Table of Contents
Private Public and Global Enterprises Notes
Many countries across the globe have acquired the policy of privatization and global business, which has gained a lot of attention over the years. For the growth and improvement of any nation, all the three, that is, private, public, and global enterprises, should go hand in hand as just one sector cannot lead the country to success.
Private Sector Enterprises
The private sector includes businesses that are controlled, owned, and managed by an individual or group of individuals. Such companies are classified as small, medium, and large enterprises that are traded privately or sometimes publicly. The business in this sector is formed by establishing a new enterprise or privatizing a public firm.
The main goal of a private company is to make profit and recruit more employees than the public sector. It focuses on providing quality services to the society and win its goodwill and trust to sustain in the market for a longer run and compete with the competitors. It has to abide by the rules and regulations of the government.
Types of Private Sector Enterprises
It is a diversified sector and contributes a considerable part to the country’s economy. The entities that provide to the private sector are:
- Sole proprietors
- Small and medium-sized enterprises
- Large and multinational companies
- Professional and trade associations
- Trade unions
Public Sector Enterprises
The public sector comprises a business owned and managed by the government, whether it is the state, central or local government. The public sector is engaged in ventures to provide goods to the government and services to the society.
A public sector organization is formed when the government fully finances the firm or when the government has 51% or more of the firm’s share capital. The government funds these companies from the collection of revenues such as taxes, fees, duties, etc. The primary motive of these enterprises is established with the purpose of kindness.
Forms of Organizing Public Sector Enterprises
Some kind of organizational framework is needed for the Government’s participation in business and economic sectors of the country to function. In the Public Sector, Government plays a major role in organizing and formulating the key points related to an organization. The Government acts through its people, its offices, and employees who take decisions on behalf of the Government. For this, Public enterprises were formed by the government to participate in the economic activities of the country. These public enterprises are owned by the public and accountable to the public through the parliament. A public enterprise may take any particular form of organization depending upon the nature of its operation and its relationship with the government.
The forms of organization that a public enterprise may take are as follows:
- Departmental Undertaking
- Statutory Corporation
- Government Company
1. Departmental Undertaking
Departmental enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself. They have not been constituted as autonomous or independent institutions and as such are not independent legal entities. These undertakings are under Central or State Government and the rules of Central/State Government are applicable. Eg. Railways
The main characteristics of Departmental Undertaking are as follows-
- The funding of these undertakings comes directly from the government.
- They are subject to accounting and audit controls applicable to other govt. activities.
- The recruitment and conditions of employment are the same as any other employee directly under the government.
- It is subject to direct control of the concerned ministry.
- Accountability of such enterprise is to the concerned ministry.
2. Statutory Corporations
Statutory Corporations are public enterprises that are brought into existence by a Special Act of Parliament. The Act defines its powers and functions, rules and regulations governing its employees, and its relationship with government departments. It enjoys the legal identity of a corporate person and has the capacity of acting in its own name.
Statutory Corporations have certain distinct features, which are discussed as below-
- These are set up under an Act of Parliament and are governed by the provisions of the Act.
- This type of organization is wholly owned by the state.
- These act as a corporate body and can sue or be sued, enter into a contract and own property in its own name.
- This type of organization is usually independently financed.
- These are not subject to the same accounting and audit controls applicable to other govt. departments.
3. Government Company
A Government company is established under the Indian Companies Act and is registered and governed by the provisions of the Indian Companies Act. According to the Indian Companies Act 2013, any company in which not less than fifty-one percent of the paid-up share capital is held by the Central Government, or by any State Government or Government, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company is called Government Company.
Government Company has certain characteristics which makes them distinct from other forms of organizations. These are discussed as follows-
- It is an organization created by the Indian Companies Act 2013.
- It has a legal identity.
- The management of the company is regulated by the provisions of the Companies Act, like any other Public Limited Co.
- The employees of the organization are appointed according to their own rules and regulations.
- These companies are exempted from the accounting and audit rule procedures. An appointed auditor by the central or state govt. presents the Annual Report directly in the parliament or state legislature.
Types of Public Sector Enterprises
Public sector organizations are established in three forms.
- Departmental undertaking – This is the earliest kind of public sector enterprise and is considered as one of the government’s departments. It does not have an individual existence other than the government and operates under one government department or ministry. For example, post and telegraph, broadcasting, railways, telephone service, etc.
- Public corporation/statutory corporation – It is a body found by the state or central legislature or by a special act of parliament. It is entirely government-funded, and the act of the legislature determines all the decisions, objects, limitations, powers, etc. For example, the State Bank of India, Life Insurance Corporation of India, Air India, Oil and Natural Gas Corporation, and Food Corporation of India.
- Government company –The central or state government holds 51% of the paid-up share capital in such a company. However, the government companies are controlled, governed, and registered under the Companies Act, 2013. For example, Hindustan Machine Tools, Steel Authority of India, and State Trading Corporation.
Global enterprises are firms that function across the globe, that is, in international trade. These enterprises are categorized based on their size, their products, technological advancements, marketing and strategy, and operational network around the world.
The central vision of a global enterprise company is to operate across many countries to earn international currencies. It has different books of accounts in several countries, which are merged at the end of the financial year according to their usage.
Global Business Services
Instead of operating numerous shared service centers and managing outsourcing vendors independently, they are:
- implementing global business services,
- providing integration of governance, locations and business practices to all shared services and,
- outsourcing activities across the enterprises.
A global enterprise is one which owns and manages the functions in two or more countries. for example- Unilever Ltd, Coca-Cola, Samsung etc.
Features of Global Enterprise
Huge Capital Resources
These enterprises have huge financial resources. They have the ability to raise funds from different sources. Funds are raised by the issue of issuing equity shares, debentures, etc to the public. The investors of the host countries are always willing to invest in them because of their high credibility in the market.
With companies of the host countries, these enterprises enter into agreements. These agreements are made in respect of the sale of technology, production of goods, patents, resources, etc.
These enterprises use advanced technology for production, hence goods/services provided by the MNCs conform to the international standard and quality specifications.
These enterprises have efficient teams doing research and development at their own R &D centers. The main task is to develop new products and design existing products into new shapes in such a manner as to make them look new and attractive and also to satisfy the demands of the customers.
Expansion of Market Territory
They expand their market territory when the network of operations of these enterprises extends beyond their existing physical boundaries. They occupy dominant positions in various markets by operating through their branches, subsidiaries in host countries.
Despite the fact the branches of these enterprises are spread over in many countries, they are managed and controlled by their Head Office (HO) in their home country only. All these branches have to work within the broad policy framework of their parent company.
Private Public and Global Enterprises- Important Questions
Question 1 What are the different types of PSEs?
Ans. The different types of Public Sector Enterprises or PSEs are:
- Statutory Corporation
- Departmental Undertaking
- Statutory Corporation
Question 2 Mention the types of business enterprise which operates in more than one nation.
Ans. Companies that operate a business in more than one nation are called Multinational Companies (MNCs). However, such companies have their headquarters in one country where all the primary business activities take place. For instance, Capgemini, Amazon, etc.,
Question 3 What are the objectives of a public sector enterprise?
- Ans. To accomplish rapid economic enhancement through industrial growth
- To prevent the development of monopoly and concentration of the economic power in the private hands
Question 4 Provide 2 features of a public-private partnership.
- The private sector’s role in the partnership is to make maximum use of its skills in managing tasks, innovation and operations to run the business effectively.
- The public partners in a public-private partnership (PPP) are the government organizations, i.e., municipalities, government departments, ministries or state-owned enterprises. The private partners can be either local or international and include businesses or investors with financial or technical skills that are relevant to the project.
Question 5 What are the features of an MNC?
- Product innovation
- Foreign collaboration
- Advanced technology
- Huge capital resources
Question 6 What is a Joint venture?
Ans. A joint venture is a business arrangement in which two or more persons give their consent to pooling their resources for the purpose of completing a particular task. This task can either be a new project or any other business pursuit. In a joint venture (JV), each of the participants is accountable for profits, losses and costs related to it.
Question 7 What is a departmental undertaking?
Ans. Departmental undertaking is a form of organization in the public sector where a public enterprise is allowed to function as a full-fledged division. It is maintained, organized and financed by the government. For e.g. India Posts functions as a department within the Ministry of Communication.
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Private Public and Global Enterprises- FAQs
Question 1 What are global enterprises?
Ans. Global enterprises are those enterprises which have their headquarters in one country but operate their business in many countries. Global enterprises are also called multinational companies or transnational corporations. For example Coca-Cola, Hyundai, Nike and so on.
Question 2 What is public sector class 11 business?
Ans. Meaning: The public sector consists of various organizations owned and managed by central or State or by both governments. The govt. participates in the economic activity of the country through these enterprises.
Question 3 What are the types of global companies?
Ans. Multinational corporations can be categorized into four different types: decentralized multinational corporations, centralized global corporations, international companies, and transnational enterprises.