Co-operatives, especially in the dairy sector in Kenya, have recently experienced a drastic change in business environment from a monopoly to liberalised markets, where they compete with the private sector. The traditional operating methods learned during the regulated environment are no longer sufficient for successful competition. Although a need for change has been recognised in most cases, transformation of internal processes and organisational culture is slow and difficult. Some co-operatives still operate in the present market situation as if nothing had happened and continue their own government- and supplier-oriented cultures, which threatens their survival in the future. Only few co-operatives have been able to transform their processes to a more customer- and shareholder-oriented direction.
In the new market environment, capital investments for higher processing quality and value addition are necessary for success in the future. These investments do not only serve member interest in the short run, but also emphasise customer satisfaction and efficiency of production. This focus of investments is difficult to attain in the government- and supplier-oriented organisations and requires a change of organisational culture. These improved capital investments can result in capital formation in farmer co-operatives.
To improve the fit of organisational culture to the liberalised markets, seeds for change are needed. These include following recommendations:
· change into a customer-oriented culture,Co-operative principles need not be abandoned in the transformation process. Increased attention should be paid to how the principles are used as guidelines of present-day operations to enhance user participation, control and members’ wealth, especially in the long term, which requires customer focus and efficiency.
· improve financial reporting,
· reform tax laws,
· computerise,
· recruit more qualified managers,
· improve business training of managers and members.
The reader can obtain a more detailed analysis by consulting the full report, which will be published by the Turku School of Economics and Business Administration.
