CBSE Class 11 Business Studies Notes : Private, Public and Global Enterprises

CBSE Class 11 Business Studies Notes : Private, Public and Global Enterprises

1. Private Sector and Public Sector There are all kinds of business organisations small or large organisation, privately owned or government owned existing.In our country. These organisation affect our daily economic life and therefore become part of the Indian Economy.

Since the Indian Economy consists of both privately owned and government owned business enterprises. it. is known as mixed economy.

2. Form of Public Sector Enterprises Public sector organisations are formed in three different forms

(i) Departmental undertaking
(ii) Public corporation/Statutory corporation
(iii) Government company

3. Departmental Undertakings This is the oldest form of public sector considered as enterprises. The departmental undertaking one of the departments of government. It has is no separate existence than government.

(i) Features

(a) They are a part of government only, there is no separate entity.
(b) They are financed from the annual budgets of the government.
(c) The revenues of departmental undertakings arc civil servants and recruited and compansated as per the rules of civil servants.
(d) They can be sued in the same manner as one can file a suit against the government.

(i) Merits

(a) Easy formation
(b) Effective control
(c) Optimum utilisation of funds
(d) Accountability
(e) Public revenue
(f) Secrecy

(iii) Demerits

(a) Inflexibility
(b) Lack of motivation
(c) Lack of financial autonomy
(d) Inefficient management
(e) Red tapism and bureaucracy

4. Public Corporation/Statutory Corporation A statutory corporation is a body corporate formed by Special Act of Parliament or by the central or state legislation. It is fully financed by the government.

(i) Features

(a) It is created by an Act of Parliament or central or state legislature.
(b) The powers, objectives and limitations of public corporation are defined in the out only.
(c) It operates under total control of Central or State Government.
(d) It is managed by the board of directors who are nominated by the government.
(e) The main motive of public corporation is service to general public.
(f) The Accounts of Public Corporation are generally audited by the Controller and Auditor General.

(ii) Merits

(a) Administrative autonomy
(b) Quick decision
(c) Service motive
(d) Efficient staff
(e) Professional management

(iii) Demerits

(a) Autonomy on paper only
(b) Lack of initiative
(c) Rigid structure
(d) Unfair Practices

5. Government Companies Government Company means any company in which at least 51% of the paid up share capital is held by the Central or State Government or partly by Central or State Government.

For example, Steel Authority of India

(i) Features

(a) Registration
(b) Ownership
(c) Management
(d) Separate legal entity
(e) Ministerial control
(f) Financial autonomy
(g) Efficient staff
(h) Accountability

(ii) Merits

(a) Administrative autonomy
(b) Greater flexibility
(c) Efficient staff
(d) Collaboration

(iii) Demerits

(a) Autonomy on paper only
(b) Political Interference
(c) Board packed with government representatives,

6. Role of Public Sector

(i) Development of Infrastructure The infrastructure consists of services like transportation. communication, irrigation etc. The infrastructure is considered as the backbone of economic growth. So government set up various public sector enterprises to under take the task of developing infrastructure of our country.

(ii) Regional Balance The government tries to locate new public sector enterprises in the backward areas so that the people of that area get opportunity to work and these can also be developed ensuring balanced regional development.

(iii) Economies of Scale Public sector industries require large base to function economically which was only possible with government resources and large scale production.

(iv) Check Over Concentration of Economic Power The public sector can invest in heavy sector and thus income does not go in a few hands of private sector but it gets shared by a large number of employees and workers. This prevents concentration of wealth in private sector.

(v) Import Substitute These enterprises are making us self-reliant and saving huge amount of foreign exchange.

7. Global Enterprises

According to Global Enterprises by Niel H Jacoby. “A multinational corporation owns and manages business in two or more countries

(i) Features

(a) Giant size
(b) International operations
(c) Professional management
(d) Centralised control
(e) Oligopolistic powers
(f) International market

(ii) Merits

(a) Employment opportunities
(b) Advanced technology
(c) Foreign capital
(d) Growth of domestic firm
(e) Foreign exchange
(f) Standard of living
(g) Healthy competition
(h) Managerial revolution

(iii) Demerits

(a) Obsolete technology
(b) Creation of monopoly
(c) Restrictive clauses
(d) Excessive remittance
(e) Threat to national sovereignty
(f) Depletion of National resources

8. Joint Venture When two or more firms join together to Establish a new enterprise then it is known as joint venture. For example, Tata Iron and Steel Company joined hand with IPCOL to promote IPITATA Sponge Iron Limited,

(i) Merits

(a) Reduces competition
(b) Reduces risk
(c) Protection for small companies
(d) Advanced technology
(e) Better competence
(f Large capital
(g) Reduction in cost

(ii) Demerits

(a) Problem in sharing capital
(b) Legal restrictions
(c) Conflicts
(d) Mergers and monopolies
(e) Lack of co-ordination