Perception of Value Co-creation Actions in Agricultural Cooperatives.

AutorFerraz, Luana Zanetti Trindade
CargoReport

Introduction

Within cooperatives, the dynamics of production and negotiation relations between the cooperative and its members can change. The traditional relations were solely based on meetings between rural producers who sought to optimize their financial and economic returns, inherent to their transactions, by obtaining better prices with the sale of larger lots and greater bargaining power when purchasing inputs and equipment, leading to lower financial costs (Pinho, 2004; Ventura, Fontes, & Soares, 2009).

In addition to the traditional direct gains resulting from increased revenues, production and productivity, and reduced costs and expenses the indirect gain of cooperatives comes from the activities offered to their members. These activities include technical and professional assistance, rural extension, and actions resulting from services provided for the common benefit of the cooperative, with a primary focus on business (Anceles, 2014).

The cooperative offers its members financial gains through the negotiation of agricultural products, as well as indirect non-financial gains and support to rural producers through the services provided. The relationship between cooperatives and their members is not limited to these operations since these organizations have dedicated efforts to implementing new processes and activities that help create more value for their members (Buainain, Alves, Silveira, & Navarro, 2014). These efforts transcend traditional concepts of value creation, as they seek to create additional value through the transfer of technologies, both in the technical processes of production (how to produce) and in the quality of products (what to produce) in conjunction with customer needs (Gronroos, 2011).

The additional value of improving relations between the parties in a cooperative is achieved by allowing members to participate in the processes and actions of the organization, by increasing revenue for the organization, or by enhancing client satisfaction (Porter & Kramer, 2011). This process is called value co-creation (Gronroos, 2011; Prahalad & Ramaswamy, 2004a, 2004b). To thrive in this new environment, organizations must look for new ways to create value for shareholders who are less growth-dependent and more focused on the relationship between business stakeholders (Ukon et al., 2013). The value co-creation process can be favored in a cooperative because the member is both the owner and consumer of the organization and may have greater participation in its activities due to the distribution of property rights and governance mechanisms of a cooperative, and, therefore, receive more benefits from this transaction.

Cooperatives optimize their processes and products by improving relations with members for many reasons. First, these organizations must ensure their economic survival and increase their competitiveness in a dynamic environment by meeting the needs of members (Ventura et al., 2009). Moreover, they must guarantee member satisfaction and loyalty in economic exchange relations (purchases, production, and sales) (Anceles, 2014; Bhuyan, 2007; Serigati, 2008). Secondly, they must maintain staff members, considering the relevance of loyalty to cooperatives (Bhuyan, 2007; Bialoskorski, 1998; Hansmann, 1996; Pinho, 2004; Serigati, 2008). Thirdly, cooperatives need to offer portfolios and projects with a medium and long-term horizon in order to impact decisions and the time orientation of members, especially considering the many interests that affect the degree of loyalty (Porter & Kramer, 2011). Lastly, cooperatives must increase the professionalism of their management structure (managers, board, risk committees, and audit committees, thus ensuring member security and satisfaction in relation to the decisions made and contributing to the survival of the cooperatives (Hakelius & Hanssonb, 2007).

In light of these reasons, the following question was investigated: Is the value perception of cooperative members regarding value co-creation actions impacted by the characteristics of these members and the cooperative? The following three objectives were proposed (a) to evaluate the members' perception regarding the value co-creation actions offered by the cooperative and whether the characteristics of members and the cooperative affected their perception; (b) to create a model for measuring the perception of value co-creation activities developed by the cooperative; (c) to analyze the relationship between the perception of value co-creation actions developed by the cooperative and the characteristics of its members.

Jaakkola and Hakanen (2013) encourage the development of methods to identify value co-creation and make it visible to clients and managers as an instrument of control, strategy, and management. In the present analysis, the perception of members is used since it allows a quantitative measurement of value co-creation. Moreover, some results of value co-creation processes generate non-measurable benefits, and the measurable results of value creation cannot be separated from value creation (Prahalad & Ramaswamy, 2004a).

This research is divided into six parts. After the introduction, a bibliographic review presents the concepts and theories used, followed by a proposition of the model, methodology of the research, and analysis of the results. Finally, the final considerations and research references are presented.

Literature Review

Cooperatives and their concepts

The International Co-operative Alliance (ICA, n.d.) defines that cooperatives are organizations owned and managed by and for their members. Members have equal rights in the activities of the organization and have a share in the results of the activities. In Brazil, cooperatives have a relevant economic importance. According to the Organization of Brazilian Cooperatives (OCB, n.d.a), the number of cooperatives is approximately 10.4 million and they directly generate 298,182 jobs. There are 6,587 cooperatives in Brazil, mostly in the sectors of consumers, agriculture, education, transport, special, production, tourism and leisure, medical, infrastructure, housing, mining, education, and credit.

Despite the favorable numbers of the cooperative sector, cooperative organizations face some adversities related to horizon, incentives, portfolio, control, and influence problems, and some issues arising from increased market competition. These problems of cooperative society, as well as capital society, demand strategies and resources to ensure survival and business expansion. The biggest challenge for cooperatives is to overcome their intrinsic inability to evolve and change from organizations with originally defensive strategies to more aggressive organizations capable of competing with capital companies.

Cooperatives are established because their members find advantages in the connection between some investments. By participating in a hybrid organization, the parties accept mutual dependency and, therefore, reduce the benefits of control the hierarchy could provide (Anderson, 1985; Menard, 2004). In contrast, the advantages include economies of specialization, economies of scale, economies of scope, and savings in transaction costs (Menard, 2004, 2013).

One of the objectives of cooperatives is to provide economic benefits to members by saving on common expenses and making results more efficient. Cooperatives have greater bargaining power in the market, which increases the economic and financial capacity of a cooperative as a single organization. This benefit also eliminates intermediaries, thus reducing the cost of purchasing consumer products (Fulton, 1999; Pinho, 2004) and ensuring more efficient production quality control (Polonio, 1999).

In this environment, where the relationship between the related parties is fundamental for the competitive advantage of the organization and to overcome market barriers, value creation emerges as a strategy that adds value by strengthening the relationship between suppliers, clients, and cooperatives.

Furthermore, value co-creation helps to minimize the problems organizations face by improving the relationship between organizations and clients. The first step is to consider customer needs and generate an additional value to the traditionally created value (Gronroos, 2011; Prahalad & Ramaswamy, 2004a). The strategy can stimulates actions with medium- and long-term benefits and allow clients to perceive the benefits generated by the organization. Moreover, it can encourage client participation in actions that meet their own needs and encourage groups to create benefits for themselves and for the organization (Dervojeda, Nagtegaal, Lengton, & Rouwmaat, 2014; Frow, Nenonen, Payne, & Storbacka, 2015; Gronroos, 2011; Prahalad & Ramaswamy, 2004a). Value co-creation dynamically offers the innovation and creation of products, services, and processes that generate direct and indirect results for the clients and organizations, thus responding to needs (Gronroos, 2011; Prahalad & Ramaswamy, 2004a).

To adhere to value co-creation, organizations must review their strategies and structure and adapt them to the new competitive reality. In many cases, adaptations must be accompanied by new investments and alternative sources of capital (Gimenes & Gimenes, 2008). Continued investments in value creation can be a strategy for the cooperative to grow, generating benefits for members and the organization itself.

Value co-creation in agricultural cooperatives

Value co-creation occurs in the personalized form of the service, i.e., in the unique experiences for the client. Value is co-created with clients, whenever customers are able to customize their experiences, using an organization's product-service in a way that is best suited to the value of their investment and in the form of new knowledge with greater revenue, profitability, added value, and loyalty. It is a type of economic strategy that addresses...

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