This is default featured slide 1 title

Go to Blogger edit html and find these sentences.Now replace these sentences with your own descriptions.

This is default featured slide 2 title

Go to Blogger edit html and find these sentences.Now replace these sentences with your own descriptions.

This is default featured slide 3 title

Go to Blogger edit html and find these sentences.Now replace these sentences with your own descriptions.

This is default featured slide 4 title

Go to Blogger edit html and find these sentences.Now replace these sentences with your own descriptions.

This is default featured slide 5 title

Go to Blogger edit html and find these sentences.Now replace these sentences with your own descriptions.



To understand the meaning and characteristics of co-operative form of organisation.
To know the different types of Co-operatives
To evaluate the merits and limitations of co-operative organisation

All forms of business organizations whether sole trader, partnership of company centre around one theme namely maximization of profit. The co-operative form of organisation is different from these in one basic respect. Ti is set up not with profit as the guiding motive but with the fundamental object of organizing and rendering service for the organisation and its members. In a co-operative society, members participate in different capacities as producers, consumers workers and managers and secure the benefit of business activities through an equitable division of the business income.


               International Labour Organisation (ILO) defines a co-operative organisation as “an association of persons, usually of limited means, who have voluntarily jointed together to achieve a common economic end through the formation of a democratically controlled business organisation, making equitable contributions to the capital required and accepting a fair share of risks and benefit of the undertaking”. Dr. H.N. Kunzru, another leading authority on co-operation writes, co-operative is self-help as well as mutual help. It is joint enterprise of those who are not financially strong and cannot stand on their own legs and therefore, come together not with a view to get profits but to overcome disability arising out of the want of adequate financial resources.
            Thus, a co-operative society may be defined as “an association of persons, with limited resources and belonging to a homogeneous group, who join together on a voluntary and equal basis for the realization of their common economic interests in a democratic way.


1.    Voluntary association
A Co-operative society is a voluntary association of persons. Any person can join a co-operative society of his free will and can leave it at any time after giving due notice to the society.  While leaving he can withdraw his capital form the society. He cannot however, transfer his share to another person.

2.    Open membership
The membership of a co-operative organisation is open to all irrespective of race, caste or sex.

3.    Finance
The capital of a co-operative society is raised form members by way of share capital. since co-operatives are generally formed by relatively weaker sections of the society their capital collections are meager. Hence, the Government to encourage co-operatives lends financial support in the form of loan from the state and central co-operative banks.

4.    Liability of members
The liability of the members of co-operative society is limited.

5.    Democratic control
Democracy is the most significant characteristic of co-operative societies. The members elect the managing committee which manages the society. Since most of the co-operatives operate on a local scale, the meetings of the members are well attended and this puts the managing committee under close supervision. Each member irrespective of the number of shares held by him has only one vote, ‘One man one vote’ is the basic element of co-operative democracy. Member cannot vote by proxy. Again to strengthen democracy, some issues are not decided by a simple majority but by two-thirds or there fourths majority.

6.    Distribution of surplus
In co-operative organisation the surplus arising out of a year’s working is given to the members in the form of bonus which need not the proportionate to their respective capital contributions.

7.    Fixed return on capital
The capital is entitled to limited return and the co-operative pay fixed interest on paid up capital to its members.

8.    Service motto
A co-operative society is organized primarily with the object of rendering maximum service to its members. Through it also strives to get profit, the objective of getting profit is only secondary.

9.    State Regulations
The co-operatives are subject to considerable state control and supervision. The co-operative societies are registered under the co-operative Societies Act. 1912. The co-operative department keeps a watch on the working of the societies and tries to regulate in whenever necessary. Every co-operative has to get its accounts audited by an auditor from the co-operative department and has to furnish returns of membership and annual report and accounts to the Registrar of co-operatives.

10.   Education and training
A co-operative society also exhibits the feature of education and training to its members with the purpose of developing co-operative spirit.

However with the passage of time, some of the above principles have undergone modifications keeping in view the demands of the new and emerging situations.


             From the nature of their activities, business co-operatives may be broadly classified into the following categories.

1.    Consumers’ Co-operatives
2.    Industrial Co-operatives
3.    Marketing Co-operatives
4.    Co-operative credit societies
5.    Co-operative farming societies

1.    Consumers’ Co-operatives

A consumer co-operative society is a voluntary association of consumer formed to obtain their requirements of goods and services at reasonable prices. These co-operatives make their purchase in bulk from manufactures or wholesalers and sell the goods to members as well as to non-members at market prices. Such societies help in eliminating middleman and stabilizing prides. The surplus earned by such societies is distributed among members in the form of bonus.

2.    Producers’ Co-operatives

This is also called industrial co-operatives. These societies are voluntary associations of small producers formed for undertaking collective production or providing production facilities and services like new materials, tool, technical knowledge etc to its members. The members supply capital and may also provide labour. The products are sold to members and non- members.

3.    Monetaring Co-operatives

A marketing co-operative is a voluntary association of producers organized to arrange the sale of their output and performs essential marketing functions like grading, warehousing, and transportation. The main aim of these societies is to rationalize the whole marketing system so that it may be beneficial to members. The sale proceeds are distributed among the contributing producers according to their contribution to the pool.

4.    Co-operative credit societies

A co-operative credit society is a voluntary association of people with limited financial resources formed with the objective of extending short-term loans and developing the habit of saving among them. These societies may be formed by agriculturists, artisans, salary earners etc. The fund of these societies consists of share capital contributed by the members, deposits and loan form the co-operative central financing organizations and the Government grants and subsidies.

5.    Housing Co-operatives

A Co-operative housing society is a voluntary association of persons with limited resources formed to secure the ownership of a house or obtaining accommodation at fair and reasonable rent. Each member has to buy atleast one share and his liability is generally limited to the value of that share.

6.    Farming Co-operatives

These societies are basically agricultural co-operatives formed with the object or achieving the benefit of large scale farming and maximizing agricultural output. These societies aim at expansion of production, improvement of farming techniques, rational utilization of land and most desirable allocation of manpower.



1.    Easy formation

It is easy to form of co-operative society. Any ten adult persons can from it. No cumbersome legal formalities are involved and the cost of formation is also less. The rules and bye-laws are more or less standardized.

2.    Democratic management

The principle of ‘one man one vote’ makes the functioning of the society really democratic. There is a continuous interaction between the managers and the managed at the meetings. The operational expenses are also minimum.

3.    Scope for internal financing

Since, a portion of the profit is kept as reserve, it saves as a useful source of internal financing for the co-operatives.

4.    Limited liability

The liability of the members is limited to the proportion of their capital contributions mentioned in the bye-laws.

5.    Stability

The co-operative society enjoys perpetual existence. Its life is not affected by the death, retirement insolvency or lunacy of a member.

6.    Economic production and distribution

A co-operative society is able to produce and market goods and services at economical prices by procuring input resources at subsidized rates from the government.

7.    Special exemptions and privileges

A co-operative society enjoys a special exemption in matters of taxes, stamp duties, and registration fees and other benefits from the Government.

8.    Social benefits

Co-operatives bring about a host of social advantages. The promote the habit of thrift and saving among members. A strong family spirit is developed among the members belonging to a particular area or profession. By distributing surplus to members, co-operatives ensure a more equitable distribution of wealth.


1.    Limitations of Capital

Co-operative are able to collect only limited capital as the members are people with limited resources.

2.    Inefficient management

A co-operative society generally suffers on account of inefficient management. It is not in a position to employ and retain competent professionals due to limited financial resources. Hence,  it has to depend on its own members who lack technical knowledge, skill or experience.

3.    Lack of unity and cohesion

The functioning of a co-operative society is generally marred by a lot of rivalry, functionalism and politicking among its members and this reflects on the efficiency and effectiveness of the society.

4.    Limitation of size

Since, a co-operative society is generally organized to cater to the requirements of limited membership, its size is small and therefore operations are also small consequently it may not be able to achieve the economies of large scale operation.

5.    Inadequate motivation

Low dividend to members and poor remuneration do not motivate people in the cooperative society.

6.    Delay in decision making

The conduct of business of a co-operative society is strictly according to the rules and regulations framed by the Government. Important matters can be decided only at the general meeting. Due to these there is delay in decision making and the implementation.

7.    Excessive state regulations

The society is subjected to a lot of supervision and regulation by the Government such as submission of accounts, its audit, approval of appointments etc. This affects the flexibility of its operation and the efficiency of its management.

8.    Lack of public confidence

A co-operative society generally does not enjoy much public confidence. It is due to both the excessive state regulation and the dishonest and political conduct of the office bears. From the foregoing evaluation, it emerges that co-operatives are suitable mainly for small and medium sized enterprises and where there is definite demand of goods and services, where sophisticated technology, advertising are not involved and where area of operation is small.


Scientific Management

Here we understand the concept and elements of scientific management
 & the benefits and the criticisms of scientific management.

The operating a business enterprise the management has two possible approaches the first is referred to as the traditional management, involving either a subjective or an intuitive evaluation of the problem and making of a decision. This is also called hit-or-miss and rule-of-thumb method. The second is referred to as the scientific management, involving orderly, methodical programme for exploration, analysis and solving the problem. It is predicted upon two beliefs: a) that there is aone best way of doing work and b) that organized systematic analysis is superior to intuitive judgment in finding that one best way. It was F.W. Taylor (1911) who popularized the concept of Scientific Management. His ideas made a tremendous impact on the factory managers of his generation and since then they have continued to influence the ideas and practices of the successive generations of managers till to-day. That is why Taylor has been universally regarded as the “Father of Scientific Management”.

To F.W. Taylor, the traditional systems of management were systems of “initiative and incentive”. The initiative to do a work was always taken by the workers and the management merely provided the necessary incentives to the works to get the best from them. Whenever the expected results did not follow, the management threw the whole blame upon the workers. The management did not take any responsibility to improve the skills of the workers. The management followed the rule-of-thumb or a trial and error method in running the affairs of the business. This made Taylor to devise ‘Scientific Management’. Under his scheme of scientific management, Taylor wanted the management to take initiative in determining the best way of doing the work by research and analysis, and then, to train and teach the workmen the best method of doing a work before he is actually given the work. His basic trust was summarized by himself as: “Science, not rule of thumb, harmony, not discord, co-operation, not individualism, maximum output in place of restricted effort and the development of each man to his greatest efficiency and prosperity”.


                 Scientific management may be referred to as a way of thinking and attitude which discards the traditional hit-and-miss and rule-of-thumb methods of doing work and replaces them the scientific methods and practices for the solution of the problems of industrial management.
Taylor defines scientific management as “knowing exactly what you want men to do and seeing that they do it in the best and the cheapest way”.


1.    Scientific management calls for the collection of all factual information, statistical data affecting the operation of the business.

2.    It demands the screening the strategic facts and situations from the data collected and the formulation of law of managerial performance based upon such facts.

3.    It requires the establishment of various standards of work performance in regard to time, quantity, quality and cost for exercising effective control over the enterprise.

4.    It makes out a case for undertaking planning before doing.

5.    It involves the establishment of rules for regulating the conduct of human beings, developing team-work and securing harmonious operations.


The various elements of scientific management

1.    Determination of task
2.    Planning the task
3.    Scientific selection, training and remuneration of workers
4.    Standardization of materials and equipments
5.    Specialization
6.    Mental revolution


Under scientific management, the management is responsible for determining the task for every worker through careful scientific investigation. The standard task that is set by the management is the amount of work which an average worker working under ideal standardized conditions in an atmosphere of mutual trust and co-operation will be able to do in a day. This was called a ‘proper days’ work by Taylor. In setting a task, a great deal of care has to be exercised. If the task is much higher than the capacity of the ordinary worker, it will defeat the very purpose of scientific management. Hence, the Taylor advocated the use of scientific techniques in task setting. Those techniques include a) methods of study b) motion study c) time study d) fatigue study and e) rate setting.
a)    Method Study:
“Method study is a systematic recording, analysis and critical examination of existing and proposed ways of doing work and the development and application of easier and more effective methods”. The first step is preparation of process chart setting various operations that are to be performed. The management should them make efforts to reduce the distance travelled by materials and effect improvements in material handling, transportation, inspection and storage etc. The possibilities of eliminating or combining certain operations may be studied. The management should thus try to ensure that the operations are laid out in the best manner.

b)    Motion study:
Motion study is the study of movements whether of a machine or an operator, in performing an operation for the purpose of eliminating useless motion and of arranging the sequence of useful motions in the most efficient order. the purpose of such a study is to find out the one best method a of job performance which every worker will be expected to follow.

c)    Time Study:
Time study may be defined primarily as the art of observing and recording the time required to do each detailed element of an industrial operation. It involves the careful measurement of the time required to do the several detailed parts of a given operation. The basic purpose of time study is to determine the proper time for performing the operation. Such study is conducted after the motion study.

Time and motion studies help in determining the best method of doing a job and the standard time allowed for it.

d)    Fatigue study:
Fatigue is the diminution of the capacity for work due to long hours of work or lack of rest. Fatigue of all kinds-physical mental and nervous affects efficiency, productivity and health. It is therefore, necessary to regulate the working hours and provide for rest pauses at scientifically determined intervals. The fatigue study, helps to decide this.

A modern term used to refer both methods of work and work measurement (time and motion studies) is work study. Work study may be defined as the systematic, objective and critical examination of all the factors governing the operational efficiency of any specified activity in order to effect improvement.

e)    Rate Setting:
Rate setting is the process of fixing wage rates in such a manner that the average worker is induced to attain the standards. For the purpose, Taylor recommended the differential piece-wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than those inefficient workers who are not able to come up to the standard set.


 The planning is said to be soul of scientific management. The planning of task usually involves decisions as to what work shall be done, how the work shall be done, where the work shall be done and when the work shall be done. The question ‘what work shall be done is generally decided by the management and the engineering department whose information is passed on to the planning department. The planning department will then the required to perform the other functions of production planning and control such as issuing orders to suppliers, routing the sequence of machines, processes and operations, assigning the time for each operation / process, ensure that the necessary materials and tools are readily available and collect all returns and records of performance and maintain them for future reference and for use in the administrative departments.


The fulfillment of task requires that competent workers are selected, trained and remunerated. The scientific approach to the performance of selection requires determination of manpower requirements, job analysis, determining sources of recruitment, conduct tests and interview and placement.
The management must take steps to train the workers systematically and scientifically before assigning them the job. A large number of on-the-job and off-the-job training methods have come into practice to train the workers.
A logical system of remunerations has to be devised. Taylor recommended the ‘differential piece-rate plan’ to induce workers to achieve standard task.

4.  Standardization

Standardization means bringing about uniformity with the object of facilitation smooth and efficient performance of tasks by workers.
Standardization may be introduced in materials, tools and equipment, working conditions (ventilation, humidity, safety precautions etc.) and speed for every machine.

5.  Specialization

Taylor advocated introduction of specialization in the administrative and organizational set up of the plant. It includes functional foremanship (Rote clerk, Instruction clerk, Time clerk etc.) management by exception and cost accounting.

6.    Mental revolution

Taylor said, scientific management, in essence, involves a complete mental revolution on the part of the worker and the management including the foreman and superintendent. In other words, both sides must aim for co-operation for maximizing output and give up hostility and suspicion. Workers should change their traditional outlook and must learn to perform the task given to them with efficiency and speed without resolving to go-slow tactics. Likewise the management should deem its duty to treat its workers with dignity, arrange for scientific training, provide for congenial working environment and should not hesitate to share the gains on a reasonable basis.

It must be remembered that scientific management is an organic whole and cannot be introduced in piece meal. Further it cannot be introduced all of a sudden and the results will not be immediate. It can take place only slowly and the benefits reaped after a period of time. As H.S. Person has rightly said, “it must be planted and cultivated like a tree. It is not something to be bought and installed like a boiler or a machine”. Merits of Scientific Management.

1.    Scientific management seeks to bring about a mental revolution, - a change in the attitudes of workers and management.
2.    It encourages experimentation investigation and scientific study and analysis in every phase of industrial activity.
3.    It promotes revolution in planning.
4.    By introducing scientific methods of selection, training and compensation and by standardizing materials and equipments it brings benefits to workers by reducing physical mental and nervous strain.
5.    It helps increase production, profits and employment.
6.    It fosters co-operation between workers and management.


      The concept of scientific management has been criticized by employers, employees and others.


The employees criticize the introduction of scientific management on the following grounds:
1.    Employees consider that the scientific management is a device to extract maximum output by speeding up the work. But this is not true. The worker’s productivity is improved not by speeding up the work, but through scientific methods of carrying it out.
2.    Employees fear that it reduce them to mere machines. This is also not true since particular method of doing a work is determined in advance scientifically.
3.    Employees feel that excessive job simplification and standardization kills skill, initiative and creativeness in the worker and makes the work dull, mechanical and monotonous. Though it is partly true an effort is made to lesson the monotony by placing the right men for the right job.
4.    It is common complaint of works that the wage rise is not proportionate to rise in productivity. It cannot be denied that both workers and management should get their due share in increased profits.
5.    Employee’s union show resentment against scientific management that it divides the workers (through differential piece rate) and weakness trade unions. This is not true. In fact under scientific management efficient workers are paid more and they are not divided. Taylor feel trade unionism is unnecessary as everything is taken care of by scientific management.
6.    Employees and their unions feel that it causes unemployment of persons who could not rise up to the expected standards. It is partly true. There is always scope for increasing efficiency by training.


1.    The employer’s criticism is that
the scientific management implies mainly centres around the introduction of the planning department and the additional cost involved.
2.    Employees argue that adoption of scientific management involves a complete reorganization of production pattern which will render the existing plant obsolete and thereby involve the organisation into a great loss. It is partly true.
3.    Owners of small business feel that this is not suitable for them as it is too expensive.


1.    Scholars criticized that  the use of the term scientific management is misnomer. They argue it is only scientific approach to management and not scientific management.
2.    It is also criticized that it is primarily concerned with ‘task management’ but did not deal with the problems of marketing, personnel, finance etc.
3.    Scientific management separates ‘planning’ from doing. But it is said that they are not separate jobs but separate parts of the same job.
4.    Psychologists criticize that by emphasizing one best way of doing things’ the scientific management kills creative abilities of workers.
5.    Psychologists criticize that it makes use of financial incentives alone and non-financial incentives which are also equally powerful in motivating the workers are not used.

It can be said that many of the criticisms raised against scientific management are exaggerated. A large part of the criticism must be attributed to the faulty methods of adopting it and not to the approach made by the system. The principles suggested by Taylor are as much valid to-day. Not only that, Taylor’s contributions were used as the basis for introducing refinement, modification and expansion of many techniques, and philosophies of management.


1.    To understand the meaning and characteristic features of company form of organisation.
2.    To understand the different kinds of companies
3.    To understand the merits and limitations of company form of organisation

The scientific and technological developments, efficient means of transport and communication and the socio cultural development of the people have necessitated the expansion of business, industry and commerce. The sole proprietorship and partnerships could not cope up with these developments and hence businessmen had to think of newer form of business ownership which resulted in company form of organisation.

Meaning of Company:
            The Companies Act, 1956 defines a company as ‘a company formed and registered under this Act or an existing company. This statutory definition is not very revealing in so far as the characteristics of a company are concerned.
            A more comprehensive definition is that a company is an “artificial person recognized by law with a distinctive name, a common seal, capital comprising of transferable shares, carrying limited liability and having a perpectual succession”.


1.        Legal entity:
Every company has a separate legal entity apart from its members. It is a artificial person and enjoys certain rights and privileges of a natural person.

2.        Limited liability:
The liability of each shareholder is limited to the amount unpaid on their shares irrespective of quantum of loss.
3.        Transferability of shares:
The capital of the company is divided into parts called shares. These share are transferable.

4.        Perpectual succession:
A company has a continued existence its continuity is not affected by death, in solvency or exit of any shareholder. The common saying in this regard is “members may come, members may go, but the company goes on forever”. Law creates it and law alone can dissolve it.

5.        Separate ownership and management:
The management of a company is entrusted with the representatives of the shareholders namely board of directors. Hence, ownership and management are separate.

6.        Common seal:
Every company has a common seal which is used as an emblem on all legal documents. Since the company is an artificial person the seal is used as the signature of the company to sign any document.

7.        Separate property:
A company, being a legal person, is capable of acquiring owing and disposing of property in its own name. it has the right to entre into contracts in its own name.

8.        Capacity to sue:
Being a legal person and enjoying distinct entity, a company is fully competent to sue others and be sued by others.


            These companies were formed in the 19th century under a special charter granted by the King or Queen of England. They do not find any place in India after independence.

            These companies are created by a special Act of the legislature – central or state. Such companies are governed by the provisions of their respective Acts. Example: Reserve Bank of India. The Industrial Finance Corporation of India, LIC, Unit Trust of India etc.


Private Company

     A private company is one which by its articles

a.    Restricts the right of its members to transfer their shares.
b.    Limits the number of its members to fifty.
c.    Prohibits any invitation to the public to subscribe for any shares in or debentures of the company.

Public Company:
            A public company means a company which is not a private company.

Companies limited by shares:
         A company in which the liability of each member is limited upto the face value of shares held by him is known as a company limited by shares.
Companies limited by guarantee:
            These companies are usually formed to set up non-trading organizations like schools, hospitals charitable institutions, etc. The liability of each member in such a company is limited to the amount he has guaranteed to contribute in the event of the winding up of the company.
Unlimited Companies:
            These companies may or may not be registered with a share capital. But the liability of members of these companies is unlimited. Such companies are rarely formed now-a- days.
Government companies:
            A registered company in which not less than 51 per cent of the paid-up share capital is held by a Central Government or by a State Government or jointly by the Central and State Government is known as a Government company.
Foreign companies:
            A company which is incorporate outside India and has established a place business in India is known as a Foreign company.

Holding and subsidiary companies:
                 A company which controls, the composition of the Board of Directors of another company or holds the majority of the equity shares of another company, is known as a holding company. The other company which is to controlled is known as a subsidiary company.
Advantages and limitations of Company form of organisation


1.    Huge financial resources:
The biggest advantage is that the company is able to collect huge financial resources from the public by issue of shares and debentures. There is virtually no limit on the member of persons who can become the members of the public company.

2.    Limited liability:
The members are not liable to pay anything more than the face value of the shares of the company to cover business debts in the event of failure of the company. This limited liability is the another biggest advantage.

3.    Easy transfer of ownership:
The company permits its members to easily transfer their shares and hence the owners of shares need not commit that resources for the entire life of the company.

4.    Stability
The company enjoys perpetual existence and stability. The feature permits it to undertake projects of long duration and offers a greater attraction to the investors to put their resources in the business.

5.    Greater scope for growth and expansion:
The company form affords enormous possibilities of growth and expansion. Since business is conducted on a large scale, it brings the economies of scale especially in the field of production, marketing and finance.

6.    Efficient management:
The company, because of its larger size and greater resources are able to employ people with exceptional abilities and competency. This helps to manage the organisation effectively and efficiently.

7.    Public confidence:
A company organisation enjoys confidence and trust of general public because its activities are made open to public through accounts and annual reports. This public confidence helps a company to raise additional capital, to market its products easily and to undertake growth and expansion programmes.

8.    Democratization of ownership:
This form gives scope for large number of people to become members and they elect their representatives to manage the company. Hence, the ownership is democratized in this form.


1.    Difficult to form:
To form the company, several legal formalities are to be observed. The cost of formation is also quite high.

2.    Lack of incentive:
This actual management of the company is not in the hands of shareholders but it is entrusted to the directors and salaried officials. One cannot expect the officials to take care of the company with as much interest and enthusiasm as the proprietors.

3.    Delay in taking decisions:
Decisions are not taken by one person but through the Board or Directors and till the Board meets, decisions have to be delayed and consequently implementation is also delayed.

4.    High cost of administration:
In the company form of organisation, the cost of management and administration is very high.

5.    Conflict of interest:
A Company organisation witnesses conflicting interests among those who deal with it such as equity shareholders and preference shareholders, directors and shareholders, managers and workers etc.

6.    Oligarchic management:
In lew, the company management may seem to be fully democratic but in practice it is mostly a case oligarchic (controlled by a small group of directors).

The advantages of the company form of organisation outweigh its limitations. Despite its weaknesses this form of organisation is best suited to large sized business activities which require huge capital outlay and maximum stability.