An Investigation of the Mondragon Cooperative: Globalization Impact

This dissertation investigates the Mondragόn Cooperative, a federation of worker cooperatives based in Spain, examining its performance in the context of globalization. It explores the cooperative's historical background, current status, distinctive features, and the impacts of globalization. The research delves into the cooperative's principles of solidarity-based management and its unique business culture. The dissertation addresses the challenges faced by Mondragόn, such as increased competition and risk, and analyzes the strategies employed to navigate these issues. Through a case study approach, the study assesses the cooperative's achievements, including its expansion and innovation, while also considering criticisms and potential limitations. The research questions focus on the compatibility of democracy and success in a business organization and how the MCC Model affects the firm’s success in this era of globalization. The conclusion assesses whether Mondragόn is thriving and provides insights into the future of the cooperative model in a globalized world. The research uses literature review, and case study methodology to support the analysis. The dissertation also includes findings on increased market, technological advancements, free flow of labor, and the impact on corporate culture and cultural relations.

Mondragon Cooperative 1
DISSERTATION
AN INVESTIGATION OF THE MONDRAGΌN COOPERATIVE: THRIVING IN THE ERA
OF GLOBALIZATION?

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................................2
THESIS STATEMENT.....................................................................................................................................3
RESEARCH QUESTIONS................................................................................................................................3
LITERATURE REVIEW....................................................................................................................................3
Historical Background of Mondragόn Cooperative..................................................................................3
Current Status of Mondragόn Cooperative.............................................................................................5
Distinctive Features of Mondragόn Cooperative.....................................................................................6
Principles of Mondragόn Cooperative.................................................................................................6
Solidarity-Based Management............................................................................................................7
Mondragόn Model...............................................................................................................................7
Business Culture..................................................................................................................................8
Impacts of Globalization on Organizations..............................................................................................9
Major Issues Faced By Mondragόn Cooperative...................................................................................10
METHODOLOGY...................................................................................................................................12
FINDINGS...............................................................................................................................................14
Increased Market............................................................................................................................14
Technological Advancement.......................................................................................................15
Free Flow of Labor..........................................................................................................................15
Competition.......................................................................................................................................16
Increased Risk..................................................................................................................................17
Corporate Culture...........................................................................................................................18
Cultural Relations and Diversity................................................................................................18
CONCLUSION........................................................................................................................................19
REFERENCES.........................................................................................................................................20

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INTRODUCTION
This dissertation seeks to assess if the Mondragόn Cooperative is thriving during this period of
globalization. The Mondragόn Cooperative is a federation and corporation of worker
cooperatives based in Spain with 80,000 employees in areas of knowledge development, retail,
industry, and finance and a total of 98 cooperatives. Mondragόn Cooperative operates under the
values of cooperation, social responsibility, innovation, and participation. Globalization is the
process of integration and interaction among governments, companies, and cooperatives, and
people resulting in the growth of international culture, ideas, and communication. Mondragόn
Cooperative, just like any other organization have been affected both positively and negatively in
this period of globalization.
Currently, globalization is playing a significant role in the growth and deterioration of the
organization through affecting natural, health, and social environment, economic processes,
technological development, and political landscape. The positive ways in which globalization
has affected organizations include culture exchange, the flow of information, larger market,
market competition, contact with consumers, organization empowerment, and effective
communication. The negative ways in which globalization have affected organization include
social injustice, negative effect on the economy, the dominance to some nations, and price
fluctuations (Forcadell, 2010). This research assesses the current state of Mondragόn
Cooperative in terms of historical background, current status, distinctive features, achievements,
major issues faced because of globalization, and the proposed solutions to solve the issues.
THESIS STATEMENT
This dissertation seeks to assess if the Mondragόn Cooperative is thriving during this period of
globalization. This assessment entails both the negative and positive impacts of globalization on

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the Mondragόn Cooperative (Duff, 2010). The research methodology adopted to attain the thesis
objective is the case study research methodology.
RESEARCH QUESTIONS
This paper assesses the response of Mondragόn Cooperative to various challenges that have been
faced as a result of the current globalization. In order to identify these challenges, the following
research questions will be addressed:
 What is the historical background of Mondragόn Cooperative?
 What is the current status of Mondragόn Cooperative in terms of size and achievements?
 What are some of the distinctive features of Mondragόn Cooperative?
 What are some of the impacts of globalization on organizations?
 Which are some of the achievements Mondragόn Cooperative has made due to
globalization?
 What are the major issues faced by Mondragόn Cooperative as a result of globalization?
 What are the solutions proposed to solve the challenges faced in this period of
globalization? (Clamp & Alhamis, 2010)
LITERATURE REVIEW
Historical Background of Mondragόn Cooperative
The Mondragόn Cooperative is a federation and corporation of worker cooperatives based in
Spain, Basque and was established by graduates of a local technical college in 1956 in the town
of Mondragon. A young priest by the name Maris Jose settles in Mondragon in 1941 and by then
it was a small town with a population of 7000 which was just recovering from tension, exile,
hunger, and poverty of the Spanish Civil War. Jose Maria developed a technical college which
became a ground for training skilled labor, engineers, and managers primarily for cooperative
and local companies (Arando, et al., 2010). Jose Maria spent many years educating young people
concerning a form of humanisms based on participation and solidarity, in harmony with the
social teaching of Catholics and the significance of attaining the required technical knowledge

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before establishing the first co-operative. Jose Maria later selected five young people in 1955 to
establish the first company for the industrial and co-operative which marked the start of
Mondragόn Cooperative.
In the initial 15 years, various co-operatives have been developed courtesy of the awakening of
the Spanish economy and the autarky of the market. During these 15 years, the first local group
was established after the motivation of the growing economy. Eroski was later established in
1969 by merging ten small consumer cooperatives locally. During the next 20 years between
1990 and 1970, the trend proceeded with strong growth in novel co-operatives promoted by the
establishment of the Ikerian Research Center in 1974, the formation of the local groups, the
promotion of the co-operative associations and the Business Division of Caja Laboral (Flecha &
Ngai, 2014). It was later decided to set up the Mondragόn Cooperative Group in 1984 with Spain
planned to join the European Economic Community in 1986. By the end of 1990, the group by
then consisted of 23,130 employees.
The objective of this new decision on the international stage was to respond to the growing
globalization, increasing abroad by establishing production plants in various states. The first was
in Mexico known as Copreci plant in 1990, followed by other states and by end of 2008, the
number of countries with production plants was 73 which later increased to 122 by the end of
2013 (Kulözü, 2014). The objectives were to strengthen employment in the Basque Country by
encouraging exports of products produced by the co-operatives, bring component supply closer
to plants of customers, particularly in domestic and automotive appliance sectors, and lastly to
increase market share and competitiveness.
The United Steelworkers announced an agreement in 2009 with Mondragόn Cooperative to
produce worker co-operatives in the US. In 2012, the industrial sector was a new record €4

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billion in sales international, defeating the figures from the 2007-2008 financial crisis.
Mondragόn Cooperative opened 11 novel subsidiaries of production (Sung & Young, 2014).
Current Status of Mondragόn Cooperative
Mondragόn Cooperative has become the most advanced and largest co-operative economy in the
whole world. Currently, Mondragόn Cooperative is composed of 80,000 employees and 98
cooperatives in knowledge development, retail, industry, and finance. Mondragόn Cooperative
functions under the values of cooperation, social responsibility, innovation, and participation.
Employees in Mondragόn Cooperative have the right of participating in a democratic structure of
decision-making governance (Flecha & Cruz, 2011). The workers are provided with social safety
nets and skill training to ensure sustainability in employment and experience a work culture of
alliances and solidarity. The areas around Mondragόn remained relatively unaffected while the
rest of Spain struggle to maintain stability in their economies after the Great Recession of 2008.
Although Mondragόn Cooperative provides various benefits through its power and wealth
distribution, the model is not exclusively absent of inequities. The Mondragόn Cooperative has
266 cooperatives and business in 32 countries, however, only 98 of those cooperatives that are
federated, while the remaining cooperatives are production subsidies internationally. Workers in
other locations are not cooperative members, and hence do not contribute to democratic
governance (Basterretxea & Albizu, 2010). This structure has developed a group of workers,
who are not owners, but the whole labor Mondragόn Cooperative currently depends on.
Mondragόn Cooperative is believed to lack emphasis on environmental and social impacts. In
Mondragόn, all cooperatives must allocate not less than 10% of their net profit to the social fund
of the cooperative used for interments in the community. There is a need to address
environmental and societal issues, and that is the responsibility of everybody. Mondragόn

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Cooperative has been drastically making changes to take a larger responsibility in pushing for
local equitable changes (Broekel, et al., 2015). There has been an increasing development of the
social transformation team, the conversation around using green energy in their R&D facilities,
and several women in managerial positions. The complexity of the mechanism and principles of
Mondragόn Cooperative has been effective in creating a secure, sustainable and democratic
living environment for its members.
Distinctive Features of Mondragόn Cooperative
Principles of Mondragόn Cooperative
The employees manage the company by themselves instead of being owned by any billionaires
or shareholders and they make the major decisions themselves. The profits of the Mondragόn
Cooperative are not paid to any offshore account, but rather the profits go the employees.
Economic democracy. Frequent meetings are conducted at all levels at Mondragόn Cooperative
where decisions are made concerning the use of profits, future investments, and challenges
encountered (CHADDAD, 2012). Additionally, every cooperative sends delegates to the General
Assembly of the Mondragόn Cooperative network, where the essential strategic issues of the
network are deliberated.
Solidarity-Based Management
Apart from the co-determination at every level, Mondragόn Cooperative success is attributed by
the solidarity reflected in the gap between pays. While other organizations normally pay their
managers huge salaries, the Mondragόn Cooperative is very different. The salary of the president
is six times as much as the lowest wage group in the co-operative. The lowest wage group earns
far much more compared to the regional average, and the management has to be contented with
what they earn just like other members of the Mondragόn Cooperative (SEVERINO, 2011).
Solidarity is also exercised between different sub-co-operatives of the Mondragόn Cooperative.

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In case one of the sub-cooperatives gets into a financial crisis, it generally receives subsidies
from the co-operatives association to stabilize itself.
Mondragόn Model
The Mondragόn Cooperative is currently a model for governments and companies globally. One
typical example is Cleveland in the US. Previously, Cleveland was a prosperous industrial city,
however, de-industrialization in larger sections of the US resulted in various factories being
closed. The people in Cleveland did not however accept the circumstances and they took the
success of the Mondragόn Cooperative as a model and developed a plan for the urban economy
with local productions and cooperatives at its core. Currently, Cleveland is booming again due to
the inspiration from the Mondragόn Cooperative (MIKAMI, 2013). Cleveland cooperatives
control the largest system of greenhouses and the largest solar energy plant in the US.
The implementation of the Mondragόn Cooperative model has also started in England. Preston,
which is located north of England has the same history as Cleveland since it also used to be a
flourishing industrial city, but de-industrialization has affected the city. However, the local
economic plan based on Mondragόn Cooperative turned the situation (Henrÿ, 2012). Currently,
the Mondragόn Cooperative model is officially part of the economic program of the British
Labour Party.
Business Culture
The Mondragόn Cooperatives are united by a shared business culture, philosophy of solidarity
and participation, and humanist business concept. The culture is rooted in the business policies,
corporate values, various principles, and shared mission. These links have been embodied in
various rules of operation approved on a basis of the majority by the Cooperative Congresses
over the years which control the activity of the Divisions they belong to from economic,
institutional, and organizational points of view and also the asset terms, Grassroots Cooperatives,

Mondragon Cooperative 9
Governing Bodies of the Corporations such as General Council and Standing Committee (Jeon,
2011).
This business culture framework has been structured depending on a common culture attained
from the ten basic principles of the Cooperative Congresses, in which Cooperative is rooted,
namely education, universality, social transformation, payment solidarity, participatory
management, subordinate and instrumental nature of capital, the sovereignty of labor, democratic
organization, and open admission (Wright, et al., 2011). This philosophy is supplemented by four
values of corporate, namely innovation focusing of constant renewal in all regions; social
responsibility, through wealth distribution based on solidarity; participation, which takes shape
as management commitment; and co-operation acting as protagonist and owners.
This business culture transforms into compliance with various general objectives adopted by the
Cooperative Congress and Basic Objectives such as involvement in the community, people in
cooperation, profitability, innovation, development, and customer focus, both of which are
passed to be board al all the organization corporation levels and implemented into the annual
business plans a four-year strategic plan of the entire corporation, divisions and specific
corporative (AGIRRE, et al., 2014).
Impacts of Globalization on Organizations
Globalization can affect the environment, economic development, human well-being, political
system, and culture of societies around the world. Whether the effects are positive or negative, is
determined by the organization or the individuals. Globalization has become an ever-present
expression in the past few years. It is defined as the process of integration of economies, politics,
and culture between countries. It is basically how one culture impacts or affects another on
various levels (Tsatsanis & Teperoglou, 2011). Globalization can be a single or many

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governments working together towards a common objective such as economic development.
Globalization as becoming more present in the organization, as a various organization is
expanding its operations to other countries and regions.
As companies from various sections of the world are working together to establish products.
There are various benefits of globalization because of different opportunities in which
organizations can internationally expand their markets. The speed in which globalization has
expanded in the past years has been as a result of technological advancement, particularly in
logistics and communications. The development has greatly promoted the demand for various
products on an international level (Albertos, et al., 2013). Globalization has opened doors and
reduced barriers to organizations between various states, this has enabled various states to
become more competitive on a global level and assisting them to diversify and develop their
products (Zeyada, 2018). The development of globalization has fully changed some
organizational aspects by affecting the planning strategy, leadership, and structure that
organizations adopt.
All these transformations are related to the globalization of organizations, like the restructuring
hierarchy, cultural differences, diversity of workplace and appearance of global managers. One
major aspect of the globalization is outsourcing, this is particularly present in customer service,
IT, and manufacturing (Fazzi, 2010). These operations are the sections of the organizations that
need a high number of workers and are normally costly parts of the operation. Outsourcing
internationally is popular because of the substantially lower manual cost of labor in states like
India, the Philippines, Taiwan, and China. Apart from the positive impacts of globalization
discussed above, there are also negative impacts associated with globalization in organizations.

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Globalization has resulted in increased income inequality gasp in some countries. Despite the
huge influx of investments and economic development, globalization has created disparities
between the illiterate and the educated hence only those who have attained a certain level of
education have the opportunity of securing employment (Mazzarol, et al., 2013). Globalization is
also blamed for the massive unemployment created by technological advancement. The
manufacturing and agricultural sectors have been affected by the impacts of globalization as
technology reduces the need for the unskilled and casual labor force in these sectors.
Major Issues Faced By Mondragόn Cooperative
Fagor Electrodomesticos which is known to be a domestic appliance company, filed for
bankruptcy on 2013 October under the Spanish law to renegotiate a debt of €1.1 billion, after
suffering serious losses during the eurocrisis and the result of poor management of finance,
putting 5600 workers at risk of unemployment. This was followed by Fagor group bankruptcy on
2013 November (Borrits, 2013).
The Mondragόn Cooperatives are not accountable to the needs of shareholders since the
shareholders are not involved in the major decision making organizations. Their interests and
opinions are not considered during the meetings. This has resulted in some shareholders opting
to depart the organization because they claim they don't have a sense of belonging in Mondragόn
Cooperative. Only the opinion of the workers matter in this cooperative and no one else is
allowed to be part of the General Council (ERRASTI, et al., 2016). Outsiders cannot buy any
control which enables the management to solely invest in the cooperative with the long-term
interest of the society in mind. This has limited the Mondragόn Cooperative to variety and
diverse opinions from other shareholders who may be having an idea that may change the face of
the cooperative.

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The Mondragόn Cooperative faced another series issue in the 2008 recession because of their
methods of investments, this deepened the economic struggle of Spain. Despite no worker was
fired since all the 84,000 workers globally remained steady, their average salaries reduced
significantly by approximately 5%. This drop-in salaries forced some employees to seek
employment at other cooperatives that were willing to pay more than what they were being
offered at Mondragόn Cooperative after the pay cut (Tkacz, et al., 2015). All the cooperatives
supported each other during these hard times ensuring they prioritize their profits to invest in the
co-operative which are declining economically.
Mondragόn Cooperative has also been blamed for lack of commitment to environmental issues
and societal issues. The Mondragόn Cooperative has many companies that are blamed for
negative environmental effects such as pollution and environmental degradation. However, the
cooperative has not committed itself in ensuring environmental sustainability through pollution
control and waste minimization (Azevedo & Gitahy, 2010). Despite the current progress towards
green energy, the manufacturing sectors of Mondragόn Cooperative are still causing
environmental pollution at an alarming rate.
METHODOLOGY
The research methodology adopted for this dissertation paper on the impacts of globalization on
Mondragόn Cooperative is the case study approach. A case study research method is a detailed
study of a specific phenomenon, organization, event, place, group, and person and it is perfect
for understanding, evaluating, comparing, and describing different aspects of the research
problem. The case study methodology is suitable for research desi when there is a need to
gaining in-depth, contextual, and concrete knowledge about a specific organization or company
since it enables the exploration of the major implications, meanings, and characteristics of the