This page contains the NCERT Business Studies class 11 chapter 3 Private, Public and Global Enterprises from Part 1 Foundations of Business. You can find the solutions for the chapter 3 of NCERT class 11 Business Studies, for the Short Answer Questions, Long Answer Questions and Application Questions in this page. So is the case if you are looking for NCERT class 11 Business Studies related topic Private, Public and Global Enterprises question and answers.
Short Answer Questions
1. Explain the concept of public sector and private sector.
Public Sector: The public sector comprises various organisations that are owned and managed by the government. These organisations can either be partly or wholly owned by the central or state government, be a part of a ministry, or come into existence through a Special Act of the Parliament. Through these enterprises, the government participates in the economic activities of the country, influencing the nation’s economic direction and growth.
Private Sector: The private sector consists of businesses owned by individuals or a group of individuals. The forms of organisation in the private sector include sole proprietorship, partnership, joint Hindu family, cooperative, and company. These are entities that operate for private ownership and profits.
2. State the various types of organisations in the private sector.
The various types of organisations in the private sector are:
1.
Sole proprietorship
2.
Partnership
3.
Joint Hindu family
4.
Cooperative
5.
Company.
3. What are the different kinds of organisations that come under the public sector?
The following are the different kinds of organisations that come under the public sector.
1.
Departmental undertakings: 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.
2.
Statutory corporations: Statutory corporations are public enterprises brought into existence by a Special Act of the Parliament. The Act defines its powers and functions, rules and regulations governing its employees and its Rationalised relationship with Government departments. This is a corporate body created by legislature with defined powers and functions and financially independent with a clear control over a specified area or a particular type of commercial activity.
3.
Government company: A Government company means any company in which not less than 51 percent of the paid up capital is held by
●
the central government
●
or by any state governments or government
●
or partly by central government and partly by one or more state governments
and includes a company which is a subsidiary company of such a government company.
4. List the names of some enterprises under the public sector and classify them.
The following is the classsfication of the names of some enterprises under the public sector
Note: The descriptions of these enterprises are given for your sake. You can skip them in the actual answer.
1.
Departmental Undertakings:
i.
Indian Posts and Telegraphs: This is a classic example of a departmental undertaking. It is responsible for postal and telecommunication services in India.
ii.
Indian Railways: The Indian Railways is another prominent departmental undertaking. It manages the country’s rail network and transportation services.
iii.
Doordarshan: Doordarshan is India’s public service broadcaster and operates as a departmental undertaking under the Ministry of Information and Broadcasting.
iv.
All India Radio (AIR): All India Radio is also a departmental undertaking that provides radio broadcasting services across the country.
2.
Statutory Corporations:
i.
Food Corporation of India (FCI): FCI is a statutory corporation responsible for the procurement and distribution of food grains in India.
ii.
Airports Authority of India (AAI): AAI is a statutory corporation that manages and operates airports across the country.
iii.
Reserve Bank of India (RBI): RBI is India’s central bank and a statutory corporation that regulates the country’s monetary and financial system.
iv.
Life Insurance Corporation of India (LIC): LIC is a statutory corporation that provides life insurance and investment services.
3.
Government Companies:
i.
Oil and Natural Gas Corporation Limited (ONGC): ONGC is a government company engaged in the exploration and production of oil and natural gas.
ii.
Bharat Heavy Electricals Limited (BHEL): BHEL is a government company that manufactures electrical equipment and power generation systems.
iii.
Steel Authority of India Limited (SAIL): SAIL is a government company involved in the production and distribution of steel and related products.
iv.
Hindustan Aeronautics Limited (HAL): HAL is a government company that designs and manufactures aircraft, helicopters, and aerospace equipment.
5. Why is the government company form of organisation preferred to other types in the public sector?
The government company form is preferred because it provides a blend of autonomy and flexibility. These companies can operate in a business-like manner with efficiencies closer to private firms, yet they’re accountable to the government, ensuring public welfare. They can be established quickly by fulfilling the Companies Act requirements and have a distinct legal entity, separate from the government.
6. How does the government maintain a regional balance in the country?
The government ensures regional balance by strategically locating public sector enterprises in backward and less developed areas. This promotes industrial development in such regions, leading to
●
employment opportunities
●
infrastructure development,
●
and overall economic growth
in the otherwise neglected areas.
7. State the meaning of public private partnership.
Public Private Partnership (PPP) refers to a collaborative arrangement between government entities and private sector companies. In a PPP model, both public and private partners contribute their
●
expertise
●
assets,
●
or resources
to achieve common objectives, typically relating to infrastructure development or service provision. The partnership capitalizes on the strengths of both sectors to deliver public services efficiently.
Long Answer Questions
1. Describe the Industrial Policy 1991, towards the public sector.
The Industrial Policy of 1991 marked a significant shift in India’s approach towards the public sector. It was formulated against the backdrop of a severe economic crisis that the country was experiencing, and its objective was to inject greater efficiency, dynamism, and competitiveness into the Indian industrial sector. Here’s an overview of the policy’s approach towards the public sector:
a)
Reduction in the Number of Industries Reserved for the Public Sector: Prior to the 1991 policy, 17 industries were exclusively reserved for the public sector. Post the policy’s implementation, this number was drastically reduced to only eight. The idea was to introduce greater private participation in industries and sectors where there was no need for the state to have a monopoly. By 2001, this list was narrowed down further, with only atomic energy, arms and ammunition, and certain segments of railways being exclusively reserved for the public sector.
b)
Disinvestment of shares of a select set of public sector enterprises: One of the primary features of the 1991 policy was the disinvestment of shares of certain public sector undertakings (PSUs). The aim was to raise resources, reduce fiscal burden on the exchequer, and promote wider public ownership. This was a significant step as it marked the beginning of the government’s intent to reduce its stake in non-core areas and focus more on governance rather than being in business.
c)
Policy regarding sick units to be the same as that for private sector: Sick PSUs, which were continuously making losses, were referred to the Board for Industrial and Financial Reconstruction (BIFR) for restructuring, revival, or, in some cases, closure. The idea was to either turn around these units to make them profitable or shut them down to prevent further wastage of public resources. While the policy did advocate for restructuring and rationalizing the workforce to enhance efficiency, it also emphasized the protection of workers’ interests. Efforts were made to retrain and redeploy workers, and measures like the Voluntary Retirement Scheme (VRS) were introduced.
d)
Memorandum of Understanding (MoU) System: The MoU system was introduced to grant more autonomy to PSUs. Under this system, PSUs signed MoUs with their respective administrative ministries, setting clear targets and performance parameters. This ensured greater accountability and also provided these units with more operational freedom.
In summary, the Industrial Policy of 1991 aimed at reducing the monopoly of PSUs, promoting efficiency, and making Indian industries more competitive. While it encouraged private participation, it also made sure that the interests of the workers in the public sector were protected.
2. What was the role of the public sector before 1991?
Before the economic reforms of 1991, the role of the public sector in India was predominant and multifaceted. The public sector was seen as the primary driver of economic development, following the socialist ideals embraced by the nation after gaining independence. Here’s a detailed look at the role of the public sector prior to 1991:
a)
Instrument of Self-reliance: The public sector was perceived as a means to achieve self-reliance. The government invested heavily in key sectors like steel, coal, and power to reduce dependence on imports and make the nation self-sufficient.
b)
Infrastructure Development: The public sector played a significant role in building the country’s infrastructure. This included key areas like
●
transportation (railways and roads)
●
telecommunications
●
energy
●
and heavy industries.
Since these sectors required massive investment and long gestation periods, the private sector was often reluctant to venture into them.
c)
Regional Development: The government aimed to achieve balanced regional development by setting up public sector units (PSUs) in economically backward areas. This not only provided employment opportunities in such regions but also spurred the growth of ancillary industries around these PSUs.
d)
Employment Generation: The public sector was a major employer. Through the establishment of various industries and undertakings, the government provided stable employment opportunities to a significant portion of the population.
e)
Economic Redistribution: The profits generated by successful PSUs were often used to finance welfare and developmental schemes. This played a key role in wealth redistribution, aiming to bridge economic disparities.
f)
Check on Private Sector: The public sector acted as a counterbalance to the private sector, preventing monopolies and ensuring that essential goods and services were available at reasonable prices.
g)
Achieving Socialistic Goals: Guided by the socialist ethos, the public sector played a crucial role in ensuring that the means of production and distribution were not concentrated in a few hands. It also ensured that critical sectors of the economy were under national control.
h)
Import Substitution: The government’s strategy was focused on import substitution to protect the domestic industry. PSUs played a crucial role in producing goods that were previously imported, thus conserving foreign exchange.
i)
Socio-Economic Development: The public sector was not just about profit. Many PSUs were set up with broader socio-economic objectives in mind, such as improving
●
healthcare
●
education
●
and transportation
even if they weren’t always profitable.
In essence, before the liberalization policies of 1991, the public sector was the backbone of the Indian economy. It was entrusted with the responsibility of achieving economic growth, providing basic needs to the population, ensuring balanced regional development, and preventing concentration of economic power. The emphasis was on social welfare and inclusive development rather than merely profit-making.
3. Can the public sector companies compete with the private sector in terms of profits and efficiency? Give reasons for your answer.
Yes, public sector companies can compete with the private sector in terms of profits and efficiency. However, the degree of competitiveness varies across industries and specific companies. Here are the reasons to support this assertion:
a)
Vast Resources: Public sector companies often have access to vast resources, both in terms of capital and raw materials. This allows them to operate on a large scale and achieve economies of scale, which can lead to increased efficiency and profitability.
b)
Government Backing: Being government-owned, public sector units (PSUs) generally have a stronger financial backing and can withstand economic downturns better than some private sector companies. They might also receive preferential treatment in terms of regulatory approvals, licenses, and land acquisition.
c)
Social Objectives: While profitability is essential, many PSUs also focus on broader social objectives, such as infrastructure development, energy security, and employment generation. This dual focus can sometimes lead to decreased emphasis on profitability but contributes significantly to nation-building.
d)
Monopolistic Advantage: In certain strategic sectors, public sector companies have a monopolistic or dominant position, which allows them to operate without intense competition. This can result in substantial profits, as seen in sectors like defense production and atomic energy.
e)
Improved Management Practices: Over the years, many PSUs have adopted modern management practices, technological advancements, and operational efficiencies, enabling them to compete effectively with their private sector counterparts.
f)
Accountability and Transparency: Public sector companies are subject to various audits, legislative oversight, and public scrutiny, ensuring higher levels of transparency and accountability.
However, there are challenges too:
i)
Bureaucratic Hurdles: PSUs often face bureaucratic red tape, which can slow decision-making processes, making them less agile compared to private firms.
ii)
Political Interference: Sometimes, decisions in PSUs are influenced by political considerations rather than purely economic ones, affecting efficiency.
iii)
Employee Productivity: In some PSUs, the workforce might not be as productive as in private firms, mainly due to job security and lack of performance-linked incentives.
iv)
Social Obligations: The commitment to broader social objectives can sometimes divert focus from profitability.
In conclusion, while public sector companies have the potential to compete with the private sector in terms of profits and efficiency, their performance varies based on the industry, management practices, and external factors. With the right reforms, efficient management, and a conducive environment, public sector companies can indeed match or even outperform their private counterparts.
4. Why are global enterprises considered superior to other business organisations?
Global enterprises, often referred to as multinational corporations (MNCs), hold a significant advantage over other types of business organisations due to several factors:
(i)
Huge capital resources: Global enterprises possess vast financial resources. Their size and credibility in international markets allow them to access huge capital, whether by issuing equity shares, bonds, or securing institutional loans. This financial strength helps them withstand market fluctuations and adversities.
(ii)
Foreign collaboration: MNCs often form partnerships or alliances with businesses in different countries. These collaborations can bring in advanced technologies, broader market access, and shared expertise, allowing the MNCs to enhance their product offerings and expand their global footprint.
(iii)
Advanced technology: Global enterprises typically operate at the forefront of technological advancements. Their commitment to research and development, combined with the financial capability to invest in cutting-edge technology, ensures they remain competitive and produce high-quality offerings.
(iv)
Product innovation: One of the hallmarks of global enterprises is their continuous drive for innovation. They have sophisticated R&D departments that focus on creating new products or enhancing existing ones, ensuring they meet the evolving needs of consumers across different markets.
(v)
Marketing strategies: These companies employ comprehensive and aggressive marketing strategies. Their brand presence is strong, and they utilize effective advertising and sales promotion techniques, giving them an edge in capturing significant market share.
(vi)
Expansion of market territory: Global enterprises operate beyond the boundaries of their home countries. Their extensive network of branches, subsidiaries, and affiliates provides them access to markets worldwide, allowing for greater diversification and risk management.
(vii)
Centralised control: While global enterprises may have operations scattered worldwide, they maintain centralized control from their headquarters. This ensures that there’s a unified strategic direction, even if day-to-day operations are decentralized to cater to local market nuances.
Given these attributes – from their financial prowess and technological leadership to their expansive market reach and centralized control – global enterprises are often viewed as superior compared to other business organisations. Their ability to leverage these advantages enables them to operate efficiently, innovate continuously, and capture new markets effectively.
5. What are the benefits of entering into joint ventures and public-private partnership?
The following are the advantages of entering into joint ventures:
(i)
Increased resources and capacity: By teaming up, businesses can pool their financial and human resources, enhancing their ability to expand and operate efficiently.
(ii)
Access to new markets and distribution networks: For businesses venturing into foreign territories, a joint venture with a local entity can provide immediate access to established markets and distribution channels.
(iii)
Access to technology: Companies can benefit from the technological advancements of their partners, saving time and investment on R&D while ensuring they remain competitive.
(iv)
Innovation: Joint ventures can stimulate innovation as businesses share and merge their expertise, potentially leading to the creation of unique products or solutions.
(v)
Low cost of production: Especially relevant for international corporations entering developing markets, joint ventures can lead to substantial cost savings due to factors like lower labor costs, raw materials, and local expertise.
(vi)
Established brand name: Partnering with a recognized local company can give immediate brand recognition and trust in a new market, reducing the time and capital required for brand-building from scratch.
The following are the advantages of Public Private Partnership (PPP):
(i)
Optimal Risk Allocation: In PPPs, risks are shared based on the ability of the partners to manage them. For instance, the private entity might take on operational risks, while the public entity handles regulatory risks.
(ii)
Efficiency and Innovation: The private sector often introduces innovative solutions and operational efficiencies, leading to faster and often more cost-effective project completion.
(iii)
Financial Leverage: Public entities can leverage private funds, leading to more available capital for infrastructure projects than if funded by the public sector alone.
(iv)
Asset Maintenance: Under PPP contracts, private entities are often responsible for the maintenance of the public asset, ensuring it’s kept to a high standard for the duration of the partnership.
(v)
Enhanced Service Quality: As private entities in PPPs often have a revenue stake in the project, there’s an inherent motivation to provide high-quality services to end-users.
(vi)
Fiscal Responsibility: PPPs can allow public entities to offload some of the financial burdens of infrastructure development and maintenance, freeing up public funds for other essential services.
In summary, both joint ventures and PPPs offer avenues for businesses and governments to combine their strengths, mitigate their weaknesses, and achieve mutual benefits. They capitalize on the complementary capabilities of the involved entities to bring about higher efficiency, financial strength, innovation, and improved service delivery.
Projects/Assignments
1. Make a list of Indian companies entering into joint ventures with foreign companies. Find out the apparent benefits derived out of such ventures.
Indian companies entering into joint ventures with foreign companies:
(i)
Tata Starbucks Pvt. Ltd. (with Starbucks Corporation of the USA)
(ii)
Mahindra-Renault (with Renault SA of France)
(iii)
Volvo and Eicher Commercial Vehicles Ltd. (VECV) (with Volvo of Sweden)
(iv)
Vistara (with Singapore Airlines)
(v)
Bajaj Auto-KTM (with KTM AG of Austria)
(vi)
Maruti Suzuki India (with Suzuki Motor Corporation of Japan)
(vii)
Hero MotoCorp-Harley-Davidson (with Harley-Davidson Motor Company of the USA)
(viii)
Bharti Airtel-Vodafone Idea (with Vodafone Group Plc. of the UK)
(ix)
Axis Bank-Citibank (with Citigroup Inc. of the USA)
(x)
Infosys-IBM (with International Business Machines Corporation of the USA)
(xi)
HCL Technologies-IBM (with International Business Machines Corporation of the USA)
(xii)
Wipro-IBM (with International Business Machines Corporation of the USA)
Apparent benefits derived out of such ventures:
(i)
Access to foreign capital and technology: Indian companies can gain access to foreign capital and technology through joint ventures with foreign companies. This can help them to expand their operations, develop new products and services, and improve their efficiency.
(ii)
Market access: Foreign companies can help Indian companies to gain access to new markets. This can help Indian companies to grow their business and increase their profits.
(iii)
Local knowledge and expertise: Indian companies can leverage the local knowledge and expertise of their foreign partners. This can help them to better understand the needs of the Indian market and to develop products and services that are tailored to the needs of Indian consumers.
(iv)
Risk sharing: Joint ventures can help to reduce the risk of entering a new market or developing a new product. This is because the risk is shared between the two partners.
(v)
Increased competition: Joint ventures can lead to increased competition in the Indian market. This can benefit consumers by giving them more choices and lower prices.
In addition to the above benefits, joint ventures can also help to promote cultural understanding and cooperation between India and other countries.
Recent examples of joint ventures between Indian and foreign companies:
(i)
In September 2023, Reliance Industries and Britishvolt announced a joint venture to build a battery gigafactory in the UK.
(ii)
In August 2023, Tata Sons and Airbus announced a joint venture to develop and manufacture military aircraft in India.
(iii)
In July 2023, Adani Group and TotalEnergies announced a joint venture to develop and operate renewable energy projects in India.
(iv)
In June 2023, Mahindra & Mahindra and Ford Motor Company announced a joint venture to develop and manufacture electric vehicles in India.
These are just a few examples of the many joint ventures that have been formed between Indian and foreign companies in recent years. These joint ventures are playing an important role in the growth and development of the Indian economy.