
possible. The result: the producer will earn more
and the consumer will pay less.
The first form of marketing is the traditional
marketing circle I he peasant sells his production
at a local market which is held in his village
every 5 or 6 days - this is the first stage. The
intermediary who buys this production transports
it. Usually on overloaded small open trucks covered
with a tarpaulin, to a regional market.
Another
intermediary will buy these goods and transport
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them to an urban market. The production will then
be sold and distributed at the neighborhood markets
where the retailers will come to get their supplies
for sale to the consumers.
This way agricultural
produce has undergone too many stages from producer
to consumer.
All intermediaries have benefited From this process, but not the producer nor the
consumer.
The solution to this state of affairs: a marketing
cooperative
owned
by
the
producers.
This
cooperative's aims are to reduce to a minimum the
number of marketing stages between producer and
consumer.
In Israel, the Tnuva cooperative is a
marketing cooperative belonging to all moshavim and
kibbutzim, and today has the fourth largest
turnover among Israeli enterprises. Tnuva has
organized a national network, which takes upon
itself the collection, transportation, storage,
processing and sale of approximately 75% of
agricultural output earmarked for the local market
in Israel.
The setting up of Tnuva has reduced
the number of steps in the marketing circle, but
not enough. Agricultural produce leaves the farm,
passes through "Tnuva" and is then sold in the
local market and in various small shops.
Another alternative reduces the number of steps
even more.
This alternative involves direct
contact between the
marketing cooperative owned
by the farmers and the consumer cooperative owned
by the consumers.
Thus, the sale of agricultural
products takes place from one cooperative to
another, and in principle, the profitability for
the producer increases while the purchase price for
the consumer decreases. This situation, though far
removed from the traditional marketing circle, does
not go far enough.
It is still necessary to try
to eliminate superfluous steps in the marketing
circle. Two solutions have been found:
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The first consists of consumer sale centers,
belonging to the marketing cooperative, an example
of which is Tnuva in Israel. These sale centers
link producers directly to consumers.
The second
solution
consists
in
supply
centers
for
agricultural produce, which are owned by the
consumer cooperatives, the latter belonging to the
consumers.
In this example the consumers have
organized themselves in order to acquire their
consumer goods directly from the producers.
The last marketing method, which we shall discuss,
concerns the organizations which belong to the
farmers and the government and which deal with the
export of agricultural products [13].
The last stage in our model is the stage at which
selling takes place directly from the producer to
the consumer. This is the preferable stage because
it produces the best results of all, both as far as
the producer is concerned, as well as for the
consumer.
An example of this is direct selling
outlets, which have been set up by moshavim and
kibbutzim at roadsides all over the country, which
sell their produce directly to the public. This
solution is beset with problems and is not always
possible of implementation - but this is the
solution we strive for.
Figure 2.
8
9
3. Conclusion
The central problem to which we have been
confronted was the quest to know how to establish
marketing cooperative in a traditional village,
existing in the traditional rural areas of any
developing
country.
We
should
remember
that
marketing is a system designed to transfer, in the
most effective way, the production from the
producers to the consumers. We know that the
existing marketing system in the traditional rural
areas is a system, which highly exploits the
producers and at the same time the consumers. This
marketing system pays to the producers the lowest
possible price, and at the same time, sells to
consumers at the highest possible price. This
system is composed of too many intermediary stages,
and each of these stages takes its part from the
total payment by the consumers.
We find, in the traditional areas, farmers who
present their merchandises on the side roads, and
waiting for clients going on the road with their
cars and stopping over to purchase their produces
directly. We observing here a stage of marketing
where the producer sells his produce directly to
the consumers, without any intermediary. Both
parties stand to gain here.
In Israel we know this phenomena where many
Kibbutzim and Moshavim which opened on side road of
major axes small shops where they sell their
produce directly to consumers drivers, going over
for their daily needs. Once again, we observe here
the direct sale from producers to consumers,
without any intermediary. This is the role of
marketing cooperative: to reduce the number of
intermediaries stages to the lowest number.
.
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Notes et references
1) Définitions de Mathur , ibid. pp. 349-350 .
2) Galor. Z (l982), ibld. ibid.
3) Hardis, I.W.: "Coopérative Theory
Implications: A selected review". p.49
dans; Anschel,ibid.
and
Market
4) Whetham. E.M.; "A Comparison of Marketing
Structures for Agriculture Produce in Developing
Countries". . pp. 26-27
Dans Digby M. and Mccready. K.J. (Ed):
Year Book of Agriculture Coopératives l970
Basil Blackwell. Oxford. l970
5) Hyden. G: "The struggle for success in
coopération:
Kabuku Noani UJamaa Coopérative Society, Tanzania".
2l2-2l3
Dans Webster. F.H. (Ed); Year Book of Agricultural
Coopération. l977 Parchment. Oxford. l977
6) Andreou. P, et Islam. M.M.:
"La commercialisation coopérative au Bangladesh".
Revue des études coopératives
No. l99 Paris l980 PP.lll-ll5
7) Patel. M.S.: "Coopérative Marketing In India"
Review of International Coopération
Vol. 69 No. 2 l976. p.52
8) Galor Zvi: "Towards the Coopérative Development
of Tradltlonal Rural Areas".
IIDCLS. Tel Avlv l985.
9) Considérations supplémentaires sur les problèmes
des coopératives de mercatique, dans:
11
Callar, D: The Social and Cultural Factors Involved
in Production by Small Farmers In Wedza Communal
Area, Zimbabwe, of Maize and Its Marketing
Unesco, Paris. RRD l7. Dec l982 P. 6l
Vinyor, T.R.: Les Facteurs socioculturels qui
orientent la production et la commercialisation de
certaines denrées alimentaires par les petits
fermiers dans la République populaire du Bénin
Unesco, Paris. RRDl6. Août l982 pp. 64-69
Semana, A.R.: The social and cultural factors
involved
in
small
scale
farmers
food
crop
production and marketing in Malawi
Unesco. Paris. RRD 20. août 1983, p. 15
Macbaney, F.E.: The social and cultural Factors
Involved ln production by small Farmers ln Cameroun
of plantain and cassava and thelr marketing
Unesco. Paris. RRD 2l. Sept. l983 p. 4l
10) Tayeh. A.K.: Coopérative Olive 0ll Processing
and Marketing ln Jordan". PP. 67-68 :
Digby.
M.
(Ed):
Year
Book
of
Agrlcultural
Coopératives l969
Basil Blaewell. Oxford l969.
11) Andrew. P.: "The Coopérative Marketing of
Carobs ln Cyprus". P. 233
Webster, F.H. (Ed) : Year Book of Agrlcultural
Coopératives l976 Oxford. l976
12) Paris. A: "Une enquête sur les cooperatives
cypriotes de commercialisation des agrumes et
autres fruits de tables"
Revue des Etudes Coopératives Paris, No. l83, l976.
pp. 45-54
13) Granier. J.C.: "La Commercialisation des fruits
et légumes en Algérie"
Revue des Etudes Coopératives Paris. No. l94 l978.
12
pp. 69-88
13