Private, Public, and Global Enterprises

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Questions and Answers

Which of the following is NOT a feature of public sector enterprises?

  • It is accountable to the public.
  • Management and control are in the hands of the government.
  • Capital is contributed by central or state governments.
  • Profit maximization is the primary objective. (correct)

Which of these is an example of a Department Undertaking?

  • Microsoft
  • Indian Railways (correct)
  • Reliance Industries
  • Google

Which of the following is a merit of Department Undertakings?

  • It faces no interference from government officials.
  • High degree of autonomy and flexibility.
  • It can quickly adapt to changing market conditions.
  • It is a significant source of revenue for the government. (correct)

What is a significant drawback of Department Undertakings?

<p>Limited competition and innovation. (D)</p> Signup and view all the answers

What is a distinguishing feature of a Department Undertaking?

<p>It is directly controlled by a government ministry. (B)</p> Signup and view all the answers

Which of the following is NOT a feature of Department Undertakings?

<p>Its finances are managed by private investors. (D)</p> Signup and view all the answers

What is the primary objective of public sector enterprises?

<p>Providing essential goods and services to the public. (C)</p> Signup and view all the answers

What is the main distinction between Department Undertakings and other forms of public sector enterprises?

<p>Department Undertakings are established as departments within a government ministry. (A)</p> Signup and view all the answers

What is one of the key purposes of a government company in terms of its influence on business practices?

<p>To regulate and control unhealthy business practices within the market. (B)</p> Signup and view all the answers

What is a significant disadvantage associated with government companies?

<p>Potential for political interference in management decisions. (B)</p> Signup and view all the answers

Which of the following is NOT mentioned as a reason for the establishment of public sector companies in India?

<p>To encourage entrepreneurship through government-backed loans and incentives. (D)</p> Signup and view all the answers

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

<p>Its management is solely governed by the board of directors. (B)</p> Signup and view all the answers

How does a government company's funding differ from a private company's funding?

<p>Government companies can receive funding from both government sources and private shareholders, while private companies rely mainly on private investors. (A)</p> Signup and view all the answers

What is a major challenge facing government companies in India?

<p>Political interference influencing management decisions and undermining efficiency. (D)</p> Signup and view all the answers

Which of the following is a potential benefit of government companies?

<p>Ability to regulate market behavior and control unhealthy practices. (A)</p> Signup and view all the answers

In which scenario is the presence of a government company considered suitable?

<p>When a sector requires a significant initial investment and long-term development. (C)</p> Signup and view all the answers

What is a key benefit of foreign companies entering a joint venture with Indian companies?

<p>All of the above (D)</p> Signup and view all the answers

Which of the following was NOT a major reform introduced in the Indian industrial policy of 1991 regarding public sector enterprises?

<p>Privatization of all public sector enterprises (D)</p> Signup and view all the answers

What was the primary objective of establishing public enterprises in India?

<p>Promote competition and check monopolies in private sector (D)</p> Signup and view all the answers

What is the key characteristic of a Memorandum of Understanding (MOU) between the government and public sector enterprises?

<p>The enterprise enjoys greater autonomy while being accountable for performance targets (C)</p> Signup and view all the answers

What was the anticipated outcome of the disinvestment policy implemented in 1991?

<p>Improved managerial performance and financial discipline in public enterprises (A)</p> Signup and view all the answers

In the context of the industrial policy of 1991, what was the approach taken towards 'sick' public sector units?

<p>Sick units were referred to the BIFR for restructuring or closure (C)</p> Signup and view all the answers

What is a distinguishing feature of a multinational company (MNC)?

<p>It has its headquarters in one country but operates in several countries (D)</p> Signup and view all the answers

What is the most significant advantage that MNCs possess?

<p>Vast capital resources available from numerous sources (B)</p> Signup and view all the answers

Which of the following best describes the central control exercised by an MNC over its global operations?

<p>The headquarters provides a broad policy framework while allowing branches significant autonomy (B)</p> Signup and view all the answers

Which of the following is NOT a feature of a Statutory Corporation?

<p>Funded entirely by the government. (D)</p> Signup and view all the answers

What is a key advantage of a Statutory Corporation compared to a government department?

<p>The ability to make quick decisions without bureaucratic red tape. (C)</p> Signup and view all the answers

What is a common criticism of Statutory Corporations?

<p>Their tendency to be inefficient due to a lack of profit motive. (B)</p> Signup and view all the answers

Which type of organization is most suitable for situations where complete government control is necessary, such as defense?

<p>Government Department (C)</p> Signup and view all the answers

What is a key difference between a Statutory Corporation and a Government Company?

<p>A Statutory Corporation is established by a special act, while a Government Company is established by a private company. (D)</p> Signup and view all the answers

Which of the following is a potential weakness of Government Companies?

<p>All of the above. (D)</p> Signup and view all the answers

When would it be most appropriate to create a Statutory Corporation?

<p>When a project requires a large capital investment and benefits from public oversight. (B)</p> Signup and view all the answers

What is a key similarity between Statutory Corporations and Government Companies?

<p>Both are established by a special act of parliament. (A)</p> Signup and view all the answers

Flashcards

Public Sector

Businesses owned and operated by the government.

Separate Legal Entity

A company that has its own legal identity, separate from its owners.

Companies Act 1956

The legislation governing the registration and regulation of companies in India.

Merit of Public Sector

Advantages include easy formation and management flexibility.

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Limitations of Public Sector

Disadvantages include government interference and lack of accountability.

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Regional Balance

Efforts to develop industries in underdeveloped areas for economic growth.

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Infrastructure Development

Creation of fundamental facilities like roads, power, and industries.

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Economies of Scale

Cost advantages gained when production increases.

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Statutory Corporations

Organizations established under a special Act defining their objectives and functions.

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Legal Entity

Statutory corporations have a distinct identity separate from the government.

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Board of Directors

Management is appointed by government, composed of professionals.

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Internal Autonomy

Statutory corporations operate independently without government interference.

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Quick Decisions

Ability to make prompt decisions due to less bureaucratic restrictions.

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Parliamentary Control

Performance of statutory corporations is subject to parliamentary discussion.

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Government Company

A company where at least 51% of the shares are held by the government.

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Monopoly Powers

Statutory corporations often have exclusive rights in their sector.

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Private Sector Enterprises

Business owned by individuals or groups, including sole proprietorship, partnership, etc.

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Public Sector Enterprises

Organizations owned and managed by the government, contributing to public welfare.

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Department Undertaking

Public enterprises established as government departments, financed by government budgets.

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Demerits of Public Sector

Disadvantages include interference, lack of flexibility, and bureaucracy.

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Features of Public Sector

Characteristics include capital from government, public welfare as an objective, and accountability.

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Accountability in Public Sector

Public enterprises must report actions and utilize funds properly to the government.

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Management of Public Enterprises

Managed and controlled by government personnel under specific regulations.

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Public Sector Reform 1991

Reforms introduced by the Indian government to enhance efficiency in public enterprises.

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MOU in Public Sector

Memorandum of Understanding where the government sets performance targets for public enterprises.

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Disinvestment

Selling equity shares of public sector enterprises to private sectors and the public to improve performance.

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Industries reserved for Public Sector

The number of industries reserved for public sector reduced from 17 to 3 in 2001.

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Multinational Company (MNC)

A company with business operations in multiple countries but headquartered in one.

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Centralized Control of MNCs

MNCs operate with a centralized headquarters that controls branches worldwide.

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International Operations of MNCs

MNCs have production and marketing in several countries.

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Huge Capital Resources of MNCs

MNCs can raise significant funds from various sources due to large resources.

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Foreign Collaboration

Agreements between foreign and local firms for sales, production, or branding.

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Joint Venture

A new enterprise formed by two or more independent firms pooling resources.

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Product Innovations

New and improved products developed through sophisticated R&D.

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Advanced Technology

Superior technology that allows organizations to provide world-class products.

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Marketing Strategies

Aggressive techniques used by MNCs to promote and sell their brands.

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Benefits of Joint Ventures

Advantages include greater resources, efficiency, and access to new markets.

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Low Cost of Production

Cost advantage due to cheap raw materials and labor in developing countries.

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Well Known Brand Names

Established brands that provide goodwill and market trust for new products.

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Study Notes

Private, Public, and Global Enterprises

  • Businesses are categorized into private, public, and global sectors.
  • Private businesses are owned by individuals or groups of individuals.
  • Public sector enterprises (PSUs) are owned and managed by governments (central/state).
  • They are involved in economic activities.
  • Global enterprises (multinational corporations) operate in multiple countries.

Types of Public Sector Enterprises

  • Departmental Undertakings: These are part of a government ministry, have no separate legal entity, and are funded by annual government allocations. Examples: Indian Railways, Postal Services.
    • Features: No separate legal entity, financed by annual budget, govt. rules govern accounting & audit, govt. employees, accountable to ministry.
    • Merits: Direct governmental control, effective in achieving objectives, accountable to parliament, suitable for activities requiring secrecy/control (e.g., defense).
    • Demerits: Interference from ministers/officials, less flexible, prone to red tape, insensitive to consumer needs.
    • Suitability: Places needing full government control, strict secrecy.
  • Statutory Corporations: Established by special Acts of Parliament/state legislatures. Have a separate legal entity, and their management and functions are defined by special act. Examples: Life Insurance Corporation (LIC), Unit Trust of India.
    • Features: Established by special act, separate legal entity, management by a board of directors, own staff, usually independently financed(borrowing).
    • Merits: Internal autonomy, quick decisions due to no govt. restrictions, parliamentary control, efficient management (professionals).
    • Demerits: Less flexibility, lacks operational flexibility, susceptibility to political interference.
    • Suitability: Where special powers are needed, large capital investment is required.
  • Government Companies: Companies where at least 51% of the share capital is held by the central or state government. Examples: Hindustan Insecticides Ltd., State Trading Corp. of India.
    • Features: Registered under Companies Act, separate legal entity, management regulated by Companies Act, employees recruited/appointed by the rules, finance from government/private holdings.
    • Merits: Easy to form (only govt. decision), autonomy in management, ability to manage market and check unhealthy business practices.
    • Limitations: Interference from government officials, evades constitutional responsibility to parliament, boards interested in pleasing political leaders.
    • Suitability: Private and government sector joint involvement needed, finance-related activities.

Features of Global Enterprises (Multinational Corporations)

  • Huge capital resources
  • International operations
  • Centralized control
  • Foreign collaborations (technology/manufacturing)
  • Advanced technology
  • Product innovations and improved designs
  • Aggressive marketing strategies

Joint Ventures

  • Collaboration between two or more independent entities to form a new enterprise.
    • Pooling of capital, technology, and expertise.
    • Example: Hero Honda (Hero Cycles of India & Honda Motors of Japan)
    • Features: Joint capital investment, private or govt. management, profit and social goals.
    • Benefits: Increased resources and capacity, access to new markets, better technology, lower production costs, well-known brands, enhanced innovation.

Public Private Partnerships (PPP)

  • Partnership between government and private entities to finance and operate projects or services. Examples: Metro Railway projects, hospitals.
    • Features: Collaboration between sectors, high priority project selection, suitable for large-scale projects, public welfare focus.

Changing Role of the Public Sector in India

  • India's public sector aimed to: accelerate economic growth, improve equity in income and wealth distribution
  • It played a significant role in infrastructure development (e.g., roadways, power plants), regional balance (spread development evenly), and control of monopolies.

Public Sector Reforms in India

  • Four major reforms in industrial policy: reduction in sectors exclusively reserved for the public sector, use of MOUs, disinvestment of shares, restructuring of units.

Learning Objectives

  • Explain the concept and characteristics of businesses.
  • Explain different forms of public enterprises.
  • Critically evaluate the changing role of the public sector.
  • Explain global enterprise characteristics.
  • Understand the advantages of joint ventures.

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Business Studies: Private, Public & Global Enterprises (PDF)

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