Those who have had experience with organizing a trade association and guiding it through the first experimental years will appreciate this good-humored recapitulation of the difficulties arising from these weaknesses of human nature. CHAPTER VIII COMMERCIAL FUNCTIONS An Association a Business Venture When a man joins a trade association he joins a business organization. He may be a member of some board of trade or chamber of commerce, but as such he feels that he is more an altruist or philanthropist than a business man. He is prompted to be a member of a civic organization because of a local pride and a proper desire to see his town or locality prosper. As his town or city may prosper, so he likewise will get certain benefits; but fundamentally he is a member of a civic organization through a desire to help somebody else rather than to further his personal interests. When he joins a trade association it is on a more or less selfish basis. John Jones, for instance, did not engage in the milling business in Indiana for the purpose of assisting James Brown in Massachusetts to live a more pleasant life. Mr. Jones began his milling business to make a living for Mrs. Jones and his family, which, although in a more critical sense is selfish, is not in the least unnatural or reprehensible. And so if Mr. Jones and Mr. Brown should both happen to join a trade association made up of millers, they would do so not so much to help each other as to further their own individual interests. But of course while the bettering of one's business and general affairs may be a man's purpose in joining a trade association, yet in a little while he gets a broader vision, becomes a bigger man, and consequently is often willing to help the other man. In thus helping the other man he gains at least some indirect benefits for himself. Functions of Association A trade association must be looked on not as a charitable, civic, or impersonal movement but as a business organization conducted by a business man, namely, the secretary. As a business organization the trade association has two important groups of functions: 1. Its commercial functions, which are its activities in connection with buying, selling, credits and collections, etc. 2. Its industrial functions, which are its technical activities in connection with economy in production, information relative to production, standardization of various kinds, etc. Commercial Functions-Purchasing The first of the obvious commercial activities of a trade association has to do with improving conditions for the purchase of raw materials and supplies. An item which largely attracts the attention of the association member is the effect of his association membership on the prices of his line of raw materials. It is surprising to the uninitiated to learn how wide a price range for the same kind of materials may exist in any particular industry. This is especially true where goods are purchased through jobbers. The retail dealer who attempts to secure a standard article often finds that the jobber's price is so near the listed retail price that it is impossible for the retailer to handle the article at a profit. This is the reason why many manufacturers advertise their goods to ultimate consumers at uniform prices. A good example of this is the sporting goods catalogues. Advantage of Knowledge of Favorable Prices If a merchant discontinues any line because he feels there is not enough profit to be made—and it may be a widely de manded product at that he not only loses the business but drives away considerable additional patronage that would be brought to him through the sale of such lines of goods. The retailer knows that other dealers are handling this product at a profit and surmises, therefore, that other jobbers are offering more favorable prices. He is handicapped, however, by not knowing what is the best price. If some idea could be given him in regard to the prevailing rates he would be in a better position to demand fair purchasing prices. The same thing applies to mills in their purchase of raw materials. For this reason it seems most desirable, as is shown in a subsequent chapter, for the manufacturers, merchants, or retailers to exchange among themselves prices at which materials or goods have been purchased. Of course in doing this care must be exercised that there shall be no agreement or collusion to make a producer or a distributer sell any commodity at a price below that which he is asking. Such an action would be a restraint of trade and therefore unlawful. Raw Material Information Some associations have gone even farther along legal lines than merely to exchange reports on purchases, and have actually established purchasing or price bureaus or subsidiary associations to enable their members to buy under the most favorable conditions, as discussed in Chapter XII. Other associations merely exchange among the members information about goods purchased and prices paid. It may be a bureau of information, the existence of which is necessitated by the inability to get accurate and full information from any other source, or it may be a bureau for the actual purchase and distribution of supplies. No averages on prices are struck, however, and no particular source of supply is recommended. The purchaser has absolute freedom to choose from whom he may purchase his goods, the same as a woman when she picks up her morning paper and looks over the advertisements to see where she can most favorably purchase a gown. By a system of confidential reports from the members, the association's files are kept up to date and are made representative of all sections. Members secure the information contained in the files upon request, and in return contribute their own experiences when asked. (See raw material reports in Chapter XVII.) Contrary to what one might imagine, this system offers little opportunity for favoritism or discrimination. The usual information supplied quotes all the figures at which the goods in question are being offered but does not divulge the name of the concern from which such prices may be obtained. The purchaser, upon receiving these prices, can then see what the range is and determine for himself at what price he would like to purchase the material or goods. Selling Another commercial function of a trade association has to do with selling. Problems similar to those described in connection with the purchase of goods arise also in connection with their sale. What an association can do and should do in this field is as yet, however, undetermined; and it is possible here to take up the subject only in a general way and note broadly a few points. First of all, it should be said that there must be no echo or paralleling of the old monopolistic pools. Their joint selling arrangements were planned merely to bring immediate profit to the members of the pool. An association must be careful that if any arrangement is established for joint selling there is no attempt or desire on the part of the members, either directly or indirectly, to impose the weight or power of the association on the purchaser. |