PRESENTATION ON THE TOPIC –

COOPERATIVE FIRMS AND THEIR

FORMATION
NAME – AYUSH TIWARI
CLASS – MBA 2ND YEAR
R.NO. – 220230004
SUBJECT - ENTREPRENUERSHIP
 INTRODUCTION

Cooperative firms, often referred to as

cooperatives or co-ops, are businesses owned
and operated by their members for their mutual
benefit. These members could be consumers,
producers, workers, or a combination thereof.
The primary goal of a cooperative is to meet the
common needs and aspirations of its members
through joint ownership and democratic
control.
 CHARACTERSTICS OF COOPERATIVE FIRMS

1. Ownership: Members of a cooperative jointly own and control the business. Each
member typically has one vote, regardless of the extent of their investment or
involvement in the cooperative.
2. Democratic Control: Cooperative firms operate on the principle of democratic
decision-making, where each member has an equal say in the organization's policies
and decisions. This ensures that the business is run in the best interests of its
members.
3. Voluntary Membership: Cooperatives are typically voluntary organizations,
meaning that members join and participate willingly. Members often share common
needs or objectives, such as access to goods or services, improving market access, or
gaining bargaining power.
4. Member Benefit: The primary purpose of a cooperative is to serve the needs of its
members. This could involve providing goods or services at fair prices, improving
market access for member-produced goods, or offering employment opportunities.
 ADVANTAGES OF COOPERATIVE FIRMS

1. Shared Risks and Rewards: Members of cooperative firms share both the risks and
rewards of the business. This collective sharing of risks helps to mitigate individual
financial burdens and encourages cooperation and mutual support among members.
2. Economic Empowerment: Cooperatives often emerge in communities where traditional
business models may be lacking or inaccessible. By providing opportunities for
entrepreneurship and economic participation, cooperatives empower individuals and
communities to create sustainable livelihoods and build wealth collectively.
3. Local Economic Development: Cooperative firms tend to reinvest their profits back into
the community, stimulating local economic development and creating job opportunities.
By keeping resources and decision-making power within the community, cooperatives
contribute to the resilience and self-reliance of local economies.
4. Social Responsibility: Many cooperative firms prioritize social responsibility and
sustainable practices as part of their business ethos. This commitment to ethical and
environmentally friendly operations resonates with consumers and can enhance the
reputation and credibility of the cooperative in the market.
 DISADVANTAGES OF COOPERATIVE FIRMS

1. Limited access to capital: Cooperatives often face challenges in raising capital

compared to other business structures because they rely heavily on member contributions
and loans from financial institutions. This limitation may hinder their ability to expand or
invest in new technologies.
2. Decision-making complexities: Decision-making in cooperatives can be slow and
cumbersome due to the democratic nature of the organization. Consensus-building among
members may take time, leading to delays in important business decisions.
3. Potential for conflict: Conflicts may arise among members regarding business strategies,
allocation of profits, or day-to-day operations. Resolving these conflicts can be
challenging and may disrupt the functioning of the cooperative.
4. Limited managerial expertise: Cooperative members may lack the necessary managerial
skills and experience to effectively run the business. This can result in inefficiencies in
operations and decision-making.
 FORMATION OF COOPERATIVE FIRMS

1. Identifying a Need or Opportunity: The formation of a cooperative usually starts with a

group of individuals identifying a common need, problem, or opportunity that they
believe can be addressed more effectively through cooperation. This could be anything
from purchasing goods and services in bulk at lower prices to marketing products
collectively for better market access.
2. Feasibility Study: Before proceeding with the formation, the group conducts a feasibility
study to assess the viability and potential success of the cooperative. This study involves
analyzing market demand, financial projections, legal requirements, and potential
challenges.
3. Formation Meeting: Once the feasibility study indicates that the cooperative is viable,
the interested parties convene a formation meeting. During this meeting, they discuss the
purpose, structure, and potential benefits of the cooperative. They also establish the initial
founding members and elect a steering committee or interim board to oversee the
formation process.
4.Drafting Bylaws and Articles of Incorporation: The group drafts the cooperative's bylaws,
which serve as the governing rules and regulations of the cooperative. Additionally, they prepare the
articles of incorporation, which are filed with the appropriate government agency to formally register
the cooperative as a legal entity.

5.Membership Recruitment: The cooperative begins recruiting members who share the same
objectives and are willing to contribute financially and/or through labor. Membership criteria, rights,
and obligations are outlined in the bylaws.

6.Capitalization and Investment: Members contribute capital to the cooperative based on the
cooperative's capitalization requirements. This capital may be used for initial startup costs,
purchasing equipment, securing facilities, or other necessary expenses. Additionally, members may
invest time or expertise in the cooperative's operations.

7.Legal Compliance: The cooperative must comply with legal requirements for incorporation,
taxation, and any industry-specific regulations. This may involve registering with government
agencies, obtaining necessary permits or licenses, and adhering to reporting and tax obligations.
8.Organizational Development: As the cooperative evolves, it establishes its organizational
structure, including governance mechanisms, management roles, decision-making processes, and
member participation frameworks. Training and education programs may also be implemented to
empower members and strengthen the cooperative's capabilities.

9.Operational Launch: Once all necessary preparations are complete, the cooperative officially
launches its operations. This may involve securing contracts, acquiring inventory, establishing
distribution channels, and implementing marketing strategies.

10.Monitoring and Evaluation: After the cooperative is operational, ongoing monitoring and
evaluation are essential to ensure its continued success and sustainability. Regular assessments of
financial performance, member satisfaction, and adherence to cooperative principles help identify
areas for improvement and strategic adjustments.
 EXAMPLE OF COOPERATIVE FIRM

• One example of an Indian cooperative firm is the Amul Cooperative. Amul

is a dairy cooperative society based in Anand, Gujarat, India. It was
founded in 1946 by Tribhuvan Das Patel under the guidance of Sardar
Vallabhbhai Patel. Amul started as a response to the exploitation faced by
milk producers by middlemen and private dairy companies.
• Amul operates as a cooperative of milk producers, known as the Gujarat
Co-operative Milk Marketing Federation Ltd. (GCMMF). It collects milk
from over 3.6 million milk producers in Gujarat and other states of India.
The cooperative model allows milk producers to collectively bargain for
better prices and access to markets.
• Through its cooperative structure, Amul has been able to empower dairy
farmers, improve their livelihoods, and ensure a steady supply of high-
quality dairy products to consumers across India and even internationally.
THANK YOU