Category: Cooperatives

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Bargaining power of suppliers

Author: John Park, Texas A&M University, jlpark@tamu.edu

Your business depends on certain suppliers that provide labor, materials and other components. Competitive pressure from these suppliers is strong when they can exercise sufficient bargaining power to influence the terms and conditions of exchange in their favor. This pressure is further strengthened when suppliers are concentrated. In agriculture, producers typically are seen as having little bargaining power or leverage due to the number of sellers in the open market. Likewise, cooperatives face …

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Internal Revenue Code Section 216

The section of the U.S. federal tax law that permits individual cooperative members to deduct mortgage interest and property tax on their income tax returns just like other homeowners do. Section 216 allows cooperative housing corporations to pass-through the mortgage interest and real property tax deductions to their stockholders on a pro rata basis.…

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Bargaining power of buyers

Author: John Park, Texas A&M University, jlpark@tamu.edu

Whether the bargaining power of your customers is weak or strong can be evaluated in a similar manner as supplier bargaining power. Even if buyers do not purchase in large quantities or offer a seller important market exposure or prestige, they may still have some degree of bargaining leverage if: (1) the cost of switching to an alternative product is low, (2) they can credibly threaten to integrate backwards into the business of …

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Allocated Equity (for cooperatives)

Equity that is assigned by amounts to individuals or organizations, typically in the form of retained patronage refunds and/or per-unit capital retains; investments by patrons for which they have received notification of the allocation. The share of net margin (savings) from member businesses that has been allocated to individual member-patrons based on their patronage but retained by the cooperative for operating purposes. There is an obligation to redeem this equity to members or past members at some point in the …

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Rivalry among existing competitors in the industry

Author: John Park, Texas A&M University, jlpark@tamu.edu

It is the nature of competition that firms will strive for advantage over their rivals. As such, rivalry is typically the strongest of the five competitive forces in any given industry. It can be defined as the competition that goes on between firms as they try to increase their market share. For example, this can be viewed as the competition that the cooperative faces when members look elsewhere to gin their cotton, sell …

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Sample Management Evaluation Form

Authors: Phil Kenkel, Oklahoma State University

Appraising the manager’s performance is an important activity for the board of directors. Developing a formal process that is routinely applied makes appraisal less confrontational. The appraisal process revolves around the identification of realistic and attainable performance standards.

Standards should cover all functions of the manager’s job and can involve both outcome and activities. Setting the standards should be a joint activity of the manager and board. Performance standards should be continuously evolving with …

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Potential entry of new competitors

Author: John Park, Texas A&M University, jlpark@tamu.edu

New entrants into a market bring new production capacity, the desire to gain a foothold in the market, and sometimes, substantial resources with which to compete. These new competitors may come from several sources: market areas or segments you currently do not serve, indirect competitors with competing products, customers and suppliers. The potential for the entrance of new competitors into a market principally depends on barriers to entry and the expected reaction of …

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Do cooperatives pay taxes?

With regard to income, cooperatives may qualify as a “single taxed” or pass-through entity in the eyes of federal or state taxing authorities. This means that the tax liability for income to the cooperative is passed through to the members rather than “double” taxed at both the cooperative and member level. Like any other business, cooperatives pay other types of taxes such as employment or property taxes.

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We would like your feedback on this Program Evaluation Frequently Asked Question.…

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Threat of substitute products

Author: John Park, Texas A&M University, jlpark@tamu.edu

In the context of this analysis, substitute products are products in other industries that can potentially affect the demand for your own product (“product” should be interpreted to include services as appropriate). In general, the more substitute products that are available to the customer, the more difficult it becomes for firms to raise their prices. The degree of difficulty will depend on how easily one product is substituted for another in the mind …

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Youth Involvement in Cooperatives

Author: Dixie Watts Dalton, Virginia Tech, dixie@vt.edu

 

Introduction to Youth Involvement in Cooperatives


Youth participating in a county-wide council.
Photo courtesy of Clayton County Extension, Iowa.

Cooperatives can be found in every state in the nation and in many sectors, from agriculture and finance to housing and daycare, to name just a few. Cooperatives meet needs that are currently not being met in the marketplace, from quality products and services to better prices and outstanding customer service. One audience that …

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