Exam Practice Question 2
State Farm Insurance, the highest-turnover US cooperative in 2020, generated $42 billion in
annual sales. Other successful member-owned cooperatives in the US include Liberty Mutual,
Northwestern Mutual, and New York Life. Agricultural cooperatives, such as Dairy Farmers
of America, also ranked amongst the top earners with annual sales turnover of $17.9 billion.
Globally, the top 300 cooperatives had a turnover of $2.2 trillion, with most generating up to
$5 billion in sales.
The French Groupe Crédit Agricole, an international banking group and the world's largest
cooperative financial institution, had the highest total turnover in 2020 at $89 billion. France,
the USA, and Germany have the most high-earning cooperatives.
Cooperatives come in various forms, including consumer, producer, and worker cooperatives.
For example, in the US, there were 612 worker cooperatives in 2021, generating $283 million
in revenue. Globally, approximately 3 million companies operate as cooperatives, with 12
percent of the world population being members.
Source: adapted from Statista
(a)
(b)
(c)
(d)
Define the term cooperatives.
Outline how cooperatives, such as State Farm Insurance, differ from traditional for-profit
organizations.
Explain two benefits of being a member of a cooperative.
Explain two reasons why is can be difficult to measure the market share of cooperatives such
as Groupe Crédit Agricole or Dairy Farmers of America.
Answers
(a) Define the term cooperatives. [2 marks]
A cooperative is a type of for-profit social enterprise that operates on the principles of mutual
cooperation, collective ownership of its members, and having democratic control. The
primary goal of a cooperative is to serve the interests of its members rather than maximising
profits for external shareholders.
Award [1] for a definition that shows limited understanding of the term cooperatives.
Award [2] for a definition that shows a clear understanding of the term cooperatives, similar
to the example above.
(b) Outline how cooperatives, such as State Farm Insurance, differ from traditional for-profit
organizations. [2 marks]
Possible reasons could include an outline of any one of the following points:
Cooperatives are businesses focused on people, owned and operated by their members
to meet shared economic, social, and cultural objectives. This allows members to
collaborate in creating sustainable social enterprises that provide long-term
employment and support the community.
Unlike traditional profit-driven businesses, cooperatives follow common principles
that emphasise fairness, equality, and social justice. They function democratically,
with each member having an equal vote, regardless of their financial contribution
Since cooperatives are not controlled by shareholders but their members, the
economic and social benefits stay within the community. Any profits earned by the
cooperative are reinvested in the business or returned to its members.
Award [1] for an answer that shows limited understanding of the difference
between cooperatives and traditional for-profit organizations.
Award [2] for an answer that shows good understanding of the difference
between cooperatives and traditional for-profit organizations, similar to the examples above.
(c) Explain two benefits of being a member of a cooperative. [4 marks]
Possible benefits include, but are not limited to, an explanation of two of the following:
Shared profits from higher sales turnover - Members of successful cooperatives like
State Farm Insurance and Dairy Farmers of America benefit from shared profits
generated by significant annual sales turnover, such as $42 billion and $17.9 billion,
respectively.
Economies of scale - Being part of a cooperative like Groupe Crédit Agricole, which
earned $89 billion in sales turnover, provides members access to large-scale financial
services and member-focused financial outcomes based on cost savings.
Democratic decision-making - Members have voting rights, ensuring that decisions
are made collectively and align with the interests of the group. With approximately 3
million cooperatives globally, members actively participate in shaping the direction of
their cooperative, ensuring decisions align with their needs.
Access to resources - Members gain access to pooled resources, such as financial
services in Crédit Agricole or market opportunities in agricultural cooperatives like
Dairy Farmers of America. In essence, cooperatives provide members with sectorspecific benefits, such as market access for farmers or improved job security due to
US worker cooperatives generating $283 million in 2021.
Mark as a [2 + 2]
For each benefit, award [1] for a valid point and [1] for an accurate explanation of that
benefit, written in the context of the case study.
(d) Explain two reasons why is can be difficult to measure the market share of cooperatives
such as Groupe Crédit Agricole or Dairy Farmers of America. [4 marks]
Possible reasons include, but are not limited to, an explanation of two of the following:
Diverse business models - Cooperatives like Groupe Crédit Agricole operate across
multiple industries (e.g., banking, insurance), making it challenging to consolidate
and compare their market presence against competitors within a single sector.
Member-centric focus - Unlike profit-driven corporations, cooperatives prioritize
member benefits over revenue generation, making traditional market share metrics
(based on revenue or profits) less applicable or harder to quantify.
Complex global operations - Cooperatives like Dairy Farmers of America engage in
both domestic and international markets, with varying regulations and reporting
standards that complicate accurate global market share assessments.
Non-traditional revenue streams - Cooperatives often generate income through unique
activities, such as member services or collective initiatives, which may not align with
conventional metrics used to assess market share.
Mark as a [2 + 2]
For each reason, award [1] for a valid point and [1] for an accurate explanation of that
reason, written in the context of the case study.
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