Addressing dairy production challenges through a shared value approach

The global demand for agricultural outputs are increasing due to the earth’s growing population and the numerous challenges related to it has been presented with many proposed solutions. In countries defined as developing markets and economies, challenges associated with the needs of the population are particularly difficult to meet. Emerging markets in this context, such as the dairy industry, struggle with productivity and output due to resource restrictions. Meanwhile, businesses accountability towards the society, addressing social issues and environmental objectives, have transformed into contemporary business practice. Businesses embracing corporate social responsibility has become the modern way to conduct business activities, in both developing countries and developed countries. There has also been a wider recognition in the academic society and among corporations that the society can possess the key for a prosperous business. New concepts such as shared value has evolved to explain the interdependencies between business and society. Ultimately, pure philanthropic behaviour has been introduced to a competitor when it comes to solving the issues related to the context of a developing market. The resource scarcity among these local businesses entails challenges to achieve the most prosperous economy as possible. Resources, such as knowledge, therefore need to be sourced externally and networks are a good example for fostering knowledge transfer. The intrinsic capabilities for the network members to absorb knowledge have not widely been investigated among smaller firms in developing markets. With the help of shared value, knowledge and network the aim of this study is to identify factors that have an impact milk production in the context of a dairy cooperative in a developing country. Further objective is to investigate how the cooperative interacts with its members to reach an increased milk production. This study contains a case study of the business activities performed by an Indonesian dairy cooperative, KAN Jabung, that has given attention to the importance of knowledge and networking to improve production and productivity. The research is based on literature review and several sources of empirical data such as semi-structured personal interviews, observations and secondary data. Furthermore, the study has a flexible design and took ethical considerations into account. The results of this study suggest that a small-scale cooperative in a developing country can achieve social objectives and transformation, engage in collaborative exchanges of knowledge while simultaneously increase its production. The result also indicates that not all factors for enhancing production are within range of influence from a cooperative middleman in the supply chain and that individual or family aspects are important when addressing family businesses. A general observation is that in order to conduct business (for example selling milk), a company in a developing country may be forced to create its own supplier. In this case it is represented by the activities the cooperative undertook to educate and collaborate with dairy farmers, aiming for a higher production and improved local society.