Cooperatives are a form of organization owned and controlled by members, not investors. These members may include businesses, individuals or a combination of both, depending on the type of cooperative. The main feature of such cooperatives is that they exist to serve their members rather than to make a profit. Any revenue surplus is therefore distributed among members according to their shares.
Initially set up by farmers producing similar products to assist individual farmers in the sale of agricultural products, marketing cooperatives today work with many other products. They collect products belonging to the same category under one roof for easy access to wholesalers and retailers, and work to negotiate terms of sales as well as prices with the buyers. Marketing cooperatives help members to lower costs involved in transportation and marketing, and give them access to a larger and often more secure market. These co-ops do not pay taxes on their profits, and those savings are passed on to the members as additional profit.
Purchasing or Service Co-ops
Purchasing cooperatives buy goods or services and sell these at lower prices to their members. This helps to reduce expenses for members who purchase from the co-op. Businesses who are members of such co-ops also save on services such as advertising and insurance. Besides agriculturists, such cooperatives also serve other consumers in sectors such as schools, households and hospitals. Service cooperatives, also known as consumer cooperatives, work to negotiate better purchase terms for consumer members in areas such as health care, housing, electrical power and insurance.
Workers join together and run a business that may be a small bakery or a large industrial unit. The workers invest in the cooperative and are the members as well as the joint owners of the business. Such cooperatives provide members with opportunities for employment and business. Each member has the right to vote on the board of governing members and participates in deciding company policies. To work successfully, these co-ops require a high level of communication and trust among members.
Cooperatives that comprise elements of different types of co-ops are known as hybrid co-ops. For example, certain cooperatives such as electric co-ops have members who are power suppliers as well as consumers. They purchase power at lower costs for their members and distribute it at lower costs to consumers, combining aspects of purchasing and consumer cooperatives. Also known as multi-stakeholder cooperatives, they have distinct roles and rights for different member categories. Being more complex in nature, these cooperatives must be managed with greater care to avoid tension among members.