Unit – III:
Private, Public and Global Enterprises
Q.1. Classify all the forms of business enterprises.
Ans: Business enterprises or business undertakings may broadly be
classified into two categories on the basis of ownership: (1) Private Sector
(2) Public Sector
Q.2. Describe the meaning
of public sector enterprise. Mention its features. What are its various forms?
Ans: The public sector consists of various
organisations owned and managed by the government. These organisations may
either by partly or wholly owned by the central or state government. They may
also be a part of the ministry or come into existence by the Special Act of
Parliament.
Its features are: 2015
(1) It is owned by central or state
government.
(2) It is managed by persons appointed by
government.
(3) Its main objective is to provide service
to society.
The forms of organisation which a
public enterprise may take are as follows:
a) Departmental undertaking.
b) Statutory Corporation.
c) Government Company.
Q.3. Describe the meaning of Private Sector Enterprise. Mention
its features. Distinguish between public and private sector.
Ans: A private sector enterprise or a private
enterprise is one, which is owned, managed and controlled by an individual or
group of persons (individuals) jointly.
Its features are:
(1) It is owned by private individual or groups
(2) It is managed by owners or managers appointed
by them.
(3) Its main objective is to earn profits.
(4)Managers are accountable for its financial
result to its owners.
Difference
between public and private sector: 2007,
2017
|
Public Sector |
Private Sector |
|
(1) It is owned by central or state
government. (2) It is managed by persons appointed by
government. (3) Its main objective is to provide service
to society. (4) Managers are accountable for its
financial results to the government. |
(1) It is owned by private individual or groups
(2) It is managed by owners or managers
appointed by them. (3) Its main objective is to earn profits. (4)Managers are accountable for its financial
result to its owners. |
Ans: A joint venture is the combination of two or
more persons into a single activity. It is a form of partnership which is
limited to a specific venture. It is exactly the same as partnership, with the
exception that it is one of a business that is to be terminated after the
completion of the particular business.
Since the business is to be terminated after completion of the venture,
a firm name is not generally used. Thus the joint venture is like a temporary
partnership without a firm name. It can also be said a particular partnership
or partnership for a particular object.
Benefits of Joint Ventures are as follows:
1)
It makes possible to undertake a big project
requiring huge capital.
2)
The risks involved in the new project are
shared by the partners in the joint venture
3)
It allows a company to expand its operations
in forcing markets.
4)
The local partner is benefited as the foreign
partner contributes foreign capital and foreign technology.
5)
The competitive strength of a smaller firm is
increased.
Q.5. What do you mean by Departmental Undertaking? Mention its
features, merits and demerits.
Ans: A departmental undertaking is a public enterprise, which is
organized, financed and controlled by the government as a government
department. E.g. in our country railways, post and telegraph and ordinance
factories have been established as government departments. This is the oldest
and most traditional form of public enterprises.
Features
of Departmental undertaking:
1)
Part of Government-Central or State
2)
Under direct control of the ministry
3)
Funds comes directly from Govt. Treasury
4)
Employees are Govt. employees.
Merits of
Departmental undertaking:
1)
Effective control
2)
Public Accountability
3)
Suitable for national security
Demerits
of Departmental undertaking:
1)
Lack of flexibility
2)
Delay in decision making
3)
Red tapism
4)
Political interference
5)
Unable to take advantage of opportunities
Q.6. What is the meaning of Public corporation or statutory
corporation? Mention its features, merits and demerits. 2015
Ans: A public corporation, known as Statutory
Corporation, is an autonomous corporate body set up under a special act of the
Parliament or of State Assembly. The Life Insurance Corporation of India, Air
India, Indian Airlines, Food Corporation of India, Oil and Natural Gas
Commission and Central Warehousing Corporation are few of the prominent public
corporations in India. 2015
Features 2016
1)
Statutory Corporation is fully owned by the
Government.
2)
It is having a separate legal entity.
3)
Its employees are not government employees.
4)
Board of Directors are appointed by the
government
5)
It prepares its own budget and can retain its
earnings which can be used for its business.
6)
Profit is not the main motive.
7)
It has public accountability.
8)
Usually it is free from all types of
interference.
Merits
1)
Free from undesirable government
2)
The government does not interfere in their
financial matters.
3)
It is relatively free from red tapes and can
take quick decisions.
4)
Its policies are subject to parliamentary
control which ensures protection of public interest.
Limitations
1)
A statutory corporation’s actions are subject
to many rules and regulations.
2)
Government and political interference have
always been there where huge funds are involved or in major decisions.
3)
Where there is dealing with public, corruption
exists at a larger level.
4)
The Board of Directors may misuse their powers
and indulge in undesirable practices.
Q.7. What do you mean by Government company? Mention its features,
merits and demerits. 07,
10, 19
Ans: Government Company: According to The Indian Companies Act,
1956, a government company is a company in which not less than 51% of the paid
up capital is held by the central or state government or both. Subsidiary of a
government company is also considered as a government company. E.g.: 1) Hindustan Machine Tools Ltd.
(HMT) 2) Bharat Heavy Electricals Ltd
(BHEL) 3) Steel Authority of India Ltd.
Features 2018
1)
It is created by the Indian Companies Act,
2013.
2)
51% of share capital is held by the central or
state or both governments.
3)
It is having a separate legal identity.
4)
Its employees are appointed according to the
rules contained in the Memorandum and Articles of Association of the company.
5)
It is exempted from the accounting and audit
rules and procedures.
6)
It obtains funds from government
shareholdings, private shareholders and capital market.
Merits
1)
It can be easily established.
2)
It has a separate legal entity.
3)
There is no undue departmental interference in
the working of the company.
4)
It can curb unhealthy business practices by
providing goods and services at reasonable prices.
Demerits
1)
The company is subject to government control
in matters of policy as well as operations.
2)
Lack of initiative on part of the directors
and officers as they do not gain or loose anything by the company's
performance.
3)
Change in the political system or the rules
directly affect the companies.
4)
Evasion of constitutional Responsibilities of
the government
Q.8. What is Global Enterprises or Multinational companies (MNC)?
Mention its features, merits and demerits. 2015, 2016
Ans: Global Enterprises/Multinational Companies: A global
enterprise is one which owns and manages business in two or more countries.
E.g.: Unilever Ltd, Coca cola, LG, Samsung, Hyundai Motors, Proctor and Gamble,
etc.
Features 2017
1)
A global enterprise has huge capital
resources.
2)
It operates through a network of subsidiaries,
branches and affiliates in host countries
3)
It uses advanced technology to provide world
class products and services.
4)
It employs professionally trained managers.
5)
It uses aggressive marketing strategies.
Advantages
of MNC’s:
1. MNC's create opportunities for marketing
the products produced in the home country throughout the world.
2. They create employment opportunities to the
people of home country both at home and abroad.
3. It gives a boost to the industrial
activities of home country.
4. MNC's help to maintain favourable balance
of payment.
5. Home country can also get the benefit of
foreign culture brought by MNC's.
Disadvantages
of MNC's:
1. MNC's may transfer technology which has
become outdated in the home country.
2. They may pose a threat to the economic and
political sovereignty of host countries.
3. MNC's may kill the domestic industry.
4. MNC's may use natural resources of the home
country and cause depletion of the resources.
5. A large sums of money flows to foreign
countries in terms of payments towards profits, dividends and royalty.
Q.9. Write a brief note on changing
role of public sector. 2018
Ans: Changing Role of Public Sector: Public Sector was started to
achieve the following objectives:
a)
To speed up the economic growth of the country
b)
To achieve a more equitable distribution of
income
c)
To create infrastructure facilities
d)
To develop all parts the country equally
Performance of the Public Sector was poor due
to unorganized plants, out dated technology, underutilization of capacity, over
staffing, trade unionism, political interference etc., So the government, in
the Industrial Policy 1991, introduced the following reforms in the public
sector.
a)
The number of industries reserved for the
public sector was reduced from 17 to 3 industries namely atomic energy, arms
and rail transport.
b)
The Memorandum of Understanding signed between
a public sector and its administrative ministry defines its autonomy and the
targets to be achieved.
c)
Equity shares of public sector units are sold
to private sector and the public which is known as disinvestment.
d)
Loss making public sectors which are
potentially viable will be restructured and revived through the Board of
Industrial and Financial Reconstruction (BIFR). Public sector units which
cannot be revived will be closed down.
e)
A National Renewal Fund was created to retrain
and redeploy retrenched labor and to compensate employees seeking voluntary
retirement.