Category Archives: Cooperatives/Democratic Management

History of Co-Ops Broaden Understanding of Their Usefulness

Jason Bonner writes…

The overview of cooperative development in the United States is a reminder of our country’s European heritage as well as a universal collective response to harsh living conditions in rural areas. Looking back on American history, cooperatives played a major role in the early development of this young country. They made it possible for small groups to venture out across the country and survive and thrive. The successes and failures can be studied closely to learn what had worked and in what situation. This knowledge can be used to help developing nations and the Bottom of the Pyramid (BOTP) rise from poverty-stricken living conditions to a much more welcomed, successful way of life.

When early settlers arrived in this country, forming cooperatives was done out of need for survival. Communities of people needed to rely on one another’s strengths for society as a whole to prosper; this was basic common instinct. They earliest documented cooperative, established in 1752 by Benjamin Franklin 24 years before the birth of the United States, is still in operation to this day, the Philadelphia Contributorship for the Insurance of Homes from Loss by Fire. It predates the historical Rochdale group in England, known for the Rochdale Principles, a set of principles of co-operation formed in 1844 that provide the foundation for the principles on which co-ops around the world operate to this day. The earliest, continuing successful cooperatives in the US were formed by farmers in order to support one another by sharing machinery, crop information, bulk purchases of supplies etc. leading to increased farming efficiency, cost savings, and profits. Agriculture cooperatives helped to spread the wealth when available as well as lesson the damages from disasters that may occur by having others with a collective interest help out. Consumer cooperatives became the most popular in the early 1900s enabling the working class opportunities to purchase needed goods of better quality and at a cheaper cost than typical retail outlets by buying in bulk from major wholesalers. This business plan is very similar to stores such as Costco and BJs, with their plan of selling in bulk to members while passing along savings, for a small membership fee of course.

Most early American co-ops failed due to insufficient capital, poor management, and/or a lack of understanding of the cooperative principles by their members. In studying the success and failure of cooperatives, a very common element becomes apparent. When income is less important than survival, the cooperatives succeed; but as soon as they grow too large, problems arise. Problems stem from wholesalers unable to supply the large bulk purchases to arguments between members on cooperative direction or use of profits. Usually, as history has taught us, the cooperatives than close, continuing a historic cycle of the popularity of the cooperative business plan. During economic downturns in a developed society, cooperatives become popular once again to help those, who are usually the working poor, survive the tough times. But as soon as economies start to improve, the fight for a more capitalistic society becomes increasingly apparent and the cooperatives fall apart again. A balance needs to be discovered to cash in on the benefits of a cooperative while keeping the destructive forces at bay. This notwithstanding, many undeveloped societies, as well as those at the BOTP, can utilize the cooperative model to help break the stranglehold of poverty and create wealth and sustainability in places it was never dreamed possible.

References

 Margolis, R. (Dec 20, 2008) How Cooperatives Fail. New Zealand Cooperatives Association. Retrieved from http://www.nz.coop.

Zeuli, K.A. & Cropp, R. (2004) Cooperatives: Principals and Practices in the 21st Century. University of Wisconsin. Retrieved from http://learningstore.uwex.edu/assets/pdfs/A1457.PDF.

Zimbelman, K. Employee Orientation Handbook on Co-op History. Cooperative Development Institute. Retrieved from http://www.cdi.coop/historyofcoops.html.

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Fishing cooperatives

Hunter R Maloumian
November 26, 2012
SGM 5119

Cooperatives have a presence in a variety of industries ranging from banking, retail, utilities and fisheries. Cooperatives are defined by the National Cooperative Business Association as “owned and democratically controlled by their members-the people who use the co-op’s services or buy its goods-not by outside investors; Co-op members elect their board of directors from within the membership. In addition, they are motivated not by profit, but by service-to meet their members’ needs or affordable and high quality goods or services; exist solely to serve their members.” The article goes onto to further elaborate on the economic impact of cooperatives stating that cooperatives account for nearly $654 billion in revenue, over two million jobs, $75 billion in wages and benefits paid and a total of $133.5 billion in value-added income. The economic impact of cooperatives is real and the additional job security present makes them a more appealing business model in down markets. Due to these facts, a variety of examples of Cooperatives exist in the United States.

Cooperatives have a large presence in the United States fishing industry and closely fit the above definition. The fisherman’s collective marketing act of 1934 allow fisherman to jointly harvest, market, and price their product without being in violation of antitrust laws. According to the United States Department of Agriculture “Only 5 percent of U.S. fishers use a cooperative to market their fish. Use of cooperatives is greatest in the Pacific region and least in the Atlantic and Gulf regions”. From this data it can be concluded that the fishing industry in the United States does not completely see the value by joining a cooperative. It is possible this outlook might shift if certain regions become over fished. One of the aspects of a cooperative is to maintain the longevity of the employees within the organization. From this perspective, it would be in the cooperatives direct interest to act in a sustainable manner and maintain the livelihood of different fish populations for future generations to harvest. According to the article, Sharing the Catch, “a team of ecologists and economists says giving fishermen or cooperatives fixed catch shares — rather than forcing them to compete in a derby-style harvest — can make fishing safer, help preserve fish populations and help battered stocks recover.”

Cooperatives and share catches are not a perfect system. In Dutch Harbor, an Aleutian Port, where the Discovery Channel show The Deadliest Catch was filmed has recently embraced this model to sustain the population of King and Snow Crabs. Although the model has had limited success, it is projected that the population of these crabs will still be fewer this year than they were last year. Andy Rosenberg believes it is crucial that government impose regulations to limit the amount of stock that is caught even in areas that are self-regulated through the use of cooperatives. Modern research conducted by economist Christopher Costello and marine ecologist Steven Gaines, both of the University of California, Santa Barbara, and economist John Lynham of the University of Hawaii paints a dismal future if regulation is not imposed. They predicted that if “overfishing, pollution and habitat destruction continue unabated, all the world’s fisheries would collapse by 2048”. It is important that fisherman and government join together to do everything and anything within reason to keep this industry sustainable. As the world’s population increases, the need for additional food/protein will increase and will place additional strain on an already crumbling industry. There is significant room for improvement however considering only a small percentage of the fisherman in the United States is currently operating under a cooperative. It is even more important however, that the United States government imposes regulation and steep penalties to those over fish a certain region or population.

Work Cited
1. http://www.rurdev.usda.gov/rbs/pub/rr44.pdf
2. http://www.ncba.coop/ncba/about-co-ops
3. http://www.uwcc.wisc.edu/info/fishery/kitts.pdf
4. http://seattletimes.com/html/nationworld/2008189257_fishery19.html

Xinjiang Quanliang Dairy Farmers Cooperatives (Case Example)

Lidan Li writes:

After introducing the reform and open door policy, China has established a market economy. The farm cooperatives have emerged in the developed area of China since 1980, while in the Xinjiang Uyghur Autonomous Region of China, a relatively poor region that people there live relying on keeping dairy cattle, cattle, and sheep, the farm cooperatives have just begun in the late 1990s. I’ll take Quanliang  dairy farmers cooperative in Xinjiang Region as an example.

The Motivation of establishing dairy farmers cooperative

First, the dairy farmers need to solve the difficulty of selling products. Before the Quanliang dairy farmers cooperative established, the dairy farmers individually sold their products to nearby factories. While the factories defaulted on a 0.2 million payment for years. Though dairy farmers in Quanliang village were working hard, they still had little income. Second, the dairy farmers need to solve the capital of purchasing agricultural commodities. As dairy farmers used to buy fodder separately, that they often bought at a high price since they have low bargaining power, sometimes even fodder in poor quality. Furthermore, the dairy farmers need to solve the difficulty of techniques. Dairy farmers were keeping livestock in the primitive way, that was ineffective compared with farm using new techniques. Because of the above problems, dairy farmers were living in a low quality life with low annual income.

The function of dairy farmers cooperative

In order to solve the default payment problem, the village head with 18 dairy cattle farmers established a cooperative to provide service for all members. Members voted to elect the one who owned the most dairy cattle as the director. The first mission of the dairy farmers cooperative is to negotiate with the factory to ask for immediate payment.

The dairy farmers cooperative also solved the capital problem for farmers. The cooperative provides agricultural commodities to farmers. They also provide dairy processing and marketing service, which save a lot for farmers. The cooperative has a better bargaining power than individual farmers, so they provide farmers with high quality fodder at a relatively low price. Cooperative members also establish a marketing department that experienced members are in charge of expanding market, selling, and purchasing. As a cooperative, they registered a trademark and began to establish brand reputation. The cooperative trained all their members with new technique products that improving the effectiveness of feeding cattle and producing dairy products.

Women’s influence in dairy farmers cooperative is prominent. In Quanliang dairy farmers cooperative, the director’s wife is responsible for the management and some other activities. She also innovated other female farmers to take more responsibility in the cooperative.

The current problem of dairy farmers cooperative

In Xinjiang, the cooperatives are slowly developed, due to the small scale cooperatives and limited farmer members. In 2006, the farmers cooperative in Xinjiang influenced about 2.53 million farmers, which is only 10.45% of all farmers in this area. Quanliang dairy farmers cooperative has 440 members, which is the largest cooperative in this area, while some other cooperatives have only about 20 members. Due to the limitation of the local economy, the capital of the cooperative is limited. The starting capital of Quanliang dairy farmers cooperative was less than 0.1 million Chinese Yuan (about $15,000 US dollar). The small-scale cooperatives have very limited influence of the industry.

Members have little participation in the decisions of the cooperative. The board of director has made most decisions. As the board of director is usually the members who invest the most capital and most informed and respected farmers. Their decisions are usually agreed by most members. However, with the development of the cooperative, the lack of democracy and the right to vote would damage the relationship between members.

As the Quanliang dairy farmers cooperative is still in its beginning level, the services it provides is limited. The cooperative’s services are relatively low cost services like providing information and training, low cost techniques equipment. They had only purchased storage equipment of dairy because of the capital limit.

The policy of the cooperative is still incomplete. Except the original 18 farmers were providing the initial equity, there is no requirement of membership fee for new members, which also slow down the development of the cooperative. This is due to Xinjiang is still an economical backward area, most farmers can’t afford the membership fee. The only revenue of the cooperative is the service fee from members who has used the service.

 

References:

1.Yanqin Guo & Xiangzhi Kong, The analysis of some problems of the development of Xinjiang farmers cooperatives, 2009.

2.Ri Zheng & Shanshan Luo, The problem and solution of the development of farmers cooperatives, 2005.

3.Donald A. Frederic, Co-ops 101: An introduction to cooperatives, April 1997.

Lancaster Farm Fresh Cooperative

Case Example: Lancaster Farm Fresh Cooperative – How Coops are Saving Farmland in Pennsylvania and Providing Healthy Food to the Mid-Atlantic

Suzanne Lunday

Lancaster Farm Fresh Cooperative (LFFC) is a nonprofit organic food cooperative comprised of roughly 75 farmers. Started in a small barn in 2006 with only 9 farmers, the cooperative has grown rapidly. In 2008, LFFC achieved sales of over $2,000,000 – much of which was returned to the farmer members in profit sharing. Located in Lancaster, PA this innovative cooperative is helping Southeastern Pennsylvania preserve valuable farmland by building the local food economy/infrastructure,  and by connecting consumers to fresh and diverse local produce and to the farmers that serve them.

LFFC aggregates produce, dairy, and value-added products from small and mid-scale family farms in the Lancaster, PA area. By aggregating production as a cooperative, LFFC is able to serve much larger wholesale and institutional markets; increase efficiency; increase bargaining power over buyers; and increase marketing benefits for the group. This cooperative demonstrates the power of non-summativity– that the collection or system is greater than the mere sum of its parts.

LFFC was one of the early pioneers of Community Supported Agriculture (CSA) in the area and now also serves large wholesale buyers from Washington D.C to New York City. Without the cooperative structure, many small farmers would not be able to reach these large markets nor produce diverse enough product mixes to meet consumer demand. In the CSA model, buyers sign up for a share of the production at the beginning of the growing season. This entitles the share member to a weekly or bi-weekly share of freshly picked produce. By providing the farmers with cash up front, much of the farm’s operating expenses such as seed and planting costs are covered for the year. This financially beneficial relationship also provides a direct link between the farmer and the consumer which strengthens communities.  Indeed, by supporting your local CSA, not only are you helping to preserve farmland, you are also contributing to regional community development right in your back yard.

I have been a member of Lancaster Farm Fresh since 2010. The abundance of fresh and delicious produce is the starting point for most meals in our household. I can say without a doubt that our household consumption of vegetables has dramatically increased since we became CSA members.  Indeed, most health professionals suggest joining your local CSA as a way to boost health.  As an example, a friend’s husband reluctantly joined a CSA two years ago at the insistence of his wife. At first, he did not look forward to the weekly pickup. Soon though, he became a vegetable convert once he tasted the fresh produce. Two years later, he has become an enthusiastic vegetable cook and has lost an estimated 60 pounds.

LFFC is a great example of how cooperatives with their unique organizational structures can execute both financial and mission based strategies. By pooling resources and executing key activities that would be out of reach for small farmers, LFFC is preserving farmland, building robust sustainable communities, and providing much needed healthy fresh food.

 

 

 

 

Sources:

http://www.landessfarm.com/

http://www.lancasterfarmfresh.com/

http://issuu.com/redflagmedia/docs/grid_2010.03_with-pasa_issuu/25

 

Mondragon – Structure and Management

Case Analysis – Mondragon

November 27, 2012

Michal Wachs

 

Structure and Management

Mondragon Corporation is the world’s biggest group of cooperatives located in the north of Spain. The Corporation’s goals include “competing on international markets with the use of democratic methods in [the] business organization, the creation of jobs, the human and professional development of its workers and a pledge to development with [the] social environment” (Mondragon). Today, Mondragon’s cooperatives are grouped into four functional areas: finance, industry, distribution, and knowledge. Each functional group has its own strategy, which is coordinated by the Corporate Centre. All of the cooperatives join together to create Mondragon. The Congress is the “supreme body for joint expression and sovereignty, with its Steering Committee as the highest management and representative body, whose duties include the election of the CEO” (Mondragon).

 

The cooperatives operating within a functional group are called a Sectorial Group, which is additionally part of a Division. “Each Division is headed by a corporate Vice-president. The President of the General Council and the 14 Vice-Presidents, together with the Departmental Managers at the Corporate Centre make up Mondragon’s management bodies. The General Council is the body charged with drawing up, coordinating and applying corporate goals and strategies” (Mondragon).

 

Mondragon’s interesting corporate structure and management hierarchy are not unique. Indeed, many cooperatives like Rabobank and the Seikatsu Club, have similar corporate structures that are implemented to ensure that members’ interests are at the core of all management decisions. Because there are no shareholders, any gains made by the cooperatives are passed directly to its members. Additionally, any losses sustained by cooperatives are spread across the entire cooperation. Furthermore, if the Congress and Steering Committee decide that a business unit should be dropped, all members employed by that cooperative must be replaced into other businesses. In this sense, Mondragon and other cooperatives provide an insurance against job loss.

 

Social Implications and Questions

Mondragon currently employs about 84,000 people and includes 256 companies and bodies, of which about half are cooperatives (Mondragon). During this latest economic recession, the loyalty to the cooperative structure was tested. The losses of cooperatives hit hard were felt by all cooperatives within Mondragon. This upset certain business units who were outperforming their competitors, and some units ultimately decided to leave Mondragon. Furthermore, any members from units that the group decided to close had to be moved to other, more successful businesses.

 

Because no members can be left behind, cooperatives are more invested in making businesses successful than conventional businesses. Relocating members can be difficult because relocated members require training, must be relocated to a business within a certain distance to their current home, and these members can be cumbersome when businesses are trying to maintain certain levels of efficiency. “Workers’ co-ops are often seen as hotbeds of radical, anti-capitalist thought. Images of hippies, earnest vegetarians or executives in blue overalls could not, however, be further from reality.” As Mikel Zabala, Mondragon’s HR chief, explained: “We are private companies that work in the same market as everybody else. We are exposed to the same conditions as our competitors” (The Economist, 2009). It is critical for cooperatives to invest in their businesses and implement best practices so that they can compete in the world market with companies that don’t share similar guiding principles relating to retaining employees.

 

From the readings, we learned that cooperatives can and do act as a unit to increase their collective purchasing and negotiating power. In the example of Seikatsu Club, the Club was able to increase green practices through its mandate not to buy products that are harmful to the environment or to members (Maruyama, 1990). Additionally, the Club was directly involved in the financing and management of sustainable food production. Similar to unions, when cooperatives leverage the collective power of its members, they are able to promote more sustainable and locally driven practices that should give voice and benefit to all members.

 

Mondragon’s glaring question is whether its structure is actually sustainable. Because there are caps to managers’ pay, talented employees are being stolen away, leaving the future of certain companies in doubt. Additionally, Mondragon is located in Spain, where the future economic picture is fairly bleak, to put it mildly. How much longer are Mondragon’s successful business units going to want to shoulder the losses of the other less successful business units? And finally, for how long can these cooperatives employ all members when the companies must maintain a level of competitiveness and quality with non-cooperative businesses, for which no labor mandates exist? Answering these questions will be critical to Mondragon’s future success.

 

Works Cited

Maruyama, S. (1990). Seikatsu: Japanese Housewives Organize. In J. Plant, & C. Plant, Green Business: Hope or Hoax (p. 136). New Society Publishers.

Mondragon. (n.d.). Home. Retrieved Nov 25, 2012, from Mondragon Corporation – International Business Group: http://www.mondragon-corporation.com/ENG.aspx?language=en-US

The Economist. (2009, March 26). All in this together. The Economist .

 

Mondragon

Evan Williams writes

Mondragon is a diversified group of cooperatives operating in finance, retail, industry and knowledge.  Members of the organizations comprising Mondragon Cooperative Corporation act as both workers as well as owners.  This creates very unique managerial dynamics.  The cooperative’s general assembly and social council are responsible for representing the members as a whole.  They ultimately determine the management and governing council of the corporation (Lafuente, 2012).  This structure truly represents Mondragon’s claim to be not only run by its members, but for the benefit of its members as well.  The viability of this model is put directly to the test through their global expansion efforts.  A truly effective cooperative will continue to yield successful results throughout international growth.  Despite these growth challenges, Mondragon’s true value is evident in their governing structures which enable them to overcome their expansion dilemmas.

Just as in any other organization, there are significant strategic concerns facing Mondragon when considering large scale growth.  One of the most detrimental factors is their growth through ownership strategy.  The corporation’s management has a primary concern about their ability to convert employees into coop worker-owners.  In this growth model, employees are afforded the opportunity to join the cooperative after working in one of the cooperative’s divisions for a predetermined amount of time.  The conversion rate of temporary employees to worker-owners is not as significant in other countries outside of Spain.  Some of these difficulties arise out of political reasons as stated in the following excerpt: “MCC (Mondragon) also looks for other advantages…Often, however, they run into difficulties, where another country’s laws treat cooperatives with disadvantages.” (Davidson, 2009).  These political barriers result not only in direct resistance from regulation, but also indirect apprehension from potential owners.  The general unfamiliarity throughout the population of these highly regulated countries inhibits Mondragon’s success rate for converting employees to coop owners.

Another compromising issue facing Mondragon is the high turnover of upper level managers.  These higher level worker-owners contend with salary caps which limit their compensation to levels below that of related jobs in non-cooperative organization.  Although these executive level positions have an intangible intrinsic value associated with the social mission, executives do pursue better paying careers in the market.  In considering Maslow’s Pyramid, if rewards at Mondragon are more in line with the self actualization level, then the turnover suggests the lower levels are not being met.  This could infer a lack of fulfillment of the lower needs like esteem or financial security.  Interestingly, the Economist philanthropy article alludes to high wealth donors attaining Maslow’s highest level of need through charitable donation (Economist, 2006).  This confirms the assumption that executives still establishing wealth are concerned more with the lower levels of need.  Therefore, the potential pool for effective executive level cooperative owners is severely limited.  The potential candidates would most likely consist of highly experienced, capable managers who are also married to the social mission.  They must also be at a unique point in their lives where they can rationalize the opportunity costs of foregoing a non-coop career with the intrinsic rewards gained through the Mondragon social mission.

As discussed in the Peredo Agua Dulce article, community based enterprises do not consider profit making as their main purpose.  The lowered expected return is acceptable in light of the organizations ability to bring about positive community development or change (Peredo, 2005).  Mondragon operates in a similar fashion where intangible factors are calculated into various business activities.  This is clearly depicted in the executive levels’ compensation being adjusted for the intrinsic rewards associated with the social mission.  More generally, this concept suggests that where Mondragon can be comparable to a typical business, as seen in their organizational governance, there are considerable differences as well.  These differences allow the cooperative to operate in less defined guidelines.  Where a typical business may have set profitability benchmarks to meet for its shareholders, Mondragon answers primarily to the community for which it operates.  In turn, however, when a company like GE has a loss making division, they have a broader course of action to mitigate the losses.  Mondragon, in comparison, must cover its losses over other divisions, or relocate their employees should they close the unprofitable division.  This ultimately exposes the cooperative to heightened levels of operational risk as it limits the possible business solutions that can be implemented.

Despite these expansion difficulties, Mondragon enjoys international success.  From its inception in the poverty stricken Basque region of Spain, the cooperative has been able to bring about positive social change.  More impressively, Mondragon has developed a financially sustainable way to bring about this beneficial social change.  Much of this is attributable to the democratic governing infrastructure.  The cooperative is organized in a considerably decentralized manner, which results in a very flat hierarchy.  Operationally, this structure affords more decision making power to lower levels of the coop worker-owners.  This has a profoundly positive effect on human resources and the quality of the work environment.  This is a direct result of employee empowerment.  The local worker-owners, regardless of location, have inherently closer ties to the community because of their heightened level of responsibilities.  Therefore, their decision making within Mondragon’s flat hierarchy will guide the cooperative toward successfully implementing social change effective locally and globally.

Mondragon proves that a highly effective organizational structure can ensure globalized success.  Where expansion efforts do, in fact, tend to dilute the social mission, the democratic governing infrastructure established at Mondragon effectively insulates it from being significantly compromised.  The viability of the governing structure is accurately described in the following excerpt: “Mondragon illustrates that an organization that is much more democratic and egalitarian than any capitalist company can succeed and can compete at levels worldwide.” (Herausgegeben, 2011).  Through the continued dedication to the “One member, one vote” policy, decisions are delegated to the local workers.  This effectively enables Mondragon to maintain its local connectivity no matter what country a division may be located.

Works Cited:

Davidson, Carl. “Steelworkers Seek Job Creation via Worker-Owned Factories.” Beaver County Blue. N.p., 27 Oct. 2009. Web. 15 Nov. 2012. http://beavercountyblue.org/2009/11/04/steelworkers-seek-job-creation-via-worker-owned-factories/.

Herausgegeben, Michael Von, and Anton Leist. The Corporation for Economic Success: The Mondragon Case. Rep. N.p.: n.p., n.d. Berkeley. Lucius and Lucius, Stuttgart, 01 Jan. 2011. Web. 15 Nov. 2012. http://burawoy.berkeley.edu/Public%20Sociology,%20Live/Flecha&Santacruz.Mondragon.pdf.

Lafuente, Jose L. “The MONDRAGON Cooperative Experience: Humanity at Work.” The MONDRAGON Cooperative Experience: Humanity at Work. McKinsey and Co, n.d. 17 Oct. 2012 Web. 26 Nov. 2012. http://www.managementexchange.com/story/mondragon-cooperative-experience-humanity-work.

 

Peredo, Ana María.  (2005). Community Venture in Agua Dulce: The Evolution of Civic Into Economic Democracy. The Journal of Applied Behavioral Science, 41(4), 458-481.

“The Business of Giving a Survey of Wealth and Philanthropy.” The Economist (2006): 1-14. 25 Feb. 2006. Web. www.economist.com/surveys

REI – A Fine Coop Indeed

One of my favorite stores to shop at is Recreational Equipment Inc., also know as REI.  REI was started as a coop in 1938 by a group of mountain climbers and has grown to the largest consumer coop in the Nation today.  Since about 2006, I have been going to REI for a good portion of the outdoor gear I need to make my hiking, climbing, biking and/or snowboarding expeditions enjoyable.  Another valuable offering that REI has is expertise.  The staff is well versed in the most recent trends and technology, but never tries to up-sell the named brands or something I don’t need.  As an avid outdoors person, I spend a good amount of money on these hobbies and value a good product backed by a company that feels the same way.  Not only does REI meet my expectations, but they set the bar for everyone else.

I would say the most impressive thing about REI (although there are many) is their unwavering ability to satisfy me during my shopping experience.  When returning items to the store, there is never a question on whether it was my fault, as they have a 100% satisfaction guarantee on all products they sell.  Additionally, REI offers an annual dividend that is allocated to my account and available for my use the next time I visit.  Since I don’t go very often anymore, the dividend is not giant by any stretch of the imagination; however, it is sizable and usually a surprise to me.

REI is also very committed to developing a sustainable business model that gives back to the communities that they serve through outreach programs, education, green building practices and grants to the communities.  The amount of ways in which members can participate and provide feedback is quite large.  From voicing your opinion through voting or getting more closely involved, there are plenty of ways to ensure your voice is heard.  REI really focuses on this and also involves their employees.  I have two friends who have worked for REI and neither of them have a single bad word to say about their employment experience (except of course your basic qualms with the retail industry).  They are always excited to talk about what they do, who they worked for and the perks they received.

In looking at REI’s financials, it does not appear that any of these customer/employee/community service initiatives are taking away from their bottom line.  In 2011, REI had net income of over $30 million on sales of just under $1.8 billion.  Keep in mind this is after the member dividend of almost $82 million was distributed.  There is no complacency in REI’s model either.  Their revenue growth from 2010-2011 was just under 8.3% and there are plans to continue expanding.

In conclusion, I would say that REI has transformed the way in which I purchase my outdoor gear.  By providing benefits above and beyond that of any other retailer I shop, my loyalty to REI will be something that is not easily broken.  Knowing that my money goes not only to support REI, but also the communities which they serve, adds a whole new layer to their value proposition that will not be easily matched by competitors.

Recreational Equipment Inc.  2011 Annual Report.  Recreational Equipment Inc., 2011.  Web. 26 November, 2012.

Speer, Jordan K. “Recreational Equipment Inc. (REI).” Apparel May 2012: 53. General OneFile. Web. 26 Nov. 2012.

About REI.  2012.  Recreational Equipment Inc.  26 Nov. 2012 http://www.rei.com/about-rei.html