Types Of Cooperatives

Thursday, February 4th, 2016

Cooperatives, or co-ops, exist across a wide range of industries including food service, utilities, credit unions, agriculture, and child care. While co-ops operate much like traditional businesses to achieve success, they get their distinct advantage in their structure and democratic governance model. Familiarizing yourself with the most common types of co-ops can help you determine if this type of business is right for you. Common types of cooperatives include consumer based, worker or producer based, purchasing based, and hybrid.

Consumer based cooperatives

A consumer cooperative is owned and managed by the people who use its services. The goal of this type of cooperative is to meet the needs and desires of its members. Consumer cooperatives are focused on the services that they provide as opposed to financial gain. Consumer co-op stores guarantee high quality products at a lower price than their competitors. Many consumer co-ops are retail outlets, such as food cooperatives. Other popular types of consumer co-ops include insurance, healthcare, utility, housing, and personal finance cooperatives.
A disadvantage of consumer cooperatives is that they cater to small and medium-income groups. There is also a high level of dependency on the members and there can be a lack of drive for proper sales promotion.

Worker or producer based cooperatives

A worker or producer cooperative is owned and managed by the people who work there. There are many ways that a worker co-op can be structured. Some worker cooperatives operate in a democratic fashion in which every worker participates in the decision making process. Some of these businesses have an election for managers and administration. Other worker or producer cooperatives have managers that are treated in the same way as the workers. The majority of the workforce owns shares, and the majority of the shares are owned by the workforce. As the workers own the organization, there is often a higher level of motivation in a worker co-op than is found in traditional businesses.
A disadvantage of worker cooperatives is the complex management skills required to meet both co-op and business needs. There are also limited choices available for external finance and employment benefits.

Purchasing based cooperatives

A purchasing cooperative is a type of arrangement made to negotiate lower prices from specific suppliers. One common form of purchasing cooperatives is the retailer co-op. Government agencies often use this model to decrease procurement costs. Purchasing co-ops include grade schools, colleges and universities, municipalities, and counties.
These entities can sign contracts or agreements to use contracts that were acquired by other government entities in a legal manner. This option provides access to a wide range of competitive and legally awarded contracts.

Hybrid cooperatives

There are many hybrid cooperative models, such as a co-op that is both a consumer and worker co-op. In a worker-consumer hybrid model, the power is divided evenly between the workers and consumers. Any type of multi-stakeholder cooperative is considered to be a hybrid model. Additionally, there are second and third tier cooperatives that are considered to be hybrids because they have members that are other co-ops.

One of the biggest advantages of hybrid cooperatives is that they offer more access to capital than standard models. However, the hybrid business model also comes with increased complexity and decreased transparency, which can create areas for conflict. It is important to be aware of these potential risks and plan for them accordingly.

If you’ve always wanted to own your own business and have been weary about franchises, a KaleidoScoops ice cream cooperative is a great alternative. By joining this cooperative, you have the support of a large company with the freedom to do what you want with your business. Call KaleidoScoops today at 1(877) 426-8488 to Get The Scoop on becoming part of the KaleidoScoops cooperative or for information about our premium ice cream. You can also Contact Us by email to learn more.