Cooperatives: challenges and opportunities - UJCC Maramures

Author:

Abstract:
This study consists of two parts - one linked to theory, definitions and characteristics of
cooperatives and the other is a research about the perception of top level management on
challenges and opportunities in the field of cooperatives. This economic entity is an
autonomous association of persons united voluntarily to meet their common economic, social
and cultural needs and aspirations through a jointly-owned and democratically-controlled
enterprise. UJCC Maramures is mostly a consumer cooperative, so it's owned and managed
by business people in order to satisfy the consumer. Nowadays, in Romania, this whole
segment of cooperatives it's a falling industry, even if it's a very useful and efficient way of
organizing and selling peasant's production. Cooperatives can give farmers the opportunity to
develop their economic revenues and income, and to use the collective power to increase
prosperity among members, their families and their communities. Also, these entities are open
to all individuals who are able to use their services and are willing to accept the
responsibilities of membership. The first modern cooperative dates back to 1844, when the
Rochdale Equitable Pioneers Society was established in Great Britain.

Keywords:
cooperative, association , challenges, oportunities, production, Maramures

Introduction:
Cooperatives are autonomous associations of persons united voluntarily to meet their common
economic, social, and cultural needs and are based on the values of self-
responsibility, democracy, equality, equity and solidarity.Cooperative members and associates
believe in the ethical values of honesty, openness, social responsibility and caring for others.
Cooperatives are organizations of people who have the same needs. Most people recognize
the business of the Rochdale pioneers of England as the first modern cooperative. In 1844,
this group of 28 men (weavers and skilled workers in other trades) formed a cooperative
society. They created business principles to guide their work and established a shop in which
to sell their goods (Zaharia and Tănăsescu, 2001, p. 43).
In Romania the first cooperative was „Concordia” and the main purpose of it was to boost the
commercerce and minimalasi de negative impact of intermediaries on the market. All of this
happened in 1873 when intermediaries and their princes used to be a big issue for everyone.
Thru democracy and communism, the cooperative society survived but changed according to
the political sphere (idem).

Section 1

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Humans have always found ways to work together to improve their lives. Cooperating to hunt
for food, build shelter and provide protection allowed early civilizations to evolve.
The first modern cooperatives as we know them today were formed during the Industrial
Revolution in England during the late 18th and 19th centuries by factory workers who needed
reasonably priced food and housing.
In 1843, a group of weavers in Rochdale, England, formed what is considered the first
successful modern cooperative, selling goods in a shop. The Rochdale Equitable Pioneers
Cooperatives exist in every sector of the economy, from grocery stores to credit unions,
housing complexes to farm supplies. While each cooperative serves its membership in a
specific way, all cooperatives share the same core values and principles passed down for
centuries.
The Rochdale Pioneers weren't the first group to try forming a coop but they were the first to
make their coop succeed. To avoid the mistakes made by earlier societies and to help others,
they developed a list of operating principles. These formed the basis for what are now know
as the cooperative principles. Rochdale is still considered the birthplace of the modern
cooperative movement (Barbu, 1996, p. 31).
The Great Depression of the 1930s saw many consumer cooperatives begin. These
cooperatives were essentially buying groups, organized to help people, especially in urban
areas, gain access to affordable food and goods.
The cooperative principles are guidelines by which cooperatives put their values into practice.
The first principle might be voluntary and open membership because cooperatives are
voluntary organisations, open to all persons able to use their services and willing to accept the
responsibilities of membership, without gender, social, racial, political or religious
discrimination. The second principle - democratic member control - cooperatives are
democratic organisations controlled by their members, who actively participate in setting their
policies and making decisions. The 3rd one - member economic participation. Members
contribute equitably to the capital of their cooperative. They usually receive limited
compensation, if any, on capital subscribed as a condition of membership. Members allocate
surpluses for some or all of the following purposes: developing their cooperative, possibly by
setting up reserves, part of which at least would be indivisible; benefiting members in
proportion to their transactions with the cooperative and supporting other activities approved
by the membership. The 4th principle: autonomy and independence. Cooperatives are
autonomous, self-help organisations controlled by their members. If they enter to agreements
with other organisations, including governments or raise capital from external sources, they

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do so on terms that ensure democratic control by their members and maintain their
cooperative autonomy. The 5th principle: education, training and information are vital for the
organisation. Cooperatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute effectively to the
development of their cooperatives. They inform the general public - particularly young people
and opinion leaders - about the nature and benefits of cooperation. The 6th principle:
cooperation among cooperatives because it is the best and the easiest way to become
significant on the market and also, at a scoial level. And last but not the least, the 7th principle:
concern for community. Cooperatives work for the sustainable development of their
communities through policies approved by their members (Parker, 1943, p.151).
According to the romanian law (nr. 1/2005), there are six types of cooperatives: producer
cooperatives, worker cooperatives, consumer cooperatives, social, retail and credit unions.
Producer Cooperatives - Members are engaged in production in separate enterprises, such as
farms, artist studios, fishing boats. These cooperatives may provide supplies, marketing,
processing or insurance, among other services.
Worker Cooperatives - These businesses are owned by some or all of the workers. They are
popular with small groups of engineers, restaurants, day cares and more.
Consumer Cooperatives - These are owned by the people who buy from the cooperative.
These cooperatives can provide nearly anything people want – from groceries to electricity to
healthcare. Consumer cooperatives can be very small – a food buying club in a rural village –
or very large – a multi-million dollar supermarket in the city.
Credit Unions - Every person who deposits money into a credit union account is a member-
owner. Credit unions are actually consumer-owned financial services cooperatives in which
every depositor becomes a member-owner. Members may attend the annual meeting and help
elect a board of directors that is typically made up of community volunteers, most of them
with considerable financial and other relevant areas of expertise. This is quite a difference
from big international banking conglomerates with their distant investor-owner millionaires
and highly paid directors who have no knowledge of or loyalty to local residents.
Credit unions, as all coops, come is all sizes-from a single facility with a few score members
to huge, multi-branch operations that cover lots of territory and employ many local people.
Community development credit unions are a special category created by the industry to
specifically serve lower income communities.

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Retail or Purchasing Cooperatives - These businesses may also be called shared service
cooperatives. Their purpose is to increase efficiency in purchasing supplies and provide
services.
Social Cooperatives - This emerging type of cooperative has a social mission, such as
improving working conditions for women or providing health care to a community (idem).
As I have said in the introduction, Concordia was the first romanian cooperative and it was
based on the core values of the Rochdale organisation. Nowadays the system it is not that
strong compared to how it used to be before communist era, a lot of properties were sold,
people lost interest, the new generation it is almost clueless linked to this issue and the aging
phenomenon of the population clearly affects the workers lifes in cooperatives.
On the other hand, the successful story of the German cooperatives is linked with two
personalities: Friedrich Wilhelm Raiffeisen (1818–1888) and Hermann Schulze-Delitzsch
(1808–1883). The idea to found the first organisations of cooperative character was literally
born out of misery. Over the course of the industrial revolution in the mid-19th century, many
farmers and small craft businesses found themselves in financially desperate straits. This
development was closely linked to the negative effects of the liberation of the serfs and the
introduction of free trade. During the reform, new structures came about which were supposed
to make the division of property more favourable to the ‘small’ people. The reality, however,
was that the situation of farmers got noticeably worse (Alexandrescu and Mihalache, 2011,
p.36).
The industrialisation of Austria began between 1800 and 1820, bringing with it a boost in the
economy and in the social make-up of the Monarchy. While the size of the economic area and
the wealth of raw materials available were conducive to development, progress was hampered
by the population’s low purchasing power, nationalist boycotts and the commodity-driven
export trade. Friedrich Wilhelm Raiffeisen was a German social reformer who ascribed great
importance to solving problems.
The first Raiffeisen bank in Austria was founded in 1886 in Mühldorf, near the village of
Spitz an der Donau. Its members included farmers, craftsmen, labourers and traders. Austria’s
first warehouse cooperative was founded in Pöchlarn in 1898.
Following the German model, a central association of cooperatives was established in 1898 in
line with the Raiffeisen system and became known as the "Allgemeiner Verband
landwirtschaftlicher Genossenschaften in Österreich" (general association of agricultural
cooperatives in Austria).

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When the Austro-Hungarian Monarchy collapsed in 1918, there were over 2,000 cooperatives
on the territory of what subsequently became the First Republic, and a far greater number in
the other succession states (idem).
In the decades that followed, the cooperative idea spread throughout Germany and Europe.
Numerous households and businesses joined forces according to the principles of Raiffeisen
and Schulze-Delitzsch. In order to provide greater support for their members, the local
primary cooperatives founded regional and national centres. These gave rise to today’s
regional centres, national centres and special institutes.
Role and importance of cooperatives are obviously increasingly in the global financial and
economic crisis. In many countries, cooperatives have more effective crisis response than
investor-owned firms. The resilience of cooperatives is increasingly recognized and opinion-
makers are keen to understand how cooperatives can play a role in addressing the dramatic
consequences of the global crisis and the reform that contributed to its generation.
Narrowing it to the former communist countries, the Ukrainian cooperative movement,
emerged in the late 1860s in response to the socioeconomic needs of the recently
emancipated peasants. The Ukrainians attributed greater importance to the movement than did
most nations. Under the political conditions of the time, it served as a means of social and
economic self-defense and became an integral part of the struggle for national independence.
The self-governing economic associations not only strengthened the people's economic power
and taught the masses civic responsibility, but also trained large numbers of civic leaders.
In the late 1960s and 1970s the "new wave" of consumer coops began. Born out of the ideas
and philosophies of the 60s, these stores were opened by young and idealistic members. They
set up coops to fit their belief in equality, not to follow their coop predecessors. Most of the
new coops sold only whole, unrefined, and bulk foods. Their operating practices were diverse
and experimental. Some stores had limited store hours, others were open seven days a week.
Some were run by volunteers, others by fully paid staff. Some had various forms of worker
self-management, others had more traditional management structures.
Cooperative associations are based on the ideas of economic cooperation and mutualism. By
participating in a cooperative enterprise the members seek either to minimize their costs or to
maximize profits. The main features of cooperative associations are an unlimited number of
members, voluntary membership, equality of rights and obligations and the election of
officers. Some cooperatives try to improve the cultural life or the moral and civic virtues of
their members. Advocates of the cooperative movement believe that it is capable of gradually
overcoming the negative aspects of the present Western socioeconomic system.

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The Bolsheviks opposed in principle the cooperative movement because, according to them, it
distracted the workers from the direct class struggle. Yet, when Lenin assumed power, he
proposed a cooperative plan by which the state would draw the small farmers, merchants and
entrepreneurs into the building of socialism. Under Soviet rule, the state and the Communist
Party controled the cooperatives but they lacked the essential features that characterize
cooperatives in the Western world (Neagu and Stănciulescu, 1996, p. 147).
Today, in the United Kingdom, the nationwide Co-operative Group, formerly the Co-
operative Wholesale Society owns many of its own supermarkets, as well as supplying goods
wholesale to the majority of British cooperative societies, providing a common branding and
logo.
In Scandinavia, the national cooperations of Coop Norway, Kooperativa Sweden and
Fællesforeningen for Denmark joined as Coop Norden in January 2002.
In Italy the Coop Italia chain formed by many sub-cooperatives controlled 17.7% of the
grocery market.
In Finland the S Group is owned by 22 regional cooperatives and 19 local cooperative stores,
which in turn are owned by their customers. The S Group overtook its nearest rival Kesko Oyj
with a 36% share of retail grocery sales compared to Kesko’s 28% (International Co-operative
Alliance, 2018, p.23).
But good things can happen in Romania too. French retail group Carrefour will set up an
agricultural cooperative in the village of Varasti, Giurgiu county, where it wants to reunite 80
families of producers, who own 60 hectares of agricultural land and produce 5,000 tons of
vegetables each year.
"The project initiated by Carrefour brings closer experienced farmers and consumers who
appreciate Romanian products of quality," according to a company press release.
Carrefour came up with this initiative in a moment when local authorities are re-discussing
the "Made in Romania" law. In its initial form, the law obliged retailers to have 51%
Romanian products in their offer. However, the law saw several amendments, following a
notice of the European Commission.
According to a few proposals agreed by the Chamber of Deputies, the large retailers will no
longer be obliged to sell 51% Romanian products and will not be obliged anymore to acquire
local goods on the short chain, but through direct partnership.
At present, it is difficult to identify a simple and direct way to define social economy.
Generally, the social economy is sometimes called ‘the third sector’ or the ‘nonprofit sector’,
and it may be defined as the economic space between the income-generating private sector

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and the public sector, where economic activities with social purposes are conducted
(Defourny, 2004).
Things were a little bit different in Romania, especially after War World 2 and communism
took over the country. Cooperatives used to be called CAPs during this period in Romania.
The beginning of the socialist transformation of agriculture started in 1949 connected to the
Soviet Union. The collectivization was slow at first, but in 1957 the process accelerated until
its end in 1962, when approximately 93% of Romanian agricultural land was involved in
collective structures. The agricultural holdings were confiscated and farmers were forced to
give away a lot of goods related to farm production including animals. This communist
system destroyed many farms which resulted in poverty in rural areas. As a result, Romanians
have a negative perception of cooperatives even nowadays, which is sad but still changeable.
All in all, even though the former cooperatives from the communist period have left a bad
taste in farmers’ mouths, it appears that this type of organization has great potential for the
future of Romanian agriculture. Moreover, cooperatives now have been given priority in
receiving European non-refundable agricultural funds. Besides, the consumers cooperative it
is also a new chance.
During the past 20 years, social economy became a subject of interest because its
organisations had to assume an increasing role in the production and supply of social goods
and services of public interest. In Romania, although forms of social economy existed for a
very long time in society, we can not speak of an institutionally or juridical determined area,
with actual outputs.
In Maramures country, which happens to be the best cooperative of Romania, at least when it
comes to financial indicators more exactly turnover, the consumers cooperatives holds an
important role in the overall economic portrait. Baia Mare (FederalCoop Baia Mare) and
Targu-Lapus (ConsumCoop Targu-Lapus) are the cities that run the cooperative movement,
obtaining a turnover of 40 228 000 lei a year
(The annual analysis report of FederalCoop 2017).
The second part of this study is the research about the perception of top level management on
challenges and opportunities in the field of cooperatives. The highest ranking executives (with
titles such as chairman/chairwoman, chief executive officer, managing director, president,
executive directors, executive vice-presidents) responsible for the entire enterprise.
Top management translates the policy into goals, objectives, and strategies, and projects a
shared-vision of the future. It makes decisions that affect everyone in the organization, and is
held entirely responsible for the success or failure of the enterprise.

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The biggest challange for this companies is the adaptabillity to the nowadays techanology and
lifestyle. A lot of younger people are clueless when it comes to cooperatives and sadly the
economic sphere is disadvantaged. The „old school” management is also a problem. In the
short term this style may get results, in the long term, talented employees will be lost and
customers also. An interesting 2013 study looks at the differences between empowering
leadership and directive leadership. It defines empowering leadership in part as sharing power
with subordinates and raising their level of autonomy and responsibility. In addition, these
leaders promote collaborative decision making, information sharing and teamwork. Directive
leadership is defined as being associated with a leader’s positional power and results in
actively structuring subordinates and laying out expectations regarding compliance (Grieser,
2016).
Although everyone is aware that the only thing constant in the world is change, people resist
change due to various reasons, including fear of failure, fear of criticism, and fear of the
unknown. Cooperatives are not different and need the adaptability to this generation. As the
baby boomers (those born between 1946 and 1964) retire in droves and Generation X (born
between 1965 and the late 1970s) is solidly entrenched for the most part in jobs and careers, it
is likely the next employee is going to be a millenial or even someone from generation Z.
Marketing strategy, objectives and leadership are vital, but always a little bit diffrent from one
to another generation.
When it comes to oportuninties, besides the economic role, the social one takes over:
1. As cooperative societies reflect best the human participative nature, they are sooner or
later discovered as source of true happiness.
2. As they transcend the space and time in their “care for others” they give greater
chance for the survival of the world.
3. As they are based on learned and not inherited qualities they give chances to literally
every human being to be able to help others and be happy.
4. As they are based on personal interactions, they have greater chances in the times of
Internet, as long as it is not regulated by power-based institutions.
5. As they are based on long-time-perspective, they have greater chances to accumulate
knowledge and experience and they much more probable to survive than power-based
societies.
Member-user-oriented cooperative corporations have the same advantages as investor-
oriented corporations over individual and partnership firms. A large number of people may
jointly form the business. Cooperatives can keep on doing business during a change of

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ownership. Usually the owner’s liability for debts of the firm is limited to the amount of the
money each has invested.
Also, low wages, worker shortages, declining reimbursements policy changes and heightened
competition do not paint a pretty picture for a small organization looking for a future of
financial peace and stability but the worker cooperative model does offer some unique
benefits.
But there is hope for every economic entity, cooperative societies included. The market,
demand and offer can change in every minute and create a different scenario for organisations.

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Section 2

Graph 1- The ranking of cooperatives in Romania based on turnover (2017)

Source: Centrocoop annual report, 2017, p. 7

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Graph 2 – Cooperative activity by sector at a worldwide level

Souce: Lese, Tuns and Oniga, 2016, p. 114

Graph 3 – Cooperative School in Buzău country 1970

Source: UCCC, 1976, p. 45

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Graph 3 - UJCC Maramures – Turnover and Profit for the last 9 years (2010-
2018)

Year Turnover Profit

2018 26 026 408 207 083

2017 25 458 721 166 092

2016 23 852 603 195 376

2015 21 367 753 128 425

2014 19 533 641 122 470

2013 18 129 725 24 621

2012 18 541 514 43 188

2011 18 650 140 82 164

2010 18 624 994 110 789

Source: Centrocoop annual report, 2018, p. 25

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Conclusion
To sum up, cooperation is not new. Early human societies cooperated by sharing hunting,
fishing, farming and shelter practices to improve their chances of survival.
Experts agree that, in the process of globalisation, flexible link-up groups like cooperations
are better positioned than the large centrally controlled corporate groups. Significant factors
for success in this process of structural change are flexibility, quick decision-making, fast
reactions and unbureaucratic structure. Globalisation could thus lead to an intensification of
the range of services on offer and member networking in cooperatives.

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List of references:

1. ***, Law number 1/2005 published in the Law Gazette on the 28th February of 2005
2. Alexandrescu, F. and Mihalache, F., 2011, Economia socială și cooperativele. Manual de intervenție,
Expert Publishing House
3. Barbu, P., 1996, Credit and Consumers Cooperatives History in Romania, Galaxia Gutenberg
Publishing House
4. CentroCoop Annual Report, 2017
5. CentroCoop Annual Report, 2018
6. Defourny, J., 2004, Social Enterprise in an Enlarged Europe: Concept and Realities, RNI Publishing
House
7. Gide, C., 1921, Consumers Co-oprative Societies , Haskwell House Publishers Ltd.
8. Grieser, A., 2016, The Cooperative movement, Cornerstone Publishing House
9. International Co-operative Alliance, 2018, European Report on cooperative economy
10. Lese, T., Tuns, V. and Oniga, I., 2016, The history of consumer cooperatives from Targu-lapus,
Maramures, Scrisul Romanesc Publishing House
11. Neagu, V. and Stănciulescu, G., 1996, Cooperație – note de curs, ASE Publishing House
12. Parker, F., 1943, Consumers Credit and Productive Cooperative societies, Government Printing Office
13. The annual analysis report of FederalCoop, 2017
14. UCCC, Cooperativa romaneasca in imagini, 1976, RECOOP Publishing House
15. Zaharia, E. and Tănăsescu, E., 2001, Gromoslav Mladenatz: economist de talie europeană (1891-1958),
Evrika Publishing House

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