THE CO-OPERTATIVE UNIVERSITY OF KENYA

ASSIGNMEMT

NAME: GRACE KIRIGI

REG NO: MBAC01/8508/2020

UNIT CODE: MCOB 4102

UNIT NAME: CO-OPERATIVE MANAGEMENT PRACTICE

LECTURER: DR. METTO K. WILSON

QUESTION 1

APPLICATION OF THE SEVEN PRINCIPLES PLURALISM, MUTUALITY,

INDIVIDUAL AUTONOMY

According to ICA, (1995) A co-operative 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. They are
based on the values of self-help, self-responsibility, democracy, equality, equity and
solidarity, guided by the cooperative principles:

1. Voluntary and Open Membership

2. Democratic Member Control
3. Member Economic Participation
4. Education, Training and Information
5. Autonomy and Independence
6. Cooperation among Co-operatives
7. Concern for Community
Application of co-operative management principle on:

Democratic- focuses on improving local communities self-reliance or sustainability,

social justice, and participatory decision-making. It recognizes that economic
growth does not inherently contribute to human development and calls for changes in
social, political, and environmental values and practices.

People centeredness- is applied in co-operatives in recognizing that people whether

employees suppliers or customers are the subject not the object of the business. The
cooperative ownership structure articulates this principle by being membership based

It underpins concern for the community because co-operatives work for the sustainable
development of their communities through policies approved by their members and it
exists because of the members as “section 4 of Co-operative Society Act, 2004
stipulates that the provisions of cooperative society has as its objects on the promotion
of the welfare and economic interests of its members”
Multiple role of work-influences social status, consumption patterns and the whole
structure of the relationship in society as a whole this provides along with people
centeredness the additional rationale for corporate social responsibility.

The co-operatives exemplify this principle by their combination of social and the
commercial. They mobilize the labour of small farmers and workers both as employees
and as consumers. Their principle of community helps to provide a holistic view of their
customers, workers and suppliers

Multiple role of work underpins concern for the community as the co-operatives helps
the community through giving back as corporate social responsibility. The 7 th principle
entails that co-operative work for the sustainable development of their members as
approved by members

Distributive justice- This is a non-exploitive sharing of resources. This is easier in co-

operatives to carry through in their case due to their ownership structure.

This underpins 3rd principle which is member economic participation as members

contribute equitably to, and democratically control, the capital of their co-operative, at
least part of the capital is usually the common property of the co-operative. As per
“section 15 of the Co-operative Society Act of 2004 stipulates that no member, other
than a co-operative society shall hold more than one-fifth of the issued and paid up
share capital of any co-operative society”

Mutuality- It is the recognition of need for shared benefits. In co-operatives because

return on capital is not the primary criterion for membership in a co-operative, mutuality
between stakeholders will be easier to establish as one reward does not have to be
achieved at the expense of any other

Mutuality is the relationship between two or more parties and co-operatives are based
on the principle of mutuality as they work together from primary to internationally for
them to achieve the objective. Mutuality underpins 6 th principle which is co-operation
among co-operatives as co-operatives serve their members effectively and strengthen
the co-operative movement by working together through local, national, regional and
internationally. Also, it underpins member economic participation as there is recognition
of need for shared benefits because members contribute equitably to, and
democratically control, the capital of their co-operative. Members share the surpluses
equitably in proportion to their contributions
Natural justice -This is the right to independent appeals procedures and the application
of fair rules and processes. In co-operatives ownership structure and culture of
accountability makes it easier to achieve. It underpins democratic member control as
natural justice has to give way to necessity in order to maintain the integrity in co-
operatives members have equal rights as one member one vote. Members actively
control the organization where they set their policies and making decisions. Men and
women serving as elected representatives are accountable to the membership. In
primary co-operatives members have equal voting rights.

Pluralism -This is managing on behalf of all stakeholders’ interests. In the co-

operatives members will find it in their interest to recognize other stakeholders. Under
managerialism members were ignored or subsumed under customers. It underpins
democratic member control as elected members act as the principal and members as
agents. Management work on behalf of the entire co-operative and at other levels and
men and women serving as elected representatives are accountable to the
membership.
QUESTION 2

ROLES OF COOPERATIVE MANAGEMENT MANAGING HOLISTIC MARKETING IN

COOPERATIVE.

Marketing farm products involves local assembling, packing, semi-processing,

processing, storing, selling, merchandising, and transporting the commodity. Many farm
products are perishable. Cooperatives sell them either in an unprocessed (fresh or
whole) or processed form. Cooperatives also market them in two basic ways-buy-and-
sell or pooling. These are some typical basic business decisions that characterize the
daily operations of a marketing cooperative. Where large businesses, including
cooperatives, may have economic and business analysts to assist the manager, the
smaller local associations must rely largely on the knowledge, experience, and
judgement of the individual manager. Among decisions the manager faces are:

1. Providing assembling or trucking services and rates. -Decisions must be made

regarding the level of service from farm to market and rates to be charged. Should the
cooperative own or lease trucks or contract for hauling?

2. Pricing or paying for products, including handling or pooling expenses and

sales proceeds.

In buy and sell operations, cooperatives determine how daily paying prices will be set
and what the gross margin per unit of product should be. Also, discounts and premiums
for quality considerations are part of the activity. In pooling operations, policies
regarding cash advances to growers at time of delivery are important. There may be no
advance, an initial small advance with succeeding advances or progress payments, an
advance based on a fixed percent of the market price, or the advance may reflect the
current market price. Also important is the length of the pool-daily, weekly, or seasonal.
Will a pool be established for each product or a group of similar products, and for each
grade or quality of the product? Some fruit and vegetable cooperatives operate under
State or Federal volume regulation programs that permit the diversion of produce to
secondary use. In such cases, policies need to be established as to who will take the
loss or gain arising from a byproducts pool-the individual whose products were diverted
or all members of the cooperative.

3. Using marketing contracts or membership agreements. - These stipulate the

responsibilities of members and of the cooperative and penalties for lack of compliance.
They provide for commitment by members, thus aiding management in dealing with
customers for the products and projection of operating capital.

4. Establishing patron storage or warehousing policies and rate. -Considerations

include policies for accepting products if storage space is limited, handling costs,
storage pool charges and accounting, and keeping the product, such as grain, in
condition by proper aeration, drying, and frequent inspection.

5. Managing inventories. -Careful attention to inventory levels, commodity values, and

physical condition is necessary to minimize risks of and shrink or loss of inventory.

6. Merchandising and selling the product. Merchandising- It involves commingling

like products to attain desired grades or quality. Cooperatives owning the product, such
as grain, may use strategy based on the commodity futures and options markets to sell
inventory. Wool marketing pools, for example, may use sealed bids or private
negotiations, and they can sell wool by forward contract or on a spot basis. Terms of
sale may include selling wool on a free-onboard (fob) basis-buyer taking all wool
offered, requiring an escrow deposit from buyer, or listing specified discounts.
Ownership in and use of cooperative sales and bargaining agencies is a major aspect in
selling products.

7. Establishing the credit rating of buyers. -Firm credit terms or escrow policies in
dealing with them are needed.

8. Providing current information to producers. -Cooperatives can be of real service

by providing research findings on production and handling practices that will develop
products that meet the quality demands of buyers and consumers.

9. Determining market potential. Management needs annual estimates on expected

trends in agriculture and business activity in the trade area.
QUESTION 3.

COOPERATIVE AND CULTURE CHALLENGES IN COOPERATIVE MANAGEMENT

The nature of cooperatives

One of the most interesting characteristics of a cooperative is its dual nature. A cooperative is
both an association of members (a society) and an enterprise (a firm). The association is where
the democratic decision-making in a group format takes place, while the firm conducts the
economic activities in support of the members. In practice, there is often no clear-cut distinction
between these two parts of the organization, certainly not in the mind of the members. Still, it is
helpful to make this distinction, as each part creates different responsibilities and tensions.

Challenges of cooperatives

Cooperatives are faced with challenges that can be divided into those that are internal and
external to the operations with specific activities going back to the principles in how best to
mitigate the impact.

Internal

a) Lack of Business Knowledge- Sometimes a cooperative is perceived as a small business

operation and founding members may not see the need to have management expertise to help
manage the cooperative. Unless the members agree to invest sufficient time and resources into
educating themselves, they run the risk of not being able to make the right business decisions.
One important decision often overlooked by members is the importance of ploughing enough of
the profits back into the business so that the business can grow and also deal with competition
from other businesses. Members need to be educated in financial management of their
cooperative. For example, they need to understand the importance of cash flow and of
investments by cooperatives, to ensure that the business does not go downhill owing to financial
losses from impaired loans and investments, capricious purchasing, or from poor management
of inventory, credit and accounts receivable: resulting in severe cash shortages and eventual
insolvency. The cooperative through its internal committees, local umbrella organization or
government office responsible for cooperatives can plan specific training on business
fundamentals affecting their cooperative such as marketing, distribution, packaging, budgeting.
b) Low membership motivation- Members may lose the motivation to care about or contribute
further to the business operations of the cooperative, either because the steps and processes
are complicated and too numerous, or because the interventions by the regulatory authority are
too.

c) Misunderstanding of democratic control-Sometimes democracy can retard or inhibit

efficiency. Decisions may follow the advice of the most influential member rather than the most
competent member or members may vote for a family member to become a director, rather than
the person who has the best skills to lead and grow the cooperative. Many cooperatives have
failed or are floundering because members perceive that the property of the cooperative is their
personal property. They would therefore demand credit, use the cooperative’s property without
paying for it or pay scant attention to repaying their credit union loans because ‘it belongs to us’.
Such uncontrolled abuse of ownership status has been detrimental to the image of
cooperatives. Members need to be reminded that the cooperative is a collective established to
benefit all members and should not be perceived to be operated in the interest of a few.
Adopting transparent processes for the election of Directors as well as clear policies and
procedures to guide prudent management are essential in building the credibility as well as the
operational stability of the cooperative.

d) Marketing- A cooperative may not have enough resources, skilled staff or volunteers to carry
out marketing activities. Market studies and customer opinion research need to be carried out
before embarking on a sales campaign. Studies should include consumer habits, satisfaction
levels and the business environment. It is important for a cooperative to remain visible in today’s
competitive environment, so that its members and the wider public are aware of the products
and services it provides. This can be mitigated by focussing on the 7th Principle – Cooperation
among Cooperatives as well as conducting sound feasibility studies and business planning
necessary skills may not be readily found within the cooperative management or Board
therefore sufficient resources should be dedicated to acquiring the skills externally.
Cooperatives must plan these decisions recognizing how best to raise the capital to fulfil their
objective.

e) Aging Membership- Cooperatives now have to address the limitations of aging membership
as many cooperatives are led and managed by senior citizens. In order to ensure the
sustainability.
f) Lack of Competitiveness- Some leaders and managers are purists. They consider their role
as limited to providing a given service or producing identified goods. While growth in business is
pursued, there is hardly any focus on researching the possibilities for an increased share of the
domestic market, whether an industry bloc or as a defined network. Improving the quality and
range of the society’s offerings, strengthening worker productivity and investing in greater
production technology are big steps towards becoming competitive. The cooperative through its
internal committees, local umbrella organization or government office responsible for
cooperatives can plan specific training on business fundamentals affecting their cooperative on
topics such as market research, competitive scans, supplier and distribution chains.

g) Weak Management- Comfort with retaining persons who often do not have the knowledge,
skills or attitudes or qualifications suitable for managing the cooperative. Planning, organisation,
coordination, innovation, budgeting, controlling and directing people are key attributes of the
management team, in which the executives of the society must be proficient; here again is the
case for co-opting young interns. The cooperative through its internal committees, local
umbrella organization or government office responsible for cooperatives can plan specific
training on business fundamentals affecting their cooperative such as bookkeeping, hiring,
budgeting and planning.

External

a) Enabling Legislation-Notwithstanding Principle 4 (Autonomy and Independence) and the

growth and complex nature of some cooperatives, Caribbean governments do not tend place a
high premium on updating cooperative legislation and regulations. External agencies are
historically more influential in lobbying governments to update the enabling environment for this
economic segment. It is within the mandate of the national league to encourage and lobby for
cooperative policies, laws and regulations, so that the drafting becomes a collaborative process
between government, cooperatives, and other relevant stakeholders. Cooperatives will advance
their mandate by adding their voices with other cooperatives and values-based entities seeking
to influence legislation and regulations. With most of these challenges identified as being
internal to the cooperative, there is an opportunity to take certain action to influence the
outcome and in so doing, make the enterprise more effective at serving the needs of its
members and community. Now that you have reviewed the history, definition, values, and
principles of cooperatives, understand the advantages and impact they make, it is now time to
learn what is required to form a new cooperative.
REFERENCES

1. Thompson, D. (1994) “Co-operative Principles Then and Now,” Co-operative Grocer 53

http://www.cooperativegrocer.coop/articles/index.2008.

2. Caribbean Cooperative Management Training Programmes. Module 1