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COOPERATE MARKETING IN NIGERIA
“Cooperative marketing” can mean many things to many people depending upon
your background. Cooperative businesses are a type of corporation but have a few
qualities that make them an attractive option for many small groups that want to
maintain member ownership of the business. “cooperative” is both a noun referring to
a legal business structure and as an adjective to describe the agreement of people to
cooperate with each other related to marketing efforts.
Agreement between a manufacturer and a member of distribution chain (distributor,
wholesaler, or retailer) under which the manufacturer shares a certain percentage of
the member's advertising and promotion costs, or contributes a fixed sum.
Agreement between two or more marketers with complementary products (such as
cosmetics and toiletries) or different seasonal sales cycles (such as raincoats and
winter coats) to promote or sell each other's products with their own. Also called
cooperative marketing or co-marketing.
Co-marketing (Collaborate marketing) is a marketing practice where two companies
cooperate with separate distribution channels, sometimes including profit sharing. It
is frequently confused with co-promotion.
Simply put, marketing cooperative as the name suggests, their primary function is to
market the products of their members.
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Cross-marketing describes the practice where two individual entities companies
exchange marketing channels for mutual benefit. No new product, service or brand is
created here
Examples:
link or banner exchanges
"Intel Inside" on PCs
Co-marketing describes the practice where two individual entities companies create
and jointly develop a new product, service or brand (and normally jointly promote it).
Co-marketing has of recent become very prominent in the entertainment industry.
This typically means partnerships between brands and entertainment properties such
as television shows, films, and music acts.
Examples:
Apple and Nike jointly developing a new service for joggers
Omega and the James Bond franchise partnered to promote the films and the
company's watches
Companies such as The SMC Group specialize in entertainment co-marketing,
and have negotiated a number of deals including Alexandra Burke and Sure
Deodorant, Shaggy and Logitech Ultimate Ears
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Cooperative Marketing Act
The Cooperative Marketing Act of 1926 was a piece of agricultural legislation
passed in the United States which expanded upon the Capper-Volstead Act of 1922.
It allowed farmers to exchange “past, present, and prospective crop, market,
statistical, economic, and other similar information” at their local cooperative
meeting, without breaking antitrust laws. Previously, under the Capper-Volstead Act,
they had only been permitted to exchange pricing information.[1]
Under the Cooperative Marketing Act, farmers and their local, regional, and national
cooperatives could legally exchange a host of information within their marketing
systems. It was a critically important strategic authorization that enabled federated
cooperative systems and marketing agencies-in-common to effectively function as
coordinated entities.
In addition, the Act created the Division of Cooperative Marketing within the United
States Department of Agriculture to assist cooperatives in gathering and sharing data
on output, prices, and demand. The Act also created the Cooperative Research and
Service Division which conducted research and service activities relating to problems
of management, organization policies, merchandising, sales, costs, competition, and
membership arising in connection with the cooperative marketing of agricultural
products and the cooperative purchase of farm supplies and services.
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The Cooperative Marketing act was useful, but it was still not satisfactory to the
Farm Bureau or other farm lobbyist groups. For farmers, an increase in available
information to help cooperatives work together was no substitute for the price floor
on select crops that they demanded. Demand for a price floor was steady, and
culminated in the passage of the McNary-Haugen bills in 1927, and again in 1928,
both which suffered the veto of President Calvin Coolidge.
Cooperative businesses are a type of corporation but have a few qualities that make
them an attractive option for many small groups that want to maintain member
ownership of the business. Cooperatives have three distinct characteristics that
separate them from other businesses. Cooperatives are member-owned, member-
controlled, and generate member-benefit. Member-owned is a function that
guarantees that the members of the cooperative are the ones that provide the initial
capital for the start-up of the business and are the current owners of the cooperative.
Member-controlled continues down the same thought process because the members
are the ones that elect the board who is responsible for making long-term decisions
for the cooperative. The members are electing other members to serve on the board
and make these decisions for the total membership of the cooperative. Member-
benefit is the end result that ensures the profits made by the cooperative are being
returned to the members, sometimes referred to as patronage refunds. These profits
are not being returned based on the investment the members made in the cooperative,
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but rather the amount of business that members conducted with the cooperative
throughout the year. For example, if you are a member of the cooperative, but do not
use any services or purchase any products from the cooperative during the year, you
have no member-benefit or patronage refunds coming your way at the end of the
year.
If you and your neighbor agree to sell your products in one roadside stand, you are
practicing cooperative marketing. When you use cooperative as an adjective it
describes the behavior or agreement of two or more parties in relation to marketing.
These cooperative marketing arrangements are usually informal and have no legal
binding between or among the parties involved. These cooperative marketing
agreements can last years and never have problems; however, sometimes group
dynamics make these agreements unpleasant and useless for the parties involved.
There are many reasons why parties join a cooperative business or participate in a
cooperative marketing arrangement.
New product commercialization
Kotler et al. (1999: 604) define new product development as the development of
original products, product improvements, product modifications and brands through
the firm's own R&D efforts. They believe that commercialization is the final step in
new product development. Zarea (2011) argues that mostly, commercialization fails
because of the unsuitable marketing strategy or inefficient implementation. This is
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exactly what we need to concentrate on, that is how marketing strategy can be
designed to produce results of success of product development. The marketing
strategy development as Kotler et al. (1999: 614) described consists of some
elements, one of the most important of them is to determine the target market. It
seems that accessing the target market to offer new product is one of the main
difficulties for ventures, so finding a way to penetrate the target market, especially
for products affordable for youth and football clubs, can be facilitated if football
clubs enter into marketing efforts, not just by embedding the product on the kit, but
by participation in the marketing strategy, as a partner. Thus, it seems better to study
a case, as success of cooperative marketing as an entrepreneurial strategy to reach the
target market.
Creating an Enabling Environment for Cooperate Marketing to Thrive In
Nigeria
In an effort that culminated in the 1970s, the Nigerian government gradually
expanded its controls over the private sector, levying differential taxes and subsidies,
increasing industrial prices relative to farm prices, favoring investment in key sectors,
providing tariff and tax incentives to vital sectors, protecting favored industrial
establishments from foreign competition, awarding import licenses to selected firms
and industries, and providing foreign exchange to priority enterprises at below-
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market exchange rates. While the ostensible reasons for this policy of favoritism were
to transfer resources to modern industry, expand high-priority businesses and sectors,
encourage profitable enterprises, and discourage unprofitable ones, in practice the
government often favored urban areas by promoting production that used socially
expensive inputs of capital, foreign exchange, and high technology. Market
intervention helped political and bureaucratic leaders protect their positions, expand
their power, and implement their policies. Project- or enterprise-based policies
(unlike reliance on the market) allowed benefits to be apportioned selectively, for
maximum political advantage. Government made it in the private interest of
numerous individuals to cooperate in programs that were harmful to the interests of
producers as a whole. However, market-clearing prices (for farm commodities or
foreign exchange), whose benefits were distributed indiscriminately, inspired little or
no political support among farmers and businesspeople.
Beginning in 1979, the policy prescription of the World Bank (and IMF) was for
African countries to refrain from interfering in foreign exchange and interest rates,
wages, and farm prices; to privatize state-owned enterprises (especially agro-
processing, farm input distribution, insurance, and retail and wholesale trade); to
relax restrictions on foreign capital; and to encourage indigenous business ventures.
By the early 1980s, Nigeria faced substantial international payments deficits in the
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midst of declining export prices and rising import prices, rising external debt
payments, and negative economic growth.
In a paper presented at the celebration of the World Consumer Rights day in 1992,
Mrs. Priscilla O. Kuye, president of the Nigerian Bar Association, averred that the
problem of consumer protection has pre-occupied the attention of successive
Nigerian governments over a long time.
Notable among the Nigerian consumer protection laws cited by Kuye are:
The sale of Goods Act of 1893 The Hire Purchase Act of 1965
The Standards Organization Act of 1971 (and its 1976, 1984 and 1990 Amendments)
The Food and drugs Decree of 1974
The Counterfeit and Fake Drugs (miscellaneous provisions Decree of 1989)
These and other statutory provisions were aimed at ensuring that the products
manufactured in Nigeria conform with certain standards so that the interests of the
consumer are safeguarded. According to Kuye, the laws prohibit and regulate
deceptive or unconscionable advertising and sales practices, product quality, credit
financing and reporting, debt collection, leases, and other aspects of consumer
transactions.
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Expatiating further on consumer protection laws available in Nigeria, Kuye made a
special case of the Standards Organization of Nigeria Act of 1871, which established
the Standards organization of Nigeria as an integral part of the Federal Ministry of
Industry. With the 1990 amendment to the Act, the organization became a body
corporate with a Director-General as the Chief Executive. The main functions of the
organization, as summarized by Kuye, are “to standardize the methods and products
industries in Nigeria, and to ensure that the government policy on standardization is
complied with by the industries. The 1990 amendment to the Act also empowers the
organization to set “Mandatory Industrial Standards”, through the Ministry of
Industries, where necessary and to take a number of disciplinary and legal actions
against any manufacturer and/or vendor who fails to conform to such mandatory
standards.
The Policy Objectives
The primary policy objectives of the Federal Government on co-operatives are:
1. To provide a conductive environment which will facilitate cooperative marketing
practice and its effective use for social and economic development of the rural
communities in Nigeria.
2. To promote the development of an effective, efficient and economic cooperative
marketing and use it as a machinery for rural transformation and development.
Policy Strategy
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In order to achieve these objectives, these strategies are pursued by the government.
1. Intensification of cooperative marketing education, training and public
enlightenment at all levels. This is to increase participation and involvement of
farmers and other rural people in co-operative movement activities. Besides it will
hopefully enhance decision making process of the rural people in order to improve
their general welfare.
2. To use cooperative marketings to achieve the macro-economic objectives of
increased domestic production of food and cash crops, industrial raw materials,
equitable distribution of inputs and. Production, farm products and other
commodities, diversify export earnings and generation of employment
3. To widen the democratic base in the local communities through cooperative
marketing participation in the formulation and implementation of rural development
programmes.
4. The methodical and gradual withdrawal of government’s involvement in the
management and running of the co-operatives.
In this regard the government’s role in cooperative marketing development will be to
create and maintain a conducive socio-economic and political framework and
environment for cooperative marketing to thrive.
Other efforts by the government include;
Universal Price Subsidies and Tax Reductions
Universal price subsidies and petroleum product tax reduction are the two most
commonly used methods of partially offsetting higher cooperate prices on the
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international market.1 They are used in various combinations, and the distinctions
between them are not always clear. Nigerian governments do not adjust taxes and
provide subsidies; others lower taxes and provide no subsidies. The result may be
identical: end users pay lower prices, and Nigerian government collects lower net
revenue from the downstream petroleum sector. However, the effects on the revenues
of different levels of Nigerian government may differ. For example, if (1) the central
Nigerian government levies no tax, (2) state governments levy an excise tax of 30
percent, and (3) the Nigerian federal government provides a price subsidy equal to
20 percent of the end-user price, state government revenues remain the same while
the Nigerian federal government suffers a net loss.
Targeted Price Subsidies and Tax Reductions
Agriculture, public and goods transport, and fisheries are among the sectors that have
benefited from targeted price interventions in some countries because of the
perceived economy wide benefits of keeping the prices of their goods and services
low. Some examples are given in this section.
Price Stabilization Fund
A price stabilization fund may have an intuitive appeal but does not work well in
practice, and all such funds were strained in 2007–08 (see Bacon and Kojima 2008,
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chapter 7). The idea behind a price stabilization fund is to set domestic prices higher
than international prices in times of low world cooperate prices and save the balance
in the fund; when world cooperate prices exceed a threshold level, money is
withdrawn from the fund to subsidize domestic prices. Ideally, such a fund is self-
financing, which would be the case if, for example, prices were mean-reverting.
Influencing Prices In addition to direct interventions, there are other ways by which
nigerian governments can affect prices. These methods include exercising influence
on state-owned cooperate companies; becoming involved in coperate produce
procurement; negotiating with coperate produce marketers; using legal force to lower
prices; widely disseminating price information; and, in cooperate-exporting countries,
using export bans and taxes.
Influencing State-Owned Cooperate Companies
If there is a national cooperate company or an cooperate company with some state
involvement that is also a price-setter (because it controls a large share of the
market), the nigerian government may send signals to the company to keep prices
low.
Nigerian government Involvement in Cooperate produce Procurement
The Nigerian governments have become directly involved in cooperate produce
procurement in the hope of lowering costs, through scale economy, reducing profit
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margins, or both. On at least one occasion, the mere threat of Nigerian government
involvement achieved price reduction
Holding Talks with Cooperate produce Marketers
The Nigerian governments have held meetings with cooperate produce marketers to
argue for price reduction. The prime minister of Cambodia in September 2008
instructed the finance ministry to meet with cooperate produce marketers to lower
prices, and called upon cooperate companies to lower prices on several occasions
(Phnom Penh Post 2008b). The Nigerian government had formed a special ministry
committee three months earlier to monitor prices with a view to assessing if there
might be price gouging
Disseminating Price Information
Transparency in pricing helps create a level playing field and can indicate whether
prevailing prices are broadly reasonable. At a minimum, nigerian governments
should promulgate and enforce a regulation requiring all filling stations to post prices
on display boards using letter sizes that are clearly visible from the road. Other means
of enhancing transparency include conducting price surveys and posting the results,
publishing graphs of domestic and international cooperate produce prices for
comparison, making historical and current prices public and readily available through
the Internet and other media, and disclosing on a regular basis the price buildup for
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each key petroleum product (including application of rules for price determination
where prices are set by the Nigerian government).
Government Motivational Export Policies and Strategies
The nation export promotion programmes are contained in the Nigerian Export
Incentives and Miscellaneous Provision Decree 18 of 1986, as amended by Decree 65
of 1992, and the 1996/1997 national budget policies on export. Some of the
assistance policy programmes include:
Currency Retention Scheme
This is also referred to as “Domiciliary Account Export Proceeds”; the scheme allows
exporters to retain one hundred percent of their foreign exchange earnings in their
domiciliary accounts in any authorized bank of their choice. The objective of the
currency retention scheme is to enable exporters have foreign exchange at their
disposal, and this can be utilized for non-oil export related activities.
Export Development Fund (EDF)
This is a special fund provided by the Nigeria government to give financial assistance
to exporting companies so as to cover part of their initial expenses in respect of the
following export promotion activities:
a. To participate in training courses, symposia and workshops in all aspects of
export promotion,
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b. To enable exporters advertise in foreign markets,
c. To carryout market research studies,
d. To encourage firms to engage in product design and consultancy programmes,
e. To participate in trade missions buyers-oriented activities, overseas trade fairs
exhibitions and store promotions
f. To assist in the area of cost of collecting trade information,
g. To encourage the development of export oriented industries.
It is important to note that the fund would only cover part of the cost involved in any
exportrelated activity, while exporters bear major part of such costs.
Export Expansion Grant Fund (EEGF)
The fund is to provide an inducement for exporters to enable them (exporters)
increase the volume of export, diversify export products and market coverage. The
Export Expansion Grant Fund is made available only to exporters who have
repatriated their proceeds from previous export transactions as certified by Central
Bank of Nigeria (CBN).
Duty Draw-Back Scheme (DDS)
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This scheme is aimed at providing for the refund of import duties and surcharges on
raw materials, including packaging and packaging materials used for the
manufacturing of products destined for export.
Duty Suspension Scheme (DSS)
This is a mechanism through which imported inputs for export production can be
imported with a waiver of import duties and surcharges, such as raw materials and
intermediate inputs packaging materials, labels, etc used directly to manufacture
export products that can be imported free of customs, excise and other duties under
the scheme.
Manufacturing-in-Bond Scheme
The manufacturing-in-bond scheme provides for importation of raw materials into a
bounded warehouse of the company for export production. That is, the scheme is
designed to enable manufacturers to export products that have a minimum value
added of 20 percent to import duty free on their raw materials for exportable
products. Only products produced in Nigeria qualify to benefit from this incentive.
Pioneer Status Scheme (PSS)
This is an incentive that grants tax holidays on corporate income to manufacturing
exporters that export at least fifty percent of their turnover. The objective of this
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scheme as provided in the income tax Act of 1971 is to encourage the establishment
of export-oriented industries in Nigeria.
Export Price Adjustment Fund (EPAF)
This fund serves as a supplement or additional fund to compensate exporters on the
following:
(a) High cost of production arising mainly from infrastructural deficiencies.
(b) Purchasing commodities at prices higher than the prevailing world market prices-
this is usually fixed by government.
(c) Other factors beyond the control of the exporters are unfavourable currency
exchange rate, political instability, etc.
The fund is principally designed to provide leverage after other incentives might have
been exhausted.
Tax Relief on Interest Income
The relief is aimed at tax exemption on interest accruing from loans granted by banks
in aid of export activities. This is in accordance to Company’s Income Tax Act of
1979, which states the percentages of tax exemption on interest for foreign investors.
Capital Asset Depreciation Allowance (CADA)
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The Company’s Income Tax Act of 1979, as amended by the Finance/Miscellaneous
Provisions Decree of 1985, and amended further by the Export Incentives Decree No.
18 of 1986, provides for an annual depreciation allowances of five percent on plants
and machinery to all manufacturing exporters who export at least fifty percent of
their annual turnover with at least thirty-five percent value added.
Incentives for Manufacturing Enterprises
Manufacturers profit and dividends are exempted from taxation under this scheme.
The tax exemption includes:
(a) Removal of taxes on interest income loans and advances granted by banks for
Export manufacturing.
(b) Tax exempt for dividend derived from manufacturing companies in the
petrochemical and liquefied natural gas sub-sectors.
(c) Low rate of tax (20%) for small manufacturing companies for the first five
years of commencement of business.
(d) Small companies’ dividends are free from tax.
(e) Restrictions for capital allowances are removed for manufacturing companies
(f) Profit for any Nigerian company in respect of goods exported from Nigeria are
exempted from tax, and
(g) Profits of companies whose supplies serve as inputs to manufacturing of
productsfor exports are excluded from tax.
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Incentives on Export of Solid Minerals
New companies venturing into the mining of solid minerals from 1996 are to enjoy
tax free holiday for the first three years of their operation.
Special Trade Agreements/Liberalization
Certain bilateral and multi-lateral trade agreements are entered with a view to
waiving or reducing some duties or tariffs on goods from countries that signed the
agreement. This is aimed at encouraging foreign trade and investment. The Lome
conventions, generalized system of preferences (GSP), and ECOWAS treaty are
some of the examples of the special trade agreements to which Nigeria has been
associated with.
Export Promotion Zone (EPZ)
Nigerian export promotion zone was established by Decree No 34 of 1991; the decree
provides for the establishment of a geographical enclave within the country, to which
normal customer’s tariffs or duties do not apply. In other words, EPZ is an incentive
provision for exporters within a nation’s customs territory, which provides an
attractive environment for doing business especially in an otherwise not too attractive
environment. The objective of EPZ is to motivate local and foreign investors,
stimulate industrial production for export, diversify economic activities, generate
foreign exchange, create backward linkages and provide bases for technology
transfer. The first export promotion zone in Nigeria is located in Calabar, and the
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foundation was laid on November 7th, 1991, by the then President of the Federal
Republic of Nigeria-General Ibrahim B.Babangida. Other policies and incentives
aimed at not only creating export awareness, but also to promote other export
activities include incentives for the manufacture of locally made spare-parts and
equipment, re-discounting and refinancing facility for export, industrial export
simulation facility, export credit guarantee facility, export credit insurance facility
and insurance of market risks.
Perception of Nigeria Export Policies and Programmes
To have an insight to the perception and performance of the Nigerian export
promotion programs, we will consider the number of participants and the total sum
paid to beneficiaries with respect to duty drawback scheme and export expansion
grant fund from 1988 to 1996. According to NEPC (1997), a total of ninety-three
companies benefited under the duty drawback scheme, out of one hundred and forty-
three companies that applied within the period; while about one hundred and ninety-
one million naira was paid to the companies for the same period of nine years (1988
to 1996). It is worthy to remark that the number of companies that applied is small,
and the number of benefiting firms is also not encouraging. Hence the desired
objectives could not be achieved. Okeke (1990), also stated, that the drawback
schemes’ elaborate administrative procedures gave rise to what the author called
“undesirable situations”. Another example of Nigerian export performance can be
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seen from the total export expansion grant disbursed to companies from 1989 to
1996. The grant ranged between 1.7 million Naira to 79 million Naira. Considering
the capital-intensive nature of expanding manufacturing companies, it will not be out
of place to state that the above sum disbursed is insignificant to make meaningful
impact in the export expansion scheme of most companies within the given period.
In analyzing the scope and the objectives of Nigerian export assistance programmes
as discussed above, we can describe them as laudable. But some of the export
assistance programmes are not yet being implemented or are poorly implemented.
Hence, Iyanda (1998) similarly remarked that Nigeria government’s approval of
export credit guarantee scheme was more on paper. In the same manner, the
commercial banks failed persistently to comply with CBN’s guidelines on credit to
the export sector, while some people have also argued that successive governments
were simply paying “Lip service” to the promotion of non-oil export.
The usual complaints of NEPC since its establishment in 1976, has been that of
inadequate funding. The under funding if NEPC may have also been responsible for
the ineffectiveness and inefficiencies. NEPC (1989), noted that, “…owing to the
ineffectiveness of existing package of export incentives as well as constrains, the
orders received in some of its missions overseas could not be executed”. This is
coupled with some administrative “bottle-necks” placed on the part of exporters
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which resulted in the inability of Nigerian exporters to respond urgently and
successfully to the over fifty million Naira tentative orders received during the trade
missions embarked in the past. It was to solve some of the above-mentioned
problems that the Association of Nigerian Exporters (ANE) was formed in 1984
(Ogunnus, 1986). ANE is a private sector, non-profit organization that liaises with
relevant government agencies over export matters. It may also be necessary at this
point to ask whether we-those involve in export policy formulation, promotion and
implementation in Nigeria-are supporting the best programme (Czinkota 1981). Some
other problems were also identified as being responsible for not achieving the
nation’s desired economic development through export marketing. One of the
problems has to do with exporting raw agricultural commodities by Nigerian
exporters, and these commodities are sold as processed goods to Nigerian consumers
at a higher price. This is why Nwakama (1986), stated that the absence of forward
integration in the Nigerian agricultural sector is largely responsible for the failure
of the Nigerian agricultural sector to expand, and make meaningful progress.
Similarly, lack of backward integration is also accused of been responsible for the
industrial sector’s low growth and expansion.
From the preceding discussions, it can be appreciated that marketing in general, and
export marketing in particular can be described as the necessary foundation and
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facilitator for any meaningful economic development to be made in any given
country of the world, and government effective export incentives and conducive
environment will not only motivate firms’ export marketing, but will also facilitate
the achievement of the desired export objectives of the Nigeria nation.
Benefits of Cooperative Marketing
Economies of scale
There are economies of scale that can be obtained from the collective effort of joining
forces and marketing as a group. It would be cheaper for beef producers to come
together and assemble a semi-load of feeder calves for shipping to Kansas than it
would be for each individual to get their calves to Kansas. When you are buying
supplies, a consolidated order that contains pallets or bulk orders is cheaper than
individually buying a small amount of supplies.
Bargaining power
A group effort can combine available supply of product or consolidate services
offered that allow bargaining power for the group. If you have 2 bushels of
tomatoes, you have little power to negotiate a price with a retailer, but if as a group
you have 140 bushels of tomatoes, you can bargain for a better price because of the
quantity that can be supplied by the group. This bargain force can be used to gain
additional economies of scale with bulk purchasing arrangements.
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Flow of product
Retail markets require some consistency in flow of product to their
establishments. As an individual with 12 doe goats, you can in no way guarantee
more than 2 kid goats per month for the year. Retailers are looking for a business
that can provide them a set amount of product on a daily, weekly, or monthly
basis. If you get together with 20 other producers and as a group you have 240 doe
goats, you could guarantee up to 40 kid goats per month to the retailer. You will
now have their attention and be able to negotiate a price that the group needs for
the kid goats.
Preserving markets
Many markets are looking to reduce the costs of obtaining products or services.
These markets are looking at buying their products or services but dealing with
less people and having the same amount of product to sell through their
establishments. If you are trying to market your 10 finished hogs to a processor
and the cooperative down the road has members with 120 hogs ready for
slaughter, the buyer will stop at the cooperative to make his purchase. He can
obtain 120 hogs in one contact versus the contact with 12 producers your size to
end up with the same end result. A cooperative marketing arrangement will
preserve many of the markets you use for the future as businesses move to cutting
costs associated with procuring products and services.
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Access to professional assistance/expertise (hire support)
Many producers can benefit from professional services in marketing and sales of
their products. If you are an apple producer, you are probably in the business
because you are good at producing apples, but you have to sell them to make any
profit. If marketing and sales are not your “cup of tea,” you are a member of the
majority of today’s agricultural producers. If you join a cooperative marketing
group that hired a marketing manager and all you had to do was raise a top quality
apple for the person to market, your life would be much easier. You individually
could not afford to hire that marketing manager, but as a group of 15 orchard
owners you can consolidate your product and finances to increase the price you
will receive for your product.
Challenges of Cooperative Marketing
Agreeing on one common mission
The first step in moving towards a cooperative marketing arrangement is to make
sure all individuals are on the same page. This is achieved by making sure that all
members are onboard to operate for the same purpose. Most of the time, this is not
present among the members, even though most groups or steering committee
members think that they all want the same end result. Again, a facilitator can help
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the group move through this process, because a common vision is essential for
moving any further on the marketing venture.
Trust and sharing of information
Many agricultural producers have operated individually for years and are skeptical
about the idea of a cooperative marketing venture. There is a time and process for
building a sense of trust among the members and generating an open sharing of
information in relation to the cooperative marketing venture. This trust must occur
among members to keep members loyal and make the effort function successfully
in the future. You are going into business with all members of the effort and if you
have trust issues, why would you ever agree to run a business with these people?
This is a major roadblock for many groups but some facilitated discussions can be
held with professionals who are experienced in dealing with the human
components of cooperative marketing organizations.
Group dynamics (democratic group decision making and costs)
The group dynamic aspect of an organization depends somewhat on the size of the
organization. A large cooperative marketing effort would have a board of directors
that govern the long-range planning and decision making for the cooperative, but
in a case where the group only consists of 20 or 25 members all members might
participate in making decisions. Most understand that a democratic process for
making decisions ensures that the members are involved and their opinions are
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addressed, but the fact is that this process can take more time to reach the end goal
of a decision. Some organizations operate on a basis that consensus has to be
reached by all for the decisions to go forward. This is different than a democratic
majority vote system and can take much more time for plans to move forward.
Lack of commitment from members
Members can become disloyal members in the blink of an eye. This behavior
exhibits why it is important that members “buy into” the vision for the group,
have a developed trust for all members, and understand the need for sharing
information and managing the group dynamics in the cooperative marketing
organization. This issue is sometimes addressed by signing a marketing agreement
or contract with the organization that outlines the repercussions that will occur
should you, as a member, breach your contract/agreement with the organization. If
you are not agreeable to signing the agreement, then I contend that one of the
three above challenges has not been resolved for you as a member. Take a step
back, readdress the situation, and let members know what your hesitations are
before signing an agreement to market through the organization. This is necessary
for the success of the organization. Human nature tells us that a member will sell
outside the organization if he or she can make a dollar more. A large majority of
producers would choose to market only with the organization when it can benefit
the member.
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Conclusion and Summary of Cooperative Marketing
We have explored the definitions of “cooperative marketing” and compared the
benefits and challenges of cooperative marketing efforts. So is a cooperative
marketing effort a fit for you? Only you can determine the right choice for your
operation, but hopefully I have given you some topics to address and think about
before participating. There are several benefits to joining a cooperative marketing
venture: obtaining economies of scale, entering new market(s), accessing
professional services, maintaining more of the retail dollar, increasing bargaining
power, and preserving existing markets. These can benefit your operation by
increased profits and efficiency, but you need to consider the challenges before
you make the final decision. The challenges are not to discourage you from
joining a cooperative marketing organization, but rather to make you aware that
with benefits come challenges for the organization. These are all related to the
human dynamics, commitment, and trust of the members who operate and own the
organization. When it comes to generating income, many of us choose the option
that will bring us the highest reward in the near future. With cooperative
marketing organizations, you have to look at the reward you receive throughout
the year from the organization. Is the average as a member of the effort better than
the average you would have achieved as an individual? This requires you to look
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at the “whole picture” and determine the best option for the future success of your
operation.
References
King, Robert, and Gigi DiGiacomo. 2000. Collaborative Marketing: A Roadmap
and Resource Guide for Farmers. Minnesota Institute for Sustainable
Agriculture (MISA).
Mather, J. Warren, and Homer J. Preston. 1980. Reprinted 1990. Cooperative
Information Report 1, Section 3: Cooperative Benefits and Limitations. United
States Department of Agriculture (USDA), Rural Business Cooperative
Development Service.
Rapp, Galen. 1995. Cooperative Information Report 10: What are Cooperatives?
United States Department of Agriculture (USDA), Rural Business Cooperative
Development Services.
SARE/ SAN. 2003. Reap New Profits: Marketing Strategies for Farmers and
Ranchers. USDA Sustainable Agriculture Network (SAN).
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Varney, Christine (December 2010). "The Capper-Volstead Act, Agricultural
Cooperatives, and Antitrust Immunity" (PDF). American Bar Association.
Retrieved 2011-01-27.
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