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Marshall School of Business
University of Southern California
Waikerie Co-operative Producers Ltd.
Teaching Note
Purpose of Case
This case was written to illustrate typical issues faced in controlling a co-operative. Co-
operatives are an important form of organization. For example, the second largest bank in the
world is a co-operative (Bank Agricole in France). Over 40% of all retail sales in the U.K. are
Suggested Assignment Questions
1. In what ways is management control in a co-cooperative like Waikerie different from that in
a typical corporation?
2. Evaluate Waikeries management control system. What suggestions would you make to
Waikeries managers, if any?
Use of Video
Before getting into the case discussion, I find it useful to show the short video clip titled The
Riverland that is included on the videotape included with the instructors manual. This clip,
which is approximately 15 minutes long, shows the Riverland growing area and a typical
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Case Analysis
How is Management Control in a Co-operative like Waikerie Different From That in a
Typical Corporation? (Question 1)
The Waikierie co-operative has some important differences from corporations that lead to
different management control approaches:
1. In a growers co-operative, like Waikerie, the owners and suppliers are one and the same.
Thus, the suppliers are the bosses of management.
2. The co-operative goals are different from those in a corporation. Profit (or actually net
operating surplus) is a constraint, not a primary goal. The primary goals in growers co-
3. The co-operative must abide by the international principles of co-operation. Most
importantly, for management control purposes, it cannot compete aggressively with most
4. The Waikerie Co-operative lacks the degree of power possessed by corporate mangers, so it
has slightly different sources of uncertainty. Like other packers, it had to deal with the
5. The co-operative cannot decline to pay a dividend or even delay the payment of dividends.
Evaluate Waikerie Control System (Question 2)
The fact that the co-operative has had a negative operating surplus for 2 years at the same time
of investigation by the co-operative (and discussion by the students):
Pricing
Paying a competitive price to growers for produce supplied is one of the four singularly
important factors mentioned at the beginning of the case. Members are complaining, but
Duncan Beaton is not really sure whether the co-operative is failing in this area. Waikerie
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should do some market analysis, perhaps by enlisting friendly members to solicit and disclose
bids they receive from other packers in the area.
Waikerie might also be well advised to consider its pricing formula. The current market
conditions, with significant packing oversupply, have created a competitive market. Charging
Cost Reductions/Accounting
Waikerie operates in a commodity market. The co-operative is trying to distinguish itself
through superior marketing programs or better service to suppliers, but until that happens,
Waikerie is providing a service that can be provided equally well by many other packers in the
Planning and Budgeting
Waikeries management is troubled that they cannot get good crop forecasts that would enable
them to prepare reasonably accurate annual financial plans. To some extent, their hopes for
accurate forecasts will never be realized. For example, the navel orange season runs from April
to September, and the co-operative is asking for the estimates in November. Given the inherent
uncertainty the growers face, these estimates cannot be reliably accurate.
But how important are accurate estimates and accurate annual financial plans? Planning
financial resource needs (e.g., borrowings) is important. The case does not provide much
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
472
foreseeable volumes. With only labor as a concern, the co-operative seems not to have a great
Incentives
Many students will point to the need for formal measurements and incentives tied to the critical
success factors. This co-operative is small, so Duncan Beaton may be able to keep all of the
relevant data in his head. But formal incentives might provide impetus for managers at various
levels to be creative and to improve performance in the areas the co-operative most needs.
Students will have a number of ideas for incentives. They might usefully be based on, for
example, cost reductions, marketing program successes, services provided to grower-members
Subsequent Events
The Waikerie Co-operative suffered large losses in 1993 (approximately A$1 million), after a
loss. The company replaced all the top-level managers.
At the same time, the primary lender to all the Riverland co-operatives, the State Bank of South
Australia, was pushing/forcing a merger of co-operatives, a rationalization process. Waikerie
explored merger possibilities, but pulled out. The Waikerie board thought that the Bank was
seeking to reduce its exposure and was not addressing the significant operating problems the co-
operatives were facing. Still, Waikeries board recognized that the co-operative had lost its
