Forms of Business Organizations

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Questions and Answers

What distinguishes a global enterprise from other types of businesses?

It owns and manages businesses in two or more countries. (correct)

It operates solely within one country.

It focuses exclusively on domestic markets.

It is managed by individual entrepreneurs.

Which of the following is NOT a feature of a global enterprise?

It has headquarters in the home country.

It engages in aggressive marketing strategies.

It primarily relies on local resources. (correct)

It uses advanced technology.

What is a primary advantage of a joint venture?

Limitations in technology exchange.

Increased competition in the local market.

Access to greater resources and capacity. (correct)

Easy entry into the domestic market.

What does Public Private Partnership (PPP) primarily involve?

Collaboration between public and private sectors. Signup and view all the answers

Which of the following statements about global enterprises is FALSE?

They often limit their marketing strategies to regional markets. Signup and view all the answers

What is a characteristic of Departmental Undertakings in the public sector?

They are part of the Central or State Government. Signup and view all the answers

Which of the following is a disadvantage of Departmental Undertakings?

Delays in decision-making processes Signup and view all the answers

What distinguishes Statutory Corporations from government departments?

They are fully owned by the government. Signup and view all the answers

Which of the following best describes the financial operational structure of Statutory Corporations?

They prepare their own budgets and can retain earnings. Signup and view all the answers

What merit do Statutory Corporations have over traditional government departments?

Quick decision-making capacity. Signup and view all the answers

What is a common limitation faced by Statutory Corporations?

Existence of corruption in dealings with the public. Signup and view all the answers

Which of the following statements regarding Departmental Undertakings is false?

Employees are private sector workers. Signup and view all the answers

Which factor contributes to the political interference in Statutory Corporations?

Dealings involving large public funds. Signup and view all the answers

Which statement accurately defines a government company?

A company where at least 51% of the paid-up capital is held by the government. Signup and view all the answers

What is a key feature of a government company?

It can appoint employees based on its own rules. Signup and view all the answers

Which of the following is NOT a merit of a government company?

Complete independence from government oversight. Signup and view all the answers

What major change occurred in the public sector due to the Industrial Policy 1991?

Reduction of industries reserved for the public sector from 17 to 3. Signup and view all the answers

How is a subsidiary of a government company classified?

As a government company. Signup and view all the answers

What is one of the objectives of the Public Sector?

To create infrastructure facilities. Signup and view all the answers

What does disinvestment in the public sector entail?

Selling equity shares of public sector units to private entities. Signup and view all the answers

Which of the following mechanisms helps restructure loss-making public sectors?

The Board of Industrial and Financial Reconstruction (BIFR). Signup and view all the answers

Study Notes

Forms of Business Organizations

Public Sector includes Departmental Undertakings, Statutory Corporations, and Government Companies.
Departmental Undertakings are directly controlled by the government and operate like government departments, with employees considered government employees. Examples include railways, defense, and post and telegraphs.
- Merits: Effective control, public accountability, suitable for national security.
- Demerits: Lack of flexibility, delay in decision making, red tapism, political interference, unable to take advantage of opportunities.
Statutory Corporations are established by special acts of Parliament.
- Features: Fully owned by the government, separate legal entity, employees are not government employees, Board of Directors appointed by the government, prepares its own budget and retains earnings, profit not the main motive, public accountability, generally free from interference.
- Merits: Free from undesirable government interference, relatively free from red tape, quick decision-making, policies subject to parliamentary control.
- Limitations: Subject to rules and regulations, government and political interference, potential for corruption, misuse of power by the Board of Directors.
Government Companies are defined by the Indian Companies Act 1956 as companies with more than 51% of paid-up capital held by the central or state government.
- Examples: Hindustan Machine Tools Ltd. (HMT), Bharat Heavy Electricals Ltd (BHEL), Steel Authority of India Ltd.
- Features: Created by the Indian Companies Act, 1956, separate legal identity, employees hired based on company rules, exempted from specific accounting and audit regulations, funds from government shareholdings, private shareholders, and capital market.
- Merits: Easy establishment, separate legal entity, limited departmental interference, ability to regulate prices.

Changing Role of Public Sector

The public sector was initially established to accelerate economic growth, promote income equality, develop infrastructure, and ensure equal development across the country.
Poor performance due to factors like outdated technology, underutilization of capacity, overstaffing, trade unionism, and political interference led to reforms in the 1991 Industrial Policy.
These reforms included:
- Reducing industries reserved for the public sector from 17 to 3 (atomic energy, arms, rail transport).
- Implementing Memoranda of Understanding (MoUs) to define autonomy and targets for public sector units.
- Implementing disinvestment, selling equity shares to the private sector and public.
- Restructuring and reviving potentially viable loss-making public sector units under the Board of Industrial and Financial Reconstruction (BIFR).
- Closing down unrevivable public sector units.
- Establishing a National Renewal Fund for retraining, redeploying, and compensating employees.

Global Enterprises / Multinational Companies

Definition: Global enterprises operate and manage businesses in two or more countries.
Examples: Unilever Ltd, Coca-Cola, LG, Samsung, Hyundai Motors, Proctor and Gamble, etc.
Features: Huge capital resources, network of subsidiaries, branches, and affiliates in host countries, headquarters in the home country with control over branches and subsidiaries, advanced technology for world-class products and services, professionally trained managers, access to international markets, advanced research and development, aggressive marketing strategies, agreements with local firms in host countries.

Joint Ventures

Definition: Joint ventures are business partnerships between two or more companies for a specific purpose.
Examples: Hero Honda, Maruti Udyog, Birla Yamaha Ltd, etc.
Benefits: Greater resources and capacity, access to advanced technology, access to new markets, lower production costs, innovative products and services, leveraging existing brand recognition and goodwill.

Public Private Partnership (PPP)

A PPP involves a partnership between the government and private sectors to finance and operate projects or services.

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Description

This quiz covers the different types of business organizations including public sector units like departmental undertakings and statutory corporations. It discusses their merits and demerits, highlighting how they operate and their accountability. Test your knowledge on the structure and function of these organizations in the business landscape.