COOPERATIVE MARKETING BASICS PART I

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COOPERATIVE MARKETING BASICS PART I

• Cornell Cooperative Extension Franklin County

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Ways of Cooperating

• Networks
• Alliances
• Cooperatives

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Networks Organizational Characteristics

• Range from informal social groups to formal
  associations
• The common bond ranges from being in the same
  industry to a specific mutual interest
• Tend to take a long-term view, because the common
  interest will continue

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Networks Organizational Characteristics

• Medium number of entities involved due to the
  industry, location and so on
• Members are from very small to medium sized
• Provides services, joint purchasing /or combined
  marketing efforts
• Anti-trust issues can be a concern

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CRITICAL ASPECTS OF NETWORKS

• Perception of common benefit
• Developing trust relationship
• Need for an active facilitator or champion

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Alliances Organizational Characteristics

• An understanding or at most a contractual
  agreement, but rarely a separate legal
  corporation
• Involves two or a small number of entities
• Entities are often corporations

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Alliances Organizational Characteristics

• The partners may be in different industries but
  they have a common interest and their
  skills/talents/ capabilities are complementary
• A short to medium to long-term relationship
• Organized to provide a very specific task,
  product or service

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Benefits of Alliances

• Shared objectives through combined resources and
  capabilities
• Because these serve a specific purpose alliances
  lack the flexibility of a broader network

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Cooperatives Organizational Characteristics

• A separate, legal, limited-liability corporation
• Members are often in the same industry have a
  common economic interest
• Formed for perpetuity
• Usually composed of many entities

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Cooperatives Organizational Characteristics

• Often used by individuals or proprietors
• Involved in joint marketing outputs, purchasing
  of supplies /or providing services
• A wide variety of products services provided

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Benefits of Cooperatives

• Take advantage of new technologies
• Increased limitations of going alone so pool
  resources
• Better access to markets, supplies, services

• As governments cut services cooperatives provide
  alternatives for goods services
• Social economic benefits for larger community

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What is YOUR motivation to form a Cooperative?

• Keep this in mind as we work through the rest of
  this Guide

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Six Phases of New Cooperative Development

• Phase I Identifying an Opportunity
• Phase II Building a consensus on potential for a
  cooperative
• Phase III Developing Trust among potential
  members

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Six Phases of New Cooperative Development

• Phase IV Securing Member Commitment
• Phase V Involving other stakeholders
• Phase VI Starting up the Cooperative
• WHERE ARE WE?

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Phase IIdentifying an Opportunity

• May appear to be the simplest step but is the
  MOST time-consuming
• It is here the group is trying to work through
  differing opinions, views, issues, concerns etc.
  and are trying to reach a consensus of
  understanding
• What emerges at this stage?

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Phase I Identifying the Opportunity

• An experienced cooperative organizer in the
  Upper Midwest, Bill Patrie, calls the process of
  identifying the opportunity as arriving at the
  central business proposition which provides the
  underlying rationale for forming a cooperative
  see pg. 12 of Considering Cooperation

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Phase IIdentifying the Opportunity

• What emerges at this stage is a group of
  leaders this group determines / agrees on THE
  PROBLEM and the value of a cooperative solution
• The group of leaders STEERING COMMITTEE
• Role/responsibilities of Steering Committee

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Phase II Building Consensus

• Here there are several pivotal questions the
  group must answer
• Will forming a cooperative create the right
  organizational structure to solve the groups
  problem?
• How will a cooperative address the identified
  problem or seize the potential opportunity?

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Phase II Building Consensus

• How do the relative strengths weaknesses of a
  cooperative compare with other available
  alternatives?
• Determining feasibility is also important at this
  point in time.
• What is associated with determining feasibility?

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Factors associated with determining feasibility
include

• Member willingness to join support organization
• Expected returns to members from cooperative
• Group decision making capabilities
• Also, an INDEPTH analysis of the POTENTIAL impact
  of the proposed cooperative on member should be
  carried out

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Now What?

• Once a group agrees that the formation of a
  cooperative is the desired choice, then the
  process can move onto the next step? BUILDING
  TRUST AMONG THE STAKEHOLDERS

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Phase III Developing Trust Among Potential
Members

• The Steering Committee has determined that a
  cooperative solution is needed.
• NOW the TRUST is essential in laying the
  groundwork for potential members.
• Another series of questions need to be addressed
  at this phase

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Phase III Developing Trust

• Funding? Is this needed and how to get seed
  money?
• Evaluating Feasibility?may include a survey of
  prospective members
• IF Steering Committee decides to proceed THEN

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Phase III Developing Trust

• must deal with issues surrounding
• Incorporation
• Bylaws (written rules the cooperative will use to
  govern itself)
• Other Legal Documents which may
  include Membership applications membership or
  stock certificates marketing or purchasing
  agreements meeting notices notices of patronage
  allocations notices of waivers

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Phase IV Securing Member Commitment

• Usually a number of activities take place to
  finalize the member commitment. Such as
• Analyzing potential risk
• Completing a detailed business plan
• Determining the required level of each members
  investment

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Phase IV Securing Member Commitment

• Defining members rights responsibilities
• Assessing the need and skills for management/
  staff
• And projecting the required level of sources
  for financing.

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Also what is needed at this time is an ANALYSIS
OF POTENTIAL RISKthis would involve looking at

• Market Risk
• Technological Risk
• Construction Risk Assessment
• Operating Risk
• Financial Risk
• Organizational Risk
• Government Policy Risk

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The next step

• Once the Potential Risk has been analyzed what is
  needed?
• Business Plan ? which includes a strategic to
  do list for the first Manager of Cooperative
• Equity Drive

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Phase V Involving Other Stakeholders

• Any successful start up Cooperative relies on
  many stakeholders other than its membersthese
  include
• Manager or Chief Executive Officer
• Role of Lenders
• Once these details are worked out then the
  Cooperative is ready for the next phase

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Phase VI Opening for Business

• After all the preliminary phases of development
  process have been accomplished a cooperative can
  open its doors for businessgranted there are
  still some activities that occur at this point.

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How Do We Get Here?

• Since Form follows function Then the
  Organizational structure of the cooperative would
  be determined by WHAT the cooperative is going to
  dofirst must have a clear idea of your
  objectives then you can set the policies,
  procedures and bylaws.

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YOUR HOMEWORK ASSIGNMENT for October 29th

• After working through the Considering
  Cooperation A Guide For New Cooperative
  Development you should be prepared to work
  through some key questions which Brian Henehan
  will address on October 29th.

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Local Market/Direct Marketing/ Freezer Trade

• 1) What are the health regulations?
• 2) Do existing local facilities meet health
  regulations?

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Local Market Consumer education Buy Local
Campaign

•  What is competitive advantage as local
  producers offer to local consumers?
• a. Support local farms
• b. Healthy
• What else?

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If you had billboard space on a major road what
would you put on it?

• Organic? (Certified or not)
• Healthy?
• Grass-fed / Grain-Fed
• Where do these distinctions shake out on the
  billboard?

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4)What Consumer Awareness program(s) already
exist?

• First list existing promotional programs
• i. Beef Check-off
• ii. Sheep Check-off
• How does the group (Livestock Coop) utilize and
  coordinate with these? Collaborate with the
  existing promotional campaigns (use the invented
  wheels already out there)

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Non-Local Markets

• If going into Markets Beyond the Local area
  there are some things to consider such as
•  Supply Capacity
• How much supply do you project within your group?

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Supply capacity

• Is it stable? This will lead you to a certain
  market route
• Is it growing? If so how much?
• Slightly?if this then can probably stay local
• Aggressively?if this then can go beyond local
  markets

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What types of products would you market?

• Fresh meat?
• Frozen ?
• Live animals?

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What channels to do this?

• Consumer/direct?
• Retail?
• Restaurant?
• E-commerce and the internetwhere does this
  factor in? OR Does it?

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Next Livestock Producers Meeting is Tuesday,
October 29th Franklin County Courthouse 7-9pm

• Guest speaker Brian Henehan, Applied Economics
  Management, Cornell University