CHAPTER 6: TRADE ASSOCIATIONS

6.1 DEFINITION

A trade association is a voluntary organization made up of people engaged in the same line of business or trade, who come together to promote, protect, and safeguard their common interests.

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6.2 EXAMPLES OF TRADE ASSOCIATIONS

• Garri Sellers Association
• Tailors Association
• Yam Sellers Association
• Butchers Association
• Taxi Drivers Association
• Association of Hotel Proprietors
• Nigerian Bar Association (NBA)
• Nigerian Medical Association (NMA)
• Nigerian Manufacturers Association (NMA)
• Association of School Proprietors

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6.3 AIMS AND FUNCTIONS OF TRADE ASSOCIATIONS

1. To promote trade in their particular line of business.
2. To protect members against exploitation or maltreatment by employers or government.
3. To disseminate information on modern methods of production and business practices.
4. To foster cooperation among members and settle disputes when necessary.
5. To enforce discipline and sanction erring members.
6. To conduct research and share findings with members.
7. To ensure uniform prices for goods and services.
8. To maintain professional standards and ethics.
9. To serve as a link between members and government.
10. To represent members’ interests before employers and government.
11. To promote welfare services for members and the public (e.g. NBA providing free legal services).

6.4 CHAMBERS OF COMMERCE

A Chamber of Commerce is a voluntary association of businessmen and entrepreneurs from different professions within a town, city, or region, formed to protect and promote commercial and industrial interests.

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6.5 EXAMPLES

• Lagos Chamber of Commerce
• Ibadan Chamber of Commerce
• London Chamber of Commerce
• Owerri Chamber of Commerce

6.6 AIMS AND FUNCTIONS OF CHAMBERS OF COMMERCE

1. To promote local and foreign trade through trade fairs and exhibitions.
2. To educate members through conferences, seminars, and workshops.
3. To collect and distribute commercial information to members.
4. To act as a watchdog and link between business people and government.
5. To discourage practices harmful to the national economy.
6. To promote honesty and integrity in business transactions.
7. To study customs regulations and tariffs of other countries.
8. To contribute to national economic development.
9. To maintain museums or archives of local and foreign products for investors.

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6.7 DIFFERENCES BETWEEN CHAMBERS OF COMMERCE AND TRADE ASSOCIATIONS

Chambers of Commerce	Trade Associations
Open to different trades and professions	Restricted to one line of business
National and international outlook	Mainly regional or local
Covers general commercial interests	Focuses on specific trade interests

6.8 CARTEL

A cartel is a monopolistic association of independent producers of similar products, formed mainly to control prices by regulating output. Members retain their independence but operate under agreed rules.

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Examples

• OPEC (Organization of Petroleum Exporting Countries)
• International Cocoa Agreement (ICA)

6.9 FEATURES OF A CARTEL

1. Monopolistic in nature.
2. Formed by independent producers of similar products.
3. Production quotas are allocated to members.
4. Output is restricted to raise prices.
5. Competition among members is eliminated.

6.10 REASONS FOR FORMING A CARTEL

1. To maintain high prices.
2. To ensure higher profits.
3. To reduce waste caused by competition.
4. To regulate production output.

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6.11 TRUST

A trust is formed when a person (the settlor) transfers property or money to another person (the trustee) to manage it on behalf of named beneficiaries. The trustee does not own the property.

Reasons for Trust

1. To manage property after the death of the owner.
2. To bring merging firms under central control.
3. To ensure fair distribution of assets among beneficiaries.

6.12 CONSORTIUM

A consortium is a temporary association of firms or banks that pool resources together to finance large or complex projects beyond the capacity of individual firms.

Reasons for Forming a Consortium

1. To finance projects requiring huge capital.
2. To handle technically complex projects.

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6.13 HOLDING COMPANY

A holding company is a company that owns a controlling interest in other companies by acquiring most or all of their shares. The controlled companies are called subsidiaries, which retain their identities.

6.14 PRICE RINGS

A price ring is an association of competing firms that agree to fix uniform prices for their products while still competing in other ways.

6.15 SYNDICATE

A syndicate is an association of independent organizations that work together for a common purpose while retaining their independence.

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6.16 MERGER / AMALGAMATION

A merger is the combination of two or more independent firms into one new firm. The old firms lose their identity, and the new firm may adopt a new or combined name.

Reasons / Advantages of Merger

1. To increase market share.
2. To enjoy economies of scale.
3. To improve management efficiency.
4. To diversify business activities.
5. To eliminate competition.
6. To achieve financial stability.
7. To reduce overhead costs.
8. To secure raw materials easily.

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Disadvantages of Merger

1. Can lead to monopoly.
2. May cause unemployment due to staff retrenchment.
3. Discourages specialization.
4. May result in low product quality due to lack of competition.