Quick Revision Notes & Formula Sheet

Class 11 Business Studies Chapter: Private, Public and Global Enterprises

Business organizations in the Indian economy are broadly classified into three sectors:

Private Sector: Owned, managed, and controlled by private individuals or groups for profit.
Public Sector: Owned, managed, and controlled by the Central or State Government (or both).
Global/Joint Sector: Enterprises operating in multiple countries (Multinational Corporations) or owned jointly by the government and private sector.

Public enterprises are commercial undertakings owned and managed by the government. They are classified into three categories:

Meaning: The oldest and most traditional form of public sector enterprise. It is run as a department of the Ministry (e.g., Indian Railways, Post Office).
Key Features:
- Financed through annual budget appropriations of the government.
- Subject to direct parliamentary control.
- Employees are government servants (civil servants).
- Revenue earned goes directly to the government treasury.
Merits: Effective control, accountability, secrecy is maintained.
Demerits: Red-tapism (delay in decision-making), lack of flexibility, no autonomy, insensitive to consumer needs.

Meaning: Established under a special Act of Parliament or State Legislature (e.g., LIC, RBI, FCI, UTI).
Key Features:
- Financed by the government, but has its own independent financial system.
- A separate legal entity with perpetual succession and a common seal.
- Employees are not government civil servants (recruited as per own rules).
- Free from budgetary, accounting, and audit controls of the government.
Merits: Operational flexibility, quick decisions, legislative control, professional management.
Demerits: Rigid autonomy exists only on paper, political interference, abuse of monopoly power.

Meaning: Any company in which not less than 51% of the paid-up share capital is held by the Central Government, State Government(s), or partly by Central and partly by State Governments (e.g., BHEL, SAIL, ONGC). Governed by the Companies Act.
Key Features:
- Registered under the Companies Act (2013 or previous).
- Separate legal entity.
- Management is regulated by provisions of the Companies Act.
- Financed through government shareholding and private participation (if any).
Merits: Easy formation, autonomy in day-to-day administration, professional management.
Demerits: Lack of accountability, evasion of constitutional responsibility, political interference.

Over the years, the role and focus of the public sector in India have shifted:

Pre-1991: Public sector had a monopoly/dominance in core and basic industries (heavy engineering, steel, power) to build infrastructure and promote rapid industrialization.
Post-1991 (New Industrial Policy): Due to inefficiencies, losses, and resource crunch, the government introduced reforms:
1. Privatization: Transfer of ownership/management from public to private sector.
2. Disinvestment: Selling off a part of equity shares of public sector undertakings (PSUs) to the private sector and public.
3. Memorandum of Understanding (MoU): Giving greater autonomy to PSU managements by setting clear performance targets.

Meaning: Huge industrial organizations that extend their industrial and marketing operations through a network of branches in several countries (e.g., Microsoft, Coca-Cola, Samsung).
Key Features:
- Huge Capital Resources: Ability to raise massive funds globally.
- Foreign Collaboration: Often collaborate with local companies.
- Advanced Technology: Use capital-intensive, superior technology.
- Product Innovation: Continuous research and development.
- Marketing Strategies: Aggressive and effective global marketing.
- Centralized Control: Headquarters (home country) exercise ultimate control over branches (host countries).

Meaning: When two or more independent firms join together to establish a mutually beneficial business enterprise.
Types:
1. Equity-based Joint Venture: A separate company is created, owned jointly by the parties.
2. Non-Equity-based Joint Venture: No separate company is created; parties enter into an agreement for specific tasks (e.g., franchising, technical collaboration).
Benefits:
- Access to new markets and distribution networks.
- Sharing of risks and financial burden.
- Access to advanced technology and managerial skills.
- Low cost of production due to economies of scale.

Meaning: A contract between a public sector institution (government) and a private sector party for the delivery of public infrastructure or services (e.g., highways, airports, metros).
Key Features:
- Combines the skills, resources, and expertise of both sectors.
- Risk is shared between government and private entities.
- Used heavily in infrastructure development.
- Funding usually comes from the private sector or combined.

Private, Public and Global Enterprises