We have seen diverse definitions of the concept of Competitiveness. Still, they all attain the same conclusion: those who gain in Competitiveness are more successful. It is better to be competitive than uncompetitive.
Companies struggle for survivance, and survivance results from their capacity to meet the client’s demand at the right price. So, how have small companies been able to compete against bigger ones and move forward? Historically, there have been many different responses. Some firms have reduced their margins to sell cheaper. Others have focused on unique market niches where the competition was limited. Another group might have increased the benefits that they offer to buyers or extended their working hours to be available longer times. The list is long.
But sometimes this is not enough. The technical evolution in many sectors of the economy makes it very difficult, if not impossible, for small firms, to follow suit and imitate the market leaders. Little players, often family businesses, cannot afford the necessary investmestment.
The idea that “Union makes force” is as old as humanity. More than probably, humanity is, in fact, a consequence of this principle, which holds true, also when we talk about businesses.
Cooperatives, in their modern form, appeared as early as the 19th century. In Wikipedia a Cooperative is defined as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise.” These autonomous associations seem capable of providing substantial benefits. In the same Wikipedia entry we find
When 100 farmers with small plots join together and create a cooperative, they can afford to buy and share the use of tractors or harvesters that they could not afford individually. They can construct the silos needed to store their production, instead of selling it at a low price when the market is overflown with the harvest from all farmers who sell for lack of storage capacity. They can hire the services of experts that they need but could not consider as individual clients.
Testimonials as the one in the picture, which is one answer in Quora to the question “How did cooperatives help farmers?” are valid examples of this principle
Cooperatives exist in many sectors of business activity and with many different purposes. There are financial cooperatives, trading cooperatives, construction cooperatives, purchasing cooperatives, the already mentioned agricultural ones, and so on.
Probably agricultural cooperatives are among the most popular. They have helped hundreds of thousands of farmers to gather forces and achieve goals that, otherwise, they could not have reached. Agricultural cooperatives have a substantial presence in Western Europe and a promising future in Eastern countries. As per today, cooperatives have not developped well in the old communist block. Many farmers in these countries resit the idea of cooperative structures, still haunted by the collectivisations that the communist regimes implemented after WWII
The role that cooperatives play in food production within the European Union can be understood in the following chart from the EU study EP pilot project: support for farmers’ cooperatives:
Some significant maps about the presence of cooperativism among EU members are:
And the summary chart:
The charts above show that being a member of a cooperative is very popular among farmers in Western Europe. But are they achieving their goal? Are the members of the cooperatives benefiting from the sharing of resources that they put in common?
Althought intuition says yes (mainly because if they were not ueful, they would not exist anymore) I did not find an analysis at European level to respond this question.
Nevertheless, we can compare the economic situation of farmers in those countries with high participation in cooperatives with the rest. The paper EU FARM ECONOMICS OVERVIEW FADN 2015 includes a lot of information in this regard and on page 11 can be found a chart showing the average family gains per farm:
And compare this with the chart already shown above:
There is a parallelism between profit per farm and cooperative presence in the market.
Farming needs money to be competitive. Also, the composition of farms’ debt, divided between long term and short term debt, seems to follow a similar path: the larger presence of cooperatives in the county larger proportion of long term loans, which could be interpreted in higher confidence by the lender to the borrower:
I am not saying that farm gains and longer debt terms are a direct result of a growing number of cooperatives, but these seem to be part of the winning formula (together with good professional management, the implication of members, the response to the market evolution, and many other, as in every business). And these are just two examples of the many that could be found.
Cooperatives seem to have a promising future ahead. The larger size of companies in different fields, from consumption to production and sales is a critical factor for survivance. The appearance of huge entities that threaten to take over global trade and production in different fields are pushing smaller together as the only way forward. Western Europe has the advantage of a long term tradition in the world of the cooperative, but there is still a long way ahead, Eastern Europe cannot keep wasting time. The local governments should invest all the necessary effort to communicate the goodness of cooperatives and adapt their legislation where needed to make it attractive. If competitiveness is the way to make people wealthier, cooperatives can play a decisive role in this area
There are also some good examples of cooperativism in Easter Europe like this manufacturing cooperative in Bulgaria that plays an important role in social inclusion besides developing the business. Examples like this should be put in value in front of the reticences expressed by many:
