Managing Capital Structure

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

All of the assets in a cooperative must be financed by some forms of debt and equity.  Those assets include the fixed assets such as the plant, building, equipment and rolling stock as well as the short term assets such as accounts receivable and inventories.  When we discuss capital structure we are referring to the choices that the cooperative made in creating the capital to fund all of its assets.  Capital …

Managing a Cooperative

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

Management Defined

There are many alternative definitions of management.  One definition is “The process of designing and maintaining an environment in which individuals can work with others efficiently and effectively to accomplish set goals.”   Other definitions of management might include phrases such as “Interacting with people to achieve results”, “Using resources to achieve objectives” or “Balancing tradeoffs”.   Commons themes across the various definitions of the term “management” are the concept of …

Economic Justification for a Cooperative

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

Why Are Cooperative Formed?

In one sense, the cooperative form of business needs no more justification than do proprietorships, partnerships or investor owned corporations.  Businesses are formed when the owners perceive a positive return on investment from providing some combination of products and services to customers.  A cooperative is simply an alternative structure for organizing economic activity.  The major rationale for forming a cooperative is to improve the economic well-being of …

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 …

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 …

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 …

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 …

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 …

Cooperative Management and Marketing

 

J. Park.

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

Cooperative Management

Business enterprises of all types, whether proprietorship, partnership, corporation, or cooperative, require the effective use of its assets in order to secure financial and organizational success. Although managerial skills are applicable across all business types, the management of a cooperative business often differs in complexity due to its foundation of user-ownership and control. In this section, we will discuss the unique attributes of cooperative management. We will cover …

Roles of Managers

Authors: John Park, Texas A&M University, jlpark@tamu.edu, and Tommy Engelke, Texas Agricultural Cooperative Council

Photo courtesy of NRCS-USDA

Cooperative managers implement the cooperative business’ policies set by the board of directors. Managers initiate and adopt short-range plans of the cooperative, while the board of directors sets the long-range goals for the business. Employees report to the managers because the managers are in charge of carrying out everyday operations of the business. In turn, managers coordinate and control daily business activities …