International Journal of Commerce and Finance, Vol. 8, Issue 1, 2022, 26-42 *Mettu University, Ethiopia, Email: kibrukefay@gmail.com ** Mettu University, Ethiopia, Email: endo_aau@yahoo.com *** Mettu University, Ethiopia 26 Factors Influencing the Success of Agricultural Cooperatives Marketing in a Case of Some Selected Woredas of Ilubabor and Buno Bedele Zones Kibru Kefay Godo* Endale Alemu Hora** Shiferaw Tamiru*** Submitted: 20.08.2021 Accepted: 01.04.2022 Published: 24.06.2022 Abstract This study aimed at assessing and identifying the factors influencing the success of agricultural marketing cooperatives in Some Selected Woredas of Ilubabor and Buno Bedele Zones. The targets for this research were members of agricultural marketing cooperatives (AMCs). For the sake of achieving the objectives of this study, responses were elicited from four hundred thirty- five (435) respondents who were drawn from the target population using random sampling procedure. Face-to-face interviews were conducted with 21 officers’ and cooperative leaders of AMCs. Data were analyzed using inferential analyses. The findings indicate that, there exists positive significant ranging from strong to very strong relationship was found between independent variables and dependent variable. Finally, the study has suggested cooperative promoter, government, and prospective members should prioritize those factors that have greater impact on their success than do others i.e., commitment of members, managerial factor and their participation, the management of cooperatives should create awareness for farmers about what benefit the farmers as well as the country would get when they provide and sell their agricultural products by cooperatives. Additionally, the responsible government bodies should identify, address and strength the relationship of foreign and domestic market linkages and cooperatives should be managed by professional personals to increase the success of cooperatives at the maximum level. Key Words: Agricultural Marketing Cooperatives, success. mailto:kibrukefay@gmail.com mailto:endo_aau@yahoo.com International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 27 1. Introduction Agriculture plays a pivotal role in the national economy in general and main source of livelihood of rural community in particular; agricultural products should be marketed properly so as to improve the lives of the rural population. Agricultural marketing is a “process that starts with a decision to produce saleable farm products, including pre and post-harvest operations, assembling, grading, storage, transportation and distribution transferring agricultural products consisting of farm, horticultural and other allied activities that, products from producer to consumer, supply of product from rural to rural and rural to urban and from rural to industrial consumers Vadivelu and Kiran (2013). One of the mechanisms to improve such agricultural product is therefore, through cooperative marketing. Bhuyan (2007) has also indicated that disloyalty in following the cooperative principles, and unavailability of powerful managers among members as the most important obstacle affecting the success of co-operatives. There is a significant correlation between the management factors and degree of success. Chambo et al. (2007) state that cooperative in many African countries are comprised of resource poor farmers, which make external assistance necessary for the group to achieve various economic gains from their successful cooperatives. Furthermore, Hill et al. (2007) considered assistance that act as motivation for farmers in cooperative, government policies, regulatory frameworks and market factors as essential external factors in the success of cooperative. These factors can influence the success of cooperatives, especially in developing countries, where cooperatives are still underdeveloped. 1.1 Statement of The Problem Agricultural marketing cooperatives are set up in order to market and sell the marketable surpluses produced by its members such as cereals, vegetables, oilseeds, coffee, livestock, and fish produces when prices are better for their maximum benefit. So marketing co-operative is a beneficial system in which a group of farmers join together in order to carry out part or all of the process involved in bringing the produce from producers to consumers (Woldu, 2007). The co- operatives provide a ready market for farmers’ crops but also absorb transaction costs (Holloway et al., 2000), which would otherwise hinder small farmers from market and production integration. However, starting and operating with cooperatives marketing includes a possibility of success as well as failure. Because of their low financial base, a simple management mistake is likely to lead to failure of a society hence there is little opportunity to learn from its past mistakes. The factors of success exist in different cooperatives and what matters is how International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 28 cooperatives recognize this on an ongoing basis. Therefore, identifying the factors of success, it is indispensable to be clear about what is failed in unsuccessful cooperatives., significant progress has been made in attempt to study on the area of agricultural cooperative performance (Daniel. B, 2006 & Ahmedin.S, 2008), role in input output marketing (Jemal.M, 2008) has been done in Ethiopia, and no /little/ is done on factors for success of agricultural cooperatives marketing. However, as far as the researchers’ knowledge is concerned, in the study are there were no empirical studies has been carried out. Besides, as it was understood form discussions with cooperative representatives, agricultural cooperatives marketing in the study areas are experiencing various challenges limiting their success. This study therefore aims to provide a holistic view of various factors contributing to the success of Agricultural Cooperative marketing through a comprehensive review of literature and empirical study available on the area. Hence, the study will to some selected woreds of Ilubabor and Buno Bedele Zones agricultural cooperatives marketing 1.2 Objectives of The Study 1.2.1 General Objectives The overall objective of the study was to assess and identify factors influencing the successof agricultural cooperatives marketing in some selected woreds of Ilubabor and Buno Bedele Zones. 1.2.2 Specific Objectives In an attempt to achieve the general objective of the research, it would also address the following specific objective:  To identify the level of success of agricultural cooperative marketing in some selected woredas of Ilubabor and Buno Bedele Zones.  To analyze factors influencing the success of agricultural cooperatives marketing.  To investigate the relationships between success and different factors influencing the success of agricultural cooperatives marketing in study area  To describe the extent of different factors, impact on the success of agricultural cooperatives marketing in study area International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 29 1.3. Research Hypothesis 1. H0: member participation factor has insignificant effect on the success of AMCs 2. H0: member commitment factor has insignificant effect on the success of AMCs 3. H0: structural factor has insignificant effect on the success of AMCs 4. H0: communication factor has insignificant effect on the success of AMCs 5. H0: managerial factor has insignificant effect on the success of AMCs 6. H0: external factor has insignificant effect on the success of AMCs 2. Literature Review 2.1. Cooperatives Definition and Concepts The definitions of cooperatives are numerous and varied. However, the International Cooperatives Alliance (1995) defines a cooperative as “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”. This suggests that cooperatives are, first and foremost, voluntary business associations formed by people of limited means through contribution of share capital that forms the basis of sharing out the profits that accrue from the business. In addition, the income generated from the enterprise can as well be used to meet other social and cultural needs and aspirations as determined by the members (Wanyama et al, 2009). 2.2 Global Agricultural Cooperatives Agricultural cooperatives are an important form of business enterprise. An agricultural cooperative, also known as farmer’s cooperatives, is a cooperative where farmers pool their resources in certain areas of activity. Historically, agricultural cooperatives have played an important role all over the world in providing market access, credit and information to producers. In particular, agricultural cooperatives in the United States and Western Europe have played an important economic role in providing competitive returns for independent farmers (Chaddad et al., 2005). 2.3 Agricultural Marketing Cooperatives in Developing Countries Agricultural marketing cooperatives are set up in order to market and sell the marketable surpluses produced by its members such as cereals, vegetables, oilseeds, coffee, livestock, and International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 30 fish produces when prices are better for their maximum benefit. So marketing co-operative is a beneficial system in which a group of farmers join together in order to carry out part or all of the process involved in bringing the produce from producers to consumers (Woldu, 2007). In Africa the first, since the start of agricultural co-operatives during the colonial days, they were linked to the co-operative marketing of agricultural exports (Carlsson, 2002) In Tanzania, Kenya, Uganda, Ghana and Nigeria; co-operatives were established to market coffee, cotton, cashew nuts and cocoa. The development of food marketing co-operatives was associated with post-colonial governments, when they realized the organizational importance of the co- operative enterprise for the development of the whole country. Cooperative is a special group of people with mutual interest to solve their individual problems through common efforts and ultimately attaining economic and social empowerment to the group members and the community. The prime objective of cooperatives is to solve problems that individuals failed to address independently. Accordingly, cooperatives are involving in inputs/outputs marketing activities, credit provision and providing other services to the members (Zerihun, 1998). In Ethiopia, however, the tradition of modern agricultural cooperatives was completely different from the western type of agricultural cooperatives from the initial days of imperial regime to the socialist regime. During the imperial regime (1960s-1974), a period during which modern cooperatives were started, agricultural cooperatives were setup in the form of cooperative production or agricultural collectives to jointly produce commercial and cash crops (i.e., coffee, tea, and spices). They were not in a position to operate efficiently and effectively due to unenforceability of efforts, discriminatory incentives, higher agency costs, and slow and centralized decision-making, which are inherent problems of collective production (Deininger, 2005). 2.4 Co-operative Marketing Cooperative marketing has create a lot of Opportunities for smallholders both on their production and marketing systems. More over some of the opportunities and benefits are economies of scale, bargaining power, available supply of product and access to professional assistance/expertise (hire support), improved access to input and output markets, as well as a stronger voice in decision making (Varghese, 2012). International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 31 2.5. Empirical Review Success is described differently by different scholars. For instance, Bruynis et al. (2007) define success in terms of longevity, business growth, profitability, and members’ satisfaction. Sexton and Iskow (2005) measure success based on self-evaluation. Ziegenhorn (2003) understands success of networks in terms of their survival. Additionally, Rankin and Russell (2005) defined a cooperative success as one which is “economically successful and hence able to compute with other cooperatives and private sector”. With diversity in method as well as subject matter, a growing body of literature seeks for factors influencing the success of cooperatives. According to Sexton and Iskow (2005) there are three significant critical factors essential for the success of agricultural marketing cooperatives, such as structural, financial and operational. The authors, after surveying 61 USA agricultural cooperatives, also identified different factors, like voluntary and open membership, accepting non- member business and employing permanent management, correlated with self-understood success. On top of this, Banaszak (2008), identified four key factors that contributed to cooperatives success, such as leadership strength; group size; business relationship amongst members and a member selection process during the group’s formation. Abdelrahman and Smith (2007) stated that some agricultural cooperatives in Sudan have not been successful. They attributed this unsuccessful or failure to the lack of members' motivation in collective action. Ozdemir (2005) compared different three types of agricultural cooperatives in Turkey and argued that members' perception of democratic administration, awareness cooperative principles and frequency of visits to cooperatives by managing directors are the key determinants of success among those growing agricultural cooperatives. Overall, the successes of cooperatives have been broadly classified as external and internal to the cooperatives. 3. Research Methodology 3.1 Research Design Research design is the blueprint for fulfilling research objectives and answering research questions (John A.H. et al., 2007:20-84). The study would employ explanatory in that it is research which is making for discovering a problem, that has ever been studied clearly to make definitions and explanations that haven’t made before and improve final result. The relationship International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 32 between variables is correlated with an aim of estimating the integrated influence of the factors on success. 3.2 Data Types and Sources In order to address the objectives of the research, the study would employ primary sources. Therefore, primary data would gather from members of affiliated primary agricultural marketing cooperative and woredas Cooperatives Promotion and Registration officers and cooperative leaders. 3.3 Target Population and Sample Size It is important to have a target population for selecting a sample. The population can be described as the specific group that has been relevant to the research study. So, the target population of the study were all 17,657 (Zonal CPRO, 2017) members of agricultural marketing cooperatives of Gechi, Bedele, Chora, Mettu, Bilo Nopha, Yayo, Alle, Bure Woredas. Accordingly, for data collection through questionnaire, the total population for this study was 17657 (CPRO, 2017). The sample size is determined based on the following simplified formula proposed by Yamane (1967) Where: n - is desired sample size for the research N – is total number of populations e – is maximum variability or margin of error 5% (.05) 1 - is the probability of the event occurring. The conventional confidence level of 95% used to ensure a more accurate result. Margin of error is 5% (0.05. Therefore: N = _17657____ = 435 1+N (e) ² 1 + 17657(0.05) ² Thus, the required sample size to fill the questionnaires were 435 International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 33 3.4 Data Collection Instrument and Fieldwork Basically, instruments would developed based on the objectives of the study and research questions. Accordingly, the researchers will use well-designed questionnaire, interviews, and focus group discussions to collect primary data from members of agricultural cooperatives marketing members and leaders and extensive literature review. The questionnaire was completed by the selected members and leaders of the cooperatives who can read and write and the enumerators would assist illiterate members who may cannot read and write. Besides, face- to-face interviews will also be conducted with officers of Woreda Cooperative promotion and Registration office and cooperative leaders. 3.5 Method of Data Processing and Analysis The method of data processing in this study would manual and computerized system. In the data processing procedure editing, coding, classification and tabulation of the collected data were used. Data processing has two phases namely: data clean-up and data reduction. After the data processing has been done, the next tasks would analyze the processed data. This is the further transformation of the processed data to look for patterns and relationship between and/or among data groups by using descriptive and inferential (statistical) analysis. The Statistical Package for Social Science (SPSS) version 22 will be used to analyze the data obtained from primary sources. 3.5.1 Model Specification The study would examine the level of significance for factors that affect agricultural cooperatives marketing success using multiple linear regression model. Besides this, to test the influence of independent variables on the dependent variable, the model specification is as follows Y = f(X1, X2, X3……. Xk,; β1, β2, β3 …….. βk) + ε Where; Y= the value of the dependent variable β1, β2 …βn are the regression coefficients of parameters International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 34 X1, X2, X3….Xn are the independent variables ε = the total error of prediction (residual) 4. Results and Discussion 4.1 Results of Inferential Statistics In this final part of analysis, the results of inferential statistics are presented. Accordingly, for the purpose of assessing the objectives of the study, Pearson’s Product Moment Correlation Coefficient and regression analyses were performed. Finally, with the aid of these inferential statistical techniques, conclusions are drawn with consider to the sample and decisions are made with respect to the research hypothesis. 4.1.1 Pearson’s Product Moment Correlation Coefficient In this study Pearson’s Product Moment Correlation Coefficient was used in order to examine whether there is significant relationship between commitment, participation, structural, communication managerial and external with success. The following results exhibited in Table 4.10, presents the results of Pearson’s Product Moment Correlation on the relationship between independent variables (those six factors) and dependent variable (cooperatives marketing success). Independent variables Marketing Success of Cooperatives Member commitment Factor Pearson Correlation P- value N .844** .000 429 Member participation Factor Pearson Correlation P- value N .801** .000 429 Structural Factor Pearson Correlation P- value N .631** .000 429 Communication Factors Pearson Correlation P- value N .652** .000 429 Managerial Factor Pearson Correlation P- value N .885** .000 429 External Factor Pearson Correlation P- value N .661** .000 429 International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 35 As it is clearly indicated in the above table 4.10, a very strong positive relationship was found between managerial skills and success (r =.885, p < .01), commitment and success (r =.844, p < .01) and participation and success (r = .801, p < 0.01), which are statistically significant at 99% confidence level. This implies that at a 1% level of significance it was discovered that the managerial skills, commitment, and participation plays a significant role in influencing the success of AMCs in the selected area. Furthermore, there is substantial, however statistically significant relationship between communication and cooperative success with (r =. 652, p <.01. This would imply that; good communication has significant influence on the success of AMCs. Additional, the result on table above further indicates that, there is a Strong positive correlation between structural factors and cooperative success (r =.631, p < 0.01). Whereas external factor (r =. 661, p < 0.01), found Strong positive correlation with success of AMCs which are statistically significant at 99% confidence level. 4.1.2 Regression Analysis The basic assumptions of multiple regressions were checked before going to analysis and all assumptions were meet successfully. Multicollinearity was tested using Correlations Matrix and confirmed that there is no strong correlation exists between two or more predictors in regression model (see annex 3). Collinearity tested using VIF and tolerance values which confirmed the guidelines given by (Myers, 1990; Bowerman & O’Connell, 1990 and Menard, 1995). Furthermore, for our current model VIF values are all well below 10 and tolerance statistics all well above .2 (see annex 4). Therefore, we can safely conclude that there is no Collinearity within a data. Table 4. 11: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .916a .845 .839 .414 Predictors: (Constant), External Factors, Commitment Factors, Communication Factors, Structural Factors, Managerial Factors, Participation Factors As shown in the model summary table the model is significant at 99% confidence level. And the correlation between the observed value of success and the optimal linear combination of the independent variables (member participation factor, member commitment factor, structural International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 36 factor, communication factor, managerial factor, external factor) is 0.916, as indicated by multiple R. Besides, given the R Square value of .845 and adjusted R square value of .839, it may be realized that 84.5% of the variation in success can be explained by the explanatory (independent) variables. The remaining 15.5 % of the variance is explained by other variables not included in this study. Hence, the model can predict much of the variation in the success of agricultural marketing cooperatives. Table 4.12: Coefficients Table of Multiple Regression Analysis Model Unstandardized Coefficients Standardized Coefficients t Variables B Std. Error Beta Sig. Constant .169 .095 1.809 .075 Member commitment Factor .311 .047 .326 7.080 .000** Member participation Factor .203 .042 .239 5.273 .000** Structural Factor .113 .042 .103 2.814 .005** Communication Factor .127 .043 .129 3.078 .002** Managerial Factor .291 .044 .310 5.697 .000** External Factor .112 .030 .182 2.958 .003** As coefficients table 4.11 of the regression presents, all of six independent variables (member commitment factor, member participation factor, structural factor, communication factor, managerial factor and external factor) was found to be the best predictors of the dependent variable (cooperatives marketing success). Furthermore, as the standardized beta value shows member commitment factor, Managerial Factor and member participation factor found as the strongest predictor of cooperative success with the β value of .326, .310 and .239 respectively. This result is consistent with the findings of (Amini & Ramezani, 2006; Trechter et al., 1997 and Osterberg & Nilsson, 2009). The other variables which are tested using regression were External, communication Factor and structural factors. As depicted in the above table both variables are found significant predictors in the success of cooperative business with the β value of .182, .129 and .103. This finding is also in line with results of (Shabanali, Fami et. Al., 2006; Poulton, Kydd, & Dorward, 2006 & Noordin et al., 2011); (Mutunga, 2008; Bijman & Verhees, 2011; Didi, 2004 & Renmingwang, 2010). International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 37 4.2 Results of Interview with Cooperative Leaders and Officers What actors are the most important for cooperative success? Market linkage was the most important factor of success since the main goal of cooperatives was to find and maintain domestic and foreign market to the product of cooperative members. Next of it effective management was the most important factor, getting market access as well as enhancing the participation of members mostly depend on management and leadership style of the cooperatives. Therefore, the majority of interviewee answers that the above two factors are the most important factors. But that means not others are not important. What are your overall suggestions for the successful development of agricultural marketing cooperatives? Majority of interviewee suggest that strengthening market linkage would sustain the marketing success of cooperatives. In addition to that government should increase its support in different ways like providing financial access and other important infrastructures. Lastly, management bodies should be professionals who have good experience in leading and managing cooperatives. But most of the time those personals were assigned to the position by their honesty for the politics of the government rather than their skill, knowledge and experience in managing cooperatives; this would hinder the success of cooperatives. 5. Conclusion and Recommendation 5.1 Conclusion The correlation coefficients for the relationships between cooperatives marketing success and its independent variables are linear and positive which ranging from strong to Very strong correlation coefficients. From six independent variables only three which are Managerial factors, commitment factors and members participation had a very strong positive relationship with the success of cooperatives marketing. Besides, the result of multiple regression analysis clearly illustrates that, even if all of six independent variables those are member commitment, member participation, communication, and managerial, structural and external factor found significant predictors of the cooperative marketing success; members commitment, managerial factors and members participation are the most significant and strongest predictor of cooperatives marketing success as compared to other factors. Therefore the study concluded that member’s commitment, managerial factors and member’s participation are very important International Journal of Commerce and Finance K. Godo & E. Hora & S. Tamiru 38 significant factors for cooperatives success. Since, Managerial factor was among the most influential factors of cooperatives success. But, the study found that the cooperatives were not managed by professional personals rather they were assigned to the position of management by their honesty for the politics of the government rather than their skill and knowledge of managing cooperatives. One of the main challenging issues of the sector was that farmers including members were not willing to provide their products for cooperatives because of broker’s trade off them for a very small increment on the price of the product; as a result, farmers shift their face to the local buyers of the product. Therefore, the study concluded that some members were not dedicated to the realization of cooperative vision. 5.2 Recommendations Firstly, the study suggest that the management of cooperatives should create awareness for farmers about what benefit the farmers as well as the country would get when they provide and sell their agricultural products by cooperatives. It needs the cooperation of all concerned bodies to educate farmers since there is knowledge gap among many farmers that broker’s use to trade off the farmers. In addition to that providing different incentive scheme were another way to attract farmers or group of farmers especially coffee producers to market safely and at attractive price by cooperatives since it generates high amount of foreign currency for the country. Secondly, the responsible government bodies should identify, address and strength the relationship of foreign and domestic market linkages with cooperatives to overcome the challenge of market linkage. In addition to those infrastructures should be fulfilled especially financial access should be provided on the time its needed. To do that responsible government bodies should facilitate it by communicating with available banks and other financial institutions available in the woredas’. 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