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Hardesty, Shermain D. (2005)
Types: Article
Subjects: Agribusiness, Marketing,
Few agricultural marketing cooperatives have nationally prominent brand names. Instead, they tend to concentrate in commodity-oriented markets, which can be attributed to the cooperative principles—user-benefit, user-financed and user-control. However, these structural disadvantages can be overcome. Due to the user-benefit principle, cooperatives often have seasonal product availability and/or limited product lines; they also suffer from the horizon problem, lacking the structure to provide long-term returns to members who invest in brand building. The user-benefit principle can be converted into an advantage by using the cooperative identity as a marketing strategy, and the horizon problem can be remedied by implementing a delivery-rights system. Cooperatives’' limited access to capital is attributable to the user-financed principle. Joint ventures, legislative reforms to expand cooperatives'’ sources of equity capital and preferred stock offerings can be used to overcome this constraint. The homogeneous nature of cooperative boards is attributable to the user-control principle; it gives rise to the principal-agent problem. Forming subsidiaries or joint ventures to market branded products can remedy this situation, with the boards composed of individuals with expertise in branded products.
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