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Lesson Notes - Forms of Business Organization_Cooperatives (2)

Cooperatives are business organizations owned and controlled by members with a common interest, emphasizing democratic control and profit sharing. They come in various types, including financial, agricultural, consumer, and worker cooperatives, each serving specific needs of their members. While cooperatives offer advantages like resource pooling and shared decision-making, they may face challenges such as limited expertise among members and slow decision-making processes.

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5 views

Lesson Notes - Forms of Business Organization_Cooperatives (2)

Cooperatives are business organizations owned and controlled by members with a common interest, emphasizing democratic control and profit sharing. They come in various types, including financial, agricultural, consumer, and worker cooperatives, each serving specific needs of their members. While cooperatives offer advantages like resource pooling and shared decision-making, they may face challenges such as limited expertise among members and slow decision-making processes.

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itz.zeebby
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C M A ALPHA

Business Studies Department


PRINCIPLES OF BUSINESS
4th Form
Lesson Notes on Forms of Business Organizations

Cooperatives

Cooperatives: this is a form of business that is owned and controlled by a group of persons who
have a common interest and who have an equal say in its operations. The cooperative society
must be registered. Shares are sold to its constituents, that is, the community that the society is
serving. The principles that govern cooperatives are listed below

Principles of Cooperatives
1. There is democratic control i.e. one person one vote
2. There is open membership
3. There is limited interest on capital investment
4. Distribution of profits; profits earn belongs to the member

Characteristics
1. They are voluntary, non-profitable organizations engaged in retail or other financial
activities.
2. They are managed and controlled by its members.
3. The members are also the client
4. Members have a common bond, for example, all teachers or public servants or belong to
a particular community
5. There is a pooling of capital among the membership

Types of cooperatives
There are many different types of cooperatives and they are defined according to the type of
services they offer to its members.

1. Financial Co-operatives – This type of cooperative member’s pool savings in order to


provide credit for each other. E.g. Credit Union & Building Societies
2. Agriculture Co-operatives- The Farmer’s Co-operative supply agricultural products and
equipment to farmers. Groups of farmers take their produce to market jointly and share
the income from sales.
3. Consumer Co-operatives – This is one, which is organized to supply its members with
items that they need. E.g. Food, gasoline or hardware goods are bought in bulk from the
funds contributed by members. This is then sold at a cost to members who benefits from
the savings obtained from these efforts.
4. Workers/Employment Co-operatives- These provide their members with employment.
They differ from the other types of cooperatives in that the members own and operate the
business that they are employed in; therefore, they are able to influence the operations of
the business.
5. Service Co-operatives- Members of service co-operatives pool their resources to provide
different types of services may be housing, health care, recreational, social, transportation
or culture.
6. Manufacturing Co-operatives- groups of small-scale manufacturer may combine
principally to market what they produce cooperatively.
7. Retail Co-operatives – the purpose of forming a retail cooperative is to sell items for
what is seen to be a fair price, and protect shoppers from larger retailers who may not
share their profits with their shoppers. Shoppers at a retail co-operative benefit from
potentially lower prices, or they may receive stamps, which enable the purchase of future
goods by using those stamps.
Advantages of Cooperatives
1. Members pool their resources.
2. Members are the owners.
3. There is shared decision making
4. All profits are shared among the membership
5. Members can work collectively to share problems
6. Employment is created for members
7. Community bond is strengthened.

Disadvantages of Cooperatives
1. The membership may not have the expertise necessary to build the organization. That is
members may lack managerial and technical experience.
2. Decision-making is slow if members are consulted and therefore, clients may lose out on
opportunity.
3. Profits are usually small or non-existent.
4. Limited access to capital

marketing cooperatives
Summary
Types of cooperatives:
a) Producer’s cooperatives: This types of cooperative society member are in the
business of producing. Such as farmers, who cooperate make decision and share
profits.
b) Buyers/Marketing cooperatives: This types of cooperative in which persons who
use a particular good in their business operations come together to purchase goods in
larger quantities and gain the benefits of discounts.
c) Retail cooperative/consumer cooperatives: This types of cooperative in which the
members. Come together for the purpose of buying certain goods or providing
services at reduced costs.
d) Financial Cooperatives/Credit Unions: This cooperative brings together person
who have common interest. For example, professionals such as teachers or groups of
persons with common goals.

Liability: Shareholders of a cooperative enjoy limited liability for the debts and obligations of
the business, including liability for the unlawful acts of other shareholders and employees. For
instance, if a fellow shareholder writes a defamatory article or posts copyright infringing material
on you are jointly run website or blog, then your liability ordinarily is limited to amounts
invested in the cooperative.

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