Which one of the following ownership choices should a group of six village farmers consider? They want to process surplus fruit into juice, share the cost o...
Question 1 Report
Which one of the following ownership choices should a group of six village farmers consider? They want to process surplus fruit into juice, share the cost of a bottling machine and sell under one brand. The farmers want equal voting rights, but one farmer argues for a conventional partnership because it may be simpler.
(a) Identify the ownership structure that best matches equal voting rights. [1]
(b) Explain one benefit of this structure for the farmers' organisational decision-making. [2]
(c) Explain one reason why the farmers may choose a partnership instead. [2]
(d) Identify one possible disadvantage if the farmers form a partnership. [1]
(e) Explain one way the chosen structure could help increase profit from fruit that would otherwise be wasted. [3]
Answer Details
(a) The structure that best matches equal voting rights is a cooperative (co-operative). [1]
(b) Each farmer has one vote. [1] Therefore, decisions are less likely to be controlled solely by farmers providing the most capital or the most fruit. [1]
(c) A partnership may be quicker or simpler to establish. [1] Partners can also share management, capital and profit arrangements directly. [1]
(d) One possible disadvantage of a partnership is unlimited liability, disagreements between partners, or having to share profit. [1]
(e) The farmers can pool fruit and finance to buy processing equipment. [1] Processing the surplus fruit into juice adds value and creates a product that can be sold. [1] This can increase sales revenue and reduce waste, raising potential profit. [1]
Exam focus: For a full explanation, develop the chain from pooled resources, to value added, to higher revenue or profit.
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