Business Ownership: Co-ops and Social Enterprises (Cambridge (CIE) A Level Business): Revision Note

Co-operatives

• Co-operatives are a form of for-profit social enterprise that are owned and run by and for their members with the principle that working together means more power

  • Each member owns one share and has one vote on key decisions

  • Profits are either shared equally between members or reinvested for their benefit

• Co-operatives are often celebrated as businesses that take a broader approach to business than the generation of profits and provide some key social benefits

• However, they do have some disadvantages:

  • Decision-making in cooperatives can be time-consuming, as members have the right to have a say

  • When a member leaves a cooperative, their share is relinquished and they receive no further benefits

  • Disagreements can occur when members possess differing social and commercial objectives

Types of cooperatives

1. Employee co-ops

• Owned equally by workers within the business

• Each employee has a vote in business decisions

• Profit is shared equally between employees

  • E.g., Flaskô in Brazil, which was purchased by its employees in 2003

2. Community co-ops

• Owned by members of a local community

• Members usually contribute time as well as finances to the cooperative

• Profit is commonly reinvested to continue providing socially valuable products

  • E.g., Hour Exchange Portland in the USA, a time-bank organisation

3. Retail co-ops

• A group of independent retailers come together and operate under one brand name

• Buying power is increased and marketing costs are shared

  • E.g., DIY retailer ACE Hardware in the Philippines

4. Producer co-ops

• Groups of manufacturers work together during the production process

• Sharing and maximising the use of expensive capital equipment is often a key aim

• Producer cooperatives are common in agriculture

  • E.g., The German Wine Group cooperative brings together small wine producers in the country's main wine-producing regions

5. Financial co-ops

• Organisations that provide financial services to individuals that may not otherwise qualify for standard banking products

• Often focused on a particular community

• Social aims take precedence over profits

  • E.g., in the UK, Medway Credit Union provides loans and savings facilities to those living with challenging circumstances

6. Housing co-ops

• Organisations that provide housing for members 

• Members collectively own and benefit from socially cohesive and lower cost dwellings

  • E.g., Almost 30% of housing in Poland is owned through housing cooperatives with Spółdzielnia Mieszkaniowa in Warsaw being one of the most well-known housing cooperatives

Social enterprises

• A social enterprise is a business that has the primary purpose of creating social or environmental impacts, in addition to generating profits

Objectives of social enterprises

Evaluating social enterprises