“Collective business model involves participation of large number of likeminded professionals, traders related to each other by means or some other business interest. These likeminded people pool resources, share information and work cohesively to achieve a common set of goals. To achieve the goal they may form a trade union, a cooperative or a franchisee.
The establishment of such a business model is done so that common interests of the people involved can be withheld through collective endeavor and cohesive representation.
The historic roots of this business model ranges back to twentieth century when the businesses were consolidating and only a few local enterprise were able to compete nationally or internationally owing to limited means of factors of production.
A brief description of the three traditional collective business systems is as follows:
Trade association: trade associations is a non –profit organization in which the competitors engaged in a common business pursuit, join together to create a platform in which they deal with common problems of their industry. Anybody can join the trade association and the anti-trust law prohibits a member trade association from denying any applicant from entering an association.
To enter such an association each member has to pay a nominal fee called “due” which is used to sustain its operations like organize meetings to discuss common problems, and distributing pamphlets to popularize common cause. Trade associations often provide members with elective group purchasing plans. Owing to their nonprofit nature, they do not pledge any credit and offer the chosen vendor with access to large body of member customers.
Trade associations lack the capacity to initiate and sustain big projects owing to limited credit.
Cooperative: A cooperative is similar to the trade association but only differs in the fact that each member of a cooperative owns a portion of the cooperative in contrast to the trade association in which the members have a non-equity position in the association. A cooperative however addresses only one facet of a business operation for example purchasing goods and services at better price. A cooperative utilizes leverage of volume of customers to obtain better bargain for its members. Cooperative also engages itself into economic activities and any gains thus accrued are proportionately distributed to all its members in the form of dividend.
Franchise: Franchisees generally pay a substantial amount for becoming a franchisee and after becoming so they are required to wear uniform as specified by the franchisor. All franchisees then work together to achieve a common goal as set out in the preamble of the franchise.”