Coop/ Joint ventures/ Franchises

Question 1

Cooperatives

Answer 1

A business where all members contribute to the running of the business, sharing the workload

Question 2

Joint ventures

Answer 2

Two or more businesses agree to work closely together on a particular project and create a separate business division to do so

Question 3

Pros of a cooperative

Answer 3

Buying in bulk
Working together to solve problems and take decisions
Good motivation for all members to work hard as they will benefit from shared profits

Question 4

Cons of Cooperatives

Answer 4

Poor management skill, unless professional managers are employed
Capital shortages cause no scale of shares to the non member general public is allowed
Slow decision making if all members are to be consulted on important issues
Harder to raise capital compared to a PLC

Question 5

Pros of Joint ventures

Answer 5

Different companies might have different strength and experiences and they therefore fit well together
They might have their major markets in different countries and they therefore fit well together
They might have major markets in different countries and they could exploit these with the new product more effectively than if they both decide to ‘go it alone’
Shared costs and resources

Question 6

Franchises

Answer 6

A business that uses the name, logo and trading systems of an existing successful business

Question 7

Pros of franchises

Answer 7

Fewer chances of business failure as a established brand and product are being used (Franchisee)
Advice and training offered by the franchiser (Franchisee)
National advertising paid for by franchiser (Franchisee)
Supplies obtained from established and quality- checked supplier (Franchisee and Franchise)
Franchiser agrees not to open another branch in the local area (Franchisee)

Question 8

Cons of Franchises

Answer 8

Share of profits or revenue has to be paid to franchiser each year (Franchisee)
Initial franchise license fee can be expensive (Franchisee)
Local promotion may still have to be paid for by franchise (Franchise)
No choice of supplier or supplier to be used (Franchisee)
Strict rules over pricing and layout of the outlet reduce owners control over their own business (Franchsisee)