NCERT Textbook - Public, Private and Global Enterprises Commerce Notes | EduRev

Business Studies (BST) Class 11

Commerce : NCERT Textbook - Public, Private and Global Enterprises Commerce Notes | EduRev

 Page 1


CHAPTER 3
PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• explain the concept and characteristics of business;
? explain the features of different forms of public enterprises viz.,
departmental, statutory corporations and government companies;
? critically examine the changing role of the public sector;
? explain the features of global enterprises; and
? appreciate the benefits of joint ventures.
© NCERT
not to be republished
Page 2


CHAPTER 3
PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• explain the concept and characteristics of business;
? explain the features of different forms of public enterprises viz.,
departmental, statutory corporations and government companies;
? critically examine the changing role of the public sector;
? explain the features of global enterprises; and
? appreciate the benefits of joint ventures.
© NCERT
not to be republished
56 BUSINESS STUDIES
3.1 INTRODUCTION
You must have come across all types
of business organisations in your daily
life. In your neighbourhood market,
there are shops owned by sole
proprietors or big retail organisations
run by a company. Then there are
people providing you services like legal
services, medical services, being owned
by more than one person i.e.,
partnership firms. These are all
privately owned organisations.
Similarly, there are other offices or
places of business which may be owned
by the government. For example,
Railways is an organisation wholly
owned and managed by the
government. The post office, in your
locality is owned by the Post and
Telegraph Department, Government of
India, though our dependence on their
postal services, particularly in cities
and towns has been greatly  reduced.
This is because of plenty of private
courier services firms operating in
bigger towns. Then there are businesses
which operate in more than one country
known as global enterprises. Therefore,
you may have observed that all types
of organisations are doing business in
the country whether they are public,
private or global. In this chapter we
shall be studying how the economy is
divided into two sectors, public and
private, the different types of public
enterprises, their role and that of the
global enterprises.
3.2 PRIVATE SECTOR AND PUBLIC
SECTOR
There are all kinds of business
organisations—small or large,
industrial or trading, privately owned
or government owned existing in our
Anita, a student of class XI, was going through some newspapers. The headlines
stared at her face, Government plans to disinvest its shares in a few companies.
The next day there was another news item on one public sector company incurring
heavy losses and the proposal for closing the same. In contrast to this, she read
another item on how some of the companies under the private sector were doing
so well. She was actually curious to know what these terms  like public sector,
disinvestment, privatisation meant. She realised that in certain areas there
was only the government which operates like the railways and in some areas
both the privately owned and government run business were operating. For
example, in the heavy industry sector SAIL, BHEL and TISCO, Reliance, Birlas
all werethere and in the telecom sector, companies like Tata, Reliance, Airtel
operate and in airlines Sahara and Jet have recently gained entry. These
companies along with the Government-owned companies like MTNL, BSNL, Indian
Airlines, Air India. She then started wondering where from companies like Coca
cola, Pepsi, Hyundai came? Were they always here or did they operate somewhere
else, in some other country. She went to the library and was surprised to know
that there was so much information about all these in books, business magazines
and newspapers.
© NCERT
not to be republished
Page 3


CHAPTER 3
PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• explain the concept and characteristics of business;
? explain the features of different forms of public enterprises viz.,
departmental, statutory corporations and government companies;
? critically examine the changing role of the public sector;
? explain the features of global enterprises; and
? appreciate the benefits of joint ventures.
© NCERT
not to be republished
56 BUSINESS STUDIES
3.1 INTRODUCTION
You must have come across all types
of business organisations in your daily
life. In your neighbourhood market,
there are shops owned by sole
proprietors or big retail organisations
run by a company. Then there are
people providing you services like legal
services, medical services, being owned
by more than one person i.e.,
partnership firms. These are all
privately owned organisations.
Similarly, there are other offices or
places of business which may be owned
by the government. For example,
Railways is an organisation wholly
owned and managed by the
government. The post office, in your
locality is owned by the Post and
Telegraph Department, Government of
India, though our dependence on their
postal services, particularly in cities
and towns has been greatly  reduced.
This is because of plenty of private
courier services firms operating in
bigger towns. Then there are businesses
which operate in more than one country
known as global enterprises. Therefore,
you may have observed that all types
of organisations are doing business in
the country whether they are public,
private or global. In this chapter we
shall be studying how the economy is
divided into two sectors, public and
private, the different types of public
enterprises, their role and that of the
global enterprises.
3.2 PRIVATE SECTOR AND PUBLIC
SECTOR
There are all kinds of business
organisations—small or large,
industrial or trading, privately owned
or government owned existing in our
Anita, a student of class XI, was going through some newspapers. The headlines
stared at her face, Government plans to disinvest its shares in a few companies.
The next day there was another news item on one public sector company incurring
heavy losses and the proposal for closing the same. In contrast to this, she read
another item on how some of the companies under the private sector were doing
so well. She was actually curious to know what these terms  like public sector,
disinvestment, privatisation meant. She realised that in certain areas there
was only the government which operates like the railways and in some areas
both the privately owned and government run business were operating. For
example, in the heavy industry sector SAIL, BHEL and TISCO, Reliance, Birlas
all werethere and in the telecom sector, companies like Tata, Reliance, Airtel
operate and in airlines Sahara and Jet have recently gained entry. These
companies along with the Government-owned companies like MTNL, BSNL, Indian
Airlines, Air India. She then started wondering where from companies like Coca
cola, Pepsi, Hyundai came? Were they always here or did they operate somewhere
else, in some other country. She went to the library and was surprised to know
that there was so much information about all these in books, business magazines
and newspapers.
© NCERT
not to be republished
57 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
country. These organisations affect our
daily economic life and therefore
become part of the Indian economy.
Since the Indian economy consists of
both privately owned and government
owned business enterprises, it is
known as a mixed economy. The
Government of India has opted for a
mixed economy where both private and
government enterprises are allowed to
operate. The economy, therefore, may
be classified into two sectors viz.,
private sector and public sector.
The private sector consists of
business owned by individuals or a
group of individuals, as you have
learnt in the previous chapter. The
various forms of organisation are
sole proprietorship, partnership,
joint Hindu family, cooperative
and company.
The public sector consists of
various organisations owned and
managed by the government. These
organisations may either be partly or
wholly owned by the central or state
government. They may also be a part
of the ministry or come into existence
by a Special Act of the Parliament. The
government, through these enterprises
participates in the economic activities
of the country.
The government in its industrial
policy resolutions, from time-to-time,
defines the area of activities in which
the private sector and public sector are
allowed to operate. In the Industrial
Policy Resolution 1948, the
Government of India had specified the
approach towards development of the
industrial sector. The roles of the
private and public sector were clearly
defined and the government through
various Acts and Regulations was
overseeing the economic activities of
both the private and public sector. The
Industrial Policy Resolution, 1956 had
also laid down certain objectives for the
public sector to follow so as to
accelerate the rate of growth and
industrialisation. The public sector was
given a lot of importance but at the
same time mutual dependency of
public and private sectors was
emphasised. The 1991 industrial
policy was radically different from all
the earlier policies where the
government was deliberating
disinvestment of public sector and
allowing greater freedom to the private
sector. At the same time, foreign direct
investment was invited from business
houses outside India. Thus,
multinational corporations or global
enterprises which operate in more than
one country gained entry into the
Indian economy. Thus, we have public
sector units, private sector enterprises
and global enterprises coexisting in the
Indian economy.
3.3 FORMS OF ORGANISING PUBLIC
SECTOR ENTERPRISES
Government’s participation in business
and economic sectors of the country
needs some kind of organisational
framework to function. You have
studied about the forms of business
organisation in the private sector viz.,
sole proprietorship, partnership, Hindu
undivided family, cooperative and
company.
© NCERT
not to be republished
Page 4


CHAPTER 3
PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• explain the concept and characteristics of business;
? explain the features of different forms of public enterprises viz.,
departmental, statutory corporations and government companies;
? critically examine the changing role of the public sector;
? explain the features of global enterprises; and
? appreciate the benefits of joint ventures.
© NCERT
not to be republished
56 BUSINESS STUDIES
3.1 INTRODUCTION
You must have come across all types
of business organisations in your daily
life. In your neighbourhood market,
there are shops owned by sole
proprietors or big retail organisations
run by a company. Then there are
people providing you services like legal
services, medical services, being owned
by more than one person i.e.,
partnership firms. These are all
privately owned organisations.
Similarly, there are other offices or
places of business which may be owned
by the government. For example,
Railways is an organisation wholly
owned and managed by the
government. The post office, in your
locality is owned by the Post and
Telegraph Department, Government of
India, though our dependence on their
postal services, particularly in cities
and towns has been greatly  reduced.
This is because of plenty of private
courier services firms operating in
bigger towns. Then there are businesses
which operate in more than one country
known as global enterprises. Therefore,
you may have observed that all types
of organisations are doing business in
the country whether they are public,
private or global. In this chapter we
shall be studying how the economy is
divided into two sectors, public and
private, the different types of public
enterprises, their role and that of the
global enterprises.
3.2 PRIVATE SECTOR AND PUBLIC
SECTOR
There are all kinds of business
organisations—small or large,
industrial or trading, privately owned
or government owned existing in our
Anita, a student of class XI, was going through some newspapers. The headlines
stared at her face, Government plans to disinvest its shares in a few companies.
The next day there was another news item on one public sector company incurring
heavy losses and the proposal for closing the same. In contrast to this, she read
another item on how some of the companies under the private sector were doing
so well. She was actually curious to know what these terms  like public sector,
disinvestment, privatisation meant. She realised that in certain areas there
was only the government which operates like the railways and in some areas
both the privately owned and government run business were operating. For
example, in the heavy industry sector SAIL, BHEL and TISCO, Reliance, Birlas
all werethere and in the telecom sector, companies like Tata, Reliance, Airtel
operate and in airlines Sahara and Jet have recently gained entry. These
companies along with the Government-owned companies like MTNL, BSNL, Indian
Airlines, Air India. She then started wondering where from companies like Coca
cola, Pepsi, Hyundai came? Were they always here or did they operate somewhere
else, in some other country. She went to the library and was surprised to know
that there was so much information about all these in books, business magazines
and newspapers.
© NCERT
not to be republished
57 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
country. These organisations affect our
daily economic life and therefore
become part of the Indian economy.
Since the Indian economy consists of
both privately owned and government
owned business enterprises, it is
known as a mixed economy. The
Government of India has opted for a
mixed economy where both private and
government enterprises are allowed to
operate. The economy, therefore, may
be classified into two sectors viz.,
private sector and public sector.
The private sector consists of
business owned by individuals or a
group of individuals, as you have
learnt in the previous chapter. The
various forms of organisation are
sole proprietorship, partnership,
joint Hindu family, cooperative
and company.
The public sector consists of
various organisations owned and
managed by the government. These
organisations may either be partly or
wholly owned by the central or state
government. They may also be a part
of the ministry or come into existence
by a Special Act of the Parliament. The
government, through these enterprises
participates in the economic activities
of the country.
The government in its industrial
policy resolutions, from time-to-time,
defines the area of activities in which
the private sector and public sector are
allowed to operate. In the Industrial
Policy Resolution 1948, the
Government of India had specified the
approach towards development of the
industrial sector. The roles of the
private and public sector were clearly
defined and the government through
various Acts and Regulations was
overseeing the economic activities of
both the private and public sector. The
Industrial Policy Resolution, 1956 had
also laid down certain objectives for the
public sector to follow so as to
accelerate the rate of growth and
industrialisation. The public sector was
given a lot of importance but at the
same time mutual dependency of
public and private sectors was
emphasised. The 1991 industrial
policy was radically different from all
the earlier policies where the
government was deliberating
disinvestment of public sector and
allowing greater freedom to the private
sector. At the same time, foreign direct
investment was invited from business
houses outside India. Thus,
multinational corporations or global
enterprises which operate in more than
one country gained entry into the
Indian economy. Thus, we have public
sector units, private sector enterprises
and global enterprises coexisting in the
Indian economy.
3.3 FORMS OF ORGANISING PUBLIC
SECTOR ENTERPRISES
Government’s participation in business
and economic sectors of the country
needs some kind of organisational
framework to function. You have
studied about the forms of business
organisation in the private sector viz.,
sole proprietorship, partnership, Hindu
undivided family, cooperative and
company.
© NCERT
not to be republished
58 BUSINESS STUDIES
In the public sector, as it grows, an
important question arises in respect of
how it is to be organised or what form
of organisation it should take. The
government has a major role to play in
the formation of the public sector. But
the government acts through its people,
its offices, employees and they take
decisions on behalf of the government.
For this purpose, public enterprises
were formed by the government to
participate in the economic activities of
the country. They are expected to
contribute to the economic deve-
lopment of the country in today’s
liberalised, competitive world. These
public enterprises are owned by the
public and are accountable to the
public through the Parliament. They
are characterised by public ownership,
public funds being used for its activities
and public accountability.
A public enterprise may take any
particular form of organisation
depending upon the nature of its
operations and their relationship with
the government. The suitability of a
particular form of organisation would
depend upon its requirements. At the
same time, in accordance with general
principles, any organisation in the
public sector should ensure organisational
performance productivity and quality
standards.
The forms of organisation which a
public enterprise may take are as
follows:
(i) Departmental undertaking
(ii) Statutory corporation
(iii) Government company
3.3.1 Departmental Undertakings
This is the oldest and most traditional
form of organising public enterprises.
Indian Economy
Public Sector Private Sector
Departmental
Undertakings
Statutory
Corporation
Government
Companies
Private
(Ltd.)
Sole
Properietorship
Partnership
Joint
Hindu
Family
Cooperative
Company
Public
(Ltd.)
Multinational
Corporations
© NCERT
not to be republished
Page 5


CHAPTER 3
PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• explain the concept and characteristics of business;
? explain the features of different forms of public enterprises viz.,
departmental, statutory corporations and government companies;
? critically examine the changing role of the public sector;
? explain the features of global enterprises; and
? appreciate the benefits of joint ventures.
© NCERT
not to be republished
56 BUSINESS STUDIES
3.1 INTRODUCTION
You must have come across all types
of business organisations in your daily
life. In your neighbourhood market,
there are shops owned by sole
proprietors or big retail organisations
run by a company. Then there are
people providing you services like legal
services, medical services, being owned
by more than one person i.e.,
partnership firms. These are all
privately owned organisations.
Similarly, there are other offices or
places of business which may be owned
by the government. For example,
Railways is an organisation wholly
owned and managed by the
government. The post office, in your
locality is owned by the Post and
Telegraph Department, Government of
India, though our dependence on their
postal services, particularly in cities
and towns has been greatly  reduced.
This is because of plenty of private
courier services firms operating in
bigger towns. Then there are businesses
which operate in more than one country
known as global enterprises. Therefore,
you may have observed that all types
of organisations are doing business in
the country whether they are public,
private or global. In this chapter we
shall be studying how the economy is
divided into two sectors, public and
private, the different types of public
enterprises, their role and that of the
global enterprises.
3.2 PRIVATE SECTOR AND PUBLIC
SECTOR
There are all kinds of business
organisations—small or large,
industrial or trading, privately owned
or government owned existing in our
Anita, a student of class XI, was going through some newspapers. The headlines
stared at her face, Government plans to disinvest its shares in a few companies.
The next day there was another news item on one public sector company incurring
heavy losses and the proposal for closing the same. In contrast to this, she read
another item on how some of the companies under the private sector were doing
so well. She was actually curious to know what these terms  like public sector,
disinvestment, privatisation meant. She realised that in certain areas there
was only the government which operates like the railways and in some areas
both the privately owned and government run business were operating. For
example, in the heavy industry sector SAIL, BHEL and TISCO, Reliance, Birlas
all werethere and in the telecom sector, companies like Tata, Reliance, Airtel
operate and in airlines Sahara and Jet have recently gained entry. These
companies along with the Government-owned companies like MTNL, BSNL, Indian
Airlines, Air India. She then started wondering where from companies like Coca
cola, Pepsi, Hyundai came? Were they always here or did they operate somewhere
else, in some other country. She went to the library and was surprised to know
that there was so much information about all these in books, business magazines
and newspapers.
© NCERT
not to be republished
57 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
country. These organisations affect our
daily economic life and therefore
become part of the Indian economy.
Since the Indian economy consists of
both privately owned and government
owned business enterprises, it is
known as a mixed economy. The
Government of India has opted for a
mixed economy where both private and
government enterprises are allowed to
operate. The economy, therefore, may
be classified into two sectors viz.,
private sector and public sector.
The private sector consists of
business owned by individuals or a
group of individuals, as you have
learnt in the previous chapter. The
various forms of organisation are
sole proprietorship, partnership,
joint Hindu family, cooperative
and company.
The public sector consists of
various organisations owned and
managed by the government. These
organisations may either be partly or
wholly owned by the central or state
government. They may also be a part
of the ministry or come into existence
by a Special Act of the Parliament. The
government, through these enterprises
participates in the economic activities
of the country.
The government in its industrial
policy resolutions, from time-to-time,
defines the area of activities in which
the private sector and public sector are
allowed to operate. In the Industrial
Policy Resolution 1948, the
Government of India had specified the
approach towards development of the
industrial sector. The roles of the
private and public sector were clearly
defined and the government through
various Acts and Regulations was
overseeing the economic activities of
both the private and public sector. The
Industrial Policy Resolution, 1956 had
also laid down certain objectives for the
public sector to follow so as to
accelerate the rate of growth and
industrialisation. The public sector was
given a lot of importance but at the
same time mutual dependency of
public and private sectors was
emphasised. The 1991 industrial
policy was radically different from all
the earlier policies where the
government was deliberating
disinvestment of public sector and
allowing greater freedom to the private
sector. At the same time, foreign direct
investment was invited from business
houses outside India. Thus,
multinational corporations or global
enterprises which operate in more than
one country gained entry into the
Indian economy. Thus, we have public
sector units, private sector enterprises
and global enterprises coexisting in the
Indian economy.
3.3 FORMS OF ORGANISING PUBLIC
SECTOR ENTERPRISES
Government’s participation in business
and economic sectors of the country
needs some kind of organisational
framework to function. You have
studied about the forms of business
organisation in the private sector viz.,
sole proprietorship, partnership, Hindu
undivided family, cooperative and
company.
© NCERT
not to be republished
58 BUSINESS STUDIES
In the public sector, as it grows, an
important question arises in respect of
how it is to be organised or what form
of organisation it should take. The
government has a major role to play in
the formation of the public sector. But
the government acts through its people,
its offices, employees and they take
decisions on behalf of the government.
For this purpose, public enterprises
were formed by the government to
participate in the economic activities of
the country. They are expected to
contribute to the economic deve-
lopment of the country in today’s
liberalised, competitive world. These
public enterprises are owned by the
public and are accountable to the
public through the Parliament. They
are characterised by public ownership,
public funds being used for its activities
and public accountability.
A public enterprise may take any
particular form of organisation
depending upon the nature of its
operations and their relationship with
the government. The suitability of a
particular form of organisation would
depend upon its requirements. At the
same time, in accordance with general
principles, any organisation in the
public sector should ensure organisational
performance productivity and quality
standards.
The forms of organisation which a
public enterprise may take are as
follows:
(i) Departmental undertaking
(ii) Statutory corporation
(iii) Government company
3.3.1 Departmental Undertakings
This is the oldest and most traditional
form of organising public enterprises.
Indian Economy
Public Sector Private Sector
Departmental
Undertakings
Statutory
Corporation
Government
Companies
Private
(Ltd.)
Sole
Properietorship
Partnership
Joint
Hindu
Family
Cooperative
Company
Public
(Ltd.)
Multinational
Corporations
© NCERT
not to be republished
59 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
These enterprises are established as
departments of the ministry and are
considered part or an extension of the
ministry itself. The Government
functions through these departments
and the activities performed by them
are an integral part of the functioning
of the government. They have not been
constituted as autonomous or
independent institutions and as such
are not independent legal entities. They
act through the officers of the
Government and its employees are
Government employees. These
undertakings may be under the central
or the state government and the rules
of central/state government are
applicable. Examples of these
undertakings are railways and post
and telegraph department.
Features
The main characteristics of
Departmental undertakings are as
follows:
(i) The funding of these enterprises
come directly from the Govern-
ment Treasury and are an annual
appropriation from the budget of
the Government. The revenue
earned by these is also paid into
the treasury;
(ii) They are subject to accounting
and audit controls applicable to
other Government activities;
(iii) The employees of the enterprise are
Government servants and their
recruitment and conditions of
service are the same as that of
other employees directly under the
Government. They are headed by
Indian Administrative Service (IAS)
officers and civil servants who are
transferable from one ministry to
another;
(iv) It is generally considered to be
a major subdivision of the
Government department and is
subject to direct control of the
ministry;
(v) They are accountable to the
ministry since their management
is directly under the concerned
ministry.
Merits
Departmental undertakings have
certain advantages which are as follows:
(i) These undertakings facilitate the
Parliament to exercise effective
control over their operations;
(ii) These ensure a high degree of
public accountability;
(iii) The revenue earned by the
enterprise goes directly to the
treasury and hence is a source of
income for the Government;
(iv) Where national security is
concerned, this form is most
suitable since it is under the direct
control and supervision of the
concerned Ministry.
Limitations
This form of organisation suffers from
serious drawbacks, some of which are
as follows:
(i) Departmental undertakings fail to
provide flexibility, which is essential
for the smooth  operation of business ;
(ii) The employees or heads of depart-
ments of such undertakings are
© NCERT
not to be republished
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