All cooperatives have a cooperative advantage because of their ownership structure. Being owned by people using the business sets cooperatives apart from competitors owned by profit-oriented shareholders. When the shareholders of a business are the users of a business, the business is focused, by definition, on the values and needs of the owners.
|Owned by members who want to use the business||Owned by shareholders for profits|
|Multiple Bottom Line: Focused on member values, needs and profitability||Single Bottom Line: Focused on profits
If a cooperative is focused on members’ values and needs, as well as sound financial health, it is aligned with its core structure. Cooperative values are human values. In many studies completed over the last ten years, it has been well documented that 90% of the consumers who know about cooperatives, will choose to do business with a cooperative, price and quality being equal. Consistently, polling in the USA has shown that, price and quality being equal, people prefer to buy a product from a co-operative. People are attracted to businesses that are grounded in human values and that are focused on serving their needs.
If a cooperative moves away from this core structure and focuses only on profits, it cannot claim a cooperative advantage. When credit unions decide to act just like a bank, when an electric cooperative acts like a for-profit utility company, when a farmer-owned cooperative acts without concern for the farmers’ interests, they cannot market their cooperative advantage. Though many of their owners may be participating in the business because they believe it to be more ethical or to have their interests in mind, if a cooperative that is not concerned about ethical operations or member benefits attempts to market themselves as such, the message will likely cause more damage than good.
A cooperative’s advantage is strengthened or weakened by the degree of alignment among the values and needs of member-owners and the actions of the board and management. When members join together to found a cooperative, it is focused on their values and needs. If, subsequently, board and management do not align the operations of the business to focus on cooperative values and member needs, there is no cooperative advantage. If the board and management do, the advantage is strengthened.
|Consumer Owned Cooperatives and Purchasing Cooperatives||Worker-Owned or Producer-Owned Cooperatives|
|Advantage to Members||Access to quality products and services, fair prices, excellent customer service, trustworthiness, community support, cooperative values and ethical business practices||Employment or access to markets and support for value added processing; cooperative values and ethical business structure, community support|
|Advantage to Consumers||(Same as above)||Access to quality products and services made by the owners, supporting producers/workers, community support|
The owner-members in consumer-owned cooperatives and purchasing cooperatives are looking to their cooperative for access to products and services, fair prices, excellent customer service, trustworthiness, community support, cooperative values and ethical business practices. The owner-members in a worker-owned or producer-owned cooperative are looking to their cooperative for employment or access to markets and value added processing, community support, cooperative values and ethical business practices; they give a quality commitment to their customers.
Cooperatives have a structure that pushes them to deliver on these promises. Investor-owned businesses have a structure that pushes them to deliver profits to shareholders. Visionary leaders in for-profit businesses can implement excellent business practices. They have proven these values-business practices are profitable, and therefore have received support from their shareholders. Board and management not aligned with the needs of their members can fail to deliver what their members and customers are looking for, ie, there is no guarantee a cooperative will bring advantages to its members or consumers, but the cooperative structure gives members a legal mechanism to push for these results.
While it is clear all cooperatives have advantages that arise from their ownership structure; it is also true that they have disadvantages. These might include negative consumer attitudes toward cooperatives, speed of decision-making, reporting requirements, legal restrictions, or access to capital. In countries where cooperatives enjoy cultural and political support, many of these issues are not disadvantages; these challenges are not imbedded in the cooperative nature of the business, but emerge from the non-cooperative nature of the society.
Respondents in the study are reporting a wide range of cooperative advantages. Generally, respondents have one or two in mind when asked an open-ended question, but when presented with a list of options, they generally acknowledge most on the list. Over the course of the interviews the following list of advantages seemed to generally be invoked:
- Member owned; democratic principles, advocacy, distribution of profits
- Community commitment & interaction; opportunity for development of community leaders • Great customer service
- Member education
- Employee education
- Cooperative buying power; economic advantage
- People helping people
- Producer (farmer) linkage with consumer; fair trade
- Cooperatives are trustworthy
- Cooperatives are local
“Member owned” is the single most invoked cooperative advantage, but further discussion reveals a wide variety of interpretation of this statement, and therefore also associated underlying benefits. Although the member-ownership structure is the fundamental difference between a cooperative and a for-profit business, it is not necessarily something that can be used effectively in member communications or marketing. There is market research showing that consumers have concerns about personally accepting the responsibility and liability associated with owning a business. It shows that while consumers wouldn’t respond to an invitation to be an owner of a cooperative, they would respond to an invitation to enjoy the benefits of ownership.
Many respondents refer back to the original seven key cooperative principles defining a cooperative, but no consensus seems to be presents as to how specifically to define resulting benefits. It seems to be more of a ‘feel’, implicit expressions of value and emotion. From the perspective of marketing and marketing research, it might be helpful to further analyze input from a range of research and attempt a more authoritative, analytically clear and explicit definition of cooperative advantages.
Research is required to determine how each membership group defines and measures the values and outcomes they are looking for in their cooperative. The first step in developing a successful MOCA program is including the members in defining the cooperative’s cooperative advantage – what it is and what it could or ought to be.
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