The empirical model of trust, loyalty, and business performance of the dairy milk supply chain

Abstract

Purpose The purpose of this paper is to measure and evaluate the relationship between collaborative communication, power dependence, price satisfaction, trust, supplier loyalty, and business performance. Design/methodology/approach Data used in this study were primary data which were collected through personal interviews and closed questionnaires using a five-point Likert scale ranging from 1 to 5. The sample consisted of 170 individual dairy farmer and several dairy cooperatives, which were located in Central Java Province (Boyolali and Semarang Districts) and West Java Province (West Bandung District). The study used partial least squares with the aid of the SmartPLS software program to analyze the hypothesis. Findings The results of hypothesis testing indicate that collaborative communication and price satisfaction had a significant positive effect on trust for Central Java and West Java Province. Meanwhile, power dependence had a significant negative effect on trust only for West Java Province. Trust had a significant positive effect on supplier loyalty for both of the two provinces. Significant positive effect of supplier loyalty on business performance was supported in Central Java Province, whereas in West Java Province, supplier loyalty had a positive but not significant effect on business performance. Research limitations/implications The limitation of this study is related to the number of samples, the type of scale used to measure a business performance, and the focus that is only on the relationship between the fargmers and cooperative to improve the performance of cooperative without considering the role of management. So, the future research may replicate this study in another region or in the other contexts of agribusiness sector that usually depends on farmer as a producer of the raw material. It may also enhance the measurement of business performance of dairy cooperative by using a direct measure of financial performance and non-financial performance and broaden the scope of research into the role of management of dairy cooperative. Practical implications It is recommended that managers of dairy cooperatives always involve the farmers when making marketing decisions especially concerning prices, products, market, and promotion. As organizational stakeholders, their involvement is vital in determining the ability of the dairy to achieve its goals. The other recommendation is the managers of cooperatives must have a clear policy on the price of milk, and this policy should indicate the transparency and accountability. Then, regarding the long-term benefit of dairy cooperative, it is recommended for dairy cooperatives to add the value of the milk so they can access wider markets, which, in turn, will maximize returns to the members. Based on this recommendation, it is better if the dairy cooperative in Indonesia not only serves as a marketing cooperative, but also serves as a farm supply cooperative which may process or formulate the milk into a more valuable product. Social implications The research confirms that individual dairy farmer’s loyalty can benefit the business of dairy cooperative. It may encourage more dairy cooperative to tap the good relationship with the individual dairy farmer at the initial stage of the economic growth of their business. Intensifying competition between dairy cooperatives would potentially bring even better quality and quantity of milk from the loyal dairy farmer. Originality/value Although this research used the conceptual model from the previous study, this research will make some improvement. First, it used more indicators to measure each dimension of the construct, and the investigation was slightly more complex and broader since the object of the research was represented by two regions, namely, Central Java Province and West Java Province.

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“…Even if information is shared, the truthfulness of the information is sometimes questioned by the receiver (Matopoulos et al, 2007;Lubowe and McDermott, 2016;Calatayud, 2017;Chopra and Meindl, 2018). Susanty et al (2017) underline that trust is the foundation to create loyalty among peers of the supply chain.…”

Harnessing a ‘Currency Matrix’ for Performance Measurement in Cooperatives: A Multi-Phased Study

“…SMA comprises measures relating to the judgmental assessment of cooperative members regarding the benefits they receive from membership and their cooperative's performance in general [123,124]. These measures habitually cover members' general stance towards the cooperative (e.g., overall satisfaction, intention to continue membership) [125,126], members' evaluation of financial aspects (e.g., satisfaction with price or market arrangements) [29,127], and members' evaluation of non-monetary membership aspects (e.g., members' influence on internal decision-making, satisfaction with information flow) [123,128]. In the vast majority of the few empirical cooperative studies that rely on SMA measures (e.g., [125,126,129], multi-item scales are commonly favored.…”

“…In the vast majority of the few empirical cooperative studies that rely on SMA measures (e.g., [125,126,129], multi-item scales are commonly favored. The latter are usually drawn from constructs developed and validated in mainstream marketing or management studies [127,130].…”

Essays on co-operatives’ idiosyncrasies : structure, performance, and membership

“…SMA comprises measures relating to the judgmental assessment of co-op members regarding the benefits they receive from membership and their co-op's performance in general (Alho, 2015;Liebrand and Ling, 2014). These measures habitually cover members' general stance towards the co-op (e.g., overall satisfaction, intention to continue membership) (Figueiredo and Franco, 2018;Hernández-Espallardo et al, 2013), members' evaluation of financial aspects (e.g., satisfaction with price or market arrangements) (Bhuyan, 2007;Susanty et al, 2017), and members' evaluation of non-monetary membership aspects (e.g., members' influence on internal decision-making, satisfaction with information flow) (Feng et al, 2016;Liebrand and Ling, 2014). In the vast majority of the few empirical co-op studies that rely on SMA measures (e.g., Figueiredo and Franco, 2018;Hernández-Espallardo et al, 2013;Van Rijsbergen et al, 2016), multi-item scales are favored.…”

“…In the vast majority of the few empirical co-op studies that rely on SMA measures (e.g., Figueiredo and Franco, 2018;Hernández-Espallardo et al, 2013;Van Rijsbergen et al, 2016), multi-item scales are favored. The latter are usually drawn from constructs developed and validated in mainstream marketing or management studies (Arcas-Lario et al, 2014;Susanty et al, 2017).…”