SS2 Commerce Lesson Note on Consortium

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TOPIC:          TRADE ASSOCIATIONS AND OTHER ENTERPRISES

CONTENT:

1. Consortium
2. Cartel
3. Amalgamation/merger/combine
4. Trust
5. Holdings

SUB-TOPIC 1: CONSORTIUM

Meaning of consortium:

It is an association of firms that pool their financial resources together to finance a project they cannot embark upon individually as a result of the project complexity or financial requirement.

Resources for forming a consortium

1. To finance a project, which requires a large capital outlay.
2. When the project is technically complex

EVALUATION

What is a consortium?

SUB-TOPIC 2: CARTEL

Meaning of cartel

A cartel is the association of firms, producers etc, in the same line of business formed to acquire or possess a monopoly business power. Cartel will arise where there are very few sellers or firms in one line of trade. Cartel was first developed in Germany.

The main purpose of cartel is to

1. Regulate the prices of their products by controlling output of members.
2. To ensure higher profit for members.
3. To reduce waste by eliminating competition

An example of cartel is the Organisation of Petroleum Exporting Countries (OPEC) of which Nigeria is a member.

Features of a Cartel

1. The members engage in the same line of business
2. Each member organisation is an independent seller or producer of the product i.e. it is monopolistic in nature
3. Production of output is restricted to the quota allocated to each producer or member of the cartel.
4. Member organisations do not compete with one another on the issue of price or output.
5. Cartel divides each member output quota periodically based on the economic situation at that time.

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