Project Materials

POOR MANAGEMENT – A STUMBLING STONE OF CONSUMER COOPERATIVES DEVELOPMENT

Chapter one

INTRODUCTION

Background of the study

Consumer cooperatives have long been regarded as vehicles for economic empowerment and communal development, but their success is heavily dependent on competent management techniques (Makower, 2019).

Consumer cooperatives have a long history, dating back to the nineteenth century, when the Rochdale Society of Equitable Pioneers in England pioneered the cooperative movement.

Since then, consumer cooperatives have spread internationally, spanning a wide range of industries such as retail, agriculture, finance, and housing (Defourny & Nyssens, 2017).

However, despite their potential for promoting socioeconomic growth, bad administration is frequently seen as a significant hindrance to their development (Veldhuizen & Kirsten, 2020).

One of the most significant obstacles for consumer cooperatives is a lack of professional management expertise (Kasongo, 2021). In contrast to standard firms, which appoint professional managers based on merit and experience, cooperatives frequently rely on volunteer members who may lack the essential skills and training.

This lack of management capacity can cause inefficiencies in operations, decision-making, and resource allocation (Birchall, 2018). Furthermore, it may limit consumer cooperatives’ ability to compete effectively in the marketplace (Defourny and Nyssens, 2017).

In addition to managerial expertise, consumer cooperatives’ governance arrangements are critical to their success (Wilson & Moeller, 2018). Cooperative governance often comprises democratic decision-making processes in which all members have equal voting rights (Ostergaard & Pomeroy, 2020).

While this democratic ideal is central to the cooperative identity, it can also provide difficulties when reaching consensus (Makower, 2019). Ineffective governance structures can result in power struggles, conflicts of interest, and decision-making gridlock (Wilson & Moeller, 2018).

As a result, consumer cooperatives may struggle to adapt to shifting market dynamics and capitalise on new opportunities (Veldhuizen & Kirsten, 2020).

Furthermore, many consumer cooperatives face significant financial management challenges (Svensson & Westerlund, 2022).

Cooperative firms frequently have difficulty obtaining funding, particularly from traditional financial institutions that may regard them as high-risk undertakings (Svensson & Westerlund, 2022). As a result, consumer cooperatives may struggle to invest in infrastructure and technology.