Can You Explain The Disadvantages Of Cooperative Society?

Question

Can You Explain The Disadvantages Of Cooperative Society?

4 Answers

Answer Question

Answer 1

The following are the reasons of failure or defects and disadvantages of cooperative organization.
1. Lack of capital.
(a).Its members are generally related to the poor group of the society and they are not in a position to invest a large amount.
(b).External financial resources of the society are limited.
(c).It cannot borrow money from non-members.
(d).It cannot issue any kind of debentures.
(e).It share cannot be transferred to nonmembers.

It thus suffers shortage of capital for the operation of business.
2. Limited scale. Due to the various hindrances behind the growth of capital, it is not possible for the cooperative society to start its business at a large scale; it therefore, keeps its business limited in the narrow field of cooperation.
3. Inefficient management. Expert and efficient management is important factor for running the business successfully. But a society cannot afford to hire the services of superior abilities due to its limited resources. Therefore its business cannot be carried on smoothly.
4. Lack of prompt decision. As all the matters are decided by the management committee and complied by another authority, it cannot act with promptness, if a chance comes to make a timely purchase or sale, they have to wait to get others consent.

Answer 2

Consumer's cooperative societies:
In the capitalist society there is a long chain of middleman from the producers of a commodity to the consumers. The consumer's cooperatives are found to eliminate the handsome profit of the middleman. They make the supply of required goods primarily to its members in a particular locality. The member shop at the coop gets good quality products at fair prices and thus raises their individual income.

The consumer's cooperative purchases the goods in bulk from the producers or the whole sale dealers and supply directly to the members on demand. The coop is managed by members themselves. The profit is distributed to the members in the proportion to the purchases made by a member in a particular trading year. The members are issued coupons at the time of purchase of commodities which are counted at the end of the trading year.

The performance of cooperate society is not satisfactory in developing countries including Pakistan due to the following reasons:
1. These societies lack capital.
2. Cooperative spirit is missing among the members.
3. There is no particular supply of goods to the coop.
4. The goods are mostly sub standard and lack variety.
5. The person appointed for selling the commodities lack initiative and donot treat the consumers properly.
6. There are complaints of wrong billing.

Answer 3

Some organisations such as banks and insurance companies will not deal with them because there is no clear leader to deal with.
Suppliers may be reluctant to extend credit for the same reason.
Job rotation means staff may be doing jobs they are not trained for or have experience in.

Answer 4

The advantageous factors of the cooperative type of organization are given below: -
1. Elimination of middlemen. The management of the consumer cooperative society directly purchases the finished goods from the manufacturer and producer. Producer cooperative society procures the raw material from the producer. Thus they try to free themselves from the grip of the middlemen and make the goods available to consumers at lower prices.

2. Saving in management expenses. Cooperative society enjoys some economies in the field of management due to voluntary services performed by the members themselves. Thus, it is possible to minimize the expenses of management and supervision.
3. Minimum stock. Society purchases the same goods which are actually demanded by its members. Thus there is need to have minimum stock at hand due to constant and regular demands.
4. Economy in distribution and production expenditure. Society is saved from any distribution and production expenses. It has got its regular customers; therefore society has not to face any trouble for marketing its goods. Thus is has not to incur any expenditure for publicity and advertisement, which is a big item in the budget of the capitalist producer.
5. Integration. Under this type of organization, complete integration between producers, wholesalers and retailers is always possible. This is thus a clear advantage over capitalist economy.