Large Scale Business Organisations

Welcome dear students! Today we are going to learn about Large Scale Business Organisations from Class 8 Social_Science. After studying this chapter, you will be able to recognize the importance and salient features of large scale business organisations. You will understand the principles, types, merits and demerits of co-operative societies. You will also understand the structure of Joint Stock companies, and analyse the features, merits and demerits of multinational corporations. Let us begin by understanding why large scale business organisations came into existence. Sole trading concerns, partnership firms, and Hindu undivided family business organisations suffer from several problems. These include inadequate capital, lack of managerial skills, lack of continuity, and unlimited liability. To overcome these serious problems, large scale business organisations were formed. The important large scale business organisations are Co-operative Societies, Joint Stock Companies, and Multi-National Corporations. [CHECKPOINT] Let us first study Co-operative Societies. These are one of the business organisations found all over the world. They are voluntary organisations started by economically weaker sections of society with the motive of organising and rendering service to its members. The first co-operative society was started by Robert Owen in the year 1844 at Rochdale in England. It was a consumer Co-operative society. Generally, these societies are started to achieve the economic progress of the people who join on the basis of equality. These societies free their members from economic exploitation. For example, farmers join together and start a Credit Co-operative Society to avail loans at a lower rate of interest and free themselves from the clutches of local money lenders. Another example is that Co-operative marketing societies are started by small producers in order to save themselves from the clutches of the middlemen. They manage to get due prices for their produce. [CHECKPOINT] Now, let us look at the formation of Co-operative Societies in India. The formation of Co-operative Societies is governed by the provisions of the Co-operative Societies Act of 1912 or the state government Acts which are in force in different states. Let us discuss the general features of Co-operative Societies. First, they are voluntary organisations. Second, the membership is open to all adults above 18 years, irrespective of caste, religion, creed, and gender. Third, there is no upper limit for membership. Fourth, there is democratic management. All the members attend the General Body Meeting and each member has one vote irrespective of share of capital invested. Fifth, profit is distributed in proportion to the share of their capital equally among all members not less than 6.25 percent. Sixth, one portion of the profit is transferred to general fund. Seventh, their status and management are supervised by the Government. [CHECKPOINT] There are seven main types of Co-operative societies. They are Credit Co-operative societies, Marketing Co-operative societies, Producers Co-operative societies, Consumers Co-operative societies, Farmers Co-operative societies, House building Co-operative societies, and Co-operative societies for different services such as supply of drinking water and improvement of education. What are the advantages of Co-operative societies? First, it is easy to form Co-operative societies. Second, there is no need of heavy capital. Third, there is no discrimination among the members. Fourth, all the members have equal rights and responsibilities, and it runs on democratic principle. Fifth, each member has one vote. Sixth, the liability of the members is limited. Seventh, they help the members to develop habits of savings. Eighth, the Co-operative societies are via media arrangements between capitalism and socialism. Ninth, the main motto of the Co-operative societies is One for all and all for One. [CHECKPOINT] However, there are also demerits of Co-operative Societies. First, the societies have limited capital resource, so large scale business is not possible. Second, it is very difficult to get suitable staff. Third, there are chances of mismanagement. Fourth, there are chances of misuse of money. Fifth, there are chances of corruption and favouritism. Let us now learn about the Co-operative Movement in India. The Co-operative Movement was started in India by passing the Co-operative Act in 1904. An act was passed in 1912 and registration was made compulsory. After independence, under Five Year Plans, the Co-operative societies came to prominence. Today we have about eight lakh Co-operative societies in our country. In Karnataka state, the first Co-operative society was started at Kanaginahala in Gadag Taluk, which is now a District. The Bengaluru City Central Co-operative society was started in 1905. Dharwad district of our state gave more importance and top prominence to the Co-operative movement, and hence Dharwad district is called The cradle of Co-operative movement. [CHECKPOINT] Next, we will study Joint Stock Companies. The Joint Stock Companies Act of 1956 regulates the formation, extension, functioning, and liquidation of Joint stock companies in India. According to the Joint Stock Companies Act of 1956, a Joint stock company is defined as a business organization created by law, having a separate legal entity with a perpetual succession and a common seal. Haney defines Joint stock companies as a voluntary organisation of individuals for profit having its capital divided into transferable shares, the ownership of which is the condition of membership. A joint stock company is a business that is owned by its investors. The shareholders buy and sell shares and own a portion of the company. The percentage of ownership is based on the number of shares that each individual owns in the company. [CHECKPOINT] Now let us move on to Multinational Corporations. Multinational corporations took their birth as early as 1860. It means they became popular after the Second World War. In the early days, U.S.A was the homeland of these corporations. Later on, a large number of such corporations emerged in European countries and Japan. Today, multinational corporations have developed even in developing countries. South Korea has a number of multinational corporations like Samsung and Hyundai. Indian corporations such as Tatas, Birla, Infosys, and Wipro have become multinational corporations. What is the meaning and explanation of Multinational Corporations? A Multinational corporation owns and manages business in two or more countries. According to the International Labour Organisation report, the essential management of the multinational enterprises lies in one country and they carry on their business in a number of other countries. Examples include Sony from Japan, Coca-cola from U.S.A, Samsung from South Korea, Hindustan Unilever from the United Kingdom, Philips from Holland, and Glaxo Smith Kline from the United Kingdom. The nation with the headquarters is called the Mother country. The nations that come under its jurisdiction are called patron Nations. [CHECKPOINT] Let us examine the features of Multinational Corporations. First, they are large corporations, and their assets and transactions are also of large scale. Second, they operate their business at least in six countries. Third, they produce goods even in the countries where they operate their business. Fourth, they have centralised control from the head office. Fifth, they have production, marketing and other facilities in several countries. Sixth, they play an important role in International Trade. Seventh, they provide technological facilities in the countries which come under their preview. What are the advantages of Multinational Corporations for the home country? First, they obtain raw materials from host countries at low prices. Second, they may also obtain the technological and administrative skills from host countries. Third, they export raw materials and finished products to host countries, thus their profit is more. Fourth, it is possible to earn ample income through profit, royalty, and through administrative agreements with host countries. Fifth, they create more employment opportunities in the home country. [CHECKPOINT] What are the advantages for depending or host countries, also known as patron countries? First, the capital investment increases even in host countries. Second, if the host countries are developing countries, the home country provides technology and through administrative procedures, it causes a revolution. Third, the host countries are helped by the increase of exports and decrease of imports. Fourth, it is possible to produce high quality products. Fifth, the important opportunities to increase in host countries, research and developments are promoted in host countries. Sixth, they help the utilisation of internal resources. However, there are disadvantages of Multinational Corporations. The home country gets the lion’s share in the profits. They develop dominance in host countries. The competition in host countries may vanish and monopoly of multinational corporations may increase. There are many complaints against these corporations that they are not respecting human rights. There is a chance for reduction of natural resources in host countries. Many a time they follow unscrupulous methods to avoid paying taxes. They exploit the labour force in host countries. Many a time they do not transfer technology in a proper way. They try to interfere in the political affairs of the nation. [CHECKPOINT] Let us look at the context of India. The industrial policy of our government restricted the foreign investment in our country till recent times. But since the economic liberalization policy of India in 1991, many Multinational corporations have started their operations in India. At the same time, a number of Indian firms also have become Multinational corporations, for example WIPRO and INFOSYS. So far we have learnt about Sole trading concerns, partnerships, Hindu undivided business firms, Co-operative societies, Joint stock companies, and Multinational corporations which come under the private sector. Besides this, we have Government undertakings, Joint sector undertakings, and Public utilities. Government undertakings are owned by the government for the public purpose. They are controlled and managed by the government. A Department of government under the control of a minister runs these undertakings. They are started either by the Central Government or by the State Government or Local self Government. Examples include Mining, Metallurgy, Ship building, and Aeronautics. Joint sector undertakings are under the control of public and government. Examples include Gujarat Fertilizers and Cochin Refineries. Public utilities are also government undertakings but they are established to provide essential products or services to the public. They do not intend to earn profits. Examples include Cooking gas, water, electricity, railways, posts, and telegraphs. [CHECKPOINT] Now let us understand Stock Exchanges. The capital of a joint-stock company is divided into small units called shares. The joint stock companies can also raise capital through issue of debentures. There is a provision to sell and buy these shares and debentures. The share or debenture holders can sell their shares or debentures at any time. For this purpose, Stock Exchanges are established. In India, the first share market was started in 1875 at Mumbai and even today, it is one of the prestigious stock markets in the world. The other stock exchanges are secondary share markets. Only the shares and debentures of listed out Joint stock companies can enter into these stock exchanges. Nowadays, Kolkata and Bengaluru stock exchanges facilitate to carry out their business through electronic media. All the stock exchanges are controlled by a Board called Securities and Exchange Board of India, also known as SEBI. [CHECKPOINT] Now, dear students, let us solve the exercises from your textbook to ensure you are fully prepared for your exams. We will start with the fill in the blanks section. Question one: The formation of co-operative societies is regulated as per The Indian Co-operative Act of 1912. Question two: The first co-operative society in the world was started by Robert Owen in the year 1844 at Rochdale in England. Question three: The First co-operative society was started in Karnataka at Kanaginahala. Question four: The Multinational corporations were first started in U.S.A. Question five: The examples of multinational corporations with Indian origin are WIPRO and INFOSYS. Question six: The first share market was started in India at Mumbai. [CHECKPOINT] Let us move to the second section, answering the following questions. Question seven asks to mention the characteristics of co-operative societies. The characteristics are: they are voluntary organisations. Membership is open to all adults above 18 years irrespective of caste, religion, creed and gender. There is no upper limit for membership. There is democratic management where all members attend the General Body Meeting and each member has one vote irrespective of share of capital invested. Profit is distributed in proportion to the share of their capital equally among all members not less than 6.25 percent. One portion of the profit is transferred to the general fund. Their status and management are supervised by the Government. Question eight asks for the different types of co-operative societies. They are Credit Co-operative societies, Marketing Co-operative societies, Producers Co-operative societies, Consumers Co-operative societies, Farmers Co-operative societies, House building Co-operative societies, and Co-operative societies for different services such as supply of drinking water and improvement of education. [CHECKPOINT] Question nine asks to list out the advantages and disadvantages of co-operative societies. The advantages are: it is easy to form them, there is no need of heavy capital, there is no discrimination among members, all members have equal rights and responsibilities running on democratic principle, each member has one vote, the liability of members is limited, they help develop habits of savings, they are via media arrangements between capitalism and socialism, and their main motto is One for all and all for One. The disadvantages are: they have limited capital resources so large scale business is not possible, it is difficult to get suitable staff, there are chances of mismanagement, chances of misuse of money, and chances of corruption and favouritism. Question ten asks for the advantages of multinational corporations to the home country. The advantages are: they obtain raw materials from host countries at low prices, they obtain technological and administrative skills from host countries, they export raw materials and finished products to host countries increasing profit, they earn ample income through profit, royalty and administrative agreements with host countries, and they create more employment opportunities in the home country. [CHECKPOINT] Question eleven asks for the important functions of stock exchanges. Based on the chapter, the important functions of stock exchanges are to provide a platform for buying and selling shares and debentures, and to allow share or debenture holders to sell their holdings at any time. It is important to remember that only the shares and debentures of listed joint stock companies can enter these stock exchanges. Finally, we have an activity for you. With the help of your teachers, start a co-operative society in your school. You can form a group, draft simple rules, elect a managing committee, and practice democratic voting and profit sharing to understand how co-operative societies function in real life. Thank you for listening! Keep revising and practicing. Goodbye! [CHAPTER_COMPLETE]