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Business Studies Chapter3 Notes

The document discusses different types of business organizations in India including private sector companies, public sector undertakings, statutory corporations, government companies, multinational companies, joint ventures, and public-private partnerships. It provides details on their features, merits, and demerits.

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Khaled Pasha
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13 views

Business Studies Chapter3 Notes

The document discusses different types of business organizations in India including private sector companies, public sector undertakings, statutory corporations, government companies, multinational companies, joint ventures, and public-private partnerships. It provides details on their features, merits, and demerits.

Uploaded by

Khaled Pasha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter-3

Public, Private and Global(Multinational) company

Indian economy :

Private sector : Ex: sole proprietorship, Joint Hindu Family business, partnership, joint stock company,
MNC’s

Public sector : EX: Department Undertakings (DU), Statutory corporation and Government companies.

Differences between Private sector and Public sector

Private sector Public sector


Aim is to earn maximum profit. Aim is to provide services to public.
Capital is invested by owners Capital is contributed by the government.
BOD and Professionals Manage and controls BOD and Government representatives manage and
cotrols.
Customized rules and regulations are followed. Government rules and regulations are followed.
More freedom of operations. Less freedom of operations.

1. Department Undertakings:

1. This is the oldest and most traditional form of public sector enterprises established by the
departments of ministry.
2. These represents the function of government as a whole across the country.
3. These are not autonomous and independent institutions.
4. These are controlled by the government and its representatives (govt. employees).

Features of Department Undertakings:

1. Funding: Funding comes directly through government treasury.


2. Accounting and audit: These undertaking follow the accounting rules formed by the Indian
accounts department and the audit is done by the government agencies.
3. Service conditions: The employees of these enterprises are government servants headed by IAS
officers and public servants and are transferable from one ministry to another ministry.
4. Accountability: The employees are accountable directly to the concerned ministry.

Merits:

 Revenue: Revenue earned by these enterprises are directly deposited into the government
treasury.
 Accountability; Provides high level of accountability through various audits.
 National security: Government directly controls and supervise these enterprises.
 Effective control: Very effective control is assured as it is made cetralised.
Demerits:

 Lack of flexibility: Due to low level or no level of flexibility, the operations are not smooth.
 Delay in decision-making: The decision-making process is time consuming as it involves
numerous approvals.
 Political interference: Political interference hinders the efficiency of these enterprises.
 Red-tapism: Postponement of decisions and day to day actions in short it is called piling up of
the work.
 Bureaucracy: Bureaucratic and conservative approach of ministry hinders to take full benefits of
business opportunities.

2.Statutory Corporations:

1. These organizations are formed by the law.


2. It is brought into existence by the special act of the parliament, which defines the power,
functions, rules and regulations of these enterprises.
3. It is a corporate body created by the legislature with well-defined powers, functions and
financially independent with a clear control over specified area or a particular type of
commercial activity.
4. Ex: Indian airlines, Air India, LIC, SBI etc.

Features of Statutory corporation;

 Body Corporate :
 Independently financed:
 Own service conditions:
 Independence from government accounting:

Merits:

 Operational flexibility.
 Non-interference by the government.
 Valuable instrument from economic growth.
 Autonomous organization.

Demerits;

 Corruption;
 Government interference(forcefully)
 Flexibility on papers only.

3.Government company: According to the companies act 2013, a government company means any
company in which atleast 51% of paid up share capital is held by central or state governments or partly
central and partly state governments.Ex: Steel authority of India, Trading corporation and Hindustan
Machine tools etc.
Features:

1. Constituted by Companies Act of 2013.


2. File a suit.
3. Enter into a contract.
4. Audit by central government.
5. The rules contained by MOA( memorandum of article) and AOA(article of association).

Merits:

 Ease in formation:
 Autonomous.
 Good market control.
 Independent status.

Demerits.

 Provisions of companies act not relevant.


 Evades constitutional responsibility.
 Main purpose defeated.

5.Global Enterprise ( Multi-National company):

1. MNC’s are gigantic corporations which has operations in many countries. They are characterized by
their huge size, large number of products, advanced technology, marketing strategies and network of
operations across the world.

2. Global enterprises are huge industrial organizations which extend their business across the world.

3. Their branches are also called majority owned foreign affiliates (MOFA). these branches operates in
several countries with varieties of products.

Features:

 Huge capital resources.


 Advanced technology.
 Foreign collaboration.
 Marketing strategies.
 Product innovations.
 Centralized control.

6.Joint Ventures:

1. When two or more companies may be private or government or Foreign or any these two agrees to
join together for a common purpose and mutual benefits.
2. This involves pooling of resources and expertise by two or more businesses to achieve a common
goal.

3.Joint ventures are formed either for long term or short term periods or projects.

4. There are two types of joint ventures, they are: 1. Contractual joint venture(CJV) and 2.Equity based
joint venture (EJV).

Contractual joint venture v/s Equity based joint ventures:

Contractual joint venture Equity based joint venture


A new jointly owned entity is not created but only A separate business entity , jointly owned by two
an agreement to work together is made. or more parties is formed by the mutual
agreement of the parties.
Parties do not share ownership of the business but Parties share joint ownership , the form of
partly exercise control over some elements of business may vary from company to company,
venture.

Merits of joint venture:

 Increase resources and capacities.


 Access to the technology.
 Low cost of production.
 Established brand name.
 Innovations.

7.Public Private Partnership:

1. PPP is defined as a relationship between private and public entities in the context of infrastructure
and services.

2. The cooperative venture between public and private entities built on expertise, allocation of
resources, risks and returns jointly.

Features:

1. Allocation of risks;
2. Ensures economy, effectiveness and efficiency.
3. Faster implementations.

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