Advantages of cooperatives

From CEOpedia | Management online

Cooperative is an association of people united voluntarily who want to provide themselves and others with common needs. For example, these are economic, cultural and social needs. cooperative is an organization in which the most important thing is to meet the needs of their members and, secondly, to bring profits. Cooperative is also known as: co-operative, co-op, or coop. Cooperation dates back as far as human beings have been meeting for common benefits. Initially, people focused on expanding local supplies.

Main goals

Cooperative has its own specific goals, we can summarize them:

  • provide goods and services to customers
  • eliminate profits of middlemen in business,
  • prevent the use of the weaker members of society,
  • protect the rights of consumers and manufacturers,
  • promote mutual respect and education of their members.

Main advantages of cooperatives

  • increase of competition
  • cost reduction of procurement of goods or selling,
  • provide high quality services to specific group of interested people (which may be unprofitable to big business),
  • provide various resources to members (credit, housing, etc.),
  • cooperatives are owned and controlled by members,
  • profits of cooperative are transferred directly to members, members decide about fund transfers,
  • cooperatives with open membership provide important social service to the community,
  • decision are undertaken democratically,
  • often this type of business is supported by government,
  • middlemen are eliminated which leads to cost reduction, main goal of cooperative is good service not profit for a limited few people.

It is also worth mentioning that the cooperative promotes cultural, social and educational values. They can be used in many ways to benefit people in their daily life needs. An important aspect of cooperation is that individuals can, by combining with each other, achieve the benefits available to wealthy and influential people so that they can develop.

Types of cooperatives

Co-operatives are created for different people to achieve specific benefits. Stands out various types of cooperatives, for example:

  • Retailers' Cooperatives - they create retail stores to meet the needs of customers in the community. They are often found in small towns or villages where local businesses have been closed. The industries in which they are created: food, agricultural. products, computer equipment, etc.
  • Workerer Cooperatives - members of the cooperative are both employees of the company as their owners. These are often entrepreneurs who start a new business or transform existing businesses. This is one of the fastest growing types of cooperatives. The industries in which they are created: bakeries, software development groups, etc.
  • Producer Cooperatives - they are created, owned and operated by producers. They can decide to work together or as separate entities. Manufacturers deal with process, market, and distribute their own products. The main advantage of this solution is cost reduction. The industries in which they are created: agricultural products, carpentry and crafts, etc.
  • Service Cooperatives - this is a type of a type of consumer cooperative, which is designed to fill a need in the community. They are organized to provide members control over the services offered. The industries in which they are created: child care, health care clinics, etc.
  • Social Cooperatives - this is a specific form of a working cooperative. The subject of activity of the social cooperative is first of all running a joint enterprise based on the personal work of members for the social and professional reintegration of its members.
  • Housing Cooperatives - the main task of housing co-operatives is to meet the housing needs and other needs of members and their families by providing members with independent dwellings or single-family houses, as well as premises for other purposes. Examples: rentals, single family homes, condominiums or market rate.


Examples of Advantages of cooperatives

  1. Democratic Control: In a cooperative, all members are equal and have one vote each. This allows for democratic control of the cooperative, with decisions being made based on the collective agreement of the members rather than a single individual.
  2. Shared Profits: Cooperatives are profit oriented, but profits are shared among the members rather than a single individual. This allows members to benefit from the collective profits and provides an incentive to become more involved in the cooperative.
  3. Access to Resources: Cooperatives offer members access to resources that they wouldn't otherwise have access to, such as capital, technology, and expertise. This allows cooperatives to stay competitive in the marketplace and provides members with more opportunities.
  4. Job Security: Cooperatives provide members with job security by protecting members from layoffs and other job-related risks. This gives members peace of mind when it comes to their employment and provides an incentive to become more engaged in the cooperative.
  5. Community Development: Cooperatives can also be used to promote economic development in a particular community. They can provide economic opportunities for members and create jobs that would otherwise not exist. This helps to create a more vibrant and prosperous community.

Limitations of Advantages of cooperatives

Cooperatives have many advantages, such as the ability to access capital, democratic decision-making, and a shared ownership structure that encourages members to support each other. However, there are some limitations to these advantages. These limitations include:

  • Limited Capital: Cooperatives may not have access to the same level of capital as larger corporations, which limits their ability to expand.
  • Unstable Leadership: Cooperatives often lack a well-defined and stable leadership structure, which can prevent them from having a clear vision and direction.
  • Difficult to Monitor: Since cooperatives are owned and managed by members, it can be difficult to ensure that all members are following the same rules and regulations.
  • Limited Resources: Cooperatives often lack the resources to compete with larger corporations in terms of marketing and product development.
  • Labor Issues: Cooperative members may be unwilling to work together, which can lead to labor disputes and slow decision-making.

Other approaches related to Advantages of cooperatives

Cooperatives offer numerous advantages to their members, including providing access to resources, increasing bargaining power, and creating a sense of community.

  • Access to Resources: Cooperatives provide their members with access to resources, such as capital, land, technology, and services, that would otherwise be difficult to obtain. By pooling resources and knowledge, members can benefit from economies of scale.
  • Increased Bargaining Power: By joining together, members of cooperatives can increase their bargaining power in the marketplace, allowing them to obtain better prices for their goods and services.
  • Sense of Community: Cooperatives can create a sense of community among their members, allowing them to work together towards a common goal. This can create a sense of ownership and pride in the cooperative, as well as a shared commitment to its success.

In summary, cooperatives offer numerous advantages to their members, including access to resources, increased bargaining power, and a sense of community. By pooling resources and knowledge, members can benefit from economies of scale and increase their bargaining power in the marketplace. Cooperatives can also create a sense of community among their members, allowing them to work together towards a common goal.


Advantages of cooperatives — recommended articles
Third sector — Types of stakeholders — Cooperative insurance — Free market system — Management company — Service economy — International joint venture — Large organizations — Innovative systems — Market rents

References

Author: Ewa Wójcik

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