Unit 3 - Business Economics and Economic Efficiency
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Essay Unit 3 - Business objectives differences between co-operatives and private sector firms
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Unit 3 - Business Economics and Economic Efficiency
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PEARSON (PEARSON)
This essay includes two points using chains of analysis that discusses the extent to which the business objectives of a large private sector firm differ from those of a co-operative.
Unit 3 - Business Economics and Economic Efficiency
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Unit 3
Discuss the extent to which the business objectives of a large
private sector company, such as Sony, are likely to differ from those
of a co-operative organisation.
Business objectives are the aims that a firm hopes to achieve. Cooperatives are
organisations that are owned and run by the members for their own benefit.
The three types are consumer, producer and worker cooperatives.
The business objectives of large private sector companies usually differ from
cooperatives as private sector firms, such as Sony, normally prioritise profit
maximisation whereas cooperatives tend to meet the needs of its members,
such as providing quality products or services. For example, line 4 of extract 2
states “Co-operatives measure their success, not only in terms of financial
performance, but also on their ability to meet their members’ needs” in
contrast most private sector firms would rather increase profits in order to
meet the expectations of shareholders. However, this may not always be the
case. After a certain level of growth, cooperatives may choose to have profit
maximisation as their main business objective. For example, Arla foods is the
largest farmer owned dairy company in Scandinavia, but unlike most
cooperatives it is actually profit maximising. In this case, private sector firms
and cooperatives objectives do not differ to a large extent.
Another way they differ is that cooperatives tend to give higher priority to
social objectives compared to private sector companies. Given that private
sector firms are usually profit maximising, firms may not employ practices that
are socially responsible as they may increase costs of production thus causing a
fall in profits. Whereas cooperatives are run by members for members, so they
would be inclined to take the social interests of members into consideration.
For example, line 6 of extract 3, regarding a cooperative, states “The TCGA was
formed in 1984 in order to bring about higher prices, improve living conditions
for cocoa growers and help farmers increase the quality of their cocoa.”
Whereas line 5 of extract 1, regarding Sony, states “Talks have been held with
trade unions with the aim of ending the system of paying production workers’
wages based on the number of years employed.” The contrast of the two
statements shows the difference in objectives between cooperatives and
private sector companies concerning the social aspect of business. However,
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