Coupon Accepted Successfully!



Write in brief about private sector and public sector

Private Sector

The private sector comprises of business owned by an individual or a group of individuals. The different types of organizations are sole or single ownership, joint venture, joint Hindu family, cooperative and company.

Public Sector

On the other hand the public sector comprises of various organizations that are owned and managed by the government. These organizations could either be wholly or partly owned by the state or central government. They may also be a part of the ministry or come into existence by a Special Act of the Parliament.


Write short notes on departmental stores

This forms the most traditional and oldest form of organizing public enterprises. These enterprises are recognized as the departments of the Ministry and are thought to be a part or an expansion of the ministry itself. The Government operates through these departments and the activities carried out by them are a vital part of the working of the government. They are not independent legal entities or have not been constituted as autonomous or independent institutions. They function through the officers of the Government and its employees are called Government employees. These enterprises may fall under the state or the central government and the rules of central/state government are applicable. Examples of these enterprises are the Post and Telegraph Department and the Railways.


What are statutory corporations?

Statutory corporations are public undertakings that come into existence via a Special Act of the Parliament. The Act defines its rules and regulations powers and functions, governing its employees and its bondage with government departments. This is a corporate body created by the legislature with set functions and powers and is economically independent with a clear control over a particular area or a specific type of commercial activity. It is a corporate person and has the ability of functioning in its own name. Statutory corporations, hence have the power of the government and significant amount of functioning flexibility of private undertakings.


Write short notes on Government Organizations

A Government organization is established under the Indian Companies Act, 1956 and is registered and run by the provisions of the Indian Companies Act. These are set up for mere business reasons and in true spirit compete with firms in the private sector. In accordance to the Indian Companies Act 1956, a government organization means any company in which not less than 51 percent of the paid up capital is held by the central government, or by any state government or partly by one or more state governments or central governments. From the above description, it is obvious that the government controls the paid up share capital of the organization. It is in the name of the President of India that the shares of the company are purchased. As the government is the chief shareholder and exercises control over the management of these organizations, they are called as government organizations.


Briefly mention the role of public sector

The role of public sector was redefined. It was not supposed to play a passive role but to actively involve and compete in the market with other private sector firms in the same field. They were also held responsible for losses and profits on investment. If a public sector was incurring losses repeatedly, it was referred to the Board for Industrial and Financial Reconstruction (BIFR) for complete renovation or close down.


List out the policies of the Government towards the public sector since 1991

Investments were to be made to:

(a) Give infrastructure to the core sector, which needs a massive capital investment, complicated and improved technology, large and effective organization structures like steel plants, civil aviation, power generation plants, railways, coal petroleum, state trading, etc

(b) Give a lead in investment to the core sector where private sector undertakings are not operating in the desired direction, like pharmaceuticals, fertilizers, petro-chemicals, newsprint, medium and heavy engineering

(c) Give direction to future investments like textiles, project management, consultancies, hotels, automobiles, etc

Four major reforms were introduced by the government of India in the public sector in its new industrial policy in 1991. The main components of the Government policy are as follows:

Restructure and bring back potentially viable PSUs
  Shut down PSUs, which cannot be invigorated
  Bring down governments equity in all non-strategic PSUs to 26 per cent or lesser, if required; and
  Fully defend the interest of workers.


1. Liberating a huge amount of public resources locked up in non strategic Public Sector Enterprises (PSEs), so that they may be used on other social priority areas such as primary education, basic health, and family welfare.

2. Reducing the large amount of public debt and interest burden

3. Transferring the commercial risk to the private sector so that the finances are put in able projects;

4. Releasing these undertakings from government control and introduction of corporate authority; and

5. In many areas where the public sector had a monopoly, for eg, in the telecom sector the consumers have benefited by more choices, quantity and quality of products and services.


What are MNCs? How are they useful in marketing products of any kind?

Over the last 10 years, MNCs have played a vital role in the Indian economy. They have become a general feature of most developing countries in the world. MNCs are gigantic corporations from what we see around us, which function in a number of countries. They are featured by their large size, huge number of products, superior technology, marketing approach and operational set up universally. Global enterprises are hence huge industrial bodies that broadened their industrial and marketing operations through a network of their branches in many different countries. Their branches are also known as Majority Owned Foreign Affiliates (MOFA). These undertakings function in many areas manufacturing many products with their business procedure extending over a many countries. They do not look at maximizing their profits from one or two products instead expand their branches all over. They have an effect on the global economy too. This is apparent from the fact that the sales of top 200 corporations were equal to 28.3 percent of the world’s GDP in 1998. This proves that the top 200 MNCs control over a quarter of the world economy. Hence, MNCs are in a state to exercise immense control on the world economy because of their capital resources, latest technology and goodwill. As a result of this, they are capable of selling any product in various countries.


Write short notes on joint venture.

Any business firm that join hands with another business firm for mutual benefit is called a joint venture. These two firms may be private, government-owned or a foreign company. Joint ventures can be adopted at any scale. It is not dependant on the size or strength of the firms. It can even collaborate for short term projects. A joint venture can also be the outcome of an agreement between two business firms in different countries. In a wider sense, a joint venture is can be described as the pooling of resources and proficiency by two or more business firms, to achieve a particular objective. The risks and rewards of the business are also shared. The reasons for joint venture often include business development and growth, developing new products or moving into new markets, especially in another country.


Write short notes on the policy taken by the Government towards sick units.

All public sector units were referred to the Board of Industrial and Financial Reconstruction to decide if a sick unit was to be restructured or shut down. The Board has reconsidered renewal and rehabilitation schemes for some cases and closing down for a number of units. There is a lot of protest amongst workers of the units which are to be closed down. A National Renewal Fund was started by the government to retrain or reemploy retrenched labour and to give compensation to public sector employees looking for voluntary retirement. There are many undertakings that are sick and inefficient of renewal as they have accrued heavy losses.


What are the features, advantages and disadvantages of departmental enterprises.

This forms the most traditional and oldest form of organizing public enterprises. These enterprises are recognized as the departments of the Ministry and are thought to be a part or an expansion of the ministry itself. The Government operates through these departments and the activities carried out by them are a vital part of the working of the government. They are not independent legal entities or have not been constituted as autonomous or independent institutions. They function through the officers of the Government and its employees are called Government employees. These enterprises may fall under the state or the central government and the rules of central/state government are applicable. Examples of these enterprises are the Post and Telegraph Department and the Railways.

The main features of Departmental enterprises are as follows:

(i) The financial support these undertakings come directly from the Government

Treasury and are an annual appropriation from the Government’s budged. The revenue earned by these enterprises houses is also paid into the treasury;

(ii) They are subject to audit and accounting controls pertinent to other Government activities;

(iii) The employees of the undertaking are considered as Government servants whose recruitment and terms of service are similar to that of other employees who are directly under the Government. They are headed by officers of the Indian Administrative Service (IAS) and civil servants who are moved from one ministry to the other;

(iv) It is generally thought to be a major subcategory of the Government department and is under the direct control of the ministry;

(v) They are answerable to the ministry as their management falls directly under the respective ministry.

Departmental enterprises have certain advantages which are as follows:

(i) These enterprises assist the Parliament to implement effective control over their functions;

(ii) These guarantee a greater degree of public accountability;

(iii) The revenue from the undertaking serves as a source of income for the government as it goes directly to the Treasury;

(iv)In terms of national security, this form is most applicable as it falls under the direct control and supervision of the concerned Ministry.

This form of enterprise suffers from serious limitations, some of which are as follows:

(i) Departmental enterprises do not provide flexibility, which is important for the smooth functioning of business;

(ii) The heads of departments or employees of such enterprises are not allowed to take independent decisions, without the approval of the ministry concerned. This leads to setback in matters where prompt decisions are necessary;

(iii) These undertakings are not able to take advantage of business opportunities. The bureaucrat’s extra-vigilance and conservative approval does not allow them to take risky actions;

(iv) There is red tapism in daily operations and no action can be taken unless it passes through the proper channels of authority;

(v) There is a lot of political intervention through the ministry;

(vi) These establishments are generally not sensitive to consumer requirements and provide inadequate services to them.


Explain the characteristics, merits and demerits of statutory corporations.

Statutory corporations have certain unique characteristics, which are described as follows:


(i) Statutory corporations are created under an Act of Parliament and are run by the provisions of the Act. The objects, powers and privileges of a statutory corporation are defined by the Act;

(ii) This form of establishment is entirely owned by the State. The government has the definitive financial accountability and has the authority to appropriate its profit. Simultaneously, the State also has to accept the losses, if any;

(iii) A statutory corporation is a body corporate that can enter into contract, obtain assets in its own name, can sue and be sued;

(iv) This type of undertaking is generally autonomously financed. It receives finances by loans from the government or from the public through returns, derived from sale of goods and services. It has the power to use its revenues;

(v) A statutory corporation is not subject to the same accounting and audit dealings pertinent to government departments. It is also not concerned with the central budget of the Government;

(vi) The employees of these undertakings do not fall under the category of government or civil servants and are not administered by government rules and policies.

The provisions of the Act in itself govern the conditions of service of the employees. Sometimes, a few officers are moved from the government departments, on deputation and made a head of these establishments.

This type of establishment benefits from certain advantages in its functioning, which are as follows:

(i) They enjoy freedom in their operation and a high degree of functional flexibility. They are least affected by undesirable government regulation and control;

(ii) As the finances of these establishments are not from the central budget, the government usually tends not to interfere in their financial issues, not excluding their earnings and receipts;

(iii) As these are independent bodies they set their own policies and procedures within the powers allocated to them by the Act. The Act may nevertheless, present a few issues or matters that need prior consent of a specific ministry;

(vi) A statutory corporation is a precious instrument for financial growth and development. It has the power of the government, combined with the initiative of private undertakings.

This form of undertaking suffers from various restrictions, which are as follows:

(i) Actually, a statutory body enjoys less operational freedom and flexibility as stated above. All actions are subject to many rules and regulations;

(ii) Government and political intervention has always been present in crucial evaluations or where large funds are concerned;

(iii) Where public is involved, uncontrolled fraudulent activities exists;

(iv) The government has a practice of employing advisors to the Corporation Board. This restricts the autonomy of the corporation from gaining access into contracts and other decisions. In matters of disagreement, the government is referred for final decisions. This delays further action.


Explain the characteristics, merits and demerits of Government organizations

Government establishments have certain features that make them unique from other types of undertakings. These are detailed as follows:

(i) It is an enterprise created by the Indian Companies Act, 1956;

(ii) The company can, against any third party, file a suit in a court of law and be sued;

(iii) The company can acquire property in its own name by entering into a contract;

(iv) Like any other public limited company, the administration of the company is regulated by the provisions of the Companies Act;

(v) The Memorandum and Articles of Association of the company contains rules and regulations. It is according to this that the employees of the company are appointed. The Memorandum and Articles of Association contain the objects of the company and its rules and regulations are the main documents of the company

(vi) These companies are excused from the accounting and audit rules and procedures. An auditor is appointed by the Central Government and the Annual Report is to be submitted in the State legislature or the parliament;

(vii) The government organization receives its finances from government shareholdings and other private shareholders. It is also allowed to raise funds from the capital market.

Government firms enjoy several benefits, which are as follows:

(i) A government organization can be established by satisfying the needs of the Indian Companies Act. A separate Act in the Parliament is not necessary;

(ii) Apart from the Government, it has a separate legal entity;

(iii) It enjoys freedom in all administrative decisions and takes actions according to business prudence;

(iv) These companies are able to control the market and restrict unhealthy business practices by providing goods and services at reasonable prices.

In spite of freedom given to these companies, they have a few limitations:

(i) The provisions of the Companies Act do not have much significance since the Government is the only shareholder in some of the companies,

(ii) It evades constitutional, accountability which a company funded by the government should have. It is not accountable directly to the Parliament

(iii) The management and administration rest in the hands of the government, as the government is the sole shareholder. The main purpose of a government company, registered like other companies, is beaten.


Explain the features of MNCs.

The corporations have discrete features which distinguish them from other private sector companies, public sector companies and public sector enterprises. They are as follows:
Huge capital resources: The characteristics of these enterprises are that they possess massive financial resources and the capability to raise funds from different sources. They tap funds from different sources. They can issue equity shares, debentures or bonds to the public. They too are in a position to borrow from financial institutions and international banks. They enjoy reliability in the capital market. Hence, investors and banks of the host country are prepared to invest in them. Due to their financial strength they are able to survive under all situations.
  Foreign collaboration: Global enterprises habitually enter into agreements with Indian companies with respect to the sale of technology, production of goods, use of brand names for the final products, etc. These MNCs can work together with companies in the public and private sector. There are generally several restrictive clauses in the agreement involving transfer of technology, pricing, dividend payments, tight control by foreign technicians, etc. Large industrial houses willing to diversify and extend have gained by working together with MNCs in terms of patents, resources, foreign exchange etc. But simultaneously these foreign collaborations have paved way to the growth of monopolies and vesting of power in few hands.
  Advanced technology: With the advancement in technology, these enterprises have technological superiorities in their methods of production. They are able to be conventional to the international standards and quality specifications. As a result, industrial growth of the country in which such corporations function as they are able to optimally exploit local resources and raw materials.
  Product innovation: These enterprises possess highly sophisticated research and development units engaged in the task of developing new products and advanced designs of existing products. Qualitative research needs huge investments that are affordable only for global enterprises.
  Marketing strategies: Global companies implement marketing strategies that are more effective than other companies in order to increase the output within a short period. They have a very reliable and up-to-date market information system. The advertising and sales promotion techniques of global companies are generally very effective as they have already carved out a place for them in the global market more so, their brands are well-known and selling their products is quite easy.
  Expansion of market territory: Their functions and activities are stretched beyond the physical boundaries of their own countries. The international image also mounts up and the market territory grows enabling them to become international brands. They function through a network of subsidiaries, branches and affiliates in host countries. Because of the giant size they occupy a foremost position in the market.
Centralised control: Their headquarters is in their home country and exercise control over all the branches and their subsidiaries. Nevertheless, this control is limited to the extensive policy framework of the parent company. There is no interference in day-to-day functions.


What are the benefits of joint venture? Explain.

Benefits: A Business can attain unforeseen gains through joint ventures with a partner which can prove to be extremely beneficial for both parties. The major benefits achieved by joint ventures are as follows:


(i) Increased resources and capacity: Joining hands with another or teaming up adds to existing resources and capacity enabling the joint venture company to grow and expand more quickly and efficiently. The new business pools in financial and human resources and is able to face market challenges and take advantage of new opportunities.

(ii) Access to new markets and distribution networks: When a business firm joins hands on joint venture with a partner from another country, it unveils a vast growing market. For instance, foreign companies gain access to the vast Indian market when they form joint venture companies in India. The products that have reached a saturation point in their host country can be easily sold in new markets and they can also make use of the established distribution channels in different local markets, or, establishing their own retail outlets may prove to be very expensive.

(iii) Access to technology: Technology is considered as a major factor for most business enterprises to enter into joint ventures. Advancement in production techniques lead to superior quality products thereby saving a lot of time, energy and investment as they do not have to develop their own technology. In addition, technology also adds to efficiency and effectiveness leading to reduction in costs.

(iv) Innovation: There is a remarkable increase in the markets and becoming more demanding in terms of new and innovative products. Joint ventures enhance business to come up with new and creative products catering to the demands of the same market. Especially, foreign partners may come up with innovative products because of new ideas and technology.

(v) Low cost of production: With the investment by international corporations India, they benefit immensely because of the lower cost of production. They are also able to obtain quality products for their global needs. India is becoming an important global source and tremendously competitive in many products. There are umpteen number of reasons for this viz., low cost of raw materials and labor, technically qualified labor force; management professionals, remarkably excellent manpower in different cadres viz., lawyers, chartered accountants, engineers, scientists. The international partner gets the products of required quality and specifications at a comparatively lower cost than what is prevailing in the home country.

(vi) Established brand name: When two business firms enter into a joint venture, one of the parties gain benefit from the other’s benevolence which has already been customary in the market. If the joint venture is in India and with an Indian company, the Indian company need not spend time or money in developing a brand name for the product or a distribution scheme. There is a ready market awaiting the product to be launched. A lot of investment is saved in the process.

Test Your Skills Now!
Take a Quiz now
Reviewer Name