1. Cabot Creamery was established in 1919. Thinking back to that time, apply Figure 4.4 to discuss the entrepreneurial process this company went through to establish itself.
The context in the dairy industry in 1919 established special boundaries for the farmers; this situation encouraged to the farmers to come up with different initiatives dealing with the excess of milk production (http://www.cabotcheese.coop). This kind of fertile social, economic and political conditions set the perfect bases to promote the entrepreneurial ideas.
At this point, we have hundreds of small farmers with excess of milk production. This small and distributed excess of milk through hundred of farmers, and the demanding conditions in the post-war times, originated a clear opportunity to develop a business in a sector that the farmers knew very well. The farmers had a complete access to the resources. In fact they could elaborate different strategies because the milk for the new entrepreneurship was the excess in the main production. The risk was very small.
The analysis of this entrepreneurial opportunity fit perfectly with the entrepreneurial process: a simple and proven idea (to make cheese and butter) with full access to the resources. The co-op option to establish the company appears to be the natural process for the small joint of forces by hundred of farmers. Then, over the time, Cabot Creamery identified new entrepreneurial opportunities such as the use of natural methods and high quality products.
2. Discuss the pros and cons of Cabotís present co-op structure. Are there any advantages/ disadvantages to the company forming a corporation?
The co-op structure appears to be the natural option under the complete boundary conditions in 1919. Hundreds of small farmers in similar conditions but without someone with a predominant position, lack of investors due to the finalization of the First World War, necessity for organizing something with the excess of production that could be favorable for all farmers, and tax advantages. In this way each farmer could directly participate in the business that they knew very well, but without depth knowledge in how to run a business. Each farmer conserved a portion of the business sharing risk and profit.
A disadvantage of this structure could rise in case that some farmers have a significant higher participation than other ones. Because of the characteristic of the co-op in the democratic voting arrangements, the bigger farmers could feel that they need more control. This thought is natural when we analyze the risk in the running of the business; those people who invest more in the business want to have more control and feel that they could minimize their risks.
As conclusion, the co-op structure presented several advantages for the new initiative in 1919 (today conditions could conduct to other outcome).
3. On page 130-131, the text discusses reasons for success and failure in small business. Using the information provided on these pages, discuss the reasons for Cabotís success thus far.
Different reasons help to Cabotís success, the principal are:
∑ The excess of milk production, it guaranteed the main resource for Cabot in a stable and cheap conditions;
∑ The farmer experience in cheese elaboration, the business was not a new business for the farmers; it was in the structure and dimension of the business, but not in the product;
∑ The co-op structure, it had many advantages:
o Provided share governance from the new scale of business for the farmers;
o Provided lower cost associated with to inputs, operation, management;
o Provided a common vision and hard work as structure, instead of that each farmer didnít need to work hardly;
o Minimum risk of strikes and loss of interest in the business;
o Enough capital contributed by hundreds of small investors;
o Provided many people with high skill in the products;
o In addition provides protection against different liabilities (for example the incurred in pollution violation activities (http://en.wikipedia.org/wiki/Cabot_Creamery))
o In addition provides easy set-up, high performance, and ease ownership transfer, easy rise of capital, tax advantages, and freedom from regulation.
∑ The market demand for food after the First World War;
∑ The differentiation of other options when the market came competitive.
Today, an extremely high competitive market, the higher farming cost, the recession period, and the new regulation for bio-fuels support increasing the cost of milk production represent huge challenges for the Cabot business. It looks that Cabot will need to discuss new strategies. The merger under Agri-Mark provided to Cabot a new opportunity, but sooner or later it will need to re-think the business.