CBSE XI Business Studies

1. PRIVATE,
PUBLIC AND
GLOBAL
ENTERPRISES

2. Classification of Indian Economy
Private Sector
Sole
Proprietorship
HUF
Partnership
Cooperative
Society
Company
Public Sector
Departmental
Undertakings
Statutory
Corporation
Government
Company

3. PRIVATE SECTOR
It includes all those enterprises
which are managed and owned
by individuals or group of
individuals.

4. PUBLIC SECTOR
• It includes all those enterprises which are
managed and owned partly or wholly by
the Central or State Government
• It can be a part of ministry or come into
existence by a Special Act of the
Parliament
• Govt participates in the economic
activities of country through these
enterprises

5. HISTORY OF PUBLIC SECTOR
• The Industrial Policy Resolution of 1948 and 1956
emphasized the role of public sector in order to achieve
rapid industrialization
• 17 industries were exclusively reserved for public sector
(arms and ammunition, atomic energy, iron and steel, heavy
machinery, mineral oil, coal etc.) but this could not achieve
desired results
• Hence, in the Industrial policy of 1991, govt opted for
disinvestment of public sector and encouraged Private sector
and FDI (Global enterprises)

6. Forms
of PSU
Departmental
Undertaking
Government
Company
Statutory
Corporation

7. DEPARTMENTAL UNDERTAKING
• Oldest and traditional
• Managed by government officials as one of the government
departments
• Under the control of concerned Ministry, who is answerable
to govt through Parliament
• Eg: Railways, Post and Telegraph

8. • Financed by Govt budget and its activities form an
integral part of govt functioning
• Rules of central / state government are applicable
• Suitable for public utility services (railways, post
and telegraph) and strategic industries (defense,
atomic power)

10. FEATURES OF DEPARTMENTAL UNDERTAKING
• Fully financed by government
• Subject to Accounting and Audit controls
• Managed and controlled by govt department headed by
concerned minister
• Appointment of Employees as per Govt terms and
conditions
• Employees accountable to the concerned minister

11. MERITS OF DEPARTMENTAL UNDERTAKING
• Effective control on the operations of the
undertaking by Govt
• Answerable to Parliament
• Revenue earned goes directly to the
treasury of govt
• Suitable for National Security

12. DEMERITS OF DEPARTMENTAL UNDERTAKING
• Lack of flexibility and negligible chances of improvement
• Employees have to take approval before taking any
decision which make things delay
• Unable to take business opportunities due to conservative
approach
• Red Tapism creates lots of unavoidable problems in the
functioning of organization
• Indifferent to the needs of consumer

13. STATUTORY CORPORATION
• It is a corporate body with a separate legal existence and perpetual succession
and common seal with power to acquire, hold, dispose of property and sue
and be sued by its name
• It is also known as Public Corporation
• It is set up under a Special Act of Parliament or of the state legislature
• The act defines its objects, powers and functions, rules and regulations
• Managed and controlled by Board of Directors appointed by the government
• It has control over a particular type of commercial activity
• Have the power of govt as well as operating flexibility of private enterprise
• Eg: RBI, LIC, FCI, Air India

14. FEATURES OF STATUTORY CORPORATION
• Formation
• Ownership
• Corporate Existence
• Financial Autonomy
• Accounting and audit procedure
• Staffing and terms of service

15. MERITS OF STATUTORY CORPORATION
• Operational flexibility
• Freedom from interference
• Autonomous setup
• Facilitates economic growth

16. DEMERITS OF STATUTORY CORPORATION
• Theoretical autonomy
• Government interference
• Undesirable practices
• Delay in action

17. Point of Distinction Departmental Undertaking Statutory Corportation
1. Status
Does not have a separate legal
entity.
It is a Separate entity.
2. Establishment It is established by a Ministry.
It is established by a Special Act of
Parliament.
3. Funds
Funds are Provided annually by
budget appropriation.
It can raise its own resources.
4. Authority to control
Rests in the hands of the Minister
and the concemed Ministry
Parliament has the authority to
control the affairs.
5. Management
Managed by government officials
and the ministry.
Managed by the Board of Directors
6. Power to borrow Does not have borrowing power. Possesses borrowing power.
7. Employees
Employees are government servants
and service rules are those
applicable to government
employees.
Employees are recruited by the
Corporation. The employees are not
government servants.
8. Autonomy Limited Considerable
9. Flexibility Limited Substantial
10. Suitability
Suitable in industries which are
basically monopolies. For e.g.
defence, public utilities etc.
Suitable for industrial and
commercial undertakings.

18. GOVERNMENT COMPANY
• Established under the Companies Act, 2013 or any previous company law
• It is registered and governed by the provisions of the companies act
• Established for the purpose of running an industrial or commercial undertaking
• As per Companies Act, 2013, a government company means any company in
which not less than 51% of the paid up capital is held by central government or
by any state government wholly or partly
• The shares of the company are purchased in the name of the President of India
• Here govt is the major shareholder and exercise major control over its
management
• Eg: SAIL, BHEL, BEML etc

20. FEATURES OF GOVERNMENT COMPANY
• Incorporation
• Separate legal entity
• Management
• Governed by provisions of MoA and AoA
• Accounting and audit procedures
• Finance

21. MERITS OF GOVERNMENT COMPANY
• Easy formation
• Operational autonomy
• Independent status
• Prevents unhealthy business practices

22. DEMERITS OF GOVERNMENT COMPANY
• Freedom only in name
• Lack of accountability
• Defeat of main purpose

24. CHANGING ROLE OF PUBLIC SECTOR
Development of
Infrastructure
Regional Balance
Economies of Scale
Check over
concentration of
Economic Power
Import Substitution
Government Policy
towards the Public
Sector since 1991

25. STEPS TAKEN BY GOVT IN IPR 1991
Reduction in no of
industries reserved for
Public Sector
Disinvestment of Shares
Same policy for sick units
as that for private sector
Memorandum of
Understanding
•The no of industries reserved for
public sector reduced to 8 in
1991 and then to 3 in 2001
•It means selling a part or whole
of the share of PSU to the private
sector
•Board of Industrial and Financial
Reconstruction (BIFR) decides
whether the unit has to be
reconstructed or closed down
•PSUs were given with clear
targets for which they will be
accountable

26. GLOBAL ENTERPRISES / MULTINATIONAL COMPANIES
• It is a company whose business operations extend beyond the
country in which it has been incorporated
• They have their head office in one country but carry on business
in another country known as host country
• They are also known as ‘Supernatural Companies’ or
‘Transnational Companies’
• Eg: Pepsi and Coca Cola companies are registered in USA, while
they operate across the world
• They operate in several areas and produce multiple products and
thereby influence the international economy

30. FEATURES OF MNCs
• Huge capital resources
• Foreign Collaborations
• Advanced Technology
• Product Innovation
• Marketing Strategies
• Expansion of Market Territory
• Centralized Control

31. MERITS OF MNCs
• Employment Opportunities
• Advanced Technology
• Inflow of Foreign Capital
• Improves Standard of living
• Growth of domestic firms
• Healthy competition
• World economy

32. DEMERITS OF MNCs
• Disregard of national
priorities
• Creation of Monopoly
• Depletion of natural
resources
• Obsolete technology
• Threat to national
sovereignty

33. JOINT VENTURE
• When two or more firms join together for a common purpose
and mutual benefit, it is known as joint venture
• The firms may be private, government-owned or a foreign
company
• They are useful to strengthen long term relationships
• It can be done for business expansion, product development or
moving into new markets
• It involves pooling of resources and expertise so as to achieve
desired goal
• There are no separate laws for joint ventures

34. • All joint ventures in India require government approvals if a
foreign partner or NRI is involved
• Automatic route – RBI
• Non automatic route – Foreign Investment Promotion
Board (FIPB)
• A joint venture must be based on MoU and must be signed by
both the parties
• It must also state that all necessary government approvals and
license have been obtained
• Terms should be thoroughly discussed considering the legal
and cultural background of the parties concerned

37. VISTARA

38. FORMATION OF JOINT VENTURE
Transfer of Business to new
Company
New Joint Venture company
Collaboration of existing
Indian Company with other
party

39. MERITS OF JOINT VENTURE
• Increased resources and capacity
• Access to new markets and
distribution networks
• Access to technology
• Innovation
• Low cost of production
• Established brand name

40. DEMERITS OF JOINT VENTURE
• Conflict of interest
• Risk of loss of trade secrets
• Lack of coordination

41. PUBLIC PRIVATE PARTNERSHIP
• It is a legally binding contract between government and private
business firm for the provision of public assets and / or pubic
services for the benefit of public
• The goal of PPP is to combine the best capabilities of the public
and private sector
• Govt remains actively involved throughout the project’s life cycle
• Private sector is responsible for the more commercial function
such as project design, construction, finance and operations

42. The Vidyasagar Setu (in West
Bengal) is one of the first PPP
projects in India

43. L & T Hyderabad Metro Rail Pvt Ltd
Bhopal-Dewas State Highway

46. FEATURES OF PUBLIC PRIVATE PARTNERSHIP
• Arrangement with Private Sector entity
• Investment / Management by Private sector
• Operations / management for a specified period
• Risk sharing with private sector
• Performance linked payment
• Conformance to performance standards

47. BENEFITS OF PUBLIC PRIVATE PARTNERSHIP
• Inflow of private investment
• Increases efficiency
• Innovation
• Sharing of project risk
• Better viability