Cooperative business advantages and disadvantages
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advantage:
Members of cooperative businesses pay lower or stabilized prices for products and services because of the buying power of the cooperative. Businesses that sell to cooperatives may receive higher or stabilized prices for their products or services. Benefits are distributed to members based on usage of the cooperative’s products or services. A member who purchases 10 percent of the products or services receives a return of 10 percent in benefits. Cooperative business members also benefit from shared ownership, which results in shared risk, both liability and financial, and reduced expenses for operational costs.
Disadvantages:
In spite of its numerous advantages, the cooperative also has some disadvantages which must be seriously considered before opting for this form of business ownership.
The important among the disadvantages are:
1. Lack of Secrecy:
A cooperative society has to submit its annual reports and accounts with the Registrar of Cooperative Societies. Hence, it becomes quite difficult for it to maintain secrecy of its business affairs.
2. Lack of Business Acumen:
The member of cooperative societies generally lack business acumen. When such members become the members of the Board of Directors, the affairs of the society are expectedly not conducted efficiently. These also cannot employ the professional managers because it is neither compatible with their avowed ends nor the limited resources allow for the same.
3. Lack of Interest:
The paid office-bearers of cooperative societies do not take interest in the functioning of societies due to the absence of profit motive. Business success requires sustained efforts over a period of time which, however, does not exist in many cooperatives. As a result, the cooperatives become inactive and come to a grinding halt.
4. Corruption:
In a way, lack of profit motive breeds fraud and corruption in management. This is reflected in misappropriations of funds by the officials for their personal gains.
5. Lack of Mutual Interest:
The success of a cooperative society depends upon its members’ utmost trust to each other. However, all members are not found imbued with a spirit of co-operation. Absence of such spirit breeds mutual rivalries among the members. Influential members tend to dominate in the society’s affairs
Members of cooperative businesses pay lower or stabilized prices for products and services because of the buying power of the cooperative. Businesses that sell to cooperatives may receive higher or stabilized prices for their products or services. Benefits are distributed to members based on usage of the cooperative’s products or services. A member who purchases 10 percent of the products or services receives a return of 10 percent in benefits. Cooperative business members also benefit from shared ownership, which results in shared risk, both liability and financial, and reduced expenses for operational costs.
Disadvantages:
In spite of its numerous advantages, the cooperative also has some disadvantages which must be seriously considered before opting for this form of business ownership.
The important among the disadvantages are:
1. Lack of Secrecy:
A cooperative society has to submit its annual reports and accounts with the Registrar of Cooperative Societies. Hence, it becomes quite difficult for it to maintain secrecy of its business affairs.
2. Lack of Business Acumen:
The member of cooperative societies generally lack business acumen. When such members become the members of the Board of Directors, the affairs of the society are expectedly not conducted efficiently. These also cannot employ the professional managers because it is neither compatible with their avowed ends nor the limited resources allow for the same.
3. Lack of Interest:
The paid office-bearers of cooperative societies do not take interest in the functioning of societies due to the absence of profit motive. Business success requires sustained efforts over a period of time which, however, does not exist in many cooperatives. As a result, the cooperatives become inactive and come to a grinding halt.
4. Corruption:
In a way, lack of profit motive breeds fraud and corruption in management. This is reflected in misappropriations of funds by the officials for their personal gains.
5. Lack of Mutual Interest:
The success of a cooperative society depends upon its members’ utmost trust to each other. However, all members are not found imbued with a spirit of co-operation. Absence of such spirit breeds mutual rivalries among the members. Influential members tend to dominate in the society’s affairs
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