Internationalization and diversification strategies of agricultural cooperatives: a quantitative study of the agricultural cooperatives in the State of Parana.
| Autor | Ritossa, Claudia Monica |
| Cargo | Report |
Introduction
This study aims to observe internationalization strategies while taking into account not only alternatives for diversification of markets but also for diversification of products aimed exclusively at international markets and the effects of both on the results achieved by agricultural cooperatives in the state of Parana. In addition to the complexity involved in the formulation of internationalization strategies, this field of study also has some specific details that somehow affect the whole research process. In different countries, agricultural cooperatives have gradually become more consistent and diversified due to the adoption of advanced management structures. The simple export of commodities that has traditionally linked the cooperatives to the global market is giving way to the development of added value agro-industrialization practices. The diversification of agricultural activities is considered a possibility to increase the surplus of cooperatives; it is a powerful and competitive alternative for entry to new markets that provide a chance to operate at a higher level of commercialization of products abroad and overcome protectionist barriers. Studies about world market tendencies stress the decline of raw material and commodity exports, which have been overtaken by processed and industrialized products (Lopes, 2003).
In Parana, a state in the southern part of Brazil that is traditionally known for its rural activities, 53% of the agricultural economy belongs to agricultural cooperatives, which accounts for 18% of the Gross Domestic Product [GDP] (Organization of Cooperatives of the State of Parana [OCEPAR], 2006). This segment, according to the Organization of Cooperatives of the State of Parana (OCEPAR, 2007), exported, in 2006, the equivalent of $852,900,000, accounting for 30.1% of total exports from Brazilian cooperatives and 8.5% of the total exports of the State. These results put the agricultural cooperatives of Parana in the second place in the ranking of Brazilian exports (Ministerio do Desenvolvimento, Industria e Comercio Exterior, Secretaria de Comercio Exterior [MDIC/SECEX], 2007) and confirm the tendency to look farther afield. Strategic investments have been made in segments of agribusiness, either for implanting, expanding or modernizing agro-industries. According to Ferreira and Denardin (2006), six hundred million reais have already been invested in 2005 and seven hundred and ninety five million in 2006. By 2010, a further three and a half billion reais will be injected into the system. These data indicate that cooperatives have been considering product diversification to meet external market demands while internationalizing. Due to the complexity and implications inherent to the strategic decision to internationalize, the intention of this exploratory and descriptive study is to contribute to the increasing knowledge of the subject and provide a basis for further study. Therefore, there are two reasons that favor the investigation of the internationalization process of agricultural cooperatives: the scarcity of studies on the subject (Donoso, Rudzki, Shadbolt, & Bailey, 2003) and the growing relevance of cooperatives to the Brazilian balance of trade.
Within these guidelines, this study aims to identify and describe the possible impacts of internationalization and diversification strategies on the results of agricultural cooperatives in Parana through the operationalization of the following specific goals: a) to identify and characterize the agricultural cooperatives of Parana involved in international activities; b) to outline the internationalization strategies of the cooperatives under study; c) to identify and characterize the eventual diversification activities in the internationalization of the cooperatives under analysis; d) to identify and characterize the factors that facilitate and hinder the internationalization strategies and the resulting diversification process of the cooperatives; and, e) to describe the possible impacts of the internationalization and diversification strategies on the results of the cooperatives involved in international activities.
COOPERATIVISM AND THE COOPERATIVES
In this study, a co-operative is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise" (Alianca Cooperativa Internacional [ACI], 2006). For a better understanding of the concept of cooperatives in Brazil, it is important to point out that one of the biggest challenges facing cooperatives lies in operationalizing their unique democratic management model: one member, one vote (Waack & Machado, 1999), which sets them apart from ordinary businesses. There is another unique characteristic: the bidimensionality of the cooperative, where the association of people is concerned with social responsibility and the enterprise is the sum of its capital. In other words, the member plays a double role: at the same time he is the client and the owner of the cooperative. As a client, a member wants the highest price; as an owner, he wants the best possible economic result. Thus, cooperatives operate in a bidimensional context, i.e., business and social.
Zylbersztajn (1994) noted that small and large cooperatives tend to reorganize their structures in order to allow a proper agency which can facilitate the formation of alliances and cooperation between cooperatives or other strategic partnerships within and outside the country. These new structures, continues the author, are contractual arrangements that enable efficient performance in demanding markets--in this way, the problem of ownership and control, the high costs of trading, and other problems, are minimized. Particularly in the case of internationalization, Novkovic (2007) argued that the international presence of cooperatives is intensified due to competitive pressures. In other words, successful cooperatives are those that adopt several strategies to reduce the impact of the governance structure, as observed by Zylbersztajn above.
INTERNATIONALIZATION
The internationalization of agricultural cooperatives, seen as the process of growing involvement in outward international activities (Welch & Luostarinen, 1988), is a world tendency and studies claim it is one of the main challenges faced by cooperatives (Donoso et al., 2003). Existing theories in the field of international business demonstrate the complexity involved in the internationalization process of companies, even though most of them are multinationals. Multiple definitions are offered, varying according to assumptions, aggregation levels and the analysis perspective of the phenomenon. In short, each theory in particular assumes specific analysis criteria that may point out different entry possibilities for the same company.
Starting with the assumption that internationalization requires coherent long-term decisions and considerable assets, the Federation of Danish Cooperatives (FCD, 2000) considers a cooperative to be international when at least one of four internationalization strategies is adopted: exports, alliances, direct investments and organization of a transnational cooperative. In fact, in the Danish model, cooperatives cooperate with each other to become more competitive, and mergers appear as an alternative to cope with the giant companies in the industry while supporting the achievement of their major objective which is to obtain profit and to survive in the market (Karantininis, 2004). Arlan-Foods, for instance, is the largest dairy cooperative in the world and is the result of the merger of Danish MD-Foods and Swedish Arla in 2000. This trend is observed among large national cooperatives and transnational strategic alliances as a means to gain economy of scale vis-a-vis global market demands (Nielsen, 2000).
According to Cook (2000), there are four basic competitive strategies to be considered by companies in the agricultural sector, including cooperatives, when analyzing the possibility of internationalizing their business: imports, exports, direct foreign investment and commercial relationships. After making a study of New Zealand cooperatives, Donoso, Shadbolt and Bailey (2004) developed a new model that describes six strategies for entrance to the internationalization process: exports (direct and indirect), direct foreign investment (joint ventures and wholly owned ventures), sourcing overseas, knowledge agreements (licensing, research and development), strategic alliances and transnational cooperatives. Although limited in its empirical base, the latter model allowed the researchers to organize entrance strategies not only for the cooperatives under study but also for cases found in literature. Suppliers of commodities have been stepping up their search for sourcing opportunities in a wide variety of markets in order to reduce transaction costs (United States Department of Agriculture [USDA], 2002), as can be seen in the commercial relationship and overseas sourcing strategies proposed in the above models.
From a macro perspective of the global environment, Birchall (2005) suggested two opposite strategic alternatives, in which the cooperative principles would still be preserved: (i) to think locally and act globally: large cooperatives act globally while expanding beyond national borders through joint ventures, mergers and acquisitions; they think locally while convincing the community that their needs will not be neglected and, in addition, offering them incentives to comply with the international demand, such as providing credit lines at preferential rates; and, (ii) to think globally and act locally: in order to be collectively large enough to neutralize global competition through the development of customized solutions to local demands, small cooperatives remain under local control, developing...
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