Unit III

PUBLIC, PRIVATE AND COOPERATIVE SECTORS: Objectives-features, advantages and disadvantages

Study of MSME (Medium, Small and Macro Enterprises) - Salient features of MSME and Emerging trends. MNCs Meaning- Merits- Demerits- MNC and Impact on Indian Economy/ Business; Emerging Trends in Business.

Public enterprise or government undertakings

Owned and managed by state or government for the common benefit of public Eg: machine tools, chemicals and fertilizers, aircrafts and automobiles, transport, development of irrigation, etc Newly formed or nationalized undertaking.

Definition
Acc to A.H. Hansen, public enterprises mean state ownership and operation of industrial, agricultural, financial and commercial undertakings

Features
State ownership State control Service motive Government financing Public ability

Difference B/W private enterprise and state enterprise

Owned Benefit Size Main motto Flexibility Efficiency political interference Payment to laborers

Objectives :
Stimulate economic growth Provide employment opportunities Channelize public savings Diffusion of economic power Egalitarian society Strengthen research and development

Rationale of public sector enterprise

For undertaking industries involving large investment but yielding low return For the development of key industries and basic industries (m/c tools, railways, iron & steel, ship building) Low rate of private investment For removing regional disparities For curbing private monopoly and concentration of economic power Abuses of the private sector (nationalized) For building up economic and social overheads (railway, roadways, power plants ; edu inst, medical insti, tech inst & public health centres) Promotion of public welfare Attainment of the socialistic pattern (constitution of India equality)

Objectives of public enterprises

To prevent growth of private monopolies in business To prevent concentration of wealth and economic power in the hands of the few To reduce the disparity in the income and wealth of the people To promote the interest and welfare of the public at large To increase the opportunities for employment

 To give a fair deal to labours To take up risky ventures which are avoided by private enterprises To reduce the regional imbalances through planned development of industries To accelerate the rate of economic development of the country To generate surplus from industries and commerce for financing welfare measures

 To serve as a powerful instrument for achieving the social and economic objectives of the state To enable the government to have control over the economy of the country To bring about greater co ordination and harmony among the various industries To mobilize public deposits and direct their flow into desire channels To diversify national economy To achieve self reliance in strategic sectors

Forms
Departmental undertakings Statutory and public corporations Government companies

Departmental undertakings
They are state enterprises managed by the government departments Eg: post, telephone, telegraphic, railway, defence industry Characteristics : Oldest and established by the ministry It is organized as a govt dept attached to the concerned ministry (communication ministry) Overall management is in the hands of officials and minister of the concerned ministry Employees are called as civil servants Financed by the annual budget allotted by the parliament It cannot retain and use its revenue (govt treasury) Cannot borrow funds from the public Strict govt regualtion

 Advantages : Full control Achieve objective (social and economic) Risk of misuse of public funds Greater accountability to the parliament Disadvantages: Interferences Management is not efficient (lack buz skills) Do not care for consumer needs Delay (procedures) Lacks initiative & flexibility Policy changes as change in govt officials

Statutory and public corporations

Body corporate created by the a special act of the parliament Eg: Indian airlines lines corporation, LIC, etc Characteristics : Modern form Special act of the parliament Retain its revenue Borrow funds form the public Management is by BOD nominated by the govt Employees are not civil servants (paid by the corporate) Interference less Service, not profit

 Merits: Autonomous institutions (freedom) Quick decisions Flexibility in operations Management is efficient Accountability to parliament Demerits : Smooth working is disturbed (interference) Constitution is rigid (statutory Act) Formation (long time) BOD with different interest

Registered under companies act of 1956 51% of the share capital is held by the government Mixed ownership Eg: HMT, Bharat heavy electrical ltd, Hindustan steel ltd, etc Characteristics: Formed Registered under Co Act Retain its revenue Can borrow funds from the public Management is in the hands of BOD Accountability to the parliament is less

Government companies:

 Advantages: Formation Free to take decision Flexibility co act Joint ownership Management is efficient Disadvantages: Directors cannot have share of the profit Management efficiency (pleasing the politicians)

Advantages of public sector enterprises

Big projects Interest of the nation Balance development Reduce inequalities Abolish private monopolies Interest of labours are well protected Estb heavy and strategic industries Source of revenue to the govt

Disadvantages of public sector enterprises

No systematic criteria investment decision Unduly long gestation period Employment of excess manpower Large overhead expenditure Inefficient management Lack of incentives Lack of co ordination among various public sector units Lack of research and development

Private sector
Owned and managed and controlled by the private individuals Main motive

Objectives of private enterprises

To reduce political interference To provide adequate competition To generate cash

Features of private sector enterprises

Private ownership and control Profit motive

No state participation
Private finance Independent management

Advantages of private sector

Customer orientation Competition Innovation Flexibility

Disadvantages of private sector

Increase in corruption

As its financial resources are limited, it cannot get the services of the skilled staff. As a private company enjoys exemption from various important provisions of the Companies Act, there is more scope for irregularities and frauds.
Compromise on quality of their products

Co-operative society
H. Calvert defines, as a form of organization wherein persons voluntarily associate together as human beings of equality for the promotion of the economic interest of themselves

Characteristics
Voluntary association Association of persons Open membership Unrestricted membership Equal voting rights Democratic management Service motive Equity of distribution of profits Corporate status and state control Liability

Advantages:
Registration Life Constructive purpose Promotes spirit of co-operation Maximum service Democratic organization Registered society

Disadvantages
Disputes Loyalty of members Inadequate capital Managerial ability State interference Large scale operation Low secrecy Public confidence.

Micro, Medium and Small Enterprises

Enterprises ::: o Manufacturing o Rendering services Classification on size :: o Investment in Pl & M/c o Equipments

Classification Investment ceiling for plant and machinery or equipment

Micro Medium
@ $ 1 = Rs. 40

Upto $62,500

Upto $ 25,000

B/W $ 1.25 mn - $ 2.0 mn

B/W $ 0.5 mn 1.25 mn

Popular Areas of Small Business Enterprise

Services Retailing Construction Financial Insurance Wholesaling Transportation Manufacturing

Manufacturing 5% Finance & Insurance Other 10% 1.7% Wholesale 8%

Construction 10% Transportation 5%

Retailing 22.7%

Services 37.6%

Salient features of MSME

Born out of individual initiatives and skills Greater operational flexibility Low cost of production High propensity to adopt technology High capacity to innovate export High employment orientation Utilization of locally available human and material resources Reduction of regional imbalances

Reasons a Business Might Fail (contd.)

Percentage of business failures

~Emerging trends~
Strength Employment Generation Use of Local Rawmaterials Balanced Regional Development Decentralization of Industries Mobilization of capital Developing Entrepreneurship Equitable Distribution of Wealth Efficient use of productive factors Promotion of Exports Weakness
Opportunities

Threat LG Constant up gradation of technology and size

Problem of RawLG materials Problem of Finance Exports Problem of Marketing Problem of under utilisation of capacity Outdated technology Poor project planning Inadequate Infrastructure Regulations Competition Sickness

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WHAT IS MNC ???

When a company operating in a home nation establishes its subsidiary in other nations (host nations), it becomes an MNC and there starts the process of globalization wherein a local company serves the entire world with its products and services. The advent of Internet and the ensuing "new economy" has opened up a plethora of new business opportunities - and an "inevitable" number of business casualties.
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Features of MNC
1. Big size 2. Huge intellectual capital 3. Operates in many countries 4. Large number of customer 5. Large number of competitors 6. Structured way of decision making
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WHAT IS INDIAN MNC ?

Thus if an Indian Company operating within the country establishes its subsidiaries in foreign soil, then it becomes an Indian MNC. The age of Indian MNC has finally dawned. Mr. Aditya Birla of Aditya Birla group first looked beyond India 30 years ago. Indian companies are using all the tricks of the trade to go global: Mergers & Acquisitions, Organic expansions, Green field investments, and Joint Ventures. The scale and the business share may not be significant today, but Indian businesses are slowly but surely establishing themselves abroad.
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Indian MNC on the global platform

INDIAN FIRMS LISTED ON THE NASDAQ

Sl. No.
1 2 3 4

COMPANY

SECTOR

INFOSYS TECHNOLOGIES LTD REDIFF.COM INDIA LTD SIFY LTD EXL

IT SERVICES INTERNET PORTAL IT SERVICES BPO

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Indian MNC on the global platform

ON THE NEW YORK STOCK EXCHANGE
Sl. No.
1
2 3 4 5 6 7 8 9 10

COMPANY
DR REDDYS LABS LTD
HDFC BANK LTD ICICI BANK LTD MAHANAGAR TELEPHONE NIGAM LTD PATNI COMPUTER SYSTEMS LTD SATYAM COMPUTER SERVICES LTD TATA MOTORS LTD VIDESH SANCHAR NIGAM LTD WIPRO LTD WNS

SECTOR
PHARMACEUTICALS
BANKING BANKING TELECOMMUNICATIONS IT SERVICES IT SERVICES AUTOMOBILES TELECOMMUNICATIONS IT SERVICES BPO
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INDIAN
India Inc. are flying high.and not only over the Indian sky..

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Initiator TATA GROUP

The Group is one of India's largest and most respected business conglomerates. The current chairman of the Tata group is Ratan Tata, who took over from J. R. D. Tata in 1991. It has interests in steel, automobiles, information technology, communication, power, tea and hotels.
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Acquisition Machine

WIPRO
Indias third-biggest software company and IT consulting firm is on an earnings tear, with fourth-quarter profits up 40% to $169 million. Last year, Wipro spent more than $250 million on acquisitions at home and in foreign markets such as Sweden and Finland, and the companys billionaire chairman, Azim Premji, says he wants to do bigger deals in the years ahead to boost economies of scale and to lower costs. One-Year Total Return: 26.26%
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Wireless Wonder

Bharti

It is good to be Indias biggest wireless operatordoing business in the worlds fastest-growing market for mobile phones. Now, Bharti is looking to expand in other fast-growing emerging markets such as Africa. Britains Vodafone owns a 10% stake in Bharti, which also provides outsourcing services to IBM.

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The Tata Nano, the worlds cheapest production car.

Kingfisher Airways, voted the best airline of south-east Asia. The Infosys IT training campus the largest in the world

The HCL laptop, the cheapest production laptop.

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MERITS OF MNC
1. MNCs create employment opportunities in the host countries. It helps to create a pool of managerial talent in the host country. 2. Helps removal of monopoly and improve the quality of domestic made products. 3. Promotes exports and reduce imports by raising domestic productions. 4. Goods are made available at cheaper price due to economies of scale.
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MERITS OF MNC
5. Job and career opportunities at home and abroad in connection with overseas operations. 6. Encourages the world unity and all resulting in world harmony 7. MNCs have become vehicles of technology to the developing countries 8. Practice of MNCs bring to the host country, the latest technique in the field of management. 9. MNCs make commendable contribution to inventions and innovations in the host country.

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Disadvantages of MNCs
1. MNCs may create depletion of resources due to its continues use by these overseas companies. 2. MNCs generally carry out their R&D in their home country and supply to the host country. 3. MNCs generally import huge raw materials due to its continuous use by these overseas companies.

DEMERITS OF MNC
4. The host county is likely to lose its economic sovereignty 5. The host nation may also experience some loss of control over its own economy 6. Feeling that labour is being exploited by the MNC/ Outsourcing 7. Lost of cultural moorings 8. The problem of Dumping
Example Chinese products are priced low in Indian market.
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CONCLUSION Due to these MNCs, competition increase and more employment opportunities are available & there will be reduction in inequalities

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MNC In India
MNC in India are attracted towards:

Indias large market potential

India presents a remarkable business opportunity by virtue of its sheer size and growth Labor competiveness Indias vast population is increasing its purchasing power

Trends Of MNCs In INDIA

First MNC in INDIA is EAST INDIA Co. in 1600. American companies accounts for around 37% of the turnover of the top 20 firms operating in India.

Finish mobile handset manufacturing giant Nokia is the largest Multinational Corporation In India.
Also insurance companies like AIG and Max New York Life Insurance doing business in India.

Success factors for MNCs operating in India

Commitment at global level Raise the profile of India Formulation of bold long term targets Empowered local Management More cost effective, enhances continuity, leverages understanding of local environment Localized product / market business models : create customized products and services in response to unique environment in India Deliver the right product at the right price with right positioning for India

MNC In India
MNC in India represent a diversified portfolio of companies representing different nations.

The Indian MNCs

Paints Asian Paints Auto & Components Tata Motors, Bharat Forge Chemicals Tata Chemicals, United Phosphorus Metals Sterlite Industries, TISCO Packaging Essel Pharmaceuticals Ranbaxy, Wockhardt, Sun, DRL Oil & Gas ONGC

MNC in INDIAN economy

Increase investment level Foreign Technology Transfer Sector-wise Inflow of FDI

 Top 5 American employers in India: General Electric: : 17,800 employees Hewlett-Packard : 11,000 employees IBM : 6,000 employees American Express : 4,000 employees Dell : 3,800 employees

Indias Big Dream

Harnessing the global trends by encouraging the MNCs to engage in product innovation for local consumers represents a big challenge in India.

Policy-makers, industry leaders and academic institutes need to work together to create and disseminate a list of "dream innovations" that will inspire people.

Examples of MNC in India

MNCS IN INDIA
MNC in India represent a diversified portfolio of comprises representing different nations:

THE INDIAN MNCS..

WHAT HAS INDIA REALLY GAINED?

Working culture for employees Systems Training and Learning Technology especially concept of working with better technologies Safety Health and Environmental Learning Culture and Ethos Excellent training grounds for many entrepreneurs R&D Outsourcing Pharmaceuticals, Engineering, IT, Telecom Product development centers (Telecom, IT)

CONCLUSION
Due to this MNCs, Competition increase and more employment opportunities are available & there will be reduction In inequalities. . .

Advantages of MNC in India

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ROLE OF MNC

The economic role of multinational corporations (MNCs) is simply to channel physical and financial capital to countries with capital shortages. Wealth is created, which yields new jobs directly and through crowding-in effects.

 New tax revenues arise from MNC generated income, allowing developing countries to improve their infrastructures and to strengthen their human capital. MNCs reduce world poverty levels and provide a positive externality that is consistent with the United Nations.

The economic development

Filling Savings Gap. Filling Trade Gap. Filling Revenue Gap. Filling Management/Technological Gap. Other Beneficial Roles like:a) The domestic labour may benefit in the form of higher real wages. b) The consumers benefits by way of lower prices and better quality products.

Contd.,
c) Investments by MNCs will also induce more domestic investment. For example, ancillary units can be set up to feed the main industries of the MNCs. d) MNCs expenditures on research and development(R&D), although limited is bound to benefit the host country.

IMPACT ON COUNTRIES
A large amount of tax collected through MNCs . Foreign currency maintenance and dealing efficiency increased. Increased revenue. Economic health improved . Employment increased. Foreign relation increased.

Market sentiments improved. Demand supply scenario balanced. Available resources used effectively Generate income for countries and other domestic companies. Import export policies implemented effectively and export increased so country benefited in dual mode.

Patents
Many multinational corporations hold patents to prevent competitors from arising. e.g.. Adidas holds patents on shoe designs Microsoft benefits from software patents. The pharmaceutical companies lobby international agreements to enforce patent laws on others.