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what are the Advantages and Disadvantages of Cooperative Society

Advantages and Disadvantages of Cooperative Society:

These are discussed below;

Advantages of Cooperative Society

The cooperatives, being a special form of business ownership, enjoy certain advantages which are no availed of by other forms of organizations. The main benefits claimed by different kinds of cooperative societies, in brief, are as under;

Advantages of Cooperative Society

  1. Elimination of middlemen.

The cooperative society eliminates the profit earned by middlemen in the supply of commodities to the consumers. The cooperatives society supplies goods and services to the members at the wholesale price.

  1. Economy in Expenditure:

The cooperative society has not to employ the specialists in the field of production and distribution. There is not top heavy management. The members themselves organize the business and reduce the overhead expenses to the minimum. There is thus a saving in production costs of the commodities.

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  1. Equal status:

Each shareholder has one vote in the management of the business of the society. All the members thus stand on equal footing regardless of the number of shares they own.

  1. Employment opportunities.

A cooperative society is mostly organized to produce goods on a small scale. It also provides retail services of consumer goods to its members at a cost lower than the market. The cooperatives thus provide employment opportunities to the needy persons in consumer cooperatives and in small scale industries.

  1. Financial assistance:
    The cooperative extends loan facilities to the agriculture for the purchase of input . it also gives financial assistance to the members for the construction of houses.
  2. Social benefits.

The cooperative society creates among the members a spirit of sacrifice tolerance, cooperative, and self-help. The environment thus created by the cooperatives can be very helpful for the special and economic progress of the country.

  1. The benefit of agriculturists.

The agriculturists who live far away from the market can obtain their farm needs at a lower price through the agricultural purchase cooperative. Similarly, they can sell their produce at a fair through the agricultural marketing cooperative society by eliminating middlemen.

  1. No surplus stock:

The cooperative society purchases the commodities according to the requirements of the members. It thus does not have to keep any surplus stock in hand.

  1. Extension of market:

The cooperative purchases the commodities at the wholesale price and sells them mostly on a nonprofit basis. The consumer other than the members, are attracted towards cooperatives and become the shareholders of the society and avail of all the benefits of cooperatives.

  1. End of class struggle.

In the cooperatives, there is no class struggle of master and servant, employer and employee. All the members are the owners of the society. As such the class struggle comes to an end.

  1. Distribution of Dividend:

In the consumer cooperative society, the profit is distributed to the shareholders on the volume of purchases made by them in a trading year. There is thus justification on the distribution of a dividend of a society which is often called a “patronage dividend” .

  1. Better standard of living:

The cooperative society helps its members in providing employment to the people and supply of goods at a lower price than the market. It thus helps in raising the standard of living of the members.

  1. Limited liability:

The liability the members is mostly limited to the value of the share held by them.

Disadvantages of cooperative society:

              Inspire of various advantages claimed of cooperatives. They have by and large proved to be an unsuccessful effort and are on the decline in all the developing capitalistic countries of the world. The main limitations of a cooperative form of ownership are given below.

  1. Small scale:

Every trading firm in order to be a viable economic unit must operate on a minimum scale. The marketing areas of the cooperative society are mostly too small to meet the operational costs of the firm. It, therefore, suffers losses and finally goes into liquidation.

  1. Lack of finance:

A cooperative firm lack finance. Its credit rating forms the external resources such as commercial banks and another financial institution is low. It, therefore, falls short of capital for meeting the normal requirements of the business and ultimately suffers losses.

  1. Ineffective management:

A cooperative firm is mostly unable to attract specialized skills to run it affairs. It cannot afford to pay higher salaries to them the members who manage the affairs find the work interesting for a short duration but later on they begin to lose interest. The cooperative firm ultimately fails due to ineffective organization and management.

  1. Does not adopt new techniques:

A cooperative firm carries on its activities in an old fashion. It tries its best to avoid the risk element and does not adopt new techniques in the ever-changing business world. It mostly remains content with service motive and as such it does not flourish.

  1. Delay in decision making:

He decision in a cooperative is made by the management committee. The control and authority, therefore, passes too many people and thus leads to delayed decisions. The decisions are mostly person oriented instead of being service oriented and thus adversely affect the organization.  

  1. Defective services.

The cooperative firm gets defective and delayed services of outside agencies.

For example fertilizers, seeds, machinery, credited are not timely available to the society societies. Which creates dissatisfaction among the members?

  1. Lack of true leadership:

An interested group normally dominates a cooperatives society. A member once elected to an office of the management holds the office till his death of dissolution of the cooperative society. The business of the firm remains with one management and that affects its business.

  1. Absence of motivation:

The man is selfish by nature. The employee is mostly low paid in the cooperative. They take less interest in the development of the society. Lack of motivation is, thus an obstacle to the development of cooperative societies.

About the author

Salman Qureshi

Salman Qureshi is an Accountant by profession & he loves to write on Commerce & Management Sciences Subject to assist Students. Hope you guys will like his effort.

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