just set up a buying cooperative to assist 50 small businesses (members) with th
ID: 1220774 • Letter: J
Question
just set up a buying cooperative to assist 50 small businesses (members) with their purchases. You will work with them to determine what items they have in common that they purchase and how much of each they purchase monthly. Your cooperative will then combine the individual orders and make a large buy on behalf of all the members. How will you convince them to purchase from you? What are the benefits for them and how will you make money?just set up a buying cooperative to assist 50 small businesses (members) with their purchases. You will work with them to determine what items they have in common that they purchase and how much of each they purchase monthly. Your cooperative will then combine the individual orders and make a large buy on behalf of all the members. How will you convince them to purchase from you? What are the benefits for them and how will you make money?
just set up a buying cooperative to assist 50 small businesses (members) with their purchases. You will work with them to determine what items they have in common that they purchase and how much of each they purchase monthly. Your cooperative will then combine the individual orders and make a large buy on behalf of all the members. How will you convince them to purchase from you? What are the benefits for them and how will you make money?
Explanation / Answer
Given that the cooperative has to take orders from individual businesses (by convincing them), the most appropriate argument is the volume discount and economies of scale. Economies and diseconomies of scale shape the long-run average cost curve.
Economies of scale are certain advantages that become available when the firm increases the size and scale of its operations.These forces bring necessary reductions in the cost of production and so the long-run average cost falls as the output rises. Volume discounts, capital substitution for labor, more efficient machines, conducive working and legal environment all contribute in the cost reduction.
The cooperative should advise the small businesses to order only from it since they will not only have cost advantages but they will certainly receive their products before time. The cooperative will benefit from reduced transaction cost, greater sales, and increased profit margin.
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