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Saturday, 18 June 2011

Disadvantages or Limitations or Demerits or Defects causes of failure of Cooperative Society

Following are the demerits of cooperative societies :

1. Lack of Capital :-
Generally the members of cooperative societies are poor and they can not provide the capital on large scale. The external resources of the society are also limited so it faces the shortage of capital problem.

2. Lack of Experience :-
There is a lack of business experience to the members of the society. Another problem is that a society can not hire the services of the experts due to its limited resources.

3. Absence of Discipline :-
Every member of the society considers him the owner of the business so inefficiency takes place and business suffers a loss.

4. Lack of Sincere Management :-
Generally the management of the society remains in the hands of the selfish and dishonest members and they take undue advantages of their powers, so it affects the business.

5. Lack of Profit Incentive :-
Basically cooperative society is not a profit earning institution. So the absence of profit incentive is an obstacle in the way of its progress.

6. Delay in Decisions :-
Generally is delayed in making various decisions about the business. It becomes the cause of failure.

7. No Legal Pressure :-
The cooperative societies Act 1925 is not comprehensive and contracts are not legally enforceable. It is also the demerit of the cooperative society.

8. No use of New Technology :-
The society cannot use the latest technology in producing the goods clue to limited sources. So demand and profit remains low.

9. Limited Scale :-
A cooperative society can not start its business on large scale due to many reasons. It produces the goods on small scale and its costs of production remains high. Limited scale of production becomes the cause of loss.

10. Instability :-
Frequent changes takes place daily in the members of the society, It makes the business unstable.

11. Absence of Co-operation :-
Generally it is observed that there is a lack of cooperation spirit among the members which becomes the cause of business failure.

12. Lack of Knowledge :-
Generally the members do not know the principles and rules of the society. So they create problem for it.


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