CBSE Class 11 Business Studies Revision Notes Chapter 3

CBSE Class 11 Business Studies Revision Notes Chapter 3 – Private, Public and Global Enterprises

Chapter 3 of Class 11 Business Studies discusses the private and public sectors, global enterprises, joint ventures and many more important topics. For a better understanding of the topics of this chapter, students can refer to the Class 11 Business Studies Chapter 3 notes prepared by Extramarks. These notes summarise all the important concepts covered in this chapter in a single place for students’ reference. These will not only help students with their revisions but also with their last-minute preparations and assignments.

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The important topics covered in this chapter have been discussed below.

Public and Private Sector

The Indian economy consists of both private and government-owned businesses. Individuals or groups can own the private sector business. Any state or federal government can own an organisation entirely or partly. The government is responsible for taking care of public sector organisations. The federal or state governments may take over these organisations entirely. 

They could be a part of the ministry or created by a Parliamentary Special Act. The government of India initiated an approach to economic development in the Industrial Policy Resolution of 1948. The Industrial Policy Resolution of 1956 set forth some goals to help achieve to speed up the expansion rate and industrialisation. 

The industrial policy of 1991, as opposed to all the other strategies where the government considered disinvesting in the public sector and allowing independence to the private sector.  

Companies outside India were asked to invest in India. The Indian economy consists of the public sector, private sector and multinational corporations. 

Indian Economy- Public and Private Sector

Public Sector                                                                         

1. Departmental Undertakings
2. Statutory Corporation
3. Government Companies

Private Sector

1. Sole Proprietorship
2. Partnership
3. Joint Hindu Family
4. Cooperative
5. Multinational Corporations
6. Company (public ltd.), (private ltd.

Changing Role of Public Sector

• Development of Infrastructure:  It is a prerequisite for industrialisation. Without transportation, communication, fuel, energy and industries, industrialisation cannot be continued. The government can collect money and coordinate and train workers and technicians. The expansion of rail, sea, road and air transport is necessary to see industrialisation and future growth. 

• Regional Balance: The Indian government oversees development in all states and regions. Special attention is paid to any delays. Four major steel facilities were built to help promote growth and get jobs. 
• Economies of Scale: As large-scale companies require a lot of investment, the government was forced to step in and take advantage of economies of scale. Power, electricity and natural gas were necessary for proper functioning. 
• The concentration of Economic Power: The industrial conglomerates should engage in heavy sectors resulting in wealth. The public sector established industries required a lot of investment for their functioning. 

• Import Substitution: Importing heavy machinery, which is necessary for an industrial basis was challenging. Different engineering firms helped in the substitution process. Different public sector firms like MMTC played a significant role in improving the country’s exports. 
• Government Policy Towards Public Sector Since 1991: The government has implemented reforms in the public sector as a part of a new industrial policy. In 1956, about 17 industries were reserved for the public sector. Three industries – rail, armaments and atomic energy were reserved for the public sector in 2001. The goal was to collect funds and foster public and worker participation in ownership of the businesses. 

The public sector units came under the Board of Industrial and Financial Reconstruction. It helps determine whether a sick unit should be finally built again or closed. In certain cases, the board reassessed the revival and the rehabilitation plans. Performance could be improved using MOU. The public sector units were given targets.  

Global Enterprises

Global enterprises are industrial conglomerates that expand their marketing operations across various nations. MOFA is the other name of these branches. They spread their branches far and across. They help positively grow the economy. 

Features:

• Huge Capital Resources: They can raise funds from various sources. There are options to sell stock, debentures, and bonds to the public. They can borrow money from banks and other institutions in the world. 

• Foreign Collaborations: It is possible to enter into agreements with Indian companies for selling of technology, manufacturing, use of brand names for finished products and other things. They work with the government as well as private companies. There are restrictive terms related to technology transfer and Priceline. Collaborations with other countries led to monopolies and concentration of power in a few hands. 

• Advanced Technology: Businesses have a lot of advantages in the manufacturing process. As they can adhere to worldwide norms and specifications, the countries where these operations are advanced. 

• Product Innovation: High research and advancement in technology help invent new products and improve existing ones. Proper research can help in financial investments that only corporations can make. 

• Marketing Strategies: Implementation of marketing strategies help improve sales. The marketing methods help boost sales. They have a niche worldwide, so their brand presence has grown over time. 

• Expansion of Market Territory: The company’s market territory grows daily. This helps to increase brand awareness. They have a monopoly in the market due to their huge size. 

• Centralised Control: The headquarters of the company are located in the home nation. They have control over all branches. The control is limited to the broad policy framework. There is no change in daily operations. 

Joint Ventures

A joint venture is made when two businesses work together to achieve a certain goal. This is done to enjoy profits. The agreement helps stipulate required permissions and licenses will be obtained within a time frame. An MOU needs to be signed by both parties where an outline is mentioned. The gain and loss of the business are also mentioned. Some common examples of joint ventures are AVI of India Pvt Ltd. 

Joint Venture-Types

1. Equity-Based

• Company 
• Limited liability partnership
• Partnership

2. Contractual

• Cooperation Agreement/Strategic Alliances

3. Equity-Based Joint Venture

• A joint venture agreement is where two parties agree to create a company which the parties jointly own. The business form may, however, vary.

4. Contractual Joint Venture

• This venture is based on commitment. There is no direct ownership, but the involved parties need little control. 

Benefits:

• The joint venture firm can help increase resources and capabilities, growing and expanding. 
• Once a company forms a joint venture with someone from another country, it gains a huge market.
• The access to latest technology and manufacturing helps in higher quality products to help save time, energy and money. 
• Joint ventures will let businesses come up with new and creative marketing strategies. New ideas and technology can help international partners come up with creative solutions. 
• International companies invest in India because they can enjoy profits due to cheap production costs. They can obtain high-quality products to meet all global needs.
• Each party will gain from another party. 

Public Private Partriershíp

A Public Private Partnership (PPP) collaborates between the public and private entities based on infrastructure and its services.

Features:

• Government entities such as ministries, state enterprises and municipalities are public partners in PPP.
• Along with social responsibility, expertise and environmental awareness, the government’s involvement helps in investment and asset transfer, supporting partnership.  

Pros:

•  Design transfer and construction risk. 
•  The potential to accelerate projects.

Cons:

• There may be a conflict between parties due to environmental considerations.
• It might not attract private finances.

How does this Class 11 Business Studies Revision Notes Chapter 3 – Private, Public, and Global H3 -Enterprises Help You?

Class 11 Business Studies notes are available at Extramarks. Students can study at their own pace and in their own comfort using these revision notes. These notes are reliable and help students to have a thorough and in-depth explanation of the concepts.

Business Studies Chapter 3 Revision Notes

The revision notes for Business Studies have been formulated by experts, which help students to have a better understanding of the concepts. 

Business Studies Chapter 3 Revision notes 

The Chapter 3 Business Studies Class 11 notes are prepared in a way that it helps students to have a better grasp of the chapter and secure good marks in the exams. The notes of chapter 3 Business Studies Class 11 are made to focus on the fundamental concepts and have an in-depth understanding of all the points and basics. 

Our Revision Notes Cover The Following

The revision notes provided by Extramarks cover all concepts related to private and public sector enterprises. 

Private Sector Enterprises

Individuals or groups of individuals own businesses. The different forms of organisation are partnership, joint, sole proprietorship, cooperative and company. 

Public Sector Enterprises

Those organisations which the central or state government owns are public sector enterprises. The government participates in various economic activities through these enterprises. 

Features:

The capital is contributed by the state and central government. The main objective of such enterprises is the welfare of the public. It is possible to manage enterprises by the government. 

Forms of Public Enterprises

• Departmental Undertakings
• Statutory Corporations
• Government Companies

Departmental Undertakings

These businesses are set up as ministry departments and are regarded as an extension or a part of the ministry. Government employees operate these. Such endeavours might be governed by the federal or the state government, and the federal or state government rules should apply. Some common examples of these are the Railway, Telegraph and Post departments.

Features: 

Such enterprises are directly funded by the budget of the government of India. It is subjected to accounting and audit controls applicable to other government activities. The enterprise employees are government employees, and their working conditions are very similar to that of other government employees. This department is under the direct control of the ministry. 

Pros:

1. To ensure that the Parliament is effectively controlling the operations. 
2. A high degree of public accountability. 
3. The enterprise’s revenue will be handed over directly to the treasury. 
4. Considering the national security level, this is the best option as it is under the direct supervision of the ministry. 

Cons:

1. Lack of flexibility
2. Head of the departments cannot take individual decisions or work without the ministry’s approval.
3. The conservative and cautious approval of the bureaucrats prevents any sort of initiative. 
4. No action can be taken until and unless the right authority approves. 
5. A lot of political involvement is there in the ministry.
6. Any sort of consumer requirements is ignored. 

Statutory Corporations

A special act of Parliament creates a statutory form of corporation. These are general public enterprises. The act is meant to establish power and functions and the rules that help govern the personnel and help in interaction with other government agencies. They have the power of the government and some amount of private sector flexibility. 

Features:

The statutory corporations are set up under the Parliament and governed by the act’s provisions. A state entirely owns such corporations. The government takes financial responsibility. They have the power to generate the desired profits. These entities can get into contracts and take over legal properties by their name. They work by obtaining funds from the public or government. The provisions themselves govern the service. 

Pros:

1. They have the flexibility and independence in functioning. 
2. The government does not control their finances, income or receipt.
3. The body created its policies and procedures. 
4. They help in economic development. 

Cons:

1. Operational flexibility is impossible.
2. Government interferes in the case of huge monetary transactions.
3. Corruption is pervasive wherever there is public interaction.
4. Advisor accounting to the corporation board limits the ability to enter into contracts or make decisions. 

Government Company

As per section 2(45) of the companies act 2013, a government company is partly or wholly government by the central and state governments. One holds around 51 per cent of the paid-up capital. There are certain restrictions regarding the appointment and retirement of senior management professionals. The company’s shares are issued in the name of India’s president. The government is the majority stakeholder and has authority over the business administration. 

Features

Under the Companies Act of 2013, the government company was formed. A third person can sue the company. It is possible to make real estate purchases by entering a contract. A corporation can make real estate purchases. The company management works as per the regulations. The companies acting like other public limited companies, take care of the management. The government appoints the auditor, and employees are hired based on company rules and regulations. The funds are collected from stakeholders.

Pros:

1. The business operates as per the Indian Companies Act.
2. It has its own legal body. 
3. It takes management decisions by itself. 
4. Companies can control the market and disrupt the goods and services. 

Cons:

1. The government is the sole stakeholder in some enterprises. 
2. It avoids the constitutional duty that a government-funded enterprise should have.
3. The government is in charge of management and administration. 

Changing Role of Public Sector

In India the public sector was primarily created  to achieve two objectives:

• To boost the economic growth of the country
• To achieve equal distribution of wealth and income among people

The role and importance of the public sector also changed with time, like:

• Development of Infrastructure
• Regional balance
• Economies of scale
• Control of Monopoly and Restrictive Trade Practices
• Import Substitution 

Public Sector Reforms

In the industrial policy of 1991, the government of India launched four major reforms in the public sector:

1. Limiting the number of industries reserved for the public sector
2. Memorandum of Understanding (MOU)
3. Disinvestment
4. Restructural and Revival

Multinational Companies/Global Enterprises

A company with its business operations in several countries through its factories, branches or offices in those countries, but headquartered in one country is called a multinational company. For Example, PHILIPS, Coca-Cola, Nestle, Microsoft, etc.

Joint Ventures

When two or more independent firms join together to form a new enterprise by merging their technology, capital and expertise, this is referred to as a joint venture. For example, Hero Cycle from India and Honda Motors Co. from Japan jointly established Hero Honda. 

Public-private Partnership (PPP):

An enterprise in which a project or a service is financed and operated through a partnership of government and private enterprises.