Private Public and Global Enterprises – Complete Guide For Class 11 Business Studies Chapter 3

Our learning resources for the chapter, Private Public and Global Enterprises which is chapter 3 in Business Studies for Class 11th are designed to ensure that you grasp this concept with clarity and perfection. Whether you’re studying for an upcoming exam or strengthening your concepts, our engaging animated videos, practice questions and notes offer you the best of integrated learning with interesting explanations and examples. 

In recent years, many countries like India have placed more emphasis on privatization and less on the public sector. Let’s explore the key reasons for the continued growth of privatization in India.

Reasons Behind The Growth Of Privatization In India

Privatization means the transfer of power from the government to private owners. The share of the private sector is increasing continuously in India because of the following reasons:

1. Efficiency: Private firms deliver goods or services more efficiently than the government due to free-market competition.
2. Profitability: Privatizing a non-profitable government-owned company can help it perform better and become profitable.
3. Capital Raising: Private companies can sometimes raise capital more easily in financial markets.

So those were the reasons behind the growing trend of privatization in India. Now, let’s shift our focus to some of the challenges that accompany this trend.

Negative Aspects of Privatization in India

As mentioned in the chapter Private Public and Global Enterprises, Despite the benefits, privatization has its downsides. Here are three negative aspects faced by the Indian economy due to the introduction of privatization:

Explanation

As per the chapter Private Public and Global Enterprises, Privatization has the following disadvantages:

1. Profit Focus: Private sector organizations often concentrate solely on profit-making and ignore social aspects.
2. National Objectives: Private sector companies may disregard the national objectives of the host country.
3. Resource Depletion: Companies might exploit non-renewable resources indiscriminately, causing great harm to the nation.

Having looked at the negative aspects of privatization, let’s discuss the kind of jobs that exist in the public sector.

Public Sector Occupations

Consider the following professionals:

• Sales Manager of an MNC
• Nurse at a Government Hospital
• Journalist of a Leading Newspaper

Which occupation would suit a person who wants to work in the public sector?

Explanation

As per the chapter Private Public and Global Enterprises, a nursing profession would suit a person who wants to work in the public sector. The remaining two professions, sales manager and journalist fall under the private sector.

With that understanding of public sector jobs, let’s move on to discuss the characteristics of multinational enterprises.

Multinational Enterprises

A multinational is described as a large company that employs people from different countries and is controlled by the government. Is this a correct description?

Explanation

While a multinational company may employ people from different countries, this description is not entirely accurate. Generally, multinationals are not controlled by the government. To be considered a multinational, a company must operate in multiple countries.

Having clarified what constitutes a multinational enterprise, let’s dive into a real-world example involving Nike Plastics in Sri Lanka.

Case Study: Nike Plastics in Sri Lanka

Nike Plastics, a multinational company, has recently set up a factory in Sri Lanka. It imports some raw materials used and assembles them in the factory. Finished products are then exported from Sri Lanka. Identify and explain two reasons why Nike Plastics imports raw materials.

Explanation

Nike Plastics imports raw materials for the following reasons:

1. Cheaper and Better Quality: In Sri Lanka, raw materials are expensive and not of good quality. So, Nike Plastics buys raw materials from outside Sri Lanka.
2. Shortage of Raw Material: If raw materials are not available in sufficient quantity locally in Sri Lanka, the company has to import them from other countries.

Now that we understand why companies like Nike Plastics import raw materials, let’s explore another strategic business approach—joint ventures.

Joint Ventures

Management of Kowal Electricals is considering expanding their business in another country through either a franchise or a joint venture. Suggest two factors Kowal Electricals should consider while forming a joint venture to add value to their organization.

Benefits of Joint Venture

Risk Sharing: Joint ventures allow companies to share the risks associated with new projects or market expansions. This reduces the financial burden on each partner and spreads the potential losses.

Access to New Markets: Partnering with local firms in a joint venture provides access to new markets and customer bases that might be difficult to enter independently.

Resource Sharing: Joint ventures enable companies to pool their resources, including capital, technology, and expertise, which can lead to more efficient and innovative operations.

Increased Expertise: Each partner brings unique skills and knowledge to the venture, which can enhance the overall capability and competitiveness of the project.

Cost Savings: By sharing operational costs and leveraging each partner’s resources, joint ventures can lead to significant cost savings.

Explanation

Kowal Electricals should consider the following factors while forming a joint venture:

1. Risk Sharing: By partnering with another company, the risks of Kowal Electricals will be shared by the joint venture partner.
2. Increased Capital: Each partner contributes capital, making more funds available for business requirements.

Having explored joint ventures, let’s look at the benefits of operating as a multinational company, using Pearson Education as an example.

Multinational Company

Pearson Education (PE), a large multinational company, publishes newspapers and magazines in several countries and wants to operate as a publisher of a new magazine in Bangladesh. Why does PE prefer to operate as a multinational company?

Explanation

Pearson Education benefits from being a multinational company due to:

1. Wide Market: Operating in many countries allows PE to sell products on a large scale, facilitating company growth.
2. Low Labor Costs: In most developing countries, labor is cheap, reducing production costs for PE.

Now that we know the advantages for companies operating globally, let’s see how this impacts countries where these companies operate, focusing on the case of African countries.

Impact of Multinationals in Africa

The government of African countries often allows multinationals to mine minerals in their territory. State one merit and one demerit of this practice for an African country.

Explanation

Merit: Multinational companies generate employment opportunities in developing countries through mineral mining.

Demerit: Large-scale mining can lead to a shortage of resources.

Moving on from the impact on resources, let’s explore why some public enterprises struggle financially and the measures to improve them.

Challenges of Public Enterprises

State-owned public enterprises incurred significant losses in 2006-07. For instance, Karnataka’s government provided maximum grants of Rs 6,140 crores to its PSUs. The State Level Public Enterprises (SLPEs) in West Bengal lost Rs 439.53 crores, according to a National Survey on SLPEs for 2006-07. Other states with underperforming units included Himachal Pradesh, Punjab, and Meghalaya. What are the possible reasons for the poor performance of public enterprises?

Explanation

Public enterprises suffer due to:

• Lack of systematic criteria for investment
• Political interferences
• Underutilization of capacity
• Shortage of devoted personnel
• Lack of incentives
• Bureaucratic delays

Now that we know the challenges, let’s discuss some potential measures for improvement.

Measures for Improvement of Public Enterprises

To improve public enterprises in India, the following measures can be considered:

1. Professional Management:
   • Employ skilled and experienced managers at executive levels.
   • Ensure that management practices are professional and efficient.
2. Clarity of Objectives:
   • Define clear and achievable objectives for public enterprises.
   • Focus on generating internal resources for growth and sustainability.
3. Management Development:
   • Implement regular training and development programs for employees.
   • Update skills and knowledge to keep up with industry standards and innovations.
4. Freedom from External Interference:
   • Reduce political and administrative interference in the management of public enterprises.
   • Establish mechanisms for operational independence.
5. Productivity Consciousness:
   • Promote a culture of productivity improvement among managers and employees.
   • Encourage cost reduction strategies and efficiency measures.
6. Efficient Management Information Systems:
   • Develop and implement robust management information systems.
   • Use these systems to enhance decision-making and operational efficiency.
7. Financial Accountability:
   • Ensure transparent financial practices and regular audits.
   • Focus on reducing financial leaks and improving fiscal discipline.

Explanation

1. Clarity of Objectives: Public enterprises should aim to generate surplus and internal resources for growth and expansion.
2. Professional Management: Employing professional managers at top executive positions.
3. Management Development: Regular training and development programs.
4. Freedom from Interference: Reducing political and administrative interference.
5. Productivity Consciousness: Educating managers and employees about productivity improvement and cost reduction.
6. Management Information Systems: Implementing efficient management information systems to improve decision-making quality.

With these measures, public enterprises can improve their performance and service delivery. Lastly, let’s look at the obligations of public utilities using the Delhi Jal Board as an example.

Obligations of Public Utilities

Refraining from hiking water tariffs, the Delhi Jal Board (DJB) announced its budget for 2006-07, proposing new technologies to plug leakages, construct new recycling plants, and bore new tube wells. “The Board has no plans to increase water tariffs in any category till additional water supply is available,” said Chief Minister Sheila Dikshit, chairperson of the Board. What are the obligations of public utilities like the Delhi Jal Board?

Explanation

Public utilities like Delhi Jal Board have the following legal duties:

1. Serve all who apply for service regardless of race, economic status, or other differences.
2. Utilize all their capacities to produce.
3. Provide safe and adequate service.
4. Avoid demanding unreasonable prices for their goods and services.

Tables

This comprehensive overview of private public and global enterprises covers the critical aspects of each sector, providing insights into the advantages and challenges associated with each. By understanding these dynamics, students can better grasp the complexities of modern business environments.