Class 11th Business Studies Public, Private and Global Enterprises Notes

1. Role of Private Sector vs Public Sector Since Independence

Private Sector Role:

• Profit motive: Aims to earn profit from business.
• Entrepreneurship: Encourages starting new industries and businesses.
• Employment: Creates jobs for people.
• Innovation: Brings new technology and ideas to production.
• Consumer goods: Produces goods and services for people.

Public Sector Role:

• Government control: Important industries like railways, coal, and electricity are managed by the government.
• Economic development: Develops backward regions and reduces regional inequality.
• Resource distribution: Ensures fair use of resources.
• Employment: Provides jobs to people.
• Infrastructure: Builds roads, power plants, and ports.

2. Forms / Types of Public Sector Enterprises

A. Departmental Undertakings

Definition: Government departments that run businesses as part of government work.

Features:

• Fully owned: Completely owned by the government.
• No separate identity: Part of the government, not a separate legal entity.
• Government funded: Entirely financed by government money.
• Government managed: Run by government officers.
• Government accounting: Accounts follow government rules.

Advantages:

• Government control: Operations follow national policies.
• Essential services: Provides services at low cost.
• Public welfare: Works for social good.
• Operations in unprofitable areas: Works where private companies are not interested.
• Employment generation: Creates jobs.

Disadvantages:

• Slow decision-making: Bureaucracy slows work.
• Low efficiency: Profit is not the main aim.
• Political interference: Decisions can be influenced by politics.
• Limited flexibility: Hard to adapt to changes.
• Resource wastage: Inefficiency may waste resources.

Examples: Indian Railways, Postal Services

B. Public / Statutory Corporations

Definition: Organizations set up by a special law, separate from the government, but controlled by it.

Features:

• Separate legal identity: Independent from government.
• Funds: Funded by government and own income.
• Management: Managed by a board of directors.
• Independent operations: Can borrow money and make contracts.
• Social and economic goals: Work for welfare and development.

Advantages:

• Autonomy: Can take decisions independently.
• Large capital: Can raise funds from market or government.
• Social service: Serve social and economic purposes.
• Professional management: Better efficiency.
• Employment and regional development: Creates jobs and develops regions.

Disadvantages:

• Government interference: May affect decisions.
• Financial loss risk: Can incur losses if mismanaged.
• Slow procedures: Bureaucracy can delay decisions.
• Profit is secondary: Social objectives come first.
• Competition challenge: Hard to compete with private companies.

Examples: LIC, SBI

C. Government Companies

Definition: Companies registered under Companies Act where government owns at least 51% shares.

Features:

• Separate legal entity: Functions like private companies.
• Majority government ownership: Government holds 51% or more shares.
• Fund raising: Can get loans from banks or institutions.
• Professional management: Managed by professionals with government oversight.
• Sector focus: Operates in important sectors for growth.

Advantages:

• Private efficiency with government support: Best of both worlds.
• Economic development: Helps industrial growth.
• Services at reasonable cost: Provides essential services to people.
• Employment generation: Creates jobs and develops regions.
• Professional management: Improves efficiency.

Disadvantages:

• Profit secondary: Social objectives may take priority.
• Bureaucratic delay: Decision-making may be slow.
• Government interference: May affect operations.
• Lower efficiency: Compared to private companies.
• Less market flexibility: Hard to adapt quickly.

Examples: ONGC, Indian Oil Corporation

3. Multinational Companies / Global Enterprises

Definition: Companies operating in more than one country with offices, factories, or marketing abroad.

Features:

• Global presence: Operates in multiple countries.
• Centralized control: Headquarters control overall decisions.
• Large capital and tech: Invests heavily with advanced technology.
• Profit and market focus: Goal is earning profit and expanding markets.
• Global influence: Affects international trade and economy.

Advantages:

• Employment: Provides jobs in other countries.
• Technology transfer: Brings new skills and knowledge.
• Exports and foreign money: Increases exports and foreign currency.
• Better products: Improves quality and variety for consumers.
• Global business growth: Promotes international business.

Disadvantages:

• Local business harm: May affect small local companies.
• Profit leaves country: Earnings go to home country.
• Cultural influence: May affect local culture.
• Dependence: Host countries may rely on them.
• Ethical/environmental issues: Sometimes causes social or environmental problems.

Examples: Coca-Cola, McDonald’s, Microsoft

4. Joint Ventures (JV)

Definition: Two or more companies work together for a specific project or business.

Features:

• Shared ownership: Partners share ownership, risk, and profit.
• Limited purpose: Usually for a specific project or duration.
• Combines strengths: Partners share resources, skills, and technology.
• Agreement-based: Roles and responsibilities are defined in contract.
• Separate entity: Acts as a distinct business unit for the project.

Advantages:

• Shared risk: Risk and investment shared among partners.
• Faster market entry: Helps enter new markets quickly.
• Skill and technology exchange: Partners learn from each other.
• Better efficiency: Combines expertise and resources.
• Local knowledge: Easier to understand local markets.

Disadvantages:

• Conflict risk: Disagreements may arise.
• Unequal contributions: Can cause disputes.
• Limited control: Individual partner control is restricted.
• Profit sharing: Profits have to be divided.
• Difficult exit: Ending the JV legally can be complex.

Examples: Sony-Ericsson, Maruti Suzuki

5. Public-Private Partnership (PPP)

Definition: Government and private companies work together to provide public services or build infrastructure.

Features:

• Collaboration: Partnership between government and private sector.
• Shared responsibility: Investment, risk, and roles are shared.
• Project-specific: Usually for roads, hospitals, metro, etc.
• Legal agreement: Roles and duties are clearly defined.
• Combined efficiency: Government oversight with private efficiency.

Advantages:

• Efficient resource use: Better use of money and resources.
• Lower government burden: Reduces financial load on government.
• Innovation: Private sector brings new ideas and technology.
• Fast execution: Projects are completed quicker.
• Improved public services: Quality of services improves.

Disadvantages:

• Profit vs welfare conflict: Private profit goals may conflict with public good.
• Delays if partnership fails: Problems may cause slow progress.
• Legal disputes: Conflicts may arise.
• Monitoring needed: Government must supervise carefully.
• Unequal benefits: Poor management can give unfair advantages.

Examples: Delhi Metro, Mumbai-Pune Expressway

Difference between Departmental Undertaking, Public Corporation, and Government Company:

Difference Between Private Sector and Public Sector