An analysis of the growth and development of the 'Tangent Grange Oil Company' as a case study

Graduation date: 1963The foundation upon which any cooperative rests is the economic need for it as a business enterprise. The existence of such a need cannot by itself provide the basis for a thriving cooperative. Not only mus.t the need exist, but the members or the promoters must through realistic and diligent investigations establish convincingly that: (1) the particular needs will be better met by cooperative action, (2) enough business and capital will be forthcoming for efficient and economic operations, (3) members as the chief source of business and risk capital, will obtain benefits not otherwise obtainable. This includes goods and services not available in their area or available but at unreasonable prices or inferior quality. The rapid evolution of Grange Oil Company int a financially stable business enterprise is proof of the need and the demand that existed for its services. Agricultural recovery during World War II and the subsequent demand for agricultural products in the postwar years, had a great impact on the growth and development of many cooperatives started during or soon after the great depression in the early 1930's. High agricultural prices relative to non-farm prices, facilitated relatively large net margins and therefore greater capital accumulation. Cooperatives were able to build and to consolidate their net-worth position in readiness for the problems that beset agriculture in the 1950's. In the decade 1952 to 1961, agriculture entered an era of price-cost squeeze. Improvements in farm technology and greater use of commercial fertilizers induced greater farm output. Consequently, prices received by farmers declined 20 percent while prices paid increased 5 percent. Narrowing net margins, caused by generally increasing operating expenses triggered sizeable sales promotion efforts. Increased sales, by virtue of their ability to keep plant overhead costs down, facilitated low per dollar expenses and enabled Grange Oil Company to make substantial savings for its members in the period 1950 to 1959. Sales alone cannot be expected to keep expenses down indefinitely. Other methods of holding down expenses have to be sought. There is a limit to the amount of inventory that present plant facilities can hold. A sales-expenses oriented plant size could prove uneconomic to run for many years. Present and future plant requirements must therefore take into account not only the sales-expenses relationship, but also current economic trends, future business expectations, size of the market and the possible degree of competition. The long run firm plans should provide for expansion when the need arises but the current plant capacity should be related to short run business expectations. The present Grange Oil Company's plant capacity exceeds the ability of the association to increase business volume in the next few years. This problem must be overcome before further expansion is contemplated. This study revealed four important points: (1) The environment in which a cooperative is launched has a great influence on its success; (2) Cooperatives need to broaden their equity capital base. More capital should be raised from members in good years for financing business and plant expansions; (3) Success hinges, among other things, on the ability of the cooperative to keep pace with the changes in the market or the industry which it serves; (4) Good effective and efficient management and employees are vital for successful operations