Generic Strategies As Competitive Advantage Of Cooperatives

Introduction

Cooperatives around the world have been uplifting lives, promoting social cohesion, raising productivity, reducing inequalities, and advancing economic growth and economic development in many different ways (Terroza, 2016). It plays an important role in promoting and fostering economic growth and social development at the community and regional level, building on the spirit of cooperation that is already prevalent in rural areas (Zeuli, 2002). In the Philippines, there are 10,762 cooperatives which complied with the reportorial requirements of CDA on 2014. These cooperatives reported PhP16 billion net surplus, PhP248. 5 `billion total assets, PhP313. 8 billion business volume generated, 290,622 employments and 7,675,283 memberships (CDA, 2017). Cooperatives operate under a business model that creates unique challenges in financial management, governance, strategy, and communication. A cooperative is unique in a sense that it is user-owned and user-controlled business that allocates benefits on the basis of use. Cooperative is owned by members who act as manager, supplier, customer, creditor, borrower of its business. This business model gives cooperative competitive advantage against other business Competitive advantage strategy consists of all approaches and moves a firm has taken or is taking to attract customers/buyers, withstanding competitive pressures and improve the market position (Porter and Collins, 2006).

A firm is said to have competitive advantage when it is able to sustain profits exceeding the average for their industry (Porter, 1985). Competitive advantage empowers a firm to make unrivaled benefits and predominant esteem for their customers (Frambach, Prabhu, and Verhallen, 2003). One of the popular strategies that can be used by companies to achieve competitive advantage is the Generic Strategies developed by Michael Porter. Generic strategies include cost leadership strategy, differentiation strategy and focus strategy (Economic Times, 2016). Cost leadership strategy requires organizations to develop policies aimed at becoming and remaining the lowest-cost producer and/or distributor in the industry. This strategy can be achieved by controlling costs which include construction of efficient-scale facilities, tight control of costs and overhead, avoidance of marginal customer accounts, minimization of operating expenses, reduction of input costs, tight control of labor costs, and lower distribution costs (Treacy & Wiersema, 2009). Differentiation strategy can be defined as the designed set of actions to products goods and services that customers perceive as being different in ways that are important to them (Bani-Han & AlHawary, 2009). Differentiation includes manufacturing products or offering services unique in relation to and more appealing than those of competitors (Zekiri & Nedelea, 2011). Focus strategy is founded on the choice of a narrow competitive scope within an industry (Bansal, 2008). The organization adopting this generic strategy selects a niche or group of niches in the industry and customizes its strategy to serving them to the exclusion of others. Like other business organizations, cooperative employs strategies to make their business ahead from the others. Unfortunately, there is a limited study on the strategies of cooperatives in the Philippine and no studies were conducted about generic strategies as competitive advantage tools of cooperative. This study will shed light on the effect of generic strategies as competitive advantage of cooperative to the financial performance.

Objective

The main objective of the study is to determine the effect of generic strategies to the financial performance of cooperatives in Occidental Mindoro. Specifically, the study aims to:

1. Determine the profile of the cooperatives in terms of:
• Number of members1.
• Length of existence1.
• Size of board of directors
2. Determine the generic strategies employ by the cooperatives
• Low-cost
• Differentiation
• Focus
3. Determine the financial performance of the cooperatives in terms of:
• Size of assets
• Capital structure
• Asset yield
• Rate of Returns
4. Determine the effect of generic strategies to the financial performance of the cooperatives.

Conceptual Framework

Generic Strategies can be defined as the strategies that were developed by Michael Porter that companies can use to achieve competitive advantage. These strategies include; cost leadership strategy, differentiation strategy and focus strategy (Economic Times, 2016). Subsequently, Tanwar (2013) states that, the three generic strategies as originally envisioned by Michael Porter represent the context in which the overall generic strategy of firms is pursued to achieve their strategic options and ultimately achieving competitive advantage. MethodologyResearch DesignThe study will use descriptive-correlational research design. Descriptive studies depict qualities connected with the subject populace (Cooper & Schindler 2010). It aims to answer who, what, where, when or how much about a situation under study. A descriptive design helped provide a clear examination of the remuneration and good governance practices and performance of cooperatives Occidental Mindoro.

Sources of Data

The primary source of data of the study are the members of the board of directors, managers and members of cooperative who are presently working in their respective capacity in the cooperatives in Occidental Mindoro. Their assessment on the current good governance practices will serve as the primary source of data. The study will utilize audited financial statements of the cooperatives.

The audited financial statements will be used to determine the financial performance using the tools describe in the study. Population of the Study The population of the study encompasses two (2) directors, and two management staffs. . Only cooperative which had submitted audited financial statements to the Cooperative Development Authority will be considered in the study. Stratified random sampling technique will be used in the study. The cooperative will be grouped according to its category in the Cooperative Development Authority. The Cooperative Development Authority categorized the cooperative according to the size of its assets- large, medium, small and micro. After the cooperative has been randomly selected, the respondents will also be selected randomly. In determining the sample size, the researcher will use Green (1991) formula which suggest that the N > 50+8m (where m is the number of IVs) for testing the multiple correlation. This only mean that the sample size of study is equal to 98Instrumentation and Validation A modified instrument will be used in the study for the purpose of collecting the needed primary data. The instrument is divided into two (2) parts: Part I covers the profile of the cooperative. Part II deals with the business strategies of the cooperative to achieve competitive advantage in terms of cost leadership, differentiation and focus. . The researcher will validate the questionnaire through a series of procedures from drafting to evaluation done by a panel of experts who possess an impeccable knowledge and experience about the subject under study. Cronbach Coefficient Alpha will be used in determining the internal consistency of the questionnaire. Data Gathering Procedure Permission from the cooperative Board of Directors and management will be obtained before the questionnaire is floated to the respondents. The accomplished questionnaires will be immediately retrieved to ensure 100% retrieval rate. Thereafter, the data obtained will be coded and encoded using the Excel format then submitted to the statistician for statistical treatment. Statistical Treatment of Data The following statistical tools were used in this study:

1. Weighted mean will be used in determining the extent of the good governance practices of the BOD, management and members of the cooperative.
2. Percentage will be used to describe the financial performance of the cooperative.
3. Correlational statistics will be used to determine the relationship between good governance practices and financial performance.

References

1. Bani-Han, i. & AlHawary, F. A. (2009). The Impact of Core Competencies on Competitive Advantage: Strategic Challenge. International Bulletin of Business Administration.
2. Bansal, P. (2008). Evolving sustainability: A longitudinal study of corporate sustainable development. Strategic Management Journal.
3. Frambach, R. T. , Prabhu, J. , & Verhallen, T. (2003). The Influence of Business Strategy on New Product Activity: The Role of Market Orientation International Journal of Research in Marketing
4. Porter, M. (1985). The Discipline of Market Leaders,. Addison-Wesley.
5. Zekiri, J. , & Nedelea, A. (2011). Strategies for achieving competitive advantage. The Annals of the “Stefan cel Mare” University of Suceava. Fascicle of the Faculty of Economics and Public Administration