Previous Year Short & Long Questions With Answers: Public, Private and Global Enterprises | Business Studies (BST) Class 11 - Commerce PDF Download

Short Answer Type Questions

Q1: Why is the government company form of organisation preferred to other types in the public sector?
Ans: A federal or state government must possess at least 51 per cent of a government enterprise. This business form was created under the Indian Companies Act of 1956.

The arguments for choosing the government-company form over other public-sector models are as follows:

• A government corporation has total autonomy in all organisational operations and decision-making procedures.
• It is not exposed to undue intrusion by the appropriate department in its operations.
• It is distinct from the government in that a government corporation is not the same as the government.
• It provides economic goods and services while also adhering to ethical marketing practices.

Q2: Explain the concept of the public sector and private sector.
Ans: The Private sector: Businesses owned by one person or a group make up the private sector. A private sector business exists solely to make a profit. The private sector includes a wide range of organisations, including:

• Company (LLP, LLC)
• Sole proprietorship
• Cooperative societies
• Partnership
• Joint Hindu family

Public sector: The public sector comprises businesses that the government partially or entirely controls. The government may own a 51 per cent controlling interest in the company. These organisations might have been created due to a particular act of the Parliament. The government contributes to the country’s economic activity through working in the public sector.

Q3: Mention the many types of businesses that operate in multiple nations.
Ans: Multinational corporations (MNCs) do business in more than one country . On the other hand, such firms have their headquarters in a single nation, where they conduct all of their principal commercial operations—for example, Capgemini, Amazon and others.

Q4: What was the role of the public sector before 1991?
Ans: Before 1991, the public sector played the following roles:

• Maintaining the regional balance: During the 1960s and 1970s, India’s regional development disparities were severe. Some regions of the nation were far more developed than others. Regional disparities inhibited the country’s growth and development. Public sector enterprises (PSEs) were founded in backward and rural areas to promote regional balance. These PSEs not only provided jobs but also helped the expansion of supporting industries like banking and transportation in these areas.
• Import substitutions and exports: Self-sufficiency was one of the primary goals of India’s economic strategy. The idea was to minimise imports while simultaneously growing exports. PSEs was founded as a result to produce heavy machinery and engineering products in the nation, restricting imports. PSEs like the Metals and Minerals Trading Corporation of India (MMITC) and the State Trading Corporation (STC) were established simultaneously to promote exports.
• Infrastructural development: For industrial development, communication, transportation, energy supply and financial infrastructure are all required. Because they lacked the skilled personnel and financial means to establish heavy industries fast, as the economy expected, the private sector showed little interest in investing in or growing them in any way. As a result, only the government could raise the money required. As a result, this industry has been responsible for building infrastructure.
• Economies of scale: Economies of scale benefit the natural gas and petroleum industries, for example (benefits derived from them are more significant when operated on a large scale). Because these large-scale industries needed significant capital expenditures, the private sector was not large enough to operate in the years after independence. The functioning of these enterprises on a smaller scale was not an option since it would have resulted in losses. Due to this, people compelled the government to establish and operate these firms.
• Keep an eye on the concentration of economic power: The public sector regulates the private sector. Only a few industrial businesses were willing to invest in heavy industries due to the concentration of wealth in a few hands in the private sector. As a result, there are income disparities. As a result, the government can develop enormous firms that need significant investments, and the money and benefits generated are distributed to many employees and workers.

Q5: What exactly do you mean by “Disinvestment of Shares”?
Ans: The disinvestment of government shareholdings in a small number of public firms has been a significant element of India’s privatisation drive. This initiative aims to provide a non-inflationary source of funding for the government.
The programme began in 1991-92 and lasted until 1995-96, when the government disinvested a portion of its stock in 40 public sector firms, raising Rs. 10,915 crore via several rounds of disinvestment. Financial institutions, mutual funds, private sector firms and the general public offered shares.
In August 1996, the Union Government established the Disinvestment Commission to advise it on the disinvestment policy for public sector firms. For disinvestment recommendations, the government submitted 40 public sector companies to the Commission. The government is now making efforts to implement the Disinvestment Commission’s findings.
Bids are requested for the sale of shares in selected state firms to guarantee openness in the Disinvestment programme and the shares are sold to the highest bidder. The government raised Rs. 1,869 crores from public-sector disinvestment in 2000-01, compared to Rs. 1,829 crores in 1999-2000 and Rs. 5,371 crores in 1998-99. The disinvestment objective was set at Rs for 2002-03. 0 crores.

Q6: State the various types of organisations in the private sector?
Ans: The private sector comprises businesses owned by one person or a group. The private sector’s principal purpose is profitability. Individual investments or shareholder contributions raise funds.
The majority of it is made up of:

• Company: A company is a legal entity with its legal entity and common seal that exists exclusively in the eyes of the law. It has perpetual succession and its legal entity, and a common seal. There are two types of companies: private and public.
• Multinational corporations: Multinational firms operate in one or more nations in addition to their home country. For example, Google..
• Sole proprietorship: A single individual owns the whole firm in this form of business. S/He manages, controls and carries out all the company’s functions and risks.
• Joint Hindu family: A Hindu joint Family owns and operates this firm, governed by Hindu Law.
• Partnership: A partnership is a group of two or more individuals who agree to work together to manage a business, share earnings, and share risks.

Long Answer Type Questions

Q1: What is a Departmental Undertaking and what does it imply? Mention the benefits and drawbacks.
Ans: It functions as a government ministry or department. The budgets of these departments are presented to the Parliament in the same way as other ministries. It may be seen in the Indian Railways and Post and Telegraph departments. Either the federal government or a state government owns and controls departmental entities.

Benefits of Departmental undertaking are:

• Proper management: Qualified government employees oversee these businesses. Their job is very methodical and these businesses are appropriately overseen and handled. Such a detailed and methodical process of management and supervision keeps all super government officials very alert to their job.
• Service Motive: These businesses were created to provide a service. They prioritise the public good and social welfare. These initiatives also assist in lowering the tax burden on the general populace.
• National Importance: These departmental organisations carry out activities of national significance. Due to stringent budgeting, accounting and auditing, the potential of misusing public funds has been reduced.
• Secrecy: These groups can keep their identities hidden. Since they are under the government’s jurisdiction, based on public interest, the government can avoid disclosing facts.

Drawbacks of Departmental undertaking are:

• Political evils: Every major decision in the departmental organisation is motivated by political considerations. It is handled and overseen by the minister, a political party representative. The minister is responsible for his party’s interests.
• Lack of competition: Departmental organisations often have monopolistic status. They are inept due to a lack of competition. There is no motivation for hard labour and efficiency when there is no rivalry or monetary motive. There isn’t much of a correlation between pay and performance.
• Least profit-making business: The government owns and controls departmental organisations, making them the least profitable venture. It was formed to provide a service. Hence, it is not a high-profit venture.
• Red tape: Employees follow the trodden path due to red tape. They are uninterested in the project. They are irresponsible and just concerned about their pay. Officers are concerned about their reputation and respect. Due to bureaucratic procedures and political factors, decisions are frequently delayed.
• Shortage of competent workers: Government personnel are inefficient in commercial matters due to a lack of skilled professionals. They have considerable administrative experience but not enough to supervise the  activities of the enterprise. Competent personnel are not hired since promotion to a higher level is predicated on seniority.

Q2: Describe the Industrial policy of 1991 for the public sector.
Ans: The Industrial Policy of 1991 resulted in a series of reforms for the public sector:

• Public Sector Disinvestment: This procedure entailed selling a portion of a company’s equity or controlling shares to the general public and private sectors. The goal of such a move was to encourage private businesses and the general public to participate in public enterprise ownership.
• Dereservation: In 1991, just eight industries were reserved for the public sector, including guns and ammunition, defence, atomic energy, mining and railroads. The private sector was allowed to indulge in all other areas.
• Policy dealing with sick units: This policy primarily dealt with reorganising or closing sick public sector units. The Board of Industrial and Financial Reconstruction (BIFR) was tasked with determining the units that the government should focus on restructuring and those that should be closed. The government established the National Renewal Fund (NRF) to assist in retraining or redeploying the workforce retrenched from a sick unit and providing compensation to employees seeking voluntary retirement.
• Memorandum of Understanding: This procedure gave public sector units more autonomy while also holding them accountable for their results. The public sector unit and the linked ministries signed a Memorandum of Understanding. The public sector units were given explicit objectives and complete operational autonomy to meet those objectives.

Q3: Briefly define the word “foreign collaboration.”
Ans: Foreign cooperation refers to businesses that have foreign units as equity partners. It is a joint venture between Indians and foreigners owned, managed and controlled together. These businesses benefit from the country’s and the world’s tremendous resources. These businesses bring together two or more countries’ financial, administrative and technical resources.

The profit is split (among the Indian owner and the foreign partner). The government has recently liberalised its policies on foreign investment in Indian  businesses. According to the New Industrial Policy, direct foreign investment up to 51 per cent ownership in high priority sectors would be approved in 1999, and foreign technology agreements in recognised high priority industries will be granted automatic authorisation.

Q4: How does the government maintain a regional balance in the country?
Ans: The government maintains regional balance in the country in the following ways:

• The Indian government has built huge steel mills in rural regions to develop these areas and provide jobs for those living there.
• Many other sectors like steel factories have been established to give work possibilities.
• The growth of industries resulted in the development of other related sectors, all of which contributed to the country’s wealth.
• Setting up industries directly influenced the region’s growth, which resulted in better roads, infrastructure development, bridges and rail connectivity, linking all regions of India.

Q5: Define multinational corporations and their impact on a country’s economic growth.
Ans: A multinational corporation is a company with its headquarters in one country and its activities in many others. This suggests that this sort of company will do business in various nations. An MNC has its registered office in one nation (referred to as the “home country”) and conducts business in several other countries (called host countries).
A global firm controls manufacturing and marketing operations in many countries. Coca-Cola, for example, is a firm based in the United States with manufacturing and marketing activities in several nations worldwide.

Multinational corporations can benefit the host country in the following ways:

• MNCs establish facilities for the manufacture and distribution of commodities, resulting in the creation of jobs in the host nation. Excess loan pay ranges and career growth options are available to managers, technical, and other employees at multinational.
• The technology in emerging nations is outdated and outmoded. MNCs can serve as conduits for transferring advanced technologies to underdeveloped countries. Developing countries benefit from advanced technical know-how, better skills, and consulting to enhance product quality and save costs.
• MNCs can help emerging economies obtain money from industrialised nations, as they face a capital shortfall necessary for fast industrialisation. They make it easier to move money from places where it is plentiful to those where it is rare. As a result, MNCs can aid in increasing investment, and as a result, the host country’s growth rate. Since its liberalisation, India has drawn billions of dollars in global investment.
• Multinational corporations (MNCs) boost competition and break up domestic monopolies. Inefficient businesses are pushed to either improve or exit the market. Following liberalisation and increased technology, many Indian enterprises now compete with multinationals.
• MNCs assist in the exploitation of idle resources of the host nation, resulting in revenue generation.
• MNCs use professional management and cutting-edge management practices to spark a managerial revolution in the host nations. As a result, the host nations can foster a professional management culture. Management approaches such as MBO and corporate planning help multinationals establish a knowledge base.
• MNCs make it easier for the host country’s economy to integrate with the global market. In the host country, they promote international brotherhood and cultural interactions.
• MNCs can assist domestic enterprises in growing by supplying them with materials, components, and other items. Several auxiliary entities have evolved to give support to MNCs throughout time.
• MNCs deliver high-quality items to the host nation’s people due to their superior technology. This contributes to a higher level of living for them.

Q6: Can the public sector companies compete with the private sector in terms of profits and efficiency? Give reasons for your answer.
Ans: It is challenging for public sector enterprises to compete with the private sector in terms of earnings and efficiency due to the following factors:

• Differences in Ownership: The government is the sole or principal stakeholder in public-sector companies. As a result, the government controls the management and administration of these businesses, which may or may not execute economically sound policies due to political considerations.
• The Difference in Objective: A private company’s primary purpose is to generate profit, but a public company’s primary goal is to offer social welfare. Hence, they can’t be entirely profit-driven.
• Operational Differences: The private sector works in all areas with a decent return on investment, whereas the public sector is mainly involved in the low-returning primary and public utility sectors.
• Differences in Management: Public-sector businesses are run and managed by government officials who may or may not have had professional training, whereas private-sector businesses are managed and run by professionals. This leads to better efficiency in the private sector.

Q7: Mention the principal features/characteristics of global corporations briefly.
Ans: Global Corporation’s Characteristics: The following are the key characteristics of most global corporations:

• MNCs are massive, with billions of dollars in assets and sales, creating significant profits from their activities. IBM’s physical assets, for example, are valued at roughly $8 billion. The sales turnover of some  international firms exceeds the gross domestic product of numerous developing nations.
• An MNC’s headquarters are located in the home nation to maintain control over its subsidiaries and affiliates. The parent corporation’s policy framework governs the local administration of branches and subsidiaries. Because the parent firm owns 40 per cent to 100 percent of the ownership in the subsidiary company, this is conceivable.
• An MNC’s international operations are managed by a parent business based in the home country. It operates through a network of branches, subsidiaries, and affiliates throughout the nations where it operates. Production, marketing and other operations are dispersed over many nations to get the economies of local operations.
• A global firm promotes a multilateral resource transfer. Technical know-how, machinery, equipment, raw materials, management knowledge and other items are transferred as a “package.”
• Many multinational firms enjoy oligopolistic power. They have a monopolistic position in the market. An MNC may amass enormous economic power by merging with and acquiring other businesses. Because of this, it has an oligopolistic nature and a strong position in the market. Hindustan Lever Limited, for example bought Tata Oil Mills to expand its market share.
• Because of their significant resources and better marketing skills, MNCs have access to international markets. As a result, multinational corporations (MNCs) can market their products in a variety of nations throughout the world.
• Professional talents, specialised knowledge, and training are used in these businesses. These executives have specific knowledge and experience in finance, marketing and human resources.

Q8: Why are global enterprises considered superior to other business organisations?
Ans: Multinational Companies are thought to be superior to other businesses since they have:

• Product innovation: Multinational corporations have fine-tuned their research and development centres for new product development. This allows them to maintain their competitive edge and large consumer base.
• Massive Financial Resources: MNCs have massive capital resources since they can raise funds from all around the world. They may borrow money from international banks, and many investors are willing to put their money into them in exchange for huge returns due to their goodwill.
• International Collaborations: Multinational corporations (MNCs) usually enter the market with the help of local private companies. This is primarily due to legislative restrictions and a desire to capitalise on the Indian firm’s brand reputation.
• Market Expansion: Their business and activities expand beyond their nations’ borders. They boost their global image and expand their market region, helping them position themselves as global brands.
• Centralised control: MNCs have a headquarters in their home country that oversees the company’s branches and subsidiaries. However, this influence is limited to the parent company’s broad policy framework. Regular operations are not affected by any delays or disruptions.
• Marketing Tactics: The marketing strategies of multinational corporations are far more successful than those of other businesses. They use aggressive marketing strategies to increase sales in a short period. They have a more reliable and current market intelligence system and more effective advertising and sales promotion strategies.