Mondragon Company’s Globalization and Cooperative Values Essay (Book Review)

Introduction

Globalization has compelled companies to adopt internationalization as a competitive strategy in global markets. Although numerous studies have elucidated the impacts of internationalization on conventional companies, few studies have examined the impact of internationalization on worker cooperatives. In this view, the case study examines the impacts of internalization on Mondragon, which is a notable example of worker cooperatives. The notable reputations of the Mondragon are that it is one of the largest worker cooperatives in Spain that has dominated domestic markets since the 1960s and international markets since 1990s. Evidently, Mondragon has marked experience in both domestic and international markets, and thus, making it an appropriate case study for worker cooperatives. Therefore, the paper examines the challenges related to internationalization that Mondragon, as well as describes how it conserves its cooperative values while at the same time adopt global economic trends as a competitive strategy.

What are the challenges related to internationalization that worker cooperatives experience?

The first challenge that relate to the internationalization of Mondragon is the economic viability of the worker cooperative. Since workers seek to join profitable companies, “it is difficult to identify a group of people in the host country to invest capital and trust the economic viability of a project at its initial phase” (Flecha and Ngai 671). Moreover, it is also extremely difficult to find other worker cooperatives, which are ready and willing to form cooperative alliances at the global level.

The second challenge is that worker cooperatives experience legal barriers in diverse host countries. “The differences in national cooperative legislation hinder international cooperative endeavors” (Flecha and Ngai 672). In essence, cooperative legislations vary from one country to another, and thus, making it difficult for worker cooperatives to expand globally.

The third challenge is the lack of receptive cooperative culture in the host countries. “Fieldwork performed in Mondragon evidenced that cooperativism is assumed to be a cultural feature of the Basque Country and that it is something worthy of pride” (Flecha and Ngai 672). Fundamentally, the culture of the host countries should be receptive to the establishment of a cooperative

The fourth challenge is that the interest of cooperative members to control investments. “We identified resistance to internationalization among members of the cooperative as stemming from a desire to protect their investments” (Flecha and Ngai 672). Essentially, the cooperative members perceive themselves as real owners of the cooperative, and thus, they do not entrust foreigners with their investments.

How does Mondragon conserve its cooperative values and at the same time adopt global economic trends as a competitive strategy?

In conserving its cooperative values and at the same time adopting global economic trends, Mondragon employs the model of the mixed cooperative. The model takes the worker-owned organizational structure, which has a governing council and a general assembly.

The organizational structure gives members rights to vote according to their amount of capital they have invested in the cooperatives. Owing to voting rights, “workers in mixed cooperatives, similar to those in worker cooperatives, can make decisions and actively participate in management” (Flecha and Ngai 673).

The members of mixed cooperatives are workers, members of other cooperatives, and cooperatives. These members provide capital to the mixed cooperatives, and hence, they enhance its economic viability.

The model of mixed cooperatives allows members to participate in their respective cooperatives. “The mixed cooperative model provide three spheres of participation – capital, profit, and management – for the cooperative’s members” (Flecha and Ngai 673).

The Corporate Management Model (CMM) is the second model that Mondragon employs in conserving its cooperative values and at the same time adopting global economic trends. “The CMM is the general tool that was created to unify the management of all of the cooperatives of the group and their subsidiaries” (Flecha and Ngai 676). The CMM offers guidelines that every cooperative adapts to its contextual environment and unique attributes.

The CMM seeks to enhance effective self-management of diverse cooperatives. Specifically, CMM “aims to achieve a system of self-management for the subsidiaries, excluding participation in the decision-making of strategic lines of the parent cooperatives, which belongs only to the parent’s worker–owners” (Flecha and Ngai 676).

To promote participation of all cooperatives, CMM advocates for three elements, namely, corporate development, self-management, and communication. Corporate development “is specific for subsidiaries, the ‘Corporate Development’, and the other two, Self-Management’ and ‘Communication’, are common to both parent cooperatives and subsidiaries” (Flecha and Ngai, 676).

Contemporary Example

The challenges that worker cooperatives experience in the wake of globalization relate to the first question. The International Cooperative Alliance, Emilia-Romagna, the Rochdale Group have experienced challenges such as inadequate resources, ineffective organizational structure, inefficient leadership, disorganized labour, and diversity of values and policies (Cheney, Cruz, Peredo, and Nazareno 591). Inadequate resources affect the economic viability of the worker cooperatives while ineffective organizational structure, inefficient leadership, disorganized labour affect the management of worker cooperatives. The diversity of values and policies reflect the existence of legal and cultural barriers owing to the unique interests of cooperative members.

Bibliography

Cheney, George, Inaki Cruz, Ana Peredo, and Elias Nazareno. “Worker cooperative as an organizational alternative: Challenges, achievements, and promise in business governance and ownership.” Organization 21.5 (2014): 591-603.

Flecha, Ramon, and Pun Ngai. “The challenge for Mondragon searching for the cooperative values in times of internalization.” Organization 21.5 (2012): 666-682.