Case Analysis: Seikatsu Club Cooperative

By: Ashley Zak

Strategy of Seikatsu Club

Seikatsu Club is a dynamic cooperative that set out to battle the issue of rising prices in Japan due to the “economic miracle.” The cooperatives strategy is to deliver goods directly to their members, whereas other cooperatives deliver their goods through a middleman, such as grocery stores, who then sells to customers. This strategy is one reason why the Seikatsu cooperative receives cheaper prices on goods for their members. Their distribution strategy to their members involves “advance orders, distribution and a payment based on a “han” or group, and limits the availability of any given item to a single brand (Maruyama)”. A “han” is comprised of 6-13 families and is the basic unit for collective purchasing (Maruyama).  The “han” is put in place to ensure goods are bought in bulk, which allows the cooperative to gain economies of scale and in turn receive better pricing. Also, because they limit the availability of one brand per item, they can control the quality of the product for their members.

Part of Seikatsu Club’s successful strategy beyond better pricing for their members is also attributed to their investment model. Unlike the model of many other cooperatives of reducing investment and growing dividends, Seikatsu continues to run their business through internal investments. This is because they continue to see their value proposition succeed through internal investment and growth. Members are reaping the benefits of the cooperative through the advantages of the cost-effective collective purchases. Therefore, they do not need to utilize the patronage refund system.

Although this “economic miracle” urbanizes Japan and stimulates growth in the region, these changes also deplete the quality of life from an environmental, lifestyle, and geographical perspective (Maruyama).Therefore, the mission of the cooperative extends beyond battling the issue of rising prices through cost-effective collective purchases, and also capitalizes on the social concerns pertaining to the environment and women’s rights. The social mission of Seikatsu Club enhances opportunities as it related to women’s rights in the workplace, and has a profound effect on the environment.

Structure of Seikatsu Club

There are several different ways to categorize cooperatives when evaluating the structure of the organization. The first is the geographical territory that the cooperative serves, or the size of the area they serve (USDA). They operate in a local, super local, regional, national, or international structure. In the case of the Seikatsu Club, this cooperative is considered national. They have 153,000 members throughout the country of Japan. The next category is the governance system, which pertains to the membership structure.  This is broken down by a centralized, federated, or mixed structure. The Seikatsu Club has a centralized governance structure, which implies that they have “one central office, one board of directors elected by its members, and a manager (chief executive officer) who supervises all operations (Maruyama).” Seikatsu has as many as 100 branch offices, with approximately 500-1000 members belonging to each branch. There is one Board of Directors for the organization that is made up of 10-20 members of the cooperative that are elected annually during the General Assembly (Maruyama).  Lastly, the structure is also categorized by the number of functions they perform. The Seikatsu Club has a very dynamic model that performs a couple functions.  The first function is that it is a purchasing cooperative. This indicates that they aggregate demand to receive lower prices from selected suppliers. This directly aligns with their strategy to only distribute products in a “han”, not allowing buying power for individual members. The other function of the Seikatsu Club is that it is a service cooperative. Members of the cooperative manage a Mutual Benefit Fund and also provide other services such as psychological support to other members.

Managerial / People Structure of Seikatsu Club

Cooperatives have many different classifications of individuals to ensure the organization is run successfully. These individuals are the members-owners, board of directors, managers, and other employees. In the case of Seikatsu, there are 153,000 members within the cooperative. There are roughly 700 employees that deliver the goods to the members once purchases have been made. “Receipt and dispersal of merchandise and collection of orders, however, is handled within the group (Maruyama).” Therefore, there is a clear distinction between the responsibilities held by members versus employees within the cooperative. As stated earlier, Seikatsu does have a Board of Directors that consists of 10-20 members that are elected annually. Within the article there is not a clear indication that there is one manager that oversees all operations for the cooperative. The article does state that they promote self-management skills, which leads me to believe that there is not a management group. “Through encouraging members to participate freely and actively and to train and educate each other, the club is also striving to nurture self-management skills (Maruyama).” This is another way in which Seikatsu is demonstrating success by differentiating their structure from other cooperatives.

Benefits of Seikatsu Club

The Sekiatsu Club provides many benefits to the members of the cooperative.  One of the major benefits is “access to quality supplies and services at reasonable cost (Maruyama).” The members of the cooperative are buying in large groups, which in turn lead to better pricing and discounts. Another benefit is political action. The women have come together to realize that they can make a huge impact on the community through representation in legislation.  This political movement also allows other women to feel empowered that they too can make a positive impact on the community. Although the members are the individuals reaping the benefits of price effective goods, the cooperative still enhances and protects the local economy by providing 700 jobs to the local communities across Japan.  These are just a few of the benefits of the Sekiatsu cooperative.

Social Mission of Seikatsu Club

Seikatsu Club is creating many opportunities in the realm of women’s rights and expanding the awareness of environmental friendly practices throughout Japan. One of the reasons they are successful with the expansion of women’s rights is through political reform. They are starting the movement of electing women into legislation and partaking in political issues. This act is attracting the attention of women and is making many realize that they too can contribute much more to society than just becoming “housewives.”  It is triggering women to enter into the service sector contributing their talents to society by owning their own enterprises in such areas as recycling, boxed lunches, and home help businesses (Maruyama).  From an environmental perspective, Seikatsu “refuses to handle products if they are detrimental to the health of our members or the environment (Maruyama).” This is done through only buying crops from local farmers that use organic fertilizer, and not buying products that do not meet the environmental standards set by the cooperative. They have even started their own businesses if certain products that they want utilize do not meet the environmental or social standards of the cooperative.

Conclusion

In conclusion, Saikatsu Club has developed a solution to its members that provides goods at a discount rate as prices are escalating due to inflation in Japan. It is through their advanced purchasing, and investment model that they differentiate themselves from other cooperatives to achieve success. Simultaneously the cooperative is making overwhelming strides as it relates to social and environmental issues within Japan. Seikatsu is a perfect example of a thriving cooperative that remains financially sound while enhancing social and environmental standards.

 

 

Works Cited

Maruyama. (n.d.). Seikatsu: Japanese housewives organize. Green Business: Hope or Hoax?,

USDA, . Co-Ops 101: An introduction to Cooperatives. Print.

 

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One thought on “Case Analysis: Seikatsu Club Cooperative

  1. tlhill2012 December 16, 2012 at 10:46 AM Reply

    Fine summary. How might this example inform efforts in the US? Alternatively, what can we learn about management from the han stucture?

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