Page 164 - Business Principles and Management

Chapter 6 • Corporate Forms of Business Ownership

Virtual corporations tend to be more tempo-
rary relationships than are joint ventures. Several FIGURE 6-7 A virtual corporation is a network of compa-
nies that form alliances among themselves as needed to
companies within the network may team up to take advantage of fast-changing market conditions.
take advantage of a market opportunity. These
same companies may also work with a different
combination of partners within the network,
depending on the expertise needed to take
advantage of a particular market opportunity C
at that time. Company
An example of a virtual corporation is the
following situation. Company A wishes to rush
to market a new sophisticated computer but
needs special parts that it does not produce. A Simple
Company A learns that Company B produces B Virtual D
one part and Company C produces another. Company Corporation Company
Unfortunately, none of the three companies has
customers who would likely have an interest in
the new computer. After searching, the firms
find that Company D sells computers to cus- A
tomers with special needs. Ultimately, all three
Company
companies agree to join with Company A to
market the new computer. This virtual corpora-
tion, illustrated in Figure 6-7, makes it possible
for all four companies to benefit when no one
company could have made and marketed the
new computer quickly on its own. Many com-
panies involved in selling the goods of other Customers
firms, especially Web-based firms, are virtual
corporations.

COOPERATIVES

A cooperative is a business owned and operated by its user-members for the
purpose of supplying themselves with goods and services. The members, who are
much like stockholders in a corporation with the protection of limited liability,
usually join a cooperative by buying shares of stock. The members elect a board
of directors, which appoints officers to run the cooperative. Much like a corpora-
tion, a cooperative must also obtain a charter from the state in which it is orga-
nized in order to operate. Some types of cooperatives need authorization from
the federal government.
The purpose of cooperatives is to provide their members with cost and profit
advantages that they do not otherwise have. For example, a group of blueberry
growers believes that individually they can save money and make more profit by
forming a cooperative for the purpose of selling their berries. Once the business
is organized and operating, the members (owners) sell their berries through the
cooperative. The cooperative markets the berries. In turn, the growers earn more
than if they tried to market the berries on their own. In addition, as owners they
share in the profits of the business.
With almost 19 million businesses in the United States, cooperatives repre-
sent only a small percentage of all businesses. This small number, however,
does not reduce their importance. Cooperatives are popular in agriculture for
buying and selling crops. And many employees belong to credit unions, where
they can invest and borrow money at low interest rates. Many insurance firms
are formed as cooperatives. Apartment buildings are often formed as coopera-
tives as well.

151