Market Linkages
Win-Win Relationships between Co-operatives and Input Suppliers & BuyersWe tend to focus on facilitating cooperation between co-operative group members, and less so on facilitating cooperation between co-operatives and the firms supplying agricultural inputs to their members or the firms buying produce from their members.
What do we tend to do? Cooperation between the co-operatives and the firms that are supplying inputs to the co-operatives and the firms that are buying produce or products from the co-operatives is key to ensuring success and economic growth. This is an example of ‘vertical cooperation’ (i.e. linkages between firms that are vertically linked to the co-operative up and down the supply chain). Generally, these vertical relationships between the co-operative and input suppliers resemble ineffective cooperation in the market place. As development agencies, we tend to unintentionally facilitate conflicting relationships where we position input suppliers and buyers as the enemy and empower co-operative members to negotiate tooth-and-nail to secure inputs at the lowest price possible or sell produce at the highest price possible. We tend to overlook how we can work with both the input supply firm or buyers and the co-operative members to facilitate win-win relationships that can, ultimately, benefit co-operative members far more than simply a price negotiation. Input suppliers can provide greater access to inputs at locations that are easier and lower cost for farmers to access. They can provide technical assistance about how and when inputs can best be used. They can also provide access to better quality and more applicable and effective inputs. Buyers can provide improved information on what type and quality of produce is in highest demand and more accessible points of purchase that are easier and lower cost for farmers. They can provide technical assistance and how and when inputs can best be used. They can also provide innovative financial arrangements with input suppliers that can assist co-operatives in accessing inputs and paying for them at harvest time when they have more cash. What could we be doing more effectively? As development projects, we are interested in facilitating changes in relationships and business models that move co-operatives from having ineffective cooperation to having effective cooperation with input supply firms or buyers of produce. More effective cooperation involves improving the transparency in the interactions and contracts between co-operatives and the firms that they buy inputs from or to whom they sell their produce. More effective cooperation involves establishing greater levels of trust between co-operatives and their input suppliers and/or buyers. Furthermore, more effective cooperation involves forming longer-term commercial relationships between co-operatives and their input suppliers or buyers. Ineffective cooperation is seen when there are limited relationships and limited-types of relationships between co-operatives and either the input suppliers providing inputs to their farmer members or the buyers purchasing produce from the co-operatives or directly from their farmer members. Effective cooperation is, instead, seen when there is a broad range of relationships, which includes, for example, strategic alliances between co-operatives and the input suppliers supplying to their farmer members or buyers purchasing their produce. Ineffective cooperation is typically seen when there are short-term, win/lose relationships between co-operatives and the input suppliers providing access to inputs to their farmer members or their buyers. This environment is even further complicated when government subsidies crowd out the need to make purchases from input suppliers. Instead, situations of effective cooperation are typically evidenced by long-term, win/win relationships between co-operatives and input supply firms or buyers. |
Update: This learning theme is still being explored. Click here to become involved.
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- Examples from the Field
Interacting with Input Suppliers and Buyers - Rwanda
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Interacting with Input Suppliers and Buyers - Mongolia
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