Chapter 3 BST Private, Public.. Rajesh Sir

XI CBSE
Business Studies
Chapter - 3
Private, Public and

Global Enterprises
Rajesh Gidwani
9824590506
Private Sector
Enterprises
Private Sector Enterprises
Firms owned, controlled and managed by

private businessmen
The main object of such undertaking is profit

making
Private Sector Enterprises
Types of Private Sector Enterprises
Sole Proprietorship Concerns

◆
Hindu Undivided Family Business

◆
◆ Partnership Business Organizations

Co-operative Societies
◆
Joint Stock Companies

◆
Public Sector
Enterprises
Public Sector Enterprises
Enterprises owned and managed by

central government or state government
or by both
The basic purpose is to render service to society

E.g. Railways, LIC, FCI, Post Offices etc.
Forms of
Public Sector
Enterprises
Forms of Public Sector Enterprises
1. Departmental Undertakings
2. Public Corporations
3. Government Companies
1 2 3
Post and Telegraph Reserve Bank of India Indian Telephone

Industries
Departmental
Undertakings
Departmental Undertakings
Undertakings created by government

✔
✔ Financed and controlled by government

Managed by government officials
✔
Under the control of a minister

✔
Departmental Undertakings
Examples of Departmental Undertakings
All India Radio Doordarshan
Post and Telegraph Indian Railway

Features of
Departmental
Undertakings
Features of Departmental Undertakings
a Funding
Financed through budget allocation

b Audit and Control
They are subject to Government audit

c Employees
Employees are Government servants

d Control
Subject to direct control by the concerned ministry

e Accountability
Accountable to the ministry and the government

Merits of
Departmental
Undertakings
Merits of Departmental Undertakings
a Control of parliament
Better control over funds and operations as it is

controlled by the ministry
b Public accountability
Responsibility to the government

c Source of revenue to government
Income earned by these organizations directly

goes to the treasury
d National security
Secrecy can be maintained especially in case of

strategic industries such as defence etc.
Limitations of
Departmental
Undertakings
Limitations of Departmental Undertakings
a Lack of flexibility
Predetermined rules and regulations and

interference from the ministry
b Delay in decisions
Approval from the government is necessary

to take decisions
c Unable to tap business opportunities
Conservative approach of bureaucrats does not

allow them to take risky ventures
d Red tapism and bureaucracy
Results delay in decision making and operations

e Political interference
These enterprises are subject political interference

through the ministry
f Consumer needs
They usually do not give any consideration for

consumer needs
Statutory Corporations
or
Public Corporations
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9824590506
Public Corporations
It is generally created as an autonomous
institution by passing a Special Act in
the Parliament or State Legislature
As a body corporate, it is a separate entity for legal

purposes and can sue and be sued, enter into
contracts and acquire property in its own name
Public Corporations
Some Important Public Corporations
Reserve Bank of India Indian Airlines Corporation
Life Insurance Corporation

Features of
Public Corporations
Features of Public Corporations
a Formed by special Act
Created under a special Act of Parliament or

State Assembly
b Ownership
Owned by the Government

c Separate legal existence
It has a separate legal entity, so that it can own

properties and enter into contract in its own name
d Financial autonomy
Obtains funds through borrowing from treasury or
public and from the sales of goods and services
It has the power to utilize its revenues

e Employees
Appointed as per the terms and conditions of the

corporation and they are not to be treated as
government servants
f Independent accounting and audit
It has its own accounting and audit, but not subject

to government audit and budget allocation
Merits of
Public Corporations
Merits of Public Corporations
a High degree of flexibility
It enjoys flexibility of operations and financial and

managerial freedom since it is free from undesirable
government control
b Least government interference
As there is no budget allocation for funds from

government there is no much government control
c Autonomous status
They can frame their own policies and procedure

within the purview of the Act
d Helps in economic development
It contributes towards economic development in a

big way
e Stability
Since they are not subject to political changes, they

can take long term business policies
Limitations of
Public Corporations
Limitations of Public Corporations
a Rules and regulations
It does not enjoy much operational flexibility as it is

governed by various rules and regulations of the
Act
b Political interference
In practice complete autonomy is not possible due

to interference from the ministry
c Chances of corruption
Officials may misuse the autonomy status for their

personal gain
d Inefficiency
Absence of competition and profit motive leads to

inefficient operations
e Delay in action
Quick decisions cannot be taken by the officials

because of the involvement of government
nominees in the director board
Government
Company
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Government Company
Public enterprises organized under the

Companies Act are Government companies
It is a company in which at least 51% of share

capital is held by the Central Government
or by the State Government or both
Government Companies in India
Hindustan Shipyard Ltd. Bharat Heavy Electricals Ltd.
Coal India Ltd. Steel Authority of India Ltd.

Features of
Government Company
Features of Government Company
a Incorporation
It is incorporated under Companies Act

b Separate legal entity
It can own properties, enter into contracts, sue and

be sued in its own name
c Management
Management is vested in the hands of Directors,

appointed by Government
d Memorandum and Articles of Association
Objects of the company and its rules and

regulations are contained in these documents
e Accounting and audit procedure

They are exempted from accounting and audit rules
as per the Act
However government appointed auditor’s report

should be presented in the Parliament or
Legislative Assembly
f Funds
Investment in government companies is raised by

government shareholdings and from private
shareholders
Merits of
Government Company
Merits of Government Company
a Easy formation by registration
No need of enactment of special Act in Parliament

b Separate legal entity
It has separate existence apart from the government

c Quick decisions
Prompt decisions in time as it has autonomy power

d Prevents unhealthy business
It can control unhealthy business practices by

providing goods and services at a reasonable price
Limitations of
Government Company
Limitations of Government Company
a Autonomy is just for name sake
Since the government is the only shareholder in

some companies, provisions of Companies Act have
no relevance.
b No accountability
Even though major investment is made by the

government, it is not answerable to the Parliament
c Main purpose is not served

Being the major shareholder, government controls
the affairs of the company
It defeats the main purpose by registering like other

companies
Changing Role of
Public Sector
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Changing Role of Public Sector
Public sector plays an important role in India’s

economic development
The most important objective of public sector is

economic growth with social justice and providing
service to the society
Importance of
Public Sector
Importance of Public Sector
1 Development of infrastructure
Transportation, communication, fuel and energy,
basic and heavy industries etc. are very essential for
economic development
Government has set up various PSUs in these areas

where private enterprises are unwilling to invest
2 Regional balance
To maintain balanced regional development the
government has taken initiative to start a number of
public sector units in backward areas
3 Economies of scale
Government has set up large scale industries in
public sector to take advantages of
economies of scale
Eg. Electric power plants, petroleum refinery,

telephone industries etc.
4 Check over concentration of economic power
The flow of economic resources to the private sector

entrepreneurs can be controlled up to a
certain extent
5 Import substitution
Government set up public sector units for production
of capital goods which were imported earlier
Several public sector companies are producing goods

on a large scale, thus playing an important role in
expanding exports of the country also
Government Policy
Towards
Public Sector
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Government Policy
Government of India introduced four major

reforms in the public sector thorough the
Industrial Policy in 1991
Government Policy
a
Restructure and revive potentially viable
Public Sector Undertakings (PSUs)
Government Policy
b
Close down PSUs, which cannot be revived
Government Policy
c
Bring down government equity
in all non-strategic PSUs to 26% or
lower if necessary
Government Policy
d
Protect the interest of workers
Measures Taken by
Govt. to Reform
Public Sector
a Measures Taken by Govt.
Reduction in the number of industries reserved
for public sector
●17 industries were reserved for public sector as per
the Industrial Policy 1956.
● It has been reduced to 8 industries in 1991 and
again to 3 industries in 2001.

● They are atomic energy, arms and rail transport.
b Measures Taken by Govt.
Disinvestment
●Sale of equity shares of Public Sector Undertakings
to private sector and to the public
● Government holding in such units is thereby
reduced and private participation enhanced
Eg. Sale of shares in Indian Petro Chemicals Ltd.,

Maruthi Udyog Ltd. etc.
c Measures Taken by Govt.
Protection of sick units
Highly sick public enterprises which are unlikely to
be revived will be referred to the Board for Industrial
and Financial Reconstruction (BIFR) for
rehabilitation
d Measures Taken by Govt.
Memorandum of understanding (MOU)
● To improve the performance of PSUs, government
introduced MOU system by giving clear target and
operational autonomy to achieve those targets
● Here PSUs are accountable for specified results
Global Enterprises
or
Multinational
Companies
Rajesh Gidwani
9824590506
Global Enterprises
Multinational Companies
● Company carrying on business in two or more
countries
● Company that operates in several countries
● Company has factories, branches or offices in
more than one country

● Branches are also called Majority Owned
Foreign Affiliates (MOFA)
Global Enterprises
Multinational Companies
It is also known as Multinational corporation,
Transnational Corporation, Global Giant, World
Enterprise, International Enterprise, MNCs etc.
Global Enterprises
Multinational Companies – Examples

Features of
Global Enterprises
a Features of Global Enterprises
Huge capital
They have large capital investment as they are
running large scale business units
Investors and financial institutions of the host

country will be ready to invest in MNCs because
of their credibility
b Features of Global Enterprises
Foreign collaboration
Global enterprises usually collaborate with Indian
companies, both private and public sector, by this
both the parties will be benefited by sharing
technology, brand name etc.
c Features of Global Enterprises
Advanced technology
MNCs are able to provide world class products
of international standards by using advanced
technology in the areas of production,
marketing etc.
d Features of Global Enterprises
Marketing strategies
They adopt aggressive marketing techniques
to increase the sales in a short period
They have advanced marketing information

system, advertising and sales promotion
techniques and a good brand name
e Features of Global Enterprises
Expansion of market territory
They can extent their markets very easily to
the foreign countries as they are running the
branches in various nations
f Features of Global Enterprises
Product innovation
Their products are always highly innovative as they
are running their own research and development
wing for developing new products and superior
designs for existing products
g Features of Global Enterprises
Centralized control
The headquarters of an MNC can exercise better
control over the operations of its branches in
various countries as they operate within the policy
framework of the parent organization
Joint Ventures
JVs
Rajesh Gidwani
9824590506
Joint Ventures
An association of two or more individuals or
organizations formed by agreement for a common
purpose or mutual benefit is called a joint venture
These organizations may be private, government or

a foreign company
Joint Ventures
Usually JVs are formed to share strengths,
minimize risks and to increase competitive
advantage in the market place
Eg. Bajaj Allianze Insurance Co., Mahindra –

Renault Ltd, Air Asia India, Maruthi and Suzuki,
Yamaha and Mahindra.
Benefits of a
Joint Venture
Business
Benefits of Joint Ventures
1 Increased resources and capacity
JVs can easily expand their business and they are

able to face market challenges, reap the benefits of
economies of scale
2 Access to markets
When a foreign company enters into JV with an

Indian company, they gain access to the vast
Indian market
3 Access to technology
Technology adds to efficiency and effectiveness and

thus reduces the cost
4 Innovation
● JVs comes up with some new ideas and
techniques
● Especially foreign partners can introduce innovative
products in the market based on their experience
5 Low cost of production
When two firms join hands, they can operate on

large scale and reap the benefits of
economies of scale
6 Established brand name
● Goodwill of one party can be enjoyed by the other
party also
● New organization need not take much effort to
establish their new brand
Eg. Toyota Kirloskar, Maruthi Suzuki etc.

Types of Joint Ventures
1. Contractual Joint Ventures (CJV)
In this case a new entity is not created
There is only an agreement to work together
The parties do not share ownership of the
business but exercise some elements of
control in the joint venture
Franchisee relationship is
Franchise Business
a typical example for
contractual joint ventures
2. Equity Based Joint Venture (EJV)
In this case a separate business entity is formed
jointly owned by two or more parties based on an
agreement
Formed by: Bajaj Finserve Ltd. Bajaj

Group of India and Allianz SE a
European financial services company
The ownership of this organization is shared by

these parties
Examples of JVs
No. Name of JV Established Joint Venture Holders
Balmer Lawrie & Co. Ltd and NYCO SA

1. AVI Oil India Pvt. Ltd 1993
France
2. Green Gas Ltd 2005 GAIL (India) Ltd. and IOCL
Delhi Aviation Fuel

3. 2010 BPCL and DIAL
Facility Pvt. Ltd
Private Public Partnership
PPP
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It is a relationship between public and private

entities in the context of infrastructure and
other services
Under PPP model public sector plays an

important role and ensures that the social
obligations are fulfilled and public investments
are successfully met
The public partners in PPP are Government

entities like ministries, government
departments, municipalities etc
The government’s contribution to PPP is in the

form of capital for investment and transfer of
assets that support the partnership
Expertise
The role of private sector is to make use of its

expertise in operation, managing tasks and
innovation to run the business efficiently
Power generation and distribution, water and
sanitation, pipelines, hospitals, school
buildings and teaching facilities, stadiums, air
traffic control, prisons, railways, roads, billing
and other information technology system,
housing etc. are the major sectors in which
PPP operates
Power generation

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XI CBSE

Private, Public and

Firms owned, controlled and managed by

The main object of such undertaking is profit

Types of Private Sector Enterprises

Sole Proprietorship Concerns

Hindu Undivided Family Business

◆ Partnership Business Organizations

Joint Stock Companies

Enterprises owned and managed by

The basic purpose is to render service to society

Post and Telegraph Reserve Bank of India Indian Telephone

Undertakings created by government

✔ Financed and controlled by government

Under the control of a minister

All India Radio Doordarshan

Post and Telegraph Indian Railway

Financed through budget allocation

b Audit and Control

They are subject to Government audit

Employees are Government servants

Subject to direct control by the concerned ministry

Accountable to the ministry and the government

Better control over funds and operations as it is

Responsibility to the government

c Source of revenue to government

Income earned by these organizations directly

Secrecy can be maintained especially in case of

Predetermined rules and regulations and

Approval from the government is necessary

c Unable to tap business opportunities

Conservative approach of bureaucrats does not

d Red tapism and bureaucracy

Results delay in decision making and operations

These enterprises are subject political interference

They usually do not give any consideration for

As a body corporate, it is a separate entity for legal

Reserve Bank of India Indian Airlines Corporation

Life Insurance Corporation

Created under a special Act of Parliament or

Owned by the Government

It has a separate legal entity, so that it can own

It has the power to utilize its revenues

Appointed as per the terms and conditions of the

It has its own accounting and audit, but not subject

It enjoys flexibility of operations and financial and

As there is no budget allocation for funds from

They can frame their own policies and procedure

It contributes towards economic development in a

Since they are not subject to political changes, they

It does not enjoy much operational flexibility as it is

In practice complete autonomy is not possible due

Officials may misuse the autonomy status for their

Absence of competition and profit motive leads to

Quick decisions cannot be taken by the officials

Public enterprises organized under the

It is a company in which at least 51% of share

Hindustan Shipyard Ltd. Bharat Heavy Electricals Ltd.