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Saturday, December 10, 2016

Business Studies - Class 11: Private, Public and Global Enterprises

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
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.

Q.4. What is the meaning of Joint Venture? Mention its benefits.
Ans: Joint Venture is a contract between two or more parties, with each party contributing their capital to undertake an economic activity which is subject to joint control. No single venturer can unilaterally control the activities.
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.
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
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.
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.
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.                                2007, 10
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.
1)      It is created by the Indian Companies Act, 1956.
2)      It is having a separate legal identity.
3)      Its employees are appointed according to the rules contained in the Memorandum and Articles of Association of the company.

4)      It is exempted from the accounting and audit rules and procedures.
5)      It obtains funds from government shareholdings, private shareholders and capital market.
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.
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.
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.
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.
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.