Kasetsart Journal of Social Sciences 42 (2021) 495–500

Kasetsart Journal of Social Sciences

journal homepage: http://kjss.kasetsart.org

Key characteristics for sustainable sugarcane: A community enterprise in ,

Panatda Utaranakorn*, Teera Kiatmanaroach Department of Agricultural Economics, Faculty of Agriculture, Khon Kaen University, Muang, Khon Kaen 40002, Thailand

Article Info Abstract

Article history: This research aimed to identify the key characteristics that facilitate effective Received 1 November 2019 Revised 8 June 2020 management performance; and to analyze the internal and external environmental Accepted 15 July 2020 factors of a sugarcane community enterprise in Khon Kaen Province, in Available online 31 July 2021 Northeastern Thailand. The results indicated that the key characteristics were instrumental in the capacity of collecting and supplying sugarcane to reach the Keywords: enterprise’s yearly quota. The community enterprise also defines how profits and community enterprise, key characteristic, benefits are divided among members. The active internal relationships within the kinship relation, group, called ‘kinship relation’, create a high level of trust, reliability, and sugarcane, honesty; and promote collective responsibility among members. Lastly, annual sustainable performance support from financial institution, namely, credit with low-interest rates, plays an important role in the enterprise’s sustainable performance. To further develop the sugarcane community enterprise and to achieve sustainable performance, we recommend that the committee and members share responsibility with honesty and harmony, plan production to meet annual quotas, divide income and benefits equally, and properly manage the loans and equity provided by financial institutions. © 2021 Kasetsart University.

Introduction initially established in 2001 to run businesses, legalize the status of groups, and generate income for people across Collective action in terms of community enterprises, several communities (Secretariat Office of the Community cooperatives, and farmer groups plays an important role in Enterprise Promotion Board, 2005). Community enterprises improving livelihoods and alleviating poverty, especially have been included in Thailand’s 10th and 11th plans of for small-scale farmers in rural areas. Farmers are thereby economic and social development to increase farmers’ able to link to market directly and are provided access to marketing power and to improve their livelihoods capital with low-interest rates, resulting in increasing (Humphries & Kainer, 2006; Office of the National income (Kumar, Wankhede, & Gena, 2015; Mhembwe & Economic and Social Development Council, 2007). Such Dube, 2017). In Thailand, community enterprises were government initiatives have encouraged farmers to form group/community enterprises and work to their mutual * Corresponding author. advantage; however, these organizations often face several E-mail address: [email protected] (P. Utaranakorn). problems such as internal management, and lack of https://doi.org/10.34044/j.kjss.2021.42.3.07 financial, managerial, and marketing skills, as well as 2542-3151/© 2021 Kasetsart University. 496 P. Utaranakorn, T. Kiatmanaroach / Kasetsart Journal of Social Sciences 42 (2021) 495–500 inadequate financial support needed for large capital small and medium-scale producers. Manyara and Jones investments (Hunnak, Fuengian, & Montriwat, 2019; (2007) described the community enterprise as a community- Mahain, Phungwattananukul, Pongkachang, & owned, sustainable, and community-based initiative in Wongkhumhunghan, 2011; Nambure, 2012; Sakolnakorn which the local community engage in its development and & Sungkharat, 2014; Somswasdi, Thongsukhowong, & management, and shares in its benefits. Nakapaksin, 2015). Previous studies on the improvement of community Sugarcane is an important economic crop, accounting enterprises have examined issues of the most suitably for roughly 21 percent of Thailand’s agricultural GDP applied practices, mostly gained through empirical (Bank of Thailand, 2017). Accordingly, the formation of evaluation and understanding. Barham and Chitemi sugarcane community enterprises has been set as one of the (2009), for example, stated that strong internal institutions, country’s national policy targets. Sugarcane community functioning group activities, and sound capital assets play enterprises support sugarcane farming practices and key roles in improving the marketing performance of improve farmers’ negotiation and bargaining skills, farmer groups. Meerkerk, Reinout and Astrid (2018) allowing for better prices and higher incomes (Kumdum & determined that the most important configuration leading Kiatmanaroch, 2017). Despite the numerous benefits, the to a durable community enterprise is the presence of social formation of such enterprises has not become widespread, capital, strong entrepreneurial leadership, and a strong nor accepted by most sugarcane farmers. The failure of business model. More recently, Hunnak et al. (2019) past sugarcane community enterprises has been attributed analyzed the problems and obstacles of an accounting primarily to the lack of sustainable management (Bank of community enterprise in Thailand. Their research suggested Thailand, 2017). As a result, few sugarcane farmers are that there are two basic approaches to develop a community willing to belong to these enterprises, and a lack of enterprise; provide the tools necessary to store financial information inhibits their development. documents, and to appoint staff responsible for the task. To date, few studies have been conducted on how Changwatchai and Santipolvut (2015) aimed to assess community enterprises can be managed for sustainable potential ways to enhance community enterprise performance. Therefore, the primary aim of this research is development. Their results proposed a five-year plan, to identify the crucial underlying characteristics that consisting of ten projects, which included educational improve group management for sustainable production seminars and the use of recommended materials. practices. In particular, the objectives were to identify the Somswasdi et al. (2015) established guidelines to improve key characteristics that facilitate the effective management community enterprise management through the evaluation of sugarcane community enterprises through an empirical of its strengths, weaknesses, opportunities and threats. understanding of the key lessons learned from a successful They concluded that the chief obstacle inhibiting community enterprise; and to examine its internal and development was the lack of qualified knowledgeable external environments. The information is intended to internal management. They stated that it is crucial to provide key guidelines for the successful implementation provide training programs to improve managerial of sugarcane community enterprises and the development knowledge and skills. Santipolavut and Sripruetkiat (2012) of new groups. further noted that the determinants of community enterprise development are the community enterprise plan, customer Literature Review database management, intra-community relationships, and community involvement. They identified three guidelines Community enterprise is a particular entrepreneurial necessary for a community enterprise to become an SME: form of active citizenship that provides jobs, services and (1) the development of increased production and standard, other benefits for its resident members (Bailey, 2012; including the appointment of a new generation leader; (2) Healey, 2015; Kleinhans, 2017; Somerville & McElwee, the creation of marketing infrastructure, such as setting up 2011). Representing a new form of self-organization that a local product distribution center and promoting acts more like a business, a community enterprise is e-commerce trade; and (3) management development. managed by a collective capacity of community members Prayukvong (2005) identified the key factors of success as providing added value for its members (Kleinhans, 2017; the process of good thinking, constructive use of wisdom Ministry of Agriculture and Cooperatives, 2005). Donovan, among leaders and group members, and accessible social Dietmar, and Nigel (2008) defined community enterprise capital. as a business based on production and service with multiple Accordingly, to assess how sugarcane community objectives, with profit maximization as one of its primary enterprises are sustainably managed and maintained, a goals. Rural community enterprises are usually made up of conceptual framework was developed from the work of P. Utaranakorn, T. Kiatmanaroach / Kasetsart Journal of Social Sciences 42 (2021) 495–500 497

Barham and Chutemi (2009) and Somswasdi et al. (2015); the members, who are your close friends, and what kind of shown in Figure 1. Before addressing the issues involving relationship do you have?” Subsequent data analysis how a community enterprise should be managed for consisted of both content and descriptive analyses. The sustainable performance, they concluded that it was network characteristics of the community enterprise were essential to understand the enterprise’s history, aspects of outlined using UCINET 6 for windows, version 6.665. managerial characteristics, and internal relationships. SWOT and TOWS analyses were applied to determine the SWOT and TOWS analyses were employed to examine the internal and external environments of the community internal and external environments of the sugarcane enterprise, all of which led to the development of strategies community enterprise, and to create the management for sustainable management. strategies necessary for successful future development, respectively. Results and Discussion

Methodology History of The Sugarcane Community Enterprise

This research was conducted in the Non Sila District of The Baan Wang Yoa sugarcane community enterprise Khon Kaen province, in Northeastern Thailand. Among located in the Baan Han Sub-district, Non Sila District, three sugarcane community enterprises in Non Sila District, Khon Kaen province of Northeastern Thailand, transferred the Baan Wang Yoa sugarcane community enterprise was from a farmer group to a community enterprise in 2012 at used as the case study. This community enterprise was the suggestion of the Bank for Agriculture and Agricultural purposively selected due to its beneficial recognized Cooperatives (BAAC). In 2018, there were a total of 48 practices in Khon Kaen province, evidenced through its members, fifteen of whom were elected to the sugarcane ability to collect high rates of sugarcane and meet factory community enterprise committee. quotas, as well as its equitable distribution of profits and The community enterprise was supported through benefits to its members. This community enterprise capital investment from the BAAC Non Sila branch, which consisted of 48 members (in 2018), of which 15 members provided one-year credit of three million baht, equivalent were elected to the management committee. to approximately 920,000 US dollars, with low-interest Data were obtained from March to October 2018, rates compared to individual credit (1 US$ = 32.77 Baht, through which ten members were selected for a focus Siam Commercial Bank of Thailand, 2018). The BAAC group; intended to investigate the history of the community Non Sila branch also recommended that the community enterprise, the management characteristics, and the internal enterprise ship its sugarcane to the sugar factories under and external environment. These ten members were the quota of the Khon Kaen Agricultural Marketing Co- selected through purposive random sampling that included operative Limited (KKAMC), which was responsible for the head of the enterprise, the vice-head of the enterprise, direct contact with the enterprise and maintained an open the committee, and some of its members. Additionally, quota for shipping sugarcane to the many numerous sugar forty-two active members were interviewed in-depth to factories on behalf of the community enterprise. The gather data involving internal relationships focusing on community enterprise worked collectively to gather and their network characteristics. The questionnaire guided the ship sugarcane to factories, and to establish credit and structured interviews through questions, such as “Among loans for member investment.

Community enterprise: -History Environmental Management -Management characteristics organization guideline for -Inter-community enterprise -SWOT analysis sustainable relationships -TOWS analysis performance

Figure 1 Research conceptual framework Source: Barham and Chitemi (2009); Somswasdi et al. (2015) 498 P. Utaranakorn, T. Kiatmanaroach / Kasetsart Journal of Social Sciences 42 (2021) 495–500

Management Characteristics of The Community Enterprise nieces, and nephews, fostering mutual belief and trust. Borgatti, Everett, & Johnson, (2013) suggested that this type The sugarcane community enterprise was managed by a of ‘kinship’ network outlines the most permanent of human committee which divided the responsibilities: management, relationships. As a result, committee were appointed based finance and credit, and collecting and shipping sugarcane on the trustworthiness, honesty, and willingness to among its members. Those responsible for managerial harmoniously contribute to collective action as expected of a determinations set up a plan in which to survey the quantities of family member. While three groups demonstrated active sugarcane produced and held meetings to identify production connections, two groups outside of the local community problems, as well as to divide enterprise profits and dividends. were not interrelated. They were found to have joined the This community enterprise also offered low-interest community enterprise sometime after it had been established, loans to members to invest in increased sugarcane production. motivated by the group’s durability and success. Access to this credit required members to assure repayment An overview suggests that a ‘kinship’ relationship is of their loans, often utilizing relatives as guarantors. As a one of the key characteristics that facilitated the sustainable point of reference, for every 10,000 baht of loan, a member performance of a community enterprise. The result needed to sell 25 tons of sugarcane within the enterprise. confirmed the finding of Santipolavut and Sripruetkiat For shipping and collection producers, also under the (2012), who stated that intra-community relationships are guidance of committee management, members were required key determinants of community enterprise development; to either deliver their sugarcane to a specified collection and rural community enterprise can establish successful point and/or ship it directly to a sugar factory. Members who long-term trust relationships when social cohesion is high sold their sugarcane at the collection point received an among members (Donovan, Dietmar, & Nigel, 2008). immediate cash payment, whereas those who shipped directly to a sugar factory received cash upon returning to the Internal and External Environments of The Community enterprise committee with an invoice. A group of five Enterprise members also undertook the added collection of sugarcane from random suppliers at the factory entrance, which further The internal and external environments investigated by increased revenues and fulfilled the group’s quota. SWOT analysis are presented in Table 1, in which the strengths that supported the sustainable performance of a Characteristics of Internal Community Enterprise Relationship community enterprise are classified into five points. Key among the sustainable goals was the ability to meet quotas The social network characteristics of the enterprise and fairly distribute profits and benefits. First, the community members were studied as an approach to understanding the enterprise sources collect and ship sugarcane to achieve their group’s internal relationships, illustrated in Figure 2. quota goal, building trust in both the sugar factories and Members were found to have active interpersonal KKAMC. Second, the committee and members of the relationships, indicated by the numerous directional arrows. community enterprise establish a clear and fair division of The relational ties show links between members who were profits and benefits, which encourages members to produce family relatives. For example, the strong network connection and ship as much sugarcane as possible to increase dividends. held by Member 1 with Member 4, 5, 6, 14, 16, 27 and 48; Third, the role and rules of the enterprise are established consisting of a mother- and father-in-law, aunts, uncles, through the harmonious decisions by all members, thereby promoting managerial effectiveness. Fourth, members were motivated to work hard and take responsibility for their profits and benefits. Lastly, leadership was maintained by a strong person, who had the trust and respect of all members and was recognized as an effective manager. Weaknesses within the community enterprise related to the few members who spent investment capital for other purposes, for which credit was not intended, or did not produce enough sugarcane to meet the demands of the quota. Consequently, debt repayment was often overdue. Significant opportunities promoted the growth of the community enterprise, including the annual capital provided by the BAAC and KKAMC, as well as the quotas they negotiated on Figure 2 Inter-community enterprise relationship among members the members’ behalf. Members could also receive additional P. Utaranakorn, T. Kiatmanaroach / Kasetsart Journal of Social Sciences 42 (2021) 495–500 499

Table 1 Internal and external environments of the sugarcane community enterprise by SWOT analysis Strengths Weaknesses 1. Achieving the group’s target quota for collecting and supplying sugarcane to 1. Members were overdue in repaying debts. the sugar factory. 2. Insufficient sugarcane production by members to meet 2. Managing and dividing profits and benefits. quotas and to repay their debt to the organization. 3. Setting up the role and clear rules of the organization. 3. Incorrect purpose of investment loan usage. 4. Committee and member relationships based on honesty and harmony. 5. Strong leadership and effective management. Opportunities Threats 1. The Bank for Agriculture and Agricultural Cooperatives (BAAC) support 1. Rising interest rate of loans. through annual investment capital. 2. Increasing competition. 2. Khon Kaen Agricultural Marketing Co-operative Limited develops permanent marketing channels with sugar factories. 3. Government supplemented (additional) revenue for farmers in need. 4. The Sugarcane Association’s negotiating prices and benefits. income from the government or sugar factory at the close of production, as well as for household consumption. Note that the sugarcane harvest. Thailand’s Sugarcane Association interest rates for uses other than sugarcane production were assisted in negotiating prices and benefits during stakeholder intended to carry slightly higher interest rates. Further strategies meetings in further support of sustainable practices. were developed to enhance the techniques used to collect Several factors also exist that threaten the managerial sugarcane, meet production objectives, and increase revenues. performance of the community enterprise, such as raising This strategy also deterred the effects of increased competition interest rates for credit by financial institutions. In addition to via new sugarcane collectors. The enterprise scheduled the the less advantageous terms for production investment, harvest of sugarcane in each area to maximize production. increasing interest rates led to uneasiness and distrust of Finally, the community enterprise conducted monthly training committee management among members. Members received programs in production, marketing, and financial management, credit from the community enterprise at low-interest rates in an attempt to overcome its weaknesses. and then used this capital to invest in their sugarcane production and harvest. In terms of the cost of providing Conclusion and Recommendation credit to members, the committee was previously able to earn additional income from the gap between the bank rate and the The key characteristics that facilitated the effective enterprise’s interest rate. Therefore, the community enterprise management of the sugarcane community enterprise at Baan now lacked the opportunity to access lower interest rates for Wang Yao of Khon Kaen province were identified as: capital investment, as well as to generate additional revenues. support through annual investment capital; effectively And, the increasing number of new sugarcane collectors managing the collection and shipment of sugarcane to the created an additional threat through increased competition. sugar factory; achieving the group’s annual quota; dividing The proposed strategies developed to enhance the the profits and benefits equally among members; and sustainable performance of the enterprise was defined by understanding of the internal relationships among members, applying TOWS Matrix, shown in Table 2. The enlargement of as well as the strengths and weaknesses within the enterprise’s the group’s quota for collecting and supplying sugarcane in environment. As a result, the following strategies were which to receive greater revenue, which was seen as one of the proposed to achieve sustainable long-term development: (1) group’s strengths, was first observed. By meeting the to enlarge the group’s quota of shipped sugarcane; (2) to production quota and exhausting their sugarcane supply, provide new alternative loan types to members; (3) to additional revenue from the Thai government became develop a plan and technique of collecting sugarcane, available. A second strategy involved offering alternative loan despite increased competition; and (4) to hold frequent types to members, which were then used for sugarcane training programs in business and financial management.

Table 2 Strategic alternatives for the community enterprise using the TOWS Matrix Internal/External Strengths Weaknesses Opportunities SO WO Increasing the target of the group’s quota for collecting Offering alternative loan types for other purposes. and supplying sugarcane to the sugar factory. Threats ST WT Developing plans and techniques for effectively Providing frequent training programs in financial collecting sugarcane. management to all members. 500 P. Utaranakorn, T. Kiatmanaroach / Kasetsart Journal of Social Sciences 42 (2021) 495–500

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