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Types Of Business Units, Cycles - II

 Types of Business Units - II

5. Co-operative Societies

            Co-operative enterprise is one of the significant forms of business organisations. When a few persons who are known to each other commence business on co-operative basis is called co-operative society. A few persons combine together and make a co-operative society. It is established after the approval of Registrar. In short, a co-operative society comes into existence when people work together by pooling their resources for a business purpose on the basis of mutual gains.

Characteristics of Co-operative Society

  • Voluntary - It is formed on a voluntary basis. A person becomes the member of the co-operative society on his own aspiration. There is no urge on him to do so.

  • Equal Rights - Every member of the co-operative society has equal rights. Equal opportunities are given to persons in the organisation of the society. Also each has the power to vote equally.

  • Self - Sufficiency - A co-operative enterprise is commenced with the initial aim of self sufficiency.

  • Mutual Help - The main dictum of the co-operative society is mutual help and to impart the training of honesty and co-operation among the members.

  • Economy - A co-operative enterprise is stated on economical basis. Endowment is made upto a specified limit. Outlay is incurred to own financial resources.

Forms of Co-operative Society

  • Co-operative Credit Societies - This type of society are formed to give financial and credit facilities. The members of the society deposit savings with the society and take loans from the society whenever the need arises.

  • Producers’ Co-operatives Societies - When a few persons with small capital for a society to commence their own business it is called producers co-operative society.

  • Consumers’ Co-operative Societies - The consumers of a region or a town join together amass the essential capital through shares and begin a store. This type of society sells the products based on the common requirement of that locality.

  • Co-operating Market Societies - When farmers form a society to buy inputs for farming like seeds, insecticides and other commodities and sell their outputs it is called the co-operative marketing society.


  • Less Capital - Persons with small capital can start business under the co-operative society.

  • Reduction of Inequalities - A co-operative enterprise helps in reducing the inequalities of earnings and wealth in the nation. It shuns exploitation as the profit is distributed among the share holders.

  • Incentive to Handwork - When workers start business on co-operative basis and get their due profits. They get an incentive for their efforts.

  • End of Class Conflict - A co-operative enterprise abolishes the difference between the employers and employees and there remains no chance of class conflict, as the workers themselves are the owners.

  • Moral and Social Benefits - A co-operative unit is most practical from the moral and social view point. It persuades the spirit of co-operation among the members of the society.

  • Savings - It persuades savings among the members of the society since they can make profit by engrossing their savings in the business.


  • Unnecessary Criticism - Every member requires having absolute knowledge about management for the reason that he has got equal rights. After eloquent it, he starts criticising the directors the directors unnecessarily which creates complexity in the management.

  • Lack of Efficient Managers - It is not requisite that elected directors may be eminent of having of whole knowledge of management. Generally the eminent managers are rarely found in a co-operative society.

  • Inability to face economic crisis - A co-operative enterprise has limited resources and thus is unable to face economic catastrophe.

  • Corruption - The directors of the co-operative society create corruption and nepotism in the working and the management of the enterprise by helping their relatives and friends.

  • Mutual Distinct - The election of the co-operative enterprise brings in the party system which grades in the mutual disbelief and arguments.

6. Public or State Undertaking

            Industrial and commercial undertakings held and run by the government are known as public sector undertakings. Some of them come under the group of public utilities such as railways, posts and telegraphs, hydroelectric projects, road transport etc. Others are run like JSCs and aspire at earning profits. Still others are semi public undertakings in which the government possesses mainstream shares along with private share holders.


  • Development of Backward Areas - Private sector cannot contend the growth needs of the backward areas. Extension of public enterprise is essential for the economic reconstruction of the backward areas.

  • Public Welfare - The endeavour of public sector is not to earn profits but the social or public welfare which promotes national interest. The enterprises which do not give direct profit but are indispensable for the public welfare are run as the state enterprise.

  • Development of Basic and Heavy industries - Private enterprise normally hesitates to partake in capital intensive investments e.g. iron and steel plant, fertiliser plant etc.

  • Reasonable Prices - In the private sector capitalists form monopolies to accuse higher prices but the public enterprises produce normally of improved class produce and sell them at reasonable prices.

  • Research - There is a superior option of rigorous research in state enterprises as compared to the private enterprises. The state enterprises have adequate funds at their dumping to utilise for research of new techniques of production and new machines etc. it augments the effectiveness of state enterprises.


  • Lack of incentive - The government servants does not have the same incentive to do their best as a man in private enterprise has. In government service endorsement is honoured merely by seniority and not by advantage.

  • Wasteful Expenditure - There is a great deal of waste in the overheads. The regime finances and property are used sloppily which result in small profit at a greater cost. It amplifies the cost of production in state enterprise.

  • Frequent and Sudden Transfers - Very frequent and sudden transfers of the government employees at far-away places with political motive, harmfully hit the normal performance of the state enterprises. Such transfer results in the waste of overheads delay in work and incompetence of the enterprise.

  • Unnecessary interference - This is universal propensity of the ministers and the bureaucrats to hinder in the free running of trade and commercial stuff particularly in the backward areas. Regular relocation of government employees from one place to another more put a grip in the daily administration of the enterprise.

  • Red Tapism - Many verdicts have to be taken in a state enterprise at diverse high level meetings. The files regarding these are locked up in various offices.

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