Private, Public and Global Enterprises Class 11 Notes: CBSE Business Studies Chapter 3

Public and Private Sector

• The Indian economy includes both private and public sector businesses.

• Private sector businesses are owned by individuals or groups.

• Public sector organisations are owned and managed by the government, either fully or partially, and may be part of a ministry or created by a Parliamentary Act.

• The Industrial Policy Resolution of 1948 outlined India's approach to economic development.

• The Industrial Policy Resolution of 1956 aimed to boost expansion and industrialisation through public sector goals.

• The 1991 industrial policy marked a shift by encouraging disinvestment in the public sector and granting more freedom to the private sector.

• Foreign companies were also invited to invest in India.

• In the Indian economy, public sector units, private firms, and multinational corporations coexist.

Indian Economy- Public and Private Sector

Public Sector

1. Departmental Undertakings

2. Statutory Corporation

3. Government Companies

Private Sector

1. Sole Proprietorship

2. Partnership

3. Joint Hindu Family

4. Cooperative

5. Multinational Corporations

6. Company  (public ltd.), (private ltd.)

1. Departmental Undertakings

Overview: Operate as extensions of ministries, run by government personnel.

Examples: Railways, Post and Telegraph Department.

Features:

• Funded directly from the government’s budget.

• Subject to accounting and audit controls like other government activities.

• Employees are government staff with similar recruitment and working conditions.

• Directly controlled by the relevant ministry.

Merits:

• Effective parliamentary control and high public accountability.

• Revenue goes directly to the treasury.

• Ideal for national security due to direct government oversight.

Limitations:

• Lack of flexibility in operations.

• Decisions require ministry approval, limiting independence.

• Bureaucratic delays and political involvement.

• Consumer needs may be overlooked.

2. Statutory Corporations

Overview: Public enterprises created by a special act of Parliament.

Features:

• Governed by the provisions of the Act.

• Fully owned by the state with government financial responsibility.

• Legal entity with authority to sue, enter contracts, and acquire property.

• Funded by government borrowings and public investment.

Merits:

• Independence in operations with high flexibility.

• No government interference in financial matters.

• Creates its own policies and procedures.

• Valuable for economic development.

Limitations:

• Bound by rules and regulations, limiting flexibility.

• Government and political interference in major decisions.

• Public interaction can lead to corruption.

• Advisors may limit decision-making authority.

3. Government Company

Overview: Company with at least 51% government ownership, formed under the Companies Act 2013.

Features:

• Formed under the Companies Act, with separate legal entity.

• Can sue and be sued, enter contracts, and own property.

• Managed as per the Companies Act with its own rules for employees.

• Exempt from regular accounting and auditing norms.

• Funded by government shareholdings and private investors.

Merits:

• Autonomy in management decisions.

• Can influence the market and discourage unhealthy practices.

Limitations:

• Government control may undermine the purpose of the company.

• Companies Act restrictions often irrelevant due to government ownership.

• The company’s role as a business entity is compromised by government control.

Changing Role of Public Sector

1. Development of Infrastructure:

• Essential for industrialization; government’s role in funding and building infrastructure.

• Expansion of transport networks has fuelled economic growth.

2. Regional Balance:

• Ensures balanced development across regions.

• Establishes industries in underdeveloped areas to spur growth and reduce inequalities.

3. Economies of Scale:

• Government involvement needed for large-scale industries requiring significant investment.

• Enabled the establishment of vital industries like electricity, petroleum, and telecommunications.

4. Concentration of Economic Power:

Prevents wealth concentration in private hands by establishing large public-sector industries.

5. Import Substitution:

• Establishes heavy engineering firms to replace imports with local production.

• Public enterprises like STC and MMTC have boosted exports.

6. Government Policy Towards Public Sector Since 1991

1. Industrial Policy Reforms:

1. In 1991, the government reduced the number of industries reserved for the public sector from 17 to four: atomic energy, armaments, communication, mining, and railways.

2. By 2001, only three industries—atomic energy, armaments, and rail transportation—remained reserved solely for the public sector.

2. Disinvestment:

1. The government initiated the sale of equity shares to the private sector and the general public to raise funds and increase public and worker participation in the ownership of public sector enterprises.

3. Board of Industrial and Financial Reconstruction (BIFR):

1. All public sector units were referred to the BIFR to assess whether sick units should be rehabilitated or shut down. The board has also reviewed revival plans for several units.

4. Memorandum of Understanding (MOU) System:

1. Public sector units were given operational autonomy with clearly defined targets. Managements were granted more authority but held accountable for achieving specific outcomes under the MOU system.

Global Enterprises

• Global enterprises are large industrial conglomerates that expand their manufacturing and marketing operations across multiple nations through a network of subsidiaries.

• Majority Owned Foreign Affiliates is another name for their branches (MOFA).

• They don't try to make the most money from just one or two things; instead, they spread their branches far and wide.

• Because of their capital resources, cutting-edge technology, and goodwill, they are in a position to exert significant power over the global economy.

Features:

1. Huge Capital Resources:

• They possess huge financial resources and the ability to raise funds from different sources.

• They can get money from a variety of places.

• They may sell stock, debentures, or bonds to the general public.

• They can also borrow money from banks and financial institutions around the world.

• They enjoy credibility in the capital market.

2. Foreign Collaboration:

• They enter into agreements with Indian companies for the selling of technology, the manufacture of items, and the usage of brand names for finished products, among other things.

• They may work with both governmental and private sector businesses.

• In most agreements, there are numerous restrictive terms relating to technology transfer and priceline. dividend payments, foreign technicians' tight oversight, and so on.

• Collaborations with other countries have resulted in the creation of monopolies and the concentration of power in a few hands.

3. Advanced Technology:

• These businesses have technological advantages in their manufacturing processes.

• They are capable of adhering to worldwide quality norms and specifications.

• As a result, the country in which such firms operate advances industrially since they are able to maximise the use of local resources and raw materials.

4. Product Innovation:

• These businesses are distinguished by highly advanced research and development divisions tasked with inventing new goods and improving the designs of existing ones.

• Qualitative research necessitates a significant financial investment that only multinational corporations can make.

5. Marketing Strategies:

• They employ aggressive marketing methods to boost sales in a short amount of time.

• They have a more trustworthy and up-to-date market data system.

• They've already carved out a niche in the worldwide market, and their brands are well-known, so selling their products isn't an issue.

6. Expansion of Market Territory:

• Their operations and activities are not limited to the borders of their respective countries.

• Their international image improves, and their market territory grows, allowing them to establish themselves as global brands.

• They operate in host nations through a network of subsidiaries, branches, and affiliates. They have a monopoly on the market due to their enormous size.

7. Centralised Control:

• Their headquarters are in their home nation, and they have complete control over all of their branches and subsidiaries.

• This control is confined to the parent company's broad policy framework.

• There is no disruption to daily operations.

Joint Ventures

• A joint venture is formed when two businesses agree to work together for a common goal and mutual gain.

• The joint venture agreement must also stipulate that all required government permissions and licences will be secured within a certain time frame.

• A joint venture agreement must be founded on a memorandum of understanding signed by both parties that outlines the terms of the arrangement.

• The business's risks and gains are also shared.The reasons behind the joint venture often include business expansion, development of new products ar moving into new markets, particularly in another country

• Examples of Joint Ventures are AVI Of India Pvt. Ltd Green Gas Ltd etc.

Joint Venture-Types

1. Equity-Based

• Company 

• Limited liability partnership

• Partnership

2. Contractual

• Cooperation Agreement/Strategic Alliances

1. Equity-Based Joint Venture

• An equity joint venture agreement is one in which two or more parties agree to construct a distinct company entity that is jointly owned by the parties.

•  The Forms of business entities may vary.

2. Contractual Joint Venture

• There is simply a commitment to collaborate.

• Although the parties do not share ownership of the company, they do have some control over it.

Benefits of Joint Ventures:

• Increased Resources and Capabilities: Joint ventures combine resources, allowing for faster and more efficient growth and expansion.

• Access to New Markets: Partnering with a foreign company provides access to large and rapidly expanding markets.

• Advanced Technology Access: Joint ventures offer access to advanced technology and manufacturing processes, saving time, energy, and money.

• Innovation and Creativity: Collaborating with international partners leads to the development of new and creative products for the market.

• Cost-Effective Production: International firms benefit from lower production costs in India, meeting global needs with high-quality products.

• Shared Goodwill: One partner benefits from the established goodwill of the other in the marketplace.

Public Private Partriershíp

• A public-private partnership (PPP) is described as a collaboration between public and private entities in the context of infrastructure and other services.

Features:

• Government entities (departments, municipalities, ministries, state-owned enterprises) act as public partners in PPPs.

• Private partners can be local or international enterprises or investors with technical and financial expertise.

• The government provides funds and assets, focusing on social responsibility, environmental awareness, and local expertise.

• The private sector contributes by applying its operational skills, management expertise, and innovation to run the partnership efficiently.

Examples:

Power generation and distribution, water and sanitation, waste disposal, pipelines, hospitals, school buildings and teaching facilities, stadiums, and other infrastructure are all needed.

Merits:

•  Transfer of design and construction risk.

•  Potential to accelerate projects.

Limitations:

• Conflict between parties may arise on environmental considerations.

• Does not attract private finance easily.

Important Topics of Business Studies Class 11 Chapter 3 Private, Public and Global Enterprises

Here’s a table summarising the important topics:

Importance of Revision Notes for Class 11 Business Studies Chapter 3

• Summarises Key Points: Condenses important concepts for quick review.

• Saves Time: Provides a fast way to revise before exams.

• Highlights Essentials: Focuses on crucial topics and definitions like Excretion in plants and animals.

• Improves Memory: Helps in better retention of information.

• Enhances Exam Prep: Targets weak areas for more effective study.

• Clarifies Concepts: Simplifies complex ideas for easier understanding.

• Includes Visuals: Uses diagrams and charts for better grasp as explained for blood circulation in Human body.

• Boosts Confidence: Prepares students thoroughly for exams.

Tips for Learning the Class 11 Business Studies Chapter 3

1. Focus on core processes with illustrations and examples.

2. Draw and label diagrams for clarity.

3. Create brief summaries of each process.

4. Connect concepts to everyday examples.

5. Solve past exam questions to test understanding.

6. Explain concepts to others to reinforce learning.

7. Revisit material frequently to retain information.

8. Utilise platforms like Vedantu for additional support.

Conclusion

The Chapter 3 on Private, Public, and Global Enterprises offers valuable insights into the various types of business organisations and their roles in the economy. By exploring their characteristics, objectives, and economic impact, students gain a thorough understanding of how these enterprises operate and contribute to economic development. This knowledge is crucial for grasping the complexities of modern business environments and preparing for future economic challenges.

Related Study Materials for Class 11 Business Studies Chapter 3

Revision Notes Links for Class 11 Business Studies

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