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The Strategic Development of Irish Livestock Marts.
Hennebry, T. Pitts, Eamonn Harte, Laurence
Hennebry, T.
Pitts, Eamonn
Harte, Laurence
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2002-09-01
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Hennebry, T., Pitts, E., Harte, L., The Strategic Development of Irish Livestock Marts, End of Project Reports, Teagasc, 2002.
Abstract
A study of co-operative livestock marts revealed that cumulative marts turnover
decreased by 26% from 1990 to 1999: Commission income as a percentage
of turnover increased from 2% in 1990 to 3.2% in 1999. However operating
expenses increased by 25% from 1990 to 1999. Operating expenses have
since 1997, surpassed commision income, thus putting co-op marts in a
collective loss making situation from their mart activities. However overall
profit from co-op mart societies (including profit generated from all business
activities) almost doubled between 1990 and 1999. While overall profitability
of livestock marts societies has increased, twelve of thirty nine marts were in
a loss making situation in 1999. Four of these marts have been in a
permanent loss - making situation since 1990. All loss making societies in
1999 have little or no involvement in non-mart activities and almost all operate
from just one site. In general, the large diversified societies are showing
profitability.
A number of strategic alternatives to deal with their situation were placed before
mart executives. A diversification strategy is by far the most likely strategy to
be adopted by marts for the future Most marts are unlikely to consider
merging with other societies. Most marts have no plans to downsize and exit
from the industry is not considered an option by any society. There is a
recognition that there is an urgent need to rationalise the industry, but this
strategy is likely to meet with a strong resistance from marts . A problem with
rationalisation is that there are no incentives to make this strategy a reality.
On the one hand, management would be reluctant to follow this approach, as
it may be perceived to reflect badly on their own performance or may result in them being forced to seek alternative employment. On the other hand, the
shareholders have little to gain and much to lose if the mart closes.
Projections of past trends and impact of new policies would suggest continuing
decline in turnover and profitability in the co-operative mart sector.
Rationalisation is therefore absolutely essential. The industry cannot sustain
the present number of marts. Diversification seems the most obvious option
for the future of the industry. In general marts that have diversified are
profitable and there is no reason why this trend cannot continue into the
future.