Ch-3 Private, Public and Global Enterprises (Prashant Kirad).pdf

Class XI BUSINESS STUDIES PRIVATE, PUBLIC AND GLOBAL ENTERPRISES PRASHANT KIRAD  PRASHANT KIRAD PRIVATE, PUBLIC AND GLOBAL ENTERPRISES Ch:3 Private Sector Main Objective: Profit making and growth of the bus...

Class XI BUSINESS STUDIES PRIVATE, PUBLIC AND GLOBAL ENTERPRISES PRASHANT KIRAD  PRASHANT KIRAD PRIVATE, PUBLIC AND GLOBAL ENTERPRISES Ch:3 Private Sector Main Objective: Profit making and growth of the business. Ownership: Owned by a single individual or a group of individuals. Examples: Reliance Industries, ITC Limited, etc. Merits Limitations Increased profits Fierce competition No external interference Member conflicts Rapid decision-making High investment 2 t h Public Sector & 1 Main objective: Public welfare 1th Owned by the government. Examples: Indian Railways, a d BHEL, 1 SAIL, etc. K i r a n t Merits h Limitations ra s P Public welfare Proper accountability Political interference Red tape Support from the government Limited flexibility  PRASHANT KIRAD Exam mai aayega! Departmental Undertakings (EMA) This form of organizing public enterprises is the oldest and most traditional. These enterprises are established as government departments and function as extensions of their respective ministries. Operating under the government's authority, their activities are integral to government operations. They are not independent entities and are managed by government officials and employees. Examples: Include the Railway and Postal services. Features: 2th Funding: These enterprises receive annual funding from the government's budget, and any revenue they generate is returned to the government. & 1 Auditing: They adhere to the same accounting and audit regulations that govern th other government activities. 1 d 1 Staffing: Employees are government workers, recruited and employed under conditions similar to those of other government employees. They are typically led by ira IAS officers and civil servants, who may be transferred between ministries. t K Establishment: These enterprises are often considered integral parts of government an departments and are directly controlled by the respective ministry. h s Pra Accountability: They are accountable to the ministry, as their management falls directly under the ministry's purview. Merits Facilitate Parliament: These enterprises enable Parliament to exercise effective control over their operations. Public Accountability: They ensure a high degree of public accountability. Source of Income: They serve as a source of income for the government. National Security: This form is the best choice for national security because it is directly controlled and supervised by the relevant ministry. Limitations: Decision-Making Delays: Employees must get ministry approval for decisions, causing slow responses. No Flexibility: These enterprises cannot adapt quickly or make independent decisions, leading to inefficiencies. Red Tape: Excessive bureaucratic procedures hinder quick and efficient operations. Significant Political Interference: Political influence affects operations and decision- making.  PRASHANT KIRAD Statutory Corporations (EMA) Statutory corporations are public enterprises established by a Special Act of Parliament. This Act outlines their powers, functions, rules, and regulations governing their employees, as well as their relationship with government departments. Examples: Include the RBI, Unit Trust of India, LIC and the Institute of Chartered Accountants of India (ICAI). Features: th Special Act: Statutory corporations are established by an Act of Parliament and 2 & 1 operate according to the regulations stated in the Act. Separate Legal Entity: They can sue and be sued, enter into contracts, and acquire th property in their own name. 1 1 Funding: They secure funding by borrowing from the government or public, and through d ira revenue generated from selling products and services. t K Accounting and Audit: They are not subject to the same accounting and audit procedures as government departments and are not concerned with the central han government budget. s Pra Employees: The staff members are not government officials and are not bound by government regulations. Merits Operational Freedom: They have freedom and flexibility in their operations without excessive government regulation and control. Financial Independence: The government typically does not intervene in their financial affairs. Hybrid Approach: They combine government authority with private enterprise initiative. Parliamentary Oversight: Their performance is reviewed in Parliament to ensure proper use of public funds. JOSH METER?  PRASHANT KIRAD Limitations: Limited Operational Freedom: In reality, a statutory corporation has limited operational freedom due to numerous rules and regulations. Government and Political Intervention: Significant decisions and funding are still subject to government and political intervention. Restricted Autonomy: Government advisors limit the corporation's autonomy, delaying decision-making by involving the government in disputes. Government companies Government companies, formed under the Companies Act, 2013, are business- oriented entities that compete with private sector companies. According to the Act, a government company is defined as one where at least 51% of the capital is owned by the central or state government(s). These companies adhere to all provisions of the Act, unless specified otherwise. The shares are registered in the name of the President of India. The government's control over the share 2th capital and management classifies them as government companies. Examples of 1 such companies include Oil and Natural Gas Corporation (ONGC), which operates in & 1th the oil and gas sector; Indian Oil Corporation (IOC), which is involved in refining 1 and marketing petroleum products; and Coal India, (CIL) the largest coal- d ira producing company in the world. t K han s Pra Features: Registered: Established under the Companies Act, 2013 or any previous Company Law. Separate legal entity: These companies are distinct legal entities from their owners. Employees: Company employees are recruited according to the guidelines outlined in the company's Memorandum and Articles of Association, which delineate its objectives and regulations. Auditing: They are not subject to the same accounting and audit regulations as private companies; instead, auditors are appointed by the government. Additionally, the Annual Report must be presented in the Parliament or the State Legislature. Funding: Government companies receive funding from both the government and private shareholders. They also have the option to raise funds from the capital market. Share: At least 51% of the paid-up capital is held by either the central or state government.  PRASHANT KIRAD Merits: Legal Compliance: Establishment governed solely by compliance with the Companies Act. Distinct Legal Identity: Possesses distinct legal identity as a separate entity. Autonomy in Business Decisions: Empowered with full autonomy over all business decisions. Market Regulation through Affordability: Aims to regulate the market through the provision of affordable goods and services. Limitations: Legal Compliance: The Companies Act loses relevance when the Government is the sole shareholder. Exemption from Parliamentary Oversight: Parliamentary accountability is absent in such cases. Government Control and Management: With sole ownership, the Government exercises complete control over the company's operations. 2th Potential Deviation from Registered Purpose: This setup may lead to a departure from the company's intended objectives. & 1 Global Enterprises 1 t h d 1 have wielded substantial influenceir a Over the last twenty years, Multinational Corporations (MNCs) K in the Indian economy and other developing nations.t These large-scale enterprises, h a n operating across borders, are renowned for their expansive ra s cutting-edge technology, global marketing product portfolios, P and extensive operational networks. MNCs prioritize strategies, broadening their industrial and marketing endeavors across diverse countries, emphasizing product diversity over concentrated profit maximization. Features: Abundant Financial Resources: Possessing substantial financial assets from various sources, including stock issuance and institutional borrowing, ensuring credibility and resilience. Foreign Collaborations: Engaging in agreements with Indian firms for technology transfer, production, and brand usage, fostering resource sharing and patent acquisition; however, these collaborations may result in monopolistic tendencies and concentrated power. Advanced Technological Capabilities: Employing cutting-edge technology in production, meeting global standards and catalyzing industrial growth by efficiently utilizing local resources and promoting technological innovation like computerization.  PRASHANT KIRAD Focus on Product Innovation: Maintaining advanced research and development departments dedicated to creating innovative products and improving existing designs, requiring significant investment capacity only feasible for such enterprises. Effective Marketing Strategies: Deploying highly efficient marketing tactics, leveraging reliable market information systems and impactful advertising techniques to swiftly drive sales, supported by a globally recognized brand presence. Global Market Expansion: Extending operations beyond home countries, establishing a global footprint through subsidiaries and affiliates, thereby dominating international markets. Centralized Headquarters Control: Headquarters, situated in the home country, oversee all branches and subsidiaries, maintaining a general policy role without day- to-day operational interference. Merits: Increased Customer Base Boosts Revenue: Expansion of customer base leads to heightened revenue generation. Enhanced Market Expansion: Facilitating broader market reach and penetration. 2th Facilitating Technology Transfer: Assisting in the transfer of technology across different locations. & 1 Limitations: 1th d 1 Monopoly in Host Countries: MNCs can dominate markets, reducing competition and consumer choice. ira t K Heavy Investment Required: Significant capital needed, creating barriers for an smaller firms. h s Rivalry Among Countries: Countries might lower standards to attract investment, Pra harming long-term sustainability. Exploitation of Resources: MNCs may deplete natural resources and engage in unfair labour practices. Joint Venture (EMA) When two businesses agree to collaborate for a common purpose and mutual benefit, they form a joint venture. In a joint venture, two or more companies combine their resources and expertise to achieve a specific goal, sharing both the risks and rewards. These partnerships are often created to facilitate expansion, develop new products, enter new markets, or form strategic alliances that enhance capabilities and resources. A joint venture involves pooling capital, technology, and human resources, with the risks and rewards shared, to establish a new entity under joint control.  PRASHANT KIRAD Contractual Joint Venture: A contractual joint venture involves parties collaborating without forming a new entity. The partners share a common intention to run a business venture, contributing inputs, exercising control, and maintaining a relatively long-term relationship, similar to a franchise arrangement. Equity Joint Venture: An equity joint venture is established when two or more parties jointly own a separate business entity. This arrangement involves shared ownership, management, responsibilities, profits, and losses, based on a negotiated memorandum of understanding. It requires careful consideration of legal and cultural factors, as well as securing timely government approvals and licenses. Features: Increased Resources and Capacity: Enhanced resources and capabilities for faster 2th growth and improved effectiveness. Access to New Markets and Distribution Networks: Tapping into new markets and & 1 utilizing existing distribution channels to reduce costs. 1th Access to Technology: Utilizing advanced technology to save time, energy, and money, while enhancing efficiency and reducing expenses. d 1 Innovation: Fostering creativity and innovation with fresh ideas and advanced ira technology from foreign partners. t K Low Cost of Production: Lower production costs and access to quality products and an skilled employees. h s Established Brand Name: Leveraging the established goodwill of the foreign partner, Pra saving time and money on brand development and distribution. Merits: Sharing of Costs and Risks: Partners share financial burdens and risks, reducing individual exposure. Access to New Markets and Distribution Channels: Entering new markets and utilizing existing distribution networks. Low Cost of Production: Achieving lower production costs through collaboration. Limitations: Unequal Distribution of Resources: Resources are not shared equally among partners. Cultural Differences: Varied work cultures can create barriers. Class 11th Phodenge - Prashant Bhaiya  PRASHANT KIRAD Public Private Partnership (PPP): (EMA) A Public-Private Partnership (PPP) is a collaborative arrangement between the public sector (government) and the private sector (businesses or non-profit organizations) to jointly execute a project or deliver a public service. This involves a contractual relationship where both parties contribute resources and expertise, sharing the associated risks and rewards. Features: Shared Responsibilities: Public and private sectors jointly undertake project responsibilities, risks, and rewards. Resource Pooling: Both parties contribute financial, technical, or managerial resources to achieve project goals. Risk Sharing: Distribution of financial, operational, and performance risks between sectors based on agreed terms. Long-term Partnership: PPPs often entail extended contractual agreements covering construction, operation, maintenance, and occasionally financing phases. Merits: 2th & 1 1th Transfer of Design and Construction Risk: PPPs involve transferring the risks associated with design and construction to the private sector. 1 Potential to Accelerate Project: PPPs offer the potential to expedite project d implementation. ira Limitations: t K han s Pra Conflict Over Environmental Considerations: Disagreements may occur between parties regarding environmental factors and their impact on the project. Difficulty in Attracting Private Finance: PPPs may struggle to secure private investment due to various factors, such as uncertain returns or perceived project risks.  PRASHANT KIRAD Top 5 Questions Q1. What is the difference between equity based and contractual joint venture Ans: Ans: Contractual joint venture is generally short term but equity based is long term. Contractual venture is done mainly to complete any project or contract but equity based venture is done to jointly run a business. Q2. What is a Joint Stock Company? Ans: A Joint Stock Company is a business entity where ownership is divided into shares held by shareholders. It operates as a separate legal entity, providing limited liability to its owners, meaning they are only liable for the company's debts up to their investment amount. Q3. Define Public Private Partnership. Explain its features. 2 t h & Ans: A Public-Private Partnership (PPP) is a collaborative 1 arrangement between the government and private sector to 1 thfund, build, and operate public projects. d 1 Features: ir a t K efforts. 1. Collaboration: Joint public-private 2. Risk Sharing: Risks h a n distributed between partners. 3. Long-terma r s Contracts: Typically 20-30 years. PInvestment: Private sector funds the project. 4. Private 5. Efficiency and Innovation: Improved management and solutions. 6. Performance-Based Payments: Payments tied to performance. 7. Public Service Focus: Projects aim to serve public needs. Q4. What are the various types of organizations in the private sector. Ans: Various types of organizations in the private sector include: 1. Sole Proprietorship: Owned and operated by one individual. 2. Partnership: Owned by two or more individuals sharing profits and liabilities. 3. Limited Liability Company (LLC): Combines benefits of partnerships and corporations, offering limited liability.  PRASHANT KIRAD Q5. State some risks of MNCs towards the domestic economy? Ans: Risks of MNCs towards the domestic economy include: 1. Market Dominance: Outcompeting local businesses. 2. Profit Repatriation: Capital outflow to home countries. 3. Resource Exploitation: Depletion and environmental harm. 4. Labor Exploitation: Lower wages and poor conditions. 5. Cultural Erosion: Undermining local traditions. 6. Economic Dependence: Vulnerability to external decisions. 7. Limited Technology Transfer: Hindered domestic tech development. 2th & 1 1th d 1 ira t K han s Pra