The Strategic Development of Irish Livestock Marts.

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.