Diversification of Regional Marketing Cooperatives *

Several definitions of diversification exist. Such motivation for diversification could apply Typically, the concept is dynamic and refers to-the equally to proprietary or cooperative forms of relationship among various activities or enterprises in business. which the firm is engaged. As new activities are The purpose of this paper is to quantitatively acquired by a firm from some existing base of document trends in diversification of regional marketactivities, complementarity of the newly acquired ing cooperatives. 1 Several diversification measures are activity relative to the existing base is subjectively compared. In addition, using regional marketing determined. Judgment is rendered on whether the cooperative fiscal year sales data from 1960 through result represents diversification or conglomeration. 1973, diversification measures are compared across Conventional wisdom has not succinctly difmajor commodity categories. Because of their limited ferentiated between diversification and conglomerageographic scope, local marketing cooperatives are tion. Some writers have considered conglomeration a ignored. special case of diversification [2, 7]. For purposes of The extent of diversification and/or conglomerathis paper, this taxonomic argument need not be tion has been documented for the proprietary food settled. sector. Review of several quantitative studies reveals Motives for diversification over time are tradithat diversification/conglomeration in general manutionally regarded as risk reduction, gaining monopoly facturing industries, as well as food industries, has power, and/or attainment of economies of size. Risk increased markedly over time [3, 4, 5, 6]. However, reduction may motivate diversification over spatial or diversification of cooperatives has not been studied. product markets. As Arnould indicates [2, p. 73]: "...firms would be expected to diversify first into related areas. The marginal cost of THE DATA information would, in most cases, be less if the Fiscal year sales data for all regional marketing moves were in this form rather than of a more cooperatives were obtained from Farmer Cooperative conglomerate nature. The move would also be Service, United States Department of Agriculture for into an area in which there is a relationship 1960-61 through 1973-74. Included are all regional between the existing product and the product cooperatives having any marketing sales during this new to the firm at the procurement, production, period (thus, some cooperatives included are prior distribution and promotion levels. This is a marily supply cooperatives but with some marketing necessary condition if potential economies of sales). Sales were recorded by major commodity scale are to be realized by diversification." category for each cooperative and deflated by